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ASSET PURCHASE AGREEMENT
by and between
NUTRITION MEDICAL, INC. [BUYER]
and
ELAN PHARMA INC. [SELLER]
January 13, 1997
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of January 13,
1997, is made and entered into by and between Nutrition Medical, Inc., a
Minnesota corporation ("Buyer"), and Elan Pharma Inc., a Massachusetts
corporation ("Seller").
WHEREAS, Seller engages in, among other things, the sales and distribution
of those medical nutrition products, including its pump, set and formula product
lines, as specifically listed on Exhibit A to this Agreement (the "Products");
and
WHEREAS, Seller desires to sell and assign to Buyer, and Buyer desires to
purchase from Seller, on the terms and subject to the conditions set forth in
this Agreement, certain of the Seller's assets associated with the manufacture
and distribution of the Products, as identified in Article I of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements and the conditions set forth in this Agreement, Buyer
and Seller hereby agree as follows:
ARTICLE I
TRANSFER OF ASSETS
1.01 TRANSFER OF ASSETS. On the terms and subject to the conditions set
forth in this Agreement, Seller shall, at the Closing (as defined in Section
3.01 hereof), sell, transfer and assign to Buyer, and Buyer shall purchase and
acquire from Seller, all of Seller's right, title and interest, as of the
Closing Date (as defined in Section 3.01 hereof), in and to all of the assets of
Seller related to, or used in conjunction with its business of manufacturing and
distributing the Products as identified below and as specifically listed or
described on the Disclosure Schedule under the caption referencing this Section
1.01 (collectively, the "Assets"), including but not limited to:
(a) All of the equipment (including, without limitation, tools, dies
and moldings) and machinery listed on Schedule 1.01(a) hereto;
(b) All of Seller's inventories of supplies, raw materials, parts,
finished goods, work-in-process, product labels and packaging materials
used in connection with the manufacture and distribution of the Products
and Seller's interest in all orders or contracts for the purchase of
supplies, raw materials, parts, product labels and packaging materials used
in connection with the manufacture and distribution of the Products subject
to the limitations set forth in Schedule 1.01(b) hereto;
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(c) Seller's interest in all licenses, purchase orders with vendors
and suppliers, contracts or agreements to which Seller is a party with
respect to the manufacture and distribution of the Products, as listed on
Schedule 1.01(c) hereto, including, without limitation, those identified in
the Disclosure Schedule under the caption referencing Section 4.13 as being
assumed by the Buyer;
(d) All unfilled or uncompleted customer contracts, commitments or
purchase or sales orders received and accepted by Seller in the ordinary
course of business in connection with the manufacture and distribution of
the Products, as listed on Schedule 1.01(d) hereto, other than purchase
orders for pumps from OEM customers of Seller as to whom Seller has
obtained the written consent of Buyer to continue making direct sales as
contemplated by Section 6.05;
(e) All documents or other tangible materials embodying technology or
intellectual property rights owned by, licensed to or otherwise controlled
by Seller and used exclusively in connection with the manufacture,
promotion and distribution of the Products, or being developed for use
exclusively in connection with the manufacture, promotion and distribution
of the Products whether such properties are located on Seller's business
premises or on the business premises of Seller's suppliers or customers,
including, without limitation all software programs (including both source
and object codes) and related documentation for software, used in or
developed specifically and exclusively for support of the manufacture,
promotion and distribution of the Products and which form an integral part
of such process;
(f) All rights in (i) patents and patent applications to the extent
used exclusively in connection with the manufacture and distribution of
Products; (ii) trademarks, service marks, trade names, product names except
to the extent described in Schedule 1.01(f) (including without limitation
the name "Nutra Pharma" or any combination of words in which the name
"Nutra Pharma" appears or any rights associated with such name or any right
to use such name in all jurisdictions in which Seller either currently uses
any such name or has any right to use any such name); (iii) copyrights,
mask works, trade secrets or other intellectual property rights owned by,
licensed to or otherwise controlled by Seller and used exclusively in,
developed for use in, being developed exclusively for use in or necessary
to the conduct of the manufacture and distribution of the Products as now
conducted or planned by Seller to be conducted including, without
limitation, those set forth in the Disclosure Schedule under the caption
referencing Section 4.14 and which are to be included in the Assets and
including the rights to institute or maintain
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any action or investigation for and to recover damages for any past
infringement thereof or any actions of unfair competition relating thereto;
(g) All of Seller's books, records and other documents and
information relating to the Assets or the manufacture and distribution of
the Products, including, without limitation, all customer, prospect, dealer
and distributor lists, sales literature, inventory records, purchase orders
and invoices, sales orders and sales order log books, customer information,
commission records, correspondence, product data, material safety data
sheets, price lists, product demonstrations, quotes and bids, all product
catalogs and brochures and electronic copies of all promotional and
marketing materials, artwork, photographs and the like; provided that
Seller shall retain original documents as required for audit purposes
(including, without limitation, invoices, purchase orders and inventory
records);
(h) All permits, licenses and other governmental approvals held by
Seller and listed on Schedule 1.01(h) hereto with respect to the Products,
to the extent they are assignable;
(i) All prepaid expenses and deposits made by Seller with respect to
the manufacture and distribution of the Products; and
(j) Goodwill (including all goodwill associated with and symbolized
by the name or names identified in subsection (f) above and used
exclusively in the conduct of the manufacture and distribution of the
Products as now conducted), all related tangibles and intangibles other
than accounts receivable which Seller uses exclusively in the conduct of
the manufacture and distribution of the Products and all rights to continue
to use the Assets in the conduct of a going business involving the
manufacture and distribution of the Products, provided, however, that Buyer
shall acquire no rights in the names, symbols, trademarks or service marks
listed in Schedule 1.01(f) hereto that are expressly identified as being
excluded from the Assets.
1.02 LIABILITIES ASSUMED. Seller shall assume the contracts, agreements,
licenses and permits described in Sections 1.01(c), 1.01(d) and 1.01(h) which
were entered into by Seller in the ordinary course of business and are
specifically listed on schedules to those sections and shall fully and
faithfully perform all the Seller's obligations thereunder. Except for the
liabilities to be assumed pursuant to the preceding sentence or as otherwise
specifically set forth in this Agreement, the parties expressly agree that Buyer
shall not assume, and nothing contained in this Agreement shall be construed as
an assumption by Buyer of, any other liabilities, obligations or undertakings of
Seller of any nature whatsoever, whether accrued, absolute, fixed or contingent,
known or unknown due or to become due, unliquidated or otherwise.
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ARTICLE II
PURCHASE PRICE
2.01 AMOUNT. The purchase price (the "Purchase Price") for the Assets
shall be:
(a) Eight Hundred Fifty Five Thousand (855,000) shares of common
stock, $0.01 par value, of the Buyer (the "Shares");
(b) a promissory note issued by the Buyer for Three Million Dollars
($3,000,000) in the form attached hereto as Schedule 2.01(b) (the "Note);
and
(c) an earn-out cash payment equal to ten percent (10%) of Buyer's
Gross Profit (as defined in Article XII) calculated in accordance with
generally accepted accounting principles ("GAAP") and the provisions of
Article XII hereof from revenues received by Buyer from the manufacture,
distribution and sale of the Products in excess of the following amounts
for the respective years: Four Million Five Hundred Thousand Dollars
($4,500,000) for calendar year 2000, Five Millon Dollars ($5,000,000) for
calendar year 2001, Five Million Five Hundred Thousand Dollars ($5,500,000)
for calendar year 2002, and Six Million Dollars ($6,000,000) for calendar
year 2003.
2.02 MANNER OF PAYMENT. Buyer shall pay that portion of the Purchase Price
for the Assets described in Section 2.01(a) and (b) on the Closing Date by
delivering to Seller the Shares and the duly executed Note. Buyer shall pay
that portion of the Purchase Price described in Section 2.01 (c) within ninety
(90) days after the end of the calendar year to which each payment relates.
ARTICLE III
CLOSING
3.01 CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") will take place at the offices of Xxxxxx & Xxxxxxx
LLP, 000 Xxxxx Xxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx at 10:00 a.m. on or before
January 13, 1997 provided that all conditions to the parties' obligations set
forth in Article VIII hereof to be performed prior to the Closing have been
satisfied or waived by the party entitled to the benefit of such condition, or
at such other place and on such other date as is mutually agreeable to Buyer and
Seller. The date on which the Closing occurs is referred to herein as the
"Closing Date," and the Closing shall be deemed effective as of 8:00 a.m.,
Minneapolis time, on the Closing Date.
