ASSET PURCHASE AGREEMENT
BY AND BETWEEN
GALAGEN INC.
AND
NUTRITION MEDICAL, INC.
DATED AS OF SEPTEMBER 1, 1998
TABLE OF CONTENTS
1. PURCHASE AND SALE OF ASSETS . . . . . . . . . . . . . . . . . . . . . 1
1.1 Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 Cash and Shares . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Assignment of International Marketing Consideration . . . . . . . 3
2.3 Royalty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.4 Adjustment to Cash Payment. . . . . . . . . . . . . . . . . . . . 3
3. ASSUMPTION OF LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . 4
4. CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
5. LABOR AND EMPLOYMENT MATTERS . . . . . . . . . . . . . . . . . . . . . 4
6. LOSS, DESTRUCTION, CONDEMNATION OR DAMAGE TO ASSETS. . . . . . . . . . 5
7. NONCOMPETITION AGREEMENT.. . . . . . . . . . . . . . . . . . . . . . . 5
8. REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . . . . . . . 5
8.1 Corporate Organization. . . . . . . . . . . . . . . . . . . . . . 5
8.2 Corporate Power . . . . . . . . . . . . . . . . . . . . . . . . . 5
8.3 Conflicting Agreements, Governmental Consents . . . . . . . . . . 5
8.4 Corporate Authority . . . . . . . . . . . . . . . . . . . . . . . 6
8.5 Actions, Suits, Proceedings . . . . . . . . . . . . . . . . . . . 6
8.6 No Material Violations. . . . . . . . . . . . . . . . . . . . . . 6
8.7 Title to Personal Property. . . . . . . . . . . . . . . . . . . . 6
8.8 Condition of Assets . . . . . . . . . . . . . . . . . . . . . . . 6
8.9 Purchase Contracts, Sales Contracts and Other Contracts and
Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
8.10 Intellectual Property Rights. . . . . . . . . . . . . . . . . . . 7
8.11 Licenses and Permits. . . . . . . . . . . . . . . . . . . . . . . 8
8.12 Taxes.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
8.13 Composition of Assets.. . . . . . . . . . . . . . . . . . . . . . 8
8.14 Investment Purpose. . . . . . . . . . . . . . . . . . . . . . . . 8
8.15 Continuity of Seller; No Distribution of Shares.. . . . . . . . . 8
8.16 Access to Information Regarding Buyer.. . . . . . . . . . . . . . 9
8.17 Restricted Shares.. . . . . . . . . . . . . . . . . . . . . . . . 9
8.18 Shareholder Approval. . . . . . . . . . . . . . . . . . . . . . . 9
8.19 Brokers and Finders.. . . . . . . . . . . . . . . . . . . . . . . 9
8.20 Full Disclosure.. . . . . . . . . . . . . . . . . . . . . . . . . 9
8.21 Proxy Statement.. . . . . . . . . . . . . . . . . . . . . . . . . 9
9. REPRESENTATIONS AND WARRANTIES OF BUYER. . . . . . . . . . . . . . . . 10
9.1 Corporate Organization. . . . . . . . . . . . . . . . . . . . . . 10
9.2 Conflicting Agreements, Governmental Consents . . . . . . . . . . 10
9.3 Corporate Authority . . . . . . . . . . . . . . . . . . . . . . . 10
9.4 Authorized Shares . . . . . . . . . . . . . . . . . . . . . . . . 10
9.5 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . 10
9.6 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.7 Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . 10
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9.8 SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . 11
10. CONDITIONS TO OBLIGATION OF BUYER TO CLOSE TRANSACTIONS. . . . . . . . 11
10.1 Approval of Seller's Shareholders . . . . . . . . . . . . . . . 11
10.2 Secretary's Certificate . . . . . . . . . . . . . . . . . . . . 11
10.3 Representations and Warranties . . . . . . . . . . . . . . . . . 12
10.4 No Adverse Change . . . . . . . . . . . . . . . . . . . . . . . 12
10.5 Observance and Performance . . . . . . . . . . . . . . . . . . . 12
10.6 Officer's Certificate . . . . . . . . . . . . . . . . . . . . . 12
10.7 Searches . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
10.8 Consents of Third Parties . . . . . . . . . . . . . . . . . . . 12
10.9 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
10.10 Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . 12
10.11 Legal Opinion. . . . . . . . . . . . . . . . . . . . . . . . . . 12
10.12 Copies of Documents. . . . . . . . . . . . . . . . . . . . . . . 12
10.13 No Legal Action. . . . . . . . . . . . . . . . . . . . . . . . . 12