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3.02 GENERAL PROCEDURE. At the Closing, each party shall deliver to the
party entitled to receipt thereof the documents required to be delivered
pursuant to Article VIII hereof and such other documents, instruments and
materials (or complete and accurate copies thereof, where appropriate) as may be
reasonably required in order to effectuate the intent and provisions of this
Agreement, and all such documents, instruments and materials shall be
satisfactory in form and substance to counsel for the receiving party. The
conveyance, transfer, assignment and delivery of the Assets shall be effected by
Seller's execution and delivery to Buyer of a xxxx of sale substantially in the
form attached hereto as Schedule 3.02 (the "Xxxx of Sale") and such other
instruments of conveyance, transfer, assignment and delivery as Buyer shall
reasonably request to cause Seller to transfer, convey, assign and deliver the
Assets to Buyer.
3.03 REMOVAL OF ASSETS. The Buyer covenants and agrees that all Assets
(other than those necessary for the continued manufacture of pumps by Seller as
provided in Section 6.05) shall be removed by Buyer, at Buyer's expense, from
the premises of Seller within ninety (90) days following the Closing Date. Any
Assets not so removed may be disposed of in any manner deemed reasonable by the
Seller at the sole cost and expense of the Buyer.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer that, except as set forth in
the Disclosure Schedule delivered by Seller to Buyer on the date hereof (the
"Disclosure Schedule") (which Disclosure Schedule sets forth the exceptions to
the representations and warranties contained in this Article IV):
4.01 INCORPORATION AND CORPORATE POWER. Seller is a corporation duly
incorporated, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts and has all requisite corporate power and
authority to own the Assets being sold to Buyer and to perform this Agreement.
4.02 SUBSIDIARIES. Except as otherwise set forth in the Disclosure
Schedule under the caption referencing this Section 4.02, the Assets do not
include any stock, partnership interest, joint venture interest or any other
security or ownership interest issued by any other corporation, organization or
entity.
4.03 EXECUTION, DELIVERY; VALID AND BINDING AGREEMENT. The execution,
delivery and performance of this Agreement by Seller and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Seller, and no other proceedings on its part are necessary
to authorize the execution, delivery and performance of this Agreement. This
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Agreement has been duly executed and delivered by Seller and, assuming that this
Agreement is the valid and binding agreement of Buyer, constitutes the valid and
binding obligation of Seller, enforceable in accordance with its terms, except
as such enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors' rights or by general principles of equity.
4.04 AUTHORITY; NO BREACH. Seller has the requisite corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. The execution, delivery and performance of this Agreement by Seller
and the consummation of the transactions contemplated hereby do not conflict
with or result in any breach of any of the provisions of, or constitute a
default under, result in a violation of, result in the creation of a right of
termination or acceleration or any lien, security interest, charge or
authorization, consent, approval, exemption or other action by or notice to any
court or other governmental body, under the provisions of the Articles of
Organization or Bylaws of Seller or any indenture, mortgage, lease, loan
agreement or other agreement or instrument by which Seller or the Assets are
bound or affected (other than consents required under Section 8.01(c) hereof,
which Seller undertakes to obtain prior to the Closing Date), or any law,
statute, rule or regulation or order, judgment or decree to which Seller or the
Assets are subject. No consent, approval or authorization of any governmental
or regulatory authority is required to be obtained by Seller in connection with
its execution, delivery and performance of this Agreement other than may be set
forth in the Disclosure Schedule under the caption referencing this Section
4.04.
4.05 GOOD CONDITION. To the best of Seller's knowledge, all of the
equipment and machinery being sold to Buyer and listed on Schedule 1.01(a) is in
good condition and repair, ordinary wear and tear excepted, and is adequate and
suitable for the purposes for which it is currently being used.
4.06 ASSETS SUFFICIENT TO MANUFACTURE AND DISTRIBUTE PRODUCTS. The Assets
being transferred to Buyer pursuant to this Agreement, including the machinery
and equipment listed on Schedule 1.01(a) are sufficient to enable Buyer to
continue to manufacture and distribute the Products in the same manner as Seller
is currently doing so, except for assets related to administrative support
services, such as computer services for accounting and manufacturing support,
which are not being transferred. Except as otherwise described in the
Disclosure Schedule under the caption referencing this Section 4.06, all of the
equipment and machinery listed on Schedule 1.01(a) is in good condition and
repair, ordinary wear and tear excepted, and is usable in the ordinary course of
business. There are no defects in such Assets or other conditions relating
thereto which, in the aggregate, materially adversely affect the operation or
value of such Assets. The representations and warranties in this Section 4.06
are to the best of Seller's knowledge.
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4.07 INVENTORY. Seller's inventory of raw materials, work in process and
finished goods relating to the manufacture and distribution of the Products
consists of items of a quality and quantity usable and, with respect to finished
goods only, salable in the ordinary course of the business at prices Seller has
charged during the past sixty (60) days. Seller's inventory of such finished
goods is not slow-moving as determined in accordance with past practices,
obsolete or damaged and is merchantable and fit for its particular use. Seller
has on hand or has ordered and expects timely delivery of such quantities of raw
materials and has on hand such quantities of work in process and finished goods
as are reasonably required timely to fill current orders on hand which require
delivery within ninety (90) days. The Disclosure Schedule, under the caption
referencing this Section 4.07, contains a materially complete and accurate
summary of the Seller's inventory of such raw materials, work in progress and
finished goods relating to the manufacture and distribution of Products as of
January 6, 1997, compiled and valued in accordance with generally accepted
accounting principles. None of the Inventory items necessary to manufacture the
Products is in short supply or otherwise difficult to obtain. The
representations and warranties in this Section 4.07 are to the best of Seller's
knowledge.
4.08 FINANCIAL STATEMENTS. Seller has delivered to Buyer copies of the
unaudited statement of earnings of the Seller for the eight-month period ended
November 30, 1996 (such statement being herein referred to as the "Latest
Financial Statement"). The Latest Financial Statement is based upon the
information contained in the books and records of Seller and fairly presents the
financial condition of the business as of the date thereof and results of
operations for the period referred to therein. The Latest Financial Statement
has been prepared in accordance with generally accepted accounting principles
applicable to unaudited interim financial statements (and thus may not contain
all notes and may not contain prior period comparative data which are required
to be prepared in accordance with generally accepted accounting principles) and
reflects all adjustments necessary to a fair statement of the results for the
interim period presented. It is recognized however, that the Seller has not
previously accounted for the business of manufacturing and distributing the
Products on a separate basis and that the Latest Financial Statement contains an
allocation of overhead and administrative expenses for which no separate
documentation is available. No representation is made with respect to any such
allocation, except that management of Seller (i) believes that such allocation
is fair and reasonable, and (ii) agrees to furnish Buyer copies of any and all
documentation that was used in preparing such allocation and to assist Buyer in
fulfilling any fair and reasonable Securities and Exchange Commission
requirements with respect thereto.
4.09 PROJECTIONS AND COST ANALYSES. All projections and cost analyses
heretofore delivered by Seller to Buyer are based upon reasonable assumptions
and
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in the opinion of management fairly represent the operations and prospects for
the manufacture and distribution of the Products.
4.10 NO MATERIAL ADVERSE CHANGES. Since December 17, 1996, there has been
no material adverse change in the assets, financial condition, operating
results, customer, employee or supplier relations, business condition or
prospects of Seller with respect to the manufacture and sale of the Products.
4.11 ABSENCE OF CERTAIN DEVELOPMENTS. Since December 17, 1996, Seller has
not in each case, with respect to the manufacture and sale of the Products:
(a) sold, assigned or transferred (including, without limitation,
transfers to any employees, affiliates or shareholders) any tangible
assets, in each case, except in the ordinary course of business;
(b) sold, assigned or transferred (including, without limitation,
transfers to any employees, affiliates or shareholders) any patents,
trademarks, trade names, product names copyrights, trade secrets or other
intangible assets;
(c) disclosed, to any person other than Buyer and authorized
representatives of Buyer, any proprietary confidential information related
to manufacture and distribution of the Products or to the Assets, other
than pursuant to a confidentiality agreement prohibiting the use or further
disclosure of such information, which agreement is identified in the
Disclosure Schedule under the caption referencing this Section 4.11 and is
in full force and effect on the date hereof;
(d) waived any rights of material value or suffered any extraordinary
losses or adverse changes in collection loss experience, whether or not in
the ordinary course of business or consistent with past practice;
(e) taken any other action or entered into any other transaction
other than in the ordinary course of business and in accordance with past
custom and practice, other than the transactions contemplated by this
Agreement or described on the Disclosure Schedule;
(f) suffered any material theft, damage, destruction or loss of or to
any property or properties owned or used by it, whether or not covered by
insurance; or
(g) made any single capital expenditure or commitment therefor in
excess of Ten Thousand Dollars ($10,000), except as set forth in Schedule
4.11(g) attached hereto.
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4.12 TITLE TO ASSETS.
Except as otherwise set forth herein, Seller owns good and marketable title
to all of the Assets free and clear of all liens and encumbrances (and none of
the Assets is subject to any personal property lease). Without limiting the
foregoing, there are no liens for taxes on any of the Assets other than liens
for taxes which are not yet due and payable.
4.13 CONTRACTS AND COMMITMENTS.
(a) The Disclosure Schedule, under the caption referencing this
Section 4.13, lists the following agreements, whether oral or written, to
which Seller is a party, which are currently in effect, and which relate to
the manufacture and distribution of the Products or to the Assets:
(i) confidentiality agreements; (ii) contract or group of related contracts
with the same party for the purchase of products or services under which
the undelivered balance of such products or services is in excess of Ten
Thousand Dollars ($10,000); (iii) contract or group of related contracts
with the same party for the sale of products or services under which the
undelivered balance of such products or services has a sales price in
excess of Ten Thousand Dollars ($10,000); (iv) contract or group of
related contracts with the same party (other than any contract or group of
related contracts for the purchase or sale of products or services)
continuing over a period of more than six (6) months from the date or dates
thereof, not terminable by it on thirty (30) days' or less notice without
penalty and involving more than Ten Thousand Dollars ($10,000); (v)
contract which prohibits Seller from freely engaging in business anywhere
in the world; (vi) contract for the distribution of any of the Products
(including any distributor, sales representative, sales and original
equipment manufacturer contract); (vii) license agreement or agreement
providing for the payment or receipt of royalties or other compensation by
Seller in connection with the intellectual property rights listed under the
caption referencing Section 1.01(f) and (g) hereof in the Disclosure
Schedule; (viii) contract or commitment for capital expenditures in excess
of Ten Thousand Dollars ($10,000) or (ix) other agreement which is either
material to the manufacture or distribution of the Products or was not
entered into in the ordinary course of business and which is a contract to
be assumed by Buyer hereunder.
(b) Seller has performed all material obligations required to be
performed by it in connection with the contracts or commitments required to
be disclosed in the Disclosure Schedule under the caption referencing this
Section 4.13 and is not in receipt of any claim of default under any
contract or commitment required to be disclosed under such caption; Seller
has no
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present expectation or intention of not fully performing any material
obligation pursuant to any contract or commitment required to be disclosed
under such caption; and Seller has no knowledge of any breach or
anticipated breach by any other party to any contract or commitment
required to be disclosed under such caption.
(c) Prior to the date of this Agreement, Buyer has been supplied with
a true and correct copy of each written contract or commitment, and a
written description of each oral contract or commitment, referred to under
the caption referencing this Section 4.13 in the Disclosure Schedule,
together with all amendments, waivers or other changes thereto.
4.14 INTELLECTUAL PROPERTY RIGHTS. The Disclosure Schedule describes under
the caption referencing this Section 4.14 all rights in patents, patent
applications, trademarks, service marks, trade names, product names, copyrights,
mask works, trade secrets, know-how or other intellectual property rights owned
by, licensed to or otherwise controlled by Seller exclusively in connection with
the manufacture and sale of the Products or used exclusively in, developed for
use exclusively in or necessary to the manufacture and distribution of the
Products as now conducted or planned to be conducted. Seller owns and possesses
all right, title and interest, or holds a valid license, in and to the rights
set forth under such caption, provided, however, that no representation is made
as to the registration of the trade name "Nutra Pharma." The Disclosure
Schedule describes under the caption referencing this Section 4.14 all
intellectual property rights which have been licensed to third parties and those
intellectual property rights which are licensed from third parties. Seller has
not received any notice of, nor are there any facts known to Seller which
indicate a likelihood of, any infringement or misappropriation by, or conflict
from, any third party with respect to the intellectual property rights listed in
the Disclosure Schedule; no claim by any third party contesting the validity of
any intellectual property rights listed under such caption has been made, is
currently outstanding or, to the best knowledge of the Seller, is threatened;
Seller has not received any notice of any infringement, misappropriation or
violation by Seller of any intellectual property rights of any third parties and
Seller, to the best knowledge of Seller, has not infringed, misappropriated or
otherwise violated any such intellectual property rights; and to the best
knowledge of Seller no infringement, illicit copying, misappropriation or
violation has occurred or will occur with respect to Products currently being
distributed by Seller or with respect to the Products currently under
development (in their present state of development) or with respect to the
manufacture and distribution of the Products as now conducted.
4.15 LITIGATION. Except as set forth in the Disclosure Schedule under the
caption referencing this Section 4.15, there are no actions, suits, proceedings,
orders or investigations pending or, to the best knowledge of Seller, threatened
against Seller, at law or in equity, or before or by any federal, state,
municipal or other
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governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign affecting the Products or the ability of Seller to
manufacture and distribute the Products, and there is no reasonable basis known
to Seller for any of the foregoing. The Disclosure Schedule under the caption
referencing this Section 4.15 lists all litigation relating to or affecting the
Assets or the Products or the manufacture and distribution thereof to which
Seller has been a party during the past five (5) years. Seller has not
received any opinion or legal advice to the effect that Seller is exposed from a
legal standpoint to any liability or disadvantage which may be material to the
Assets, financial condition, operating result, business condition or prospects
for the manufacture and distribution of the Products or Seller.
4.16 WARRANTIES. The Disclosure Schedule summarizes under the caption
referencing this Section 4.16 all claims outstanding, pending or, to the best
knowledge of Seller, threatened for breach of any warranty relating to any
Products sold or leased by Seller prior to the date hereof other than claims for
replacement of Products or warranty repairs which are not material in the
aggregate. The description of Seller's product warranties set forth under the
caption referencing this Section 4.16 is correct and complete. The Seller has
reserves for warranty claims fully adequate to cover all warranty claims made or
to be made against any Products sold or leased prior to the date thereof.
4.17 CUSTOMERS AND SUPPLIERS. The Disclosure Schedule, under the caption
referencing this Section 4.17, lists the 10 largest customers and suppliers of
Seller relating to the manufacture and distribution of the Products for the
fiscal year ended March 31, 1996, and for the eight-month period ended November
30, 1996 and sets forth opposite the name of each such customer or supplier the
approximate percentage of net sales or purchases by Seller attributable to such
customer or supplier for each such period. Since November 30, 1996, no customer
or supplier listed on the Disclosure Schedule under the caption referencing this
Section 4.17 has indicated that it will stop or decrease the rate of business
done with Seller except for changes in the ordinary course of Seller's business.
4.18 COMPLIANCE WITH LAWS; PERMITS. Seller and its officers, directors,
agents and employees have complied in all material respects with all applicable
laws, regulations and other requirements, including, but not limited to,
federal, state, local and foreign laws, ordinances, rules, regulations and other
requirements pertaining to product labeling and consumer products safety which
materially affect the manufacture and distribution of the Products or the Assets
as currently conducted by Seller; and no claims have been filed against Seller
alleging a violation of any such laws, regulations or other requirements.
Seller has no knowledge of any action, pending or threatened, to change any
laws, rules, regulations or ordinances affecting the manufacture and sale of the
Products or the Assets as currently manufactured and distributed. Seller is not
relying on any exemption from or
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deferral of any such applicable law, regulation or other requirement that would
not be available to Buyer after it acquires the Assets. Seller has, in full
force and effect, all licenses, permits and certificates, from federal, state,
local and foreign authorities (including, without limitation, the federal Food
and Drug Administration and any comparable foreign agencies) necessary to
manufacture and distribute the Products and own and operate Assets(collectively,
the "Permits") as currently owned and operated. A true, correct and complete
list of all the Permits is set forth under the caption referencing this Section
4.18 in the Disclosure Schedule, with an indication as to whether the Permit is
assignable to Buyer. Seller has conducted its business in compliance with all
material terms and conditions of the Permits.
4.19 DISCLOSURE. Neither this Agreement nor any of the Exhibits or
Schedules hereto nor any of the documents delivered by or on behalf of Seller
pursuant to Article VIII hereof nor the Disclosure Schedule nor the financial
statement referred to in Section 4.08 hereof, taken as a whole, contain any
untrue statement of a material fact regarding Seller or the Business or any of
the other matters dealt with in this Article IV relating to Seller or the
transactions contemplated by this Agreement. This Agreement, the Exhibit and
Schedules hereto, the documents delivered to Buyer by or on behalf of Seller
pursuant to Article VIII hereof, the Disclosure Schedule and the financial
statement referred to in Section 4.08 hereof, taken as a whole, do not omit any
material fact necessary to make the statements contained herein or therein, in
light of the circumstances in which they were made, not misleading.