10.14 Closing Documents. . . . . . . . . . . . . . . . . . . . . . . . 13
10.15 Noncompetition Agreement.. . . . . . . . . . . . . . . . . . . . 13
10.16 Distribution Agreement.. . . . . . . . . . . . . . . . . . . . . 13
10.17 Settlement of Claims.. . . . . . . . . . . . . . . . . . . . . . 13
11. CONDITIONS TO OBLIGATION OF SELLER TO CLOSE TRANSACTIONS . . . . . . . 13
11.1 Approval of Seller's Shareholders . . . . . . . . . . . . . . . 13
11.2 Secretary's Certificate . . . . . . . . . . . . . . . . . . . . 13
11.3 Representations and Warranties . . . . . . . . . . . . . . . . . 13
11.4 Observance and Performance . . . . . . . . . . . . . . . . . . . 13
11.5 Officer's Certificate . . . . . . . . . . . . . . . . . . . . . 13
11.6 Consents of Third Parties . . . . . . . . . . . . . . . . . . . 14
11.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
11.8 Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . 14
11.9 Legal Opinion . . . . . . . . . . . . . . . . . . . . . . . . . 14
11.10 No Legal Actions . . . . . . . . . . . . . . . . . . . . . . . . 14
11.11 International Marketing Agreement. . . . . . . . . . . . . . . . 14
11.12 Nasdaq Listing . . . . . . . . . . . . . . . . . . . . . . . . . 14
11.13 Consent of Buyer to Settlement Agreement.. . . . . . . . . . . . 14
12. EXCLUSIVE MARKETING PRIOR TO CLOSING . . . . . . . . . . . . . . . . . 14
13. OPERATION OF BUSINESS PRIOR TO CLOSING; COOPERATION. . . . . . . . . . 14
13.1 Maintenance of Business . . . . . . . . . . . . . . . . . . . . 15
13.2 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
13.3 No Disposition of Assets . . . . . . . . . . . . . . . . . . . . 15
13.4 No Additional Liens . . . . . . . . . . . . . . . . . . . . . . 15
13.5 No Modification of Agreements . . . . . . . . . . . . . . . . . 15
13.6 Maintenance of Tangible Assets . . . . . . . . . . . . . . . . . 15
13.7 No Extraordinary Agreements . . . . . . . . . . . . . . . . . . 15
13.8 Maintenance of Insurance . . . . . . . . . . . . . . . . . . . . 15
13.9 Accounts Receivable; Accounts Payable . . . . . . . . . . . . . 15
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13.10 Inventories; Supplies. . . . . . . . . . . . . . . . . . . . . . 15
13.11 Cooperation. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
13.12 Inspection Rights. . . . . . . . . . . . . . . . . . . . . . . . 16
13A. COVENANTS OF BUYER . . . . . . . . . . . . . . . . . . . . . . . . . . 16
13A.1 Nasdaq Listing . . . . . . . . . . . . . . . . . . . . . . . . . 16
13A.2 Blue Sky Approval. . . . . . . . . . . . . . . . . . . . . . . . 16
13A.3 Proxy Statement. . . . . . . . . . . . . . . . . . . . . . . . . 16
14. POST-CLOSING TRANSITIONAL MATTERS. . . . . . . . . . . . . . . . . . . 17
14.1 Invoices for Existing or Previously Shipped Inventory of
Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
14.2 Delivery of Tangible Assets . . . . . . . . . . . . . . . . . . 17
14.3 Delivery and Assignment of International Marketing
Consideration . . . . . . . . . . . . . . . . . . . . . . . . . 17
14.4 Transitional Consulting . . . . . . . . . . . . . . . . . . . . 17
14.5 Use of Nutrition Medical Name . . . . . . . . . . . . . . . . . 18
14.6 Use of Purchased Supplies . . . . . . . . . . . . . . . . . . . 18
14.7 Use of Office Space . . . . . . . . . . . . . . . . . . . . . . 18
14.8 Accounts Receivable Remittances . . . . . . . . . . . . . . . . 18
15. REGISTRATION REQUIREMENTS . . . . . . . . . . . . . . . . . . . . . . 18
15.1 Required Registration . . . . . . . . . . . . . . . . . . . . . 18
15.2 Registration Procedures . . . . . . . . . . . . . . . . . . . . 19
15.3 Delayed Effectiveness of Registration Statement . . . . . . . . 20
15.4 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
15.5 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . 21
15.6 Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . 22
15.7 Right to Suspend Sales . . . . . . . . . . . . . . . . . . . . . 23
16. LIMITATIONS ON TRANSACTIONS IN SHARES . . . . . . . . . . . . . . . . 23
16.1 No Distribution of Shares . . . . . . . . . . . . . . . . . . . 23
16.2 Limitations on Resale of the Shares . . . . . . . . . . . . . . 23