4.20 FINANCIAL MATTERS. Seller represents and warrants to the Buyer that
it understands that the acquisition of the Shares as contemplated by this
Agreement involves substantial risk and that its financial condition and
investments are such that it is in a financial position to hold the Shares for
an indefinite period of time and to bear the economic risk of, and withstand a
complete loss of, such Shares. In addition, by virtue of its expertise, the
advice available to it and previous investment experience, Seller has extensive
knowledge and experience in financial and business matters, investments,
securities and private placements and the capability to evaluate the merits and
risks of the transactions contemplated by this Agreement. Seller represents
that it is an "accredited investor" as that term is defined in Regulation D
promulgated under the Securities Act of 1933. During the negotiation of the
transactions contemplated herein, Seller and its representatives have been
afforded full and free access to corporate books, financial statements, records,
contracts, documents, and other information concerning the Buyer and to its
offices and facilities, have been afforded an opportunity to ask such questions
of the Buyer's officers and employees concerning the Buyer's business,
operations, financial condition, assets, liabilities and other relevant matters
as they have deemed necessary or desirable, and have been given all such
information as has been requested, in order to evaluate the merits and risks of
the prospective investment contemplated herein.
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4.21 BROKERAGE. No third party shall be entitled to receive any brokerage
commissions, finder's fees, fees for financial advisory services or similar
compensation in connection with the transactions contemplated by this Agreement
based on any arrangement or agreement made by or on behalf of Seller.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller that:
5.01 INCORPORATION AND CORPORATE POWER. Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Minnesota, with the requisite corporate power and authority to enter into
this Agreement and perform its obligations hereunder.
5.02 EXECUTION, DELIVERY; VALID AND BINDING AGREEMENT. The execution,
delivery and performance of this Agreement by Buyer and the consummation of the
transactions contemplated hereby have been duly and validly authorized by all
requisite corporate action, and no other corporate proceedings on its part are
necessary to authorize the execution, delivery or performance of this Agreement.
This Agreement has been duly executed and delivered by Buyer and constitutes the
valid and binding obligation of Buyer, enforceable in accordance with its terms,
except as such enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors' rights or by general principles of equity.
5.03 NO BREACH. Buyer has the requisite corporate power and authority to
execute and deliver this Agreement and to perform its obligations hereunder.
The execution, delivery and performance of this Agreement by Buyer and the
consummation by Buyer of the transactions contemplated hereby do not conflict
with or result in any breach of any of the provisions of, constitute a default
under, result in a violation of, result in the creation of a right of
termination or acceleration or any lien, security interest, charge or
encumbrance upon any assets of Buyer, or require any authorization, consent,
approval, exemption or other action by or notice to any court or other
governmental body, under the provisions of the Articles of Incorporation or
Bylaws of Buyer or any indenture, mortgage, lease, loan agreement or other
agreement or instrument by which Buyer is bound or affected, or any law,
statute, rule or regulation or order, judgment or decree to which Buyer is
subject. No consent, approval or authorization of any governmental or
regulatory authority is required to be obtained by Buyer in connection with its
execution, delivery and performance of this Agreement.
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5.04 BROKERAGE. No third party shall be entitled to receive any brokerage
commissions, finder's fees, fees for financial advisory services or similar
compensation in connection with the transactions contemplated by this Agreement
based on any arrangement or agreement made by or on behalf of Buyer.
5.05 CAPACITY TO MANUFACTURE AND DISTRIBUTE PRODUCTS. Buyer has adequate
resources and capital such that upon transfer of the Assets to Buyer pursuant to
this Agreement Buyer shall have sufficient capacity to continue to manufacture
and distribute the Products in the same manner as Seller is currently doing so
for a period of one year.
5.06 LITIGATION. Except as set forth in the Disclosure Schedule under the
caption referencing this Section 5.06, there are no actions, suits, proceedings,
orders or investigations pending or, to the best knowledge of Buyer, threatened
against Buyer, at law or in equity, or before or by any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign which would materially affect the ability
of Buyer to manufacture and distribute the Products following the Closing, and
there is no reasonable basis known to Buyer for any of the foregoing. The
Filings defined in Section 5.11 list all litigation to which Buyer has been a
party during the past three (3) years. Buyer has not received any opinion or
legal advice to the effect that Buyer is exposed from a legal standpoint to any
liability or disadvantage which may be material to its financial condition,
operating results, business condition or prospects for the manufacture and
distribution of the Products.
5.07 COMPLIANCE WITH LAWS; PERMITS. Buyer has complied in all material
respects with all applicable laws, regulations and other requirements,
including, but not limited to, federal, state, local and foreign laws,
ordinances, rules, regulations and other requirements pertaining to its business
operations, including product labeling and consumer products safety, the non-
compliance with which would materially affect the ability of Buyer to
manufacture and distribute the Products. Buyer has no knowledge of any action,
pending or threatened, to change any laws, rules, regulations or ordinances
affecting the manufacture and sale of the Products.
5.08 CAPITALIZATION. The authorized stock of Buyer consists solely of
Twenty Million (20,000,000) shares of Common Stock $.01 par value and Five
Million (5,000,000) shares of Preferred Stock no par value. At December 31,
1996, there were Four Million Five Hundred Ninety Three Thousand Twenty Four
(4,593,024) shares of Common Stock issued, all of which shares were
outstanding. No shares of Preferred Stock were outstanding. All of the
issued and outstanding shares of stock of Buyer, including the Shares
delivered pursuant to this Agreement, are duly authorized, validly issued,
fully paid and nonassessable.
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5.09 REGISTRATION. The Shares to be paid as consideration pursuant to this
Agreement are of a series and class of stock of the Buyer which have been
registered with the Securities and Exchange Commission ("Commission") pursuant
to the Securities Act of 1933, as amended (the "Act"), but the Shares have not
and will not be registered with the Commission. Buyer has made, and shall at
all times continue to make, all filings necessary with the Commission in order
to maintain the registration of its Common Stock that is currently registered
and to ensure the availability to Seller of the benefits of Rule 144 promulgated
pursuant to the Act. Copies of all such filings which shall be made after the
Closing Date shall be furnished to Buyer together with any other information
affecting the availability of any exemptive provision. Buyer knows of no reason
why the benefits of Rule 144, subject to limitations on the amount of securities
that may be sold by an affiliate, would not be available to Seller upon
compliance by Seller with the provisions thereof applicable to Seller. The
Shares are of a class and series of stock which is regularly and actively traded
and trading in such shares has not been suspended nor is Buyer aware of any
basis upon which any such suspension is likely to be imposed; provided, however,
that Buyer makes no representation regarding the volume of any future trading
activity in its shares of Common Stock.
5.10 FINANCIAL STATEMENTS. Buyer has delivered to the Seller copies of its
financial statements for its fiscal year ended December 31, 1995, together with
the report of Ernst & Young LLP, independent auditors, with respect thereto.
Such financial statements have been prepared in accordance with generally
accepted accounting principles consistently applied, and fairly present the
financial position of Buyer and its subsidiaries on such date and the results of
their operations for the period then ended and there has been no change since
the date of such financial statements which had a material adverse effect on the
business operations or financial condition of Buyer taken as a whole such as to
require public disclosure under federal securities law and which has not been
publicly disclosed.
5.11 COMMISSION FILINGS. Buyer has made all required filings with the
Commission and, to the knowledge of Buyer, all such filings were complete and
accurate in all material respects as of the dates of such filings, and all such
filings complied in all material respects with all applicable requirements of
the Act and/or the Securities Exchange Act of 1934. Buyer has made available or
provided to Seller copies of (a) its Prospectus dated September 26, 1996, and
(b) Form 10-Q for the quarter ended September 30, 1996 (collectively, the
"Filings"). The Filings, as of the respective dates thereof, did not contain
any untrue statement of a material fact, or omit to state a material fact
required to be stated therein or necessary to make the statement contained
therein not misleading in light of the circumstances in which such statements
were made.
5.12 DISCLOSURE. Neither the Agreement nor any of the Exhibits or
Schedules hereto nor any of the documents or information delivered by or on
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behalf of Buyer pursuant to Section 4.20 hereof or pursuant to this Article V
nor the financial statement or other information referred to in Section 5.10
hereof, taken as a whole, contain any untrue statement of a material fact
regarding Buyer or its business or any of the other matters dealt with in this
Article V relating to Buyer or the transactions contemplated by this Agreement.
This Agreement, the Exhibits and Schedules hereto, the information documents
delivered to Buyer by or on behalf of Seller pursuant to Article V hereof and
Section 4.20 hereof, the financial statement or other information referred to in
Section 5.10 hereof, taken as a whole, do not omit any material fact necessary
to make the statements contained herein or therein, in light of the
circumstances in which they were made, not misleading.
ARTICLE VI
COVENANTS OF SELLER
6.01 CONDUCT OF THE MANUFACTURE AND DISTRIBUTION OF THE PRODUCTS. Seller
agrees to observe each term set forth in this Section 6.01 and agrees that, from
the date hereof until the Closing Date, unless otherwise consented to by Buyer
in writing:
(a) Seller shall not, directly or indirectly, sell, pledge, dispose
of or encumber any of the Assets, except in the ordinary course of
manufacture and distribution of the Products.
(b) Seller shall conduct its manufacture and distribution of the
Products in the ordinary course, and to refrain from entering into unusual
transactions, including unusually large sales to its distributors.
6.02 CONDITIONS. Seller shall take all commercially reasonable
actions necessary to cause the conditions set forth in Section 8.01 to be
satisfied and to consummate the transactions contemplated herein by the Closing
Date.
6.03 RESTRICTION ON TRANSFER OF SHARES. Seller covenants and agrees that
it is taking the Shares for investment; and not for resale; and that it will not
sell, assign, pledge, transfer or otherwise dispose of the Shares or of any
stock dividends, warrants or other rights issued with respect to the Shares, for
a period of three (3) years after the Closing Date. For purposes of enforcing
this covenant and agreement, the Shares shall bear a legend including this
restriction when they are delivered at the Closing, and Buyer may issue stop
transfer instructions to its transfer agent.
6.04 VOTING THE SHARES. Seller covenants and agrees that for a period of
three (3) years after the Closing Date it will vote the Shares as directed by
the Board of Directors of Buyer subject to the reasonable business judgment of
Buyer's board of
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directors and to compliance by Buyer with its obligations hereunder. For
purposes of enforcing this covenant and agreement, Seller shall deliver to Buyer
at the Closing an irrevocable proxy valid for three (3) years granting the Buyer
the right to so vote the Shares in the form of Schedule 6.04 hereto.
6.05 OPERATION OF PUMP ASSEMBLY BUSINESS. Seller agrees following the
Closing Date to continue to operate its pump assembly business until the Buyer
transfers the Assets used in the pump assembly business to a facility designated
by Buyer (which the parties contemplate may take up to three (3) years) (the
"Transition Period"). It is expected that all pump sales will be made from
Seller to Buyer, who will resell them to customers, with the exception of those
OEM customers for whom Buyer has given its prior written consent that Seller
may make direct sales (the "Direct OEM Customers").
The inventory of parts, supplies, work in process and finished pumps of the
Seller and the equipment, tools, dies and other fixed assets of the Seller
necessary for the continued manufacture of pumps shall be included in the
Assets, but shall be left at Seller's premises during the Transition Period. If
requested by Buyer, Seller shall execute a Uniform Commercial Code Financing
Statement to record Buyer's ownership in the assets.
With respect to contracts of Seller necessary for the manufacture and sale
of pumps, the parties shall make such arrangements on a case by case basis as
may be required in order to permit Seller to continue such manufacture and sale
in accordance with the provisions of this Section 6.05. Any new inventory items
required during the Transition Period shall be paid for and owned by Buyer.
Seller's invoices to Buyer for pumps shall show a credit for items used from
Buyer's inventory, and Seller shall reimburse Buyer at Seller's current standard
costs adjusted annually for general price changes for inventory items used in
pumps sold to the Direct OEM Customers.
During the Transition Period, fixed assets used in the manufacture of pumps
which may require replacement shall be replaced as follows: those fixed assets
with a replacement cost of less than $400 shall be purchased by Seller and the
cost thereof shall be added to Seller's cost of manufacture during the year in
which such replacement was made; those fixed assets with a replacement cost of
more than $400 shall be purchased by Buyer and made available to Seller without
expense.
All the foregoing inventory and assets, whether purchased by Seller or by
Buyer, shall be transferred without charge as designated by Buyer at the end of
the Transition Period or upon any cessation of Seller's obligations under this
Section 6.05. Buyer will pay packing and shipping charges.
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During the Transition Period, Seller will sell pumps to Buyer for Seller's
cost (which shall include a reasonable allocation of overhead expenses) plus ten
percent (10%) during the first twelve (12) months after the Closing Date, cost
plus fifteen percent (15%) during the next twelve (12) months, and Seller's cost
plus twenty percent (20%) thereafter. All sales made to Buyer hereunder shall
be made upon the terms and conditions of sale, including the warranty terms and
payment terms as set forth on Schedule 6.05. To enable Seller to estimate its
manufacturing scheduling and purchasing requirements, Buyer shall provide to
Seller rolling three (3) month forecasts for projected purchases of pumps with
the first month of each such forecast constituting a firm purchase order.
Seller shall pay Buyer a royalty equivalent to fifteen percent (15%) of its
gross revenues received from all sales of pumps by Seller to anyone other than
Buyer, such royalty, together with reimbursement for items of inventory used in
such sales, being payable within thirty (30) days after the end of each calendar
month in which the sales were made. The royalty shall apply to all such sales
of pumps from the Closing Date until the end of the Transition Period.
During the Transition Period, Seller shall continue to conduct the pump
assembly business in the same manner as it is currently being conducted,
Seller's cost shall be determined in accordance with GAAP, and any charges
incurred by Seller with related parties shall be at rates that are no less
favorable than Seller could obtain from an unrelated vendor. Seller shall
establish and maintain adequate accounting records and controls to determine
Seller's costs of pump assembly and Seller's gross revenues from sales of pumps
to anyone other than Buyer. Designated representatives of Buyer shall be
entitled inspect Seller's records during business hours for purposes of
confirming the Seller's costs of pump assembly and Seller's gross revenues from
sales of pumps to anyone other than Buyer.
Seller's obligation to continue manufacture of pumps pursuant to this
Section 6.05 shall cease if Buyer fails to purchase such quantity of pumps
which, when added to pumps sold by Seller to the Direct OEM Customers, exceeds a
threshold of Two Thousand (2,000) pumps during any twelve (12) month period, but
in no event shall its obligation to manufacture pumps exceed three (3) years.
Notwithstanding the provisions of Section 6.10 of this Agreement, the
Seller may continue to manufacture and sell pumps to the Direct OEM Customers,
if done in compliance with this Section 6.05, during the Transition Period; but
upon termination of the Transition Period, Seller shall cease all manufacture
and sale of pumps and use its best efforts to induce the Direct OEM Customers to
purchase pumps directly from Buyer.
6.06. TECHNICAL ASSISTANCE TO BUYER. For a period of twelve (12)
months following the Closing Date, Seller will provide at its expense
commercially
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reasonable technical assistance to the Buyer to enable Buyer to assimilate the
technology associated with the Assets, and to allow for the operational
transition for the set and formula products, all as more specifically described
in and limited by Schedule 6.06 to this Agreement.
6.07 BUYER'S RIGHTS WITH RESPECT TO IMPERIAL FLAVOURS. Seller is the
holder of fifty-five (55) Class B Preference Shares of Imperial Flavours, Inc.
Seller covenants and agrees that it will not divest any interest in such
investment in Imperial Flavours for a period of three (3) years after the
Closing Date, and that for a period of two (2) years after such three (3) year
period, Seller will grant Buyer a right of first refusal to acquire such stock
of Imperial Flavours, if Sellers desires to sell it.
6.08 STANDSTILL AGREEMENT. For a period commencing on the date of this
Agreement and continuing for a period ending five (5) years after the Closing
Date, Seller agrees that neither it nor its Associates or Affiliates, as those
terms are defined in Rule 12(b)(2) of the General Rules and Regulations of the
Securities Exchange Act of 1934, as in effect on the date hereof (the "1934
Act"), will, without the consent of the Board Directors of Buyer:
(a) Acquire, or offer to acquire, directly or indirectly, any equity
securities of the Buyer in excess of the number of Shares issued to it in
part payment of the Purchase Price (and any shares issued with respect
thereto);
(b) Proceed with or seek to cause, directly or indirectly, any
acquisition of the Buyer, including any assets or other property rights
(tangible and intangible) of the Buyer; or
(c) Directly or indirectly, otherwise act, alone or in consort with
others, through the solicitation of proxies to control the Buyer.
6.09 NO NEGOTIATIONS, ETC. Prior to the Closing Date, Seller shall
not directly or indirectly, through any officer, director, agent or otherwise,
solicit, initiate or encourage submission of any proposal or offer from any
person or entity (including any of its or their officers or employees) relating
to any acquisition or purchase of all or a material portion of the Assets,
Seller shall promptly notify Buyer if any such proposal or offer, or any inquiry
from or contact with any person with respect thereto, is made and shall promptly
provide Buyer with such information regarding such proposal, offer, inquiry or
contact as Buyer may request.
6.10 NONCOMPETITION COVENANT. During the ten-year period commencing on the
Closing Date, Seller and its direct and indirect corporate shareholders shall
not directly or indirectly engage in any business activities that are
competitive with the manufacture and distribution of the Products as conducted
by Seller prior to the consummation of the transactions contemplated hereby.
For this purpose, Seller's
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"Hearty Balance" line of products shall not be deemed to be competitive. Seller
understands that Buyer would not have agreed to purchase the Assets without
having received this noncompetition covenant from Seller, and Seller
acknowledges that it has entered into this noncompetition covenant as a material
inducement to Buyer to consummate the transactions contemplated hereby. Seller
will use its best efforts of obtain the benefits of a nonsoliciation agreement
from Xxxx Xxxxxx comparable to one currently running in favor of Seller.