17. TAXES, FEES AND OTHER EXPENSES . . . . . . . . . . . . . . . . . . . . 24
17.1 Taxes and Fees . . . . . . . . . . . . . . . . . . . . . . . . . 24
17.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
18. INDEMNIFICATION BY SELLER . . . . . . . . . . . . . . . . . . . . . . 24
18.1 Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
18.2 Settlement and Compromise . . . . . . . . . . . . . . . . . . . 25
18.3 Termination of Indemnification . . . . . . . . . . . . . . . . . 25
18.4 Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . 25
19. INDEMNIFICATION BY BUYER . . . . . . . . . . . . . . . . . . . . . . . 25
19.1 Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
19.2 Settlement and Compromise . . . . . . . . . . . . . . . . . . . 26
19.3 Termination of Indemnification . . . . . . . . . . . . . . . . . 26
19.4 Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . 26
20. TERMINATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . 26
20.1 Mutual Consent . . . . . . . . . . . . . . . . . . . . . . . . . 26
20.2 Breach of Agreement . . . . . . . . . . . . . . . . . . . . . . 26
20.3 Delayed Closing . . . . . . . . . . . . . . . . . . . . . . . . 26
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20.4 Government Action . . . . . . . . . . . . . . . . . . . . . . . 26
21. NONSOLICITATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
22. SALE OF ADDITIONAL PRODUCT . . . . . . . . . . . . . . . . . . . . . . 27
22.1 Additional Product . . . . . . . . . . . . . . . . . . . . . . . 27
22.2 Right of First Refusal . . . . . . . . . . . . . . . . . . . . . 27
22.3 Qualifying Offeror . . . . . . . . . . . . . . . . . . . . . . . 28
22.4 Termination of Right of First Refusal . . . . . . . . . . . . . 28
23. ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
24. COVENANT OF FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . 28
25. CONFIDENTIALITY AND NONDISCLOSURE. . . . . . . . . . . . . . . . . . . 28
26. SURVIVAL OF REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . 28
27. PUBLIC ANNOUNCEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . 28
28. ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
29. AMENDMENT AND WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . 29
30. CHOICE OF LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
31. ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
32. SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
33. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
34. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
35. BULK TRANSFER LAWS . . . . . . . . . . . . . . . . . . . . . . . . . . 30
36. DEFINITION OF KNOWLEDGE. . . . . . . . . . . . . . . . . . . . . . . . 30
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SCHEDULES AND EXHIBITS
SCHEDULES
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SCHEDULE 1. PRODUCTS
SCHEDULE 1.1(b) FIXED ASSETS
SCHEDULE 1.1(j) INTELLECTUAL PROPERTY
SCHEDULE 1.1(k) LICENSES AND PERMITS
SCHEDULE 1.2 PURCHASE MONEY SECURITY INTERESTS
SCHEDULE 8.5 ACTIONS, SUITES, PROCEEDINGS
SCHEDULE 8.8 INVENTORY LOCATIONS
SCHEDULE 8.9 CONTRACTS
SCHEDULE 8.10(e) JUDGMENTS, ORDERS, CONSENT DECREES OR SETTLEMENT
AGREEMENTS AFFECTING THE PRODUCTS
SCHEDULE 14.7 OFFICE SPACE COSTS
EXHIBITS
--------
EXHIBIT A FORM OF MARKETING AGREEMENT
v
Draft: 8/27/98
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is dated as of September 1, 1998, by
and between GalaGen Inc., a Delaware corporation ("Buyer"), and Nutrition
Medical, Inc., a Minnesota corporation ("Seller").
RECITALS
WHEREAS, Seller owns the rights to the products listed in Schedule
1 (each a "Product" and together the "Products") and is engaged in the
business of selling and distributing the Products (the "Business"); and
WHEREAS, Seller desires to sell and Buyer desires to purchase the
Seller's interests in the Products and certain related assets of Seller used
in, related to or arising from the Business on the terms and subject to the
conditions of this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and of
the mutual covenants and conditions contained herein, the parties hereby
agree as follows:
1. PURCHASE AND SALE OF ASSETS.
1.1 ASSETS. On the terms and subject to the conditions of
this Agreement, Seller agrees to sell, transfer, convey and deliver to Buyer,
and Buyer agrees to purchase from Seller, on and as of the Closing Date (as
defined in Section 4 hereof), the following property and assets of Seller
(together the "Assets"):
(a) All of Seller's rights to the Products;
(b) The fixed assets described in Schedule 1.1(b) attached hereto;
(c) All Seller's interest in inventory of the Products, wherever
held, existing at the Closing Date;
(d) All rights of Seller under contracts, purchase orders and
agreements pursuant to which Seller has agreed to purchase Products after the
Closing Date ("Product Manufacturing Contracts");
(e) All rights of Seller under any warranty or guarantee by any
manufacturer, supplier or other transferor of any of the Assets;
(f) All rights of Seller under contracts and agreements pursuant
to which Seller has agreed to sell Products after the Closing Date;
(g) Electronic or manual copies of all sales records, purchase
records, customer lists, supplier lists, production records and other similar
records related to the Products or associated with the Business as it applies
to the Products;
(h) All advertising, marketing and promotional materials
associated with the Products;
(i) All rights of Seller under any contracts (in addition to those
specified in Sections 1.1(d) and (f) above), indentures, guarantees, leases,
commitments, or other agreements related to the Products;
(j) All interests of Seller in any copyrights, patents,
trademarks, trade names, logos, trade secrets, inventions, know how, other
confidential information and other intellectual property of any nature
related to or arising from the Products, utilized in their production or
associated with the Business as it applies to the Products, together with
pending applications for any of the foregoing, including without limitation
those identified in Schedule 1.1(j) hereto;
(k) All rights of Seller, except for those rights identified in
Schedule 1.1.(k) hereto as nontransferable, under any franchises, approvals,
permits, licenses, orders, registrations, certificates, variances, and
similar rights obtained from governments and governmental agencies, related
to the Products or associated with the Business as it applies to the Products
including without limitation the licenses and permits listed in Schedule
1.1(k) hereto; and
(l) All goodwill and other general intangibles of Seller related
to the Products or arising from the Business as it applies to the Products.
1.2 TITLE TO ASSETS. Except as hereinafter specifically
provided, the Assets will be transferred by Seller to Buyer in accordance
with this Agreement free and clear of all liens, security interests,
encumbrances or debts of any nature, except for (i) liens for taxes not yet
due or delinquent or being contested in good faith by appropriate
proceedings, (ii) liens identified in the disclosure schedules attached
hereto, (iii) liens imposed by law and incurred in the ordinary course of
business for obligations not yet due or delinquent, (iv) liens in respect of
pledges or deposits under workers' compensation laws, and (v) purchase money
security interests on any Assets securing indebtedness incurred or assumed
for the purpose of financing all or any part of the cost of acquiring such
Assets, provided that any such lien attaches solely to the Assets so acquired
and that the amount of the debt secured thereby does not exceed 100% of the
cost of such Assets. A list of each Asset covered by a purchase money
security interest referred to in clause (v) above, including in each case the
amount of outstanding debt secured thereby, is attached as Schedule 1.2
hereto.
2. PURCHASE PRICE.
2.1 CASH AND SHARES. At the Closing, on the terms and subject to
the conditions of this Agreement, Buyer will transfer to Seller, in
consideration of the Assets:
(a) Cash in the amount of $175,000, adjusted as set forth in
Section 2.4 hereof, by wire transfer of immediately available funds to the
cash account or accounts as may be specified by Seller, and;
2
(b) Shares of Common Stock of Buyer (each a "Share" and together
the "Shares") having an aggregate fair market value, as defined below, of
$625,000.
For purposes of determining the number of Shares to be delivered to
Seller at the Closing, each Share shall be deemed to have a fair market value
equal to the average of the closing sale price of a Share on the Nasdaq
National Market for the thirty trading days immediately preceding the Closing
Date.
2.2 ASSIGNMENT OF INTERNATIONAL MARKETING CONSIDERATION. Buyer
and Seller anticipate that, prior to the Closing Date, Buyer will enter into
an international marketing agreement (the "International Marketing
Agreement") with an entity controlled by Xxxxxxx X. Xxxx (the "International
Marketing Entity") containing mutually acceptable terms whereby, effective
upon the Closing, Buyer will license to the International Marketing Entity
the exclusive right to market, sell and distribute certain Products in
certain countries other than the United States in return for certain
consideration (the "International Marketing Consideration"). The
International Marketing Consideration to be received from the International
Marketing Entity pursuant to the International Marketing Agreement shall be
delivered or assigned by Buyer to Seller, together with all rights to any
collateral related to the International Marketing Consideration