6.11 PRODUCT LIABILITY. Seller covenants and agrees that it will be liable
for any claims arising in connection with Products sold prior to the Closing
Date, including without limitation all expenses associated with any product
returns, any warranty claims, and any product liability claims. Seller hereby
authorizes Buyer, in behalf of Seller, to handle and process all such claims.
Buyer will provide Seller with a monthly report and invoice, which shall be
payable by Seller within thirty (30) days, for all claims relating to product
returns and ordinary warranty claims. Buyer shall give written notice of any
product liability claims in accordance with Article X of this Agreement.
6.12 SALES TAX. Seller shall be responsible for paying any and all sales
taxes, Canadian Goods and Services taxes, or similar taxes or charges payable
upon transfer of ownership of the Assets to Buyer on the Closing Date.
ARTICLE VII
COVENANTS OF BUYER
Buyer covenants and agrees with Seller as follows:
7.01 CONDITIONS. Buyer shall take all commercially reasonable actions
necessary to cause the conditions set forth in Section 8.02 to be satisfied and
to consummate the transactions contemplated herein as soon as reasonably
possible after the satisfaction thereof (but in any event within three business
days of such date).
7.02 BOARD REPRESENTATION. After the Closing Date, if requested by Seller,
Buyer will seek to have a person designated by Seller's chief executive officer,
subject to approval of such designee by Buyer's board of directors, which
approval shall not be unreasonably withheld or delayed, elected as a member of
Buyer's board of directors at a board of directors meeting held within sixty
(60) days after the request, and shall use its best efforts to have such person
nominated for election and elected to the board at its subsequent annual
shareholders meetings; provided any such designee shall first waive any right to
participate in the Nutrition Medical, Inc. 1996 Non-Employee Director Stock
Option Plan (the "Plan"). Buyer's obligation hereunder shall terminate upon
the earlier of (i) full and final payment of the Note,
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or (ii) the date on which Seller ceases to own more than fifty percent (50%) of
the Shares. Subject to the foregoing condition with respect to waiver of
participation in the Plan, any such member of the Buyer's board of directors
shall receive such compensation or expense reimbursement as is generally made
available by the Buyer to its outside directors.
ARTICLE VIII
CONDITIONS TO CLOSING
8.01 CONDITIONS TO BUYER'S OBLIGATIONS. The obligation of Buyer to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the following conditions on or before the Closing Date:
(a) The representations and warranties set forth in Article IV hereof
shall be true and correct in all material respects at and as of the Closing
Date as though then made, except that any such representation or warranty
made as of a specified date (other than the date hereof) shall only need to
have been true on and as of such date;
(b) Seller shall have performed in all material respects all of the
covenants and agreements required to be performed and complied with by it
under this Agreement prior to the Closing;
(c) Seller shall have obtained, or caused to be obtained, each
consent and approval required in order to complete the transactions
contemplated hereby.
(d) There shall not be threatened, instituted or pending any action
or proceeding, before any court or governmental authority or agency,
domestic or foreign, challenging or seeking to make illegal, or to delay or
otherwise directly or indirectly restrain or prohibit, the consummation of
the transactions contemplated hereby or seeking to obtain material damages
in connection with such transactions.
(e) On the Closing Date, Seller shall have delivered to Buyer the
following:
(i) the Xxxx of Sale and such other instruments of conveyance,
transfer, assignment and delivery as Buyer shall have reasonably
requested pursuant to Section 3.02 hereof;
(ii) the irrevocable proxy pursuant to Section 6.04 hereof; and
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(iii) certificates of appropriate officer(s) of Buyer dated
the Closing Date, stating that the conditions set forth in subsections
8.01(a) and (b) above have been satisfied.
8.02 CONDITIONS TO SELLER'S OBLIGATIONS. The obligations of Seller to
consummate the transactions contemplated by this Agreement are subject to the
satisfaction of the following conditions on or before the Closing Date:
(a) The representations and warranties set forth in Article V hereof
will be true and correct in all material respects at and as of the Closing
as though then made;
(b) Buyer shall have performed in all material respects all the
covenants and agreements required to be performed by it under this
Agreement prior to the Closing;
(c) There shall not be threatened, instituted or pending any action
or proceeding, before any court or governmental authority or agency,
domestic or foreign, challenging or seeking to make illegal, or to delay or
otherwise directly or indirectly restrain or prohibit, the consummation of
the transactions contemplated hereby or seeking to obtain material damages
in connection with such transactions.
(d) On the Closing Date, Buyer will have delivered to Seller:
(i) the certificate for the Shares;
(ii) the Note; and
(iii) a certificate of appropriate officer(s) of Buyer dated
the Closing Date, stating that the conditions set forth in subsections
8.02(a) and (b) above have been satisfied.
ARTICLE IX
TERMINATION
9.01 TERMINATION. This Agreement may be terminated at any time prior
to the Closing:
(a) by the mutual consent of Buyer and Seller;
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(b) by either Buyer or Seller if there has been a material
misrepresentation, breach of warranty or breach of covenant on the part of
the other in the representations, warranties and covenants set forth in
this Agreement;
(c) by Buyer if, after the date hereof, there shall have been a
material adverse change in the condition of the Assets or if, after the date
hereof, an event shall have occurred which, so far as reasonably can be
foreseen, would result in any such change, except to the extent such change
is directly caused by Buyer; or
(d) by Seller if, after the date hereof, there shall have been a
material adverse change in the condition, financial or otherwise, of the
Buyer.
9.02 EFFECT OF TERMINATION. In the event of termination of this
Agreement by either Buyer or Seller as provided in Section 9.01, this Agreement
shall become void and there shall be no liability on the part of either Buyer or
Seller, or their respective stockholders, officers, or directors, except that
Sections 11.01, 11.02 and 11.10 hereof shall survive indefinitely, and except
with respect to willful breaches of this Agreement prior to the time of such
termination.
ARTICLE X
SURVIVAL; INDEMNIFICATION
10.01 SURVIVAL, INDEMNIFICATION. The representations and warranties
contained in this Agreement shall survive the Closing for a period of three (3)
years, except the representation and warranty set forth in Section 4.12, which
shall survive without limitation. Each of the covenants contained in this
Agreement shall survive the Closing for such period of time as is necessary for
it to be fully performed as described in this Agreement.
Seller agrees to indemnify Buyer with respect to, and hold Buyer harmless
from, any loss, liability or expense (including, but not limited to, reasonable
legal fees) which Buyer may directly or indirectly incur or suffer by reason of,
or which results, arises out of or is based upon (a) the inaccuracy of any
representation or warranty made by Seller in this Agreement, or (b) the failure
of Seller to comply with any covenants or other commitments made by Seller in
this Agreement [provided, however: (i) that notice of any claim for
indemnification hereunder with respect to any inaccuracy of a representation or
warranty made by Seller in this Agreement shall be made within three (3) years
following the Closing Date, and (ii) no claim shall be brought except to the
extent that such claim, when aggregated with all previous claims, shall exceed
Ten Thousand Dollars ($10,000). Any claim for a breach of a covenant shall be
subject to the applicable legal statute of limitations for
-23-
bringing such claim In no event shall Seller be liable for a claim for
indemnification which exceeds the Purchase Price paid and to be paid hereunder.
Buyer agrees to indemnify Seller with respect to, and hold Seller harmless
from, any loss, liability or expense (including, but not limited to, reasonable
legal fees) which Seller may directly or indirectly incur or suffer by reason
of, or which results, arises out of or is based upon (a) the inaccuracy of any
representation or warranty made by Buyer in this Agreement, or (b) the failure
of Buyer to comply with any covenants or other commitments made by Buyer in this
Agreement [provided, however: (i) that notice of any claim for indemnification
hereunder with respect to any inaccuracy of a representation or warranty made by
Buyer in this Agreement shall be made within three (3) years following the
Closing Date, and (ii) no claim shall be brought except to the extent that such
claim, when aggregated with all previous claims, shall exceed Ten Thousand
Dollars ($10,000). Any claim for a breach of a covenant shall be subject to the
applicable legal statute of limitations for bringing such claim In no event
shall Buyer be liable for a claim for indemnification which exceeds the Purchase
Price paid and to be paid hereunder.
10.02 LEGAL PROCEEDINGS. In the event Buyer or Seller become involved
in any legal, governmental or administrative proceeding which may result in
indemnification claims hereunder, such party shall promptly notify the other
party in writing and in full detail of the filing, and of the nature of such
proceeding. The other party may, at its option and expense, defend any such
proceeding if the proceeding could give rise to an indemnification obligation
hereunder. If the other party elects to defend any proceeding, it shall have
full control over the conduct of such proceeding, although the party being
indemnified shall have the right to retain legal counsel at its own expense and
shall have the right to approve any settlement of any dispute giving rise to
such proceeding, provided that such approval may not be withheld unreasonably by
the party being indemnified. The party being indemnified shall reasonably
cooperate with the indemnifying party in such proceeding.
ARTICLE XI
MISCELLANEOUS
11.01 PRESS RELEASES AND ANNOUNCEMENTS. Prior to the Closing Date,
neither party hereto shall issue any press release (or make any other public
announcement) related to this Agreement or the transactions contemplated hereby
or make any announcement to the employees, customers or suppliers of Seller
without prior written approval of the other party hereto, except as may be
necessary in order to obtain consents necessary to the consummation of the
transactions contemplated hereby or which may be necessary, in the opinion of
counsel to the party seeking to make disclosure, to comply with the requirements
of this Agreement or applicable
-24-
law. If any such press release or public announcement is so required, the party
making such disclosure shall consult with the other party prior to making such
disclosure, and the parties shall use all reasonable efforts, acting in good
faith, to agree upon a text for such disclosure which is satisfactory to both
parties.
11.02 EXPENSES. Except as otherwise expressly provided for herein,
Seller and Buyer will pay all of their own expenses (including attorneys' and
accountants' fees in connection with the negotiation of this Agreement, the
performance of their respective obligations hereunder and the consummation of
the transactions contemplated by this Agreement (whether consummated or not).
11.03 FURTHER ASSURANCES. Seller agrees that, on and after the Closing
Date, it shall take all appropriate action (without incurring any out-of-pocket
expenses) and execute any documents, instruments or conveyances of any kind
which may be reasonably necessary or advisable to carry out any of the
provisions hereof, including, without limitation, putting Buyer in possession
and operating control of the Assets.
11.04 AMENDMENT AND WAIVER. This Agreement may not be amended or
waived except in a writing executed by the party against which such amendment or
waiver is sought to be enforced. No course of dealing between or among any
persons having any interest in this Agreement will be deemed effective to modify
or amend any part of this Agreement or any rights or obligations of any person
under or by reason of this Agreement.
11.05 NOTICES. All notices, demands and other communications to be
given or delivered under or by reason of the provisions of this Agreement will
be in writing and will be deemed to have been given when personally delivered or
three business days after being mailed by first class U.S. mail, return receipt
requested, or when receipt is acknowledged, if sent by facsimile, telecopy or
other electronic transmission device. Notices, demands and communications to
Buyer and Seller will, unless another address is specified in writing, be sent
to the address indicated below:
Notices to Buyer: With a copy to:
----------------- ---------------
Nutrition Medical, Inc. Xxxxxx & Xxxxxxx LLP
0000 - 00xx Xxxxxx Xxxxx 000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000 Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxx Attention: Xxxxxxx Xxxxxxxx
Telecopy: (000) 000-0000 Telecopy: (000) 000-0000
Notices to Seller: With a copy to:
------------------ ---------------
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Xxxx Xxxxxx Inc. Xxxxxx X. Xxxxxxxxxx, Esq.
2 Xxxxxxx Boulevard Xxxxxx & Xxxxxxx L.L.P.
Xxxxxxxxxx, Xxxxx Xxxxxx 00000 One Federal Street
Attention: Xxxxx Xxxxxxx Xxxxxx, Xxxxxxxxxxxxx 00000
Telecopy: (000) 000-0000 Telecopy: (000) 000-0000
11.06 ASSIGNMENT. This Agreement and all of the provisions hereof will
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, except that neither this Agreement
nor any of the rights, interests or obligations hereunder may be assigned by
either party hereto without the prior written consent of the other party hereto.
11.07 SEVERABILITY. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Agreement.
11.08 COMPLETE AGREEMENT. This Agreement and the Exhibit and Schedules
hereto, the Disclosure Schedule and the other documents referred to herein
contain the complete agreement between the parties and supersede any prior
understandings, agreements or representations by or between the parties, written
or oral, which may have related to the subject matter hereof in any way.
11.09 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, any one of which need not contain the signatures of more than one
party, but all such counterparts taken together will constitute one and the same
instrument.
11.10 GOVERNING LAW. The internal law, without regard to conflicts of
laws principles, of the State of Minnesota will govern all questions concerning
the construction, validity and interpretation of this Agreement and the
performance of the obligations imposed by this Agreement.
ARTICLE XII
PROVISIONS RELATIVE TO EARN OUT
12.01 DEFINITIONS. For purposes of this Agreement, the following
definitions shall apply:
(a) The "Acquired Assets" shall mean the combined business, assets
and properties of the Seller in whatever corporate form, combination or
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structure it may hereafter be conducted by Buyer. Buyer shall cause business
activities and operations of the Acquired Assets to be accounted for separately
from any other business activities and operations of Buyer or any of its
affiliates and shall account for the results of operations of the Acquired
Assets on the basis of a fiscal year ending December 31 in each year.
(b) "Disposition" shall mean any sale, transfer or conveyance (by
means of stock sale or asset sale or otherwise) of substantially all of the
Acquired Assets and business associated therewith, but shall not include
the grant of a security interest in the Acquired Assets in favor of an
institutional lender.
(c) "Gross Profit" for any fiscal year shall mean the gross revenues
received by Buyer from the manufacture, distribution and sale of the
Products less direct costs of sale determined in accordance with generally
accepted accounting principles; provided, that there shall be excluded from
consideration, either as income or expense as the case may be, in
determining Gross Profit the following:
(i) Gains or losses from the sale of tangible or intangible
assets other than in the ordinary course of business;
(ii) Management fees, allocation of administration overhead, or
other similar charges attributable to any Affiliate of the Buyer made
other than in accordance with reasonable commercial practices or as
required by regulatory authorities or order;
(iii) Any allocation with respect to the Acquired Assets of
any sum for legal or accounting services other than for charges for
such services actually rendered to the Acquired Assets;
(iv) Extraordinary or non-recurring items;
(v) Any distributions of the payments pursuant to Section
2.01(c) (the "Earn Out"), or any portion of the Purchase Price
attributable to good will.
If in connection with any sale by the Buyer of its products or
services to any Affiliate of the Buyer (i) the prices or terms of payment
are less favorable than those extended by the Buyer to any independent
customer in the ordinary course of trade or (ii) sale of the Products are
charged with any selling expenses which would reduce the Gross Profit to an
amount which is less than the average Gross Profit which would be earned on
the sale of the Products in the ordinary course of trade, Gross Profit
shall be increased by the
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difference in price or expenses, as the case may be, actually received or
incurred in respect of the sale of the Products and the prices or expenses
which would have been paid or incurred in a transaction conducted in the
ordinary course of trade.
12.02 COMPUTATION OF GROSS PROFIT. The computations of Gross Profit
shall be prepared by the Chief Financial Officer of Buyer who shall certify that
computations were prepared in accordance with GAAP. A copy of each such
computation shall be delivered to Seller as soon as practicable after end of
each calendar year in which an Earn Out is applicable pursuant to this Agreement
but no later than 120 days after the end of each calendar year. In the event
that Seller does not agree that any such computation accurately reflects Gross
Profit for any relevant calendar year, it shall submit to the Buyer in writing,
no later than 30 days after receipt of such computation, written notification
that it disagrees with such computation together with Seller's computation
thereof. If such notice is not delivered to the Buyer within such 30 day
period, the computation submitted to Seller shall be conclusively deemed to be
correct. If the parties are unable to reconcile their respective differences as
to the computation of Gross Income, then any differences which have not been
reconciled shall be submitted to a firm of independent certified public
accountants acceptable to both Buyer and Seller (the "Arbitrator"), whose
decision with respect thereto shall be final. Payments with respect to any
portion of the Earn Out which is not in dispute shall be paid on the dates
specified in Article III; any balance due above any amount previously paid by
the Buyer shall be paid within 15 days of a final determination hereunder.
12.03 RECORDS AND INSPECTION. Buyer will maintain all reasonable books
and records with respect to sale of the Products as may be necessary to carry
out the provisions hereof, until the expiration or termination of the earn out
period. Such books and records shall be open to inspection and audit at
reasonable hours by Seller or its designee.
12.04 DISPOSITION. Nothing contained in this Agreement shall be
construed to restrict the ability of the Buyer to make any Disposition of the
Acquired Assets in such manner as Buyer in its sole discretion deems
appropriate; PROVIDED, that the Note shall immediately become due and payable in
full upon the making of any such Disposition.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
NUTRITION MEDICAL, INC. [BUYER]
By /s/ Xxxxxxx X. Xxxx
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Its President CEO
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ELAN PHARMA INC. [SELLER]
By /s/ Xxxxx Xxxxxxx
-----------------------------------
Its President
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UNDERTAKING
Elan Pharmaceutical Research Corp., the sole shareholder of Elan Pharma
Inc., and Elan Corporation plc, the sole shareholder of Elan Pharmaceutical
Research Corp., in consideration of the benefits they expect to receive from the
foregoing Asset Purchase Agreement, and to induce Nutrition Medical, Inc. to
enter into such Asset Purchase Agreement, hereby agree in their own behalf and
in behalf of any business controlled by either of them to be bound by the
provisions of Section 6.08, 6.09 and 6.10 of such Asset Purchase Agreement.
ELAN PHARMACEUTICAL RESEARCH CORP.
By /s/ Xxxxx X. Xxxxxx
-----------------------------------
Its
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ELAN CORPORATION PLC
By /s/ Xxxxx X. Xxxxxx
-----------------------------------
Its Chairman and Chief Executive Officer
TABLE OF CONTENTS
Page
ARTICLE I
TRANSFER OF ASSETS . . . . . . . . . . . . . . . . . . . . . 1
1.01 Transfer of Assets . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . 4
2.01 Amount . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.02 Manner of Payment . . . . . . . . . . . . . . . . . . . 4
ARTICLE III
CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.01 Closing . . . . . . . . . . . . . . . . . . . . . . . . 4
3.02 General Procedure . . . . . . . . . . . . . . . . . . . 4
3.03 Removal of Assets . . . . . . . . . . . . . . . . . . . 5
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . . 5
4.01 Incorporation and Corporate Power . . . . . . . . . . . 5
4.02 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . 5
4.03 Execution, Delivery; Valid and Binding Agreement . . . . 5
4.04 Authority; No Breach . . . . . . . . . . . . . . . . . . 6
4.05 Good Condition. . . . . . . . . . . . . . . . . . . . . 6
4.06 Assets Sufficient to Manufacture and Distribute
Products . . . . . . . . . . . . . . . . . . . . . . . . 6
4.07 Inventory . . . . . . . . . . . . . . . . . . . . . . . 7
4.08 Financial Statements. . . . . . . . . . . . . . . . . . 7
4.09 Projections and Cost Analyses . . . . . . . . . . . . . 7
4.10 No Material Adverse Changes . . . . . . . . . . . . . . 8
4.11 Absence of Certain Developments . . . . . . . . . . . . 8
4.12 Title to Assets . . . . . . . . . . . . . . . . . . . . 9
4.13 Contracts and Commitments . . . . . . . . . . . . . . . 9
4.14 Intellectual Property Rights . . . . . . . . . . . . . . 10
4.15 Litigation . . . . . . . . . . . . . . . . . . . . . . . 10
4.16 Warranties . . . . . . . . . . . . . . . . . . . . . . . 11
4.17 Customers and Suppliers . . . . . . . . . . . . . . . . 11
4.18 Compliance with Laws; Permits . . . . . . . . . . . . . 11
4.19 Disclosure . . . . . . . . . . . . . . . . . . . . . . . 12
4.20 Financial Matters . . . . . . . . . . . . . . . . . . . 12
4.21 Brokerage . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . 13
5.01 Incorporation and Corporate Power . . . . . . . . . . . 13
5.02 Execution, Delivery; Valid and Binding Agreement . . . . 13
5.03 No Breach . . . . . . . . . . . . . . . . . . . . . . . 13
5.04 Brokerage . . . . . . . . . . . . . . . . . . . . . . . 14
5.05 Capacity to Manufacture and Distribute Products . . . . 14
5.06 Litigation . . . . . . . . . . . . . . . . . . . . . . . 14
5.07 Compliance with Laws; Permits . . . . . . . . . . . . . 14
5.08 Capitalization . . . . . . . . . . . . . . . . . . . . . 14
5.09 Registration . . . . . . . . . . . . . . . . . . . . . . 15
5.10 Financial Statements . . . . . . . . . . . . . . . . . . 15
5.11 Commission Filings . . . . . . . . . . . . . . . . . . . 15
5.12 Disclosure . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE VI
COVENANTS OF SELLER . . . . . . . . . . . . . . . . . . . . . 16
6.01 Conduct of the Manufacture and Distribution of the
Products . . . . . . . . . . . . . . . . . . . . . . . . 16
6.02 Conditions . . . . . . . . . . . . . . . . . . . . . . . 16
6.03 Restriction on Transfer of Shares . . . . . . . . . . . 16
6.04 Voting the Shares . . . . . . . . . . . . . . . . . . . 16
6.05 Operation of Pump Assembly Business . . . . . . . . . . 17
6.06.Technical Assistance to Buyer . . . . . . . . . . . . . 18
6.07 Buyer's Rights with Respect to Imperial Flavors . . . . 19
6.08 Standstill Agreement . . . . . . . . . . . . . . . . . . 19
6.09 No Negotiations, etc . . . . . . . . . . . . . . . . . . 19
6.10 Noncompetition Covenant . . . . . . . . . . . . . . . . 19
6.11 Product Liability . . . . . . . . . . . . . . . . . . . 20
6.12 Sales Tax . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE VII
COVENANTS OF BUYER . . . . . . . . . . . . . . . . . . . . . 20
7.01 Conditions . . . . . . . . . . . . . . . . . . . . . . . 20
7.02 Board Representation . . . . . . . . . . . . . . . . . . 20
ARTICLE VIII
CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . . 21
8.01 Conditions to Buyer's Obligations . . . . . . . . . . . 21
8.02 Conditions to Seller's Obligations . . . . . . . . . . . 22
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ARTICLE IX
TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.01 Termination . . . . . . . . . . . . . . . . . . . . . . 22
9.02 Effect of Termination . . . . . . . . . . . . . . . . . 23
ARTICLE X
SURVIVAL; INDEMNIFICATION . . . . . . . . . . . . . . . . . . 23
10.01 Survival, Indemnification . . . . . . . . . . . . . . . 23
10.02 Legal Proceedings . . . . . . . . . . . . . . . . . . . 24
ARTICLE XI
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 24
11.01 Press Releases and Announcements . . . . . . . . . . . 24
11.02 Expenses . . . . . . . . . . . . . . . . . . . . . . . 25
11.03 Further Assurances . . . . . . . . . . . . . . . . . . 25
11.04 Amendment and Waiver . . . . . . . . . . . . . . . . . 25
11.05 Notices . . . . . . . . . . . . . . . . . . . . . . . 25
11.06 Assignment . . . . . . . . . . . . . . . . . . . . . . 26
11.07 Severability . . . . . . . . . . . . . . . . . . . . . 26
11.08 Complete Agreement . . . . . . . . . . . . . . . . . . 26
11.09 Counterparts . . . . . . . . . . . . . . . . . . . . . 26
11.10 Governing Law . . . . . . . . . . . . . . . . . . . . 26
ARTICLE XII
PROVISIONS RELATIVE TO EARN OUT . . . . . . . . . . . . . . . 26
12.01 Definitions . . . . . . . . . . . . . . . . . . . . . 26
12.02 Computation of Gross Profit . . . . . . . . . . . . . 28
12.03 Records and Inspection . . . . . . . . . . . . . . . . 28
12.04 Disposition . . . . . . . . . . . . . . . . . . . . . 28
LIST OF
EXHIBIT AND SCHEDULES
Exhibit A. . . . . . . . . . . List of Products
Schedule 1.01(a) . . . . . . . List of Equipment and Machinery
Schedule 1.01(b) . . . . . . . Exceptions to Inventory Transfer
Schedule 1.01(c) . . . . . . . Licences, Purchase Orders, Contract
and Agreements
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Schedule 1.01(d) . . . . . . . Unfilled Customer Contracts, Commitments
and Purchase Orders
Schedule 1.01(f) . . . . . . . Exceptions to Intellectual Property
Transfer
Schedule 1.01(h) . . . . . . . Licenses, Permits and Approvals
Schedule 2.01(b) . . . . . . . Note
Schedule 3.02. . . . . . . . . Xxxx of Sale
Schedule 4.02. . . . . . . . . Subsidiaries and Stocks to be
Transferred
Schedule 4.04. . . . . . . . . Governmental Consents Necessary to
Completion of Sale
Schedule 4.06. . . . . . . . . Exceptions to Good Condition of Machinery
and Equipment
Schedule 4.07. . . . . . . . . Inventory as of January 6, 1997
Schedule 4.11(c) . . . . . . . Confidentiality Agreements
Schedule 4.11(g) . . . . . . . Capital Expenditures
Schedule 4.13. . . . . . . . . Contracts and Commitments
Schedule 4.14. . . . . . . . . Intellectual Property Rights
Schedule 4.15. . . . . . . . . Litigation
Schedule 4.16. . . . . . . . . Warranties
Schedule 4.17. . . . . . . . . Major Customers and Suppliers
Schedule 4.18. . . . . . . . . Permits
Schedule 6.04. . . . . . . . . Irrevocable Proxy
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Schedule 6.05. . . . . . . . . Seller's Standard Terms
Schedule 6.06. . . . . . . . . Technical Assistance
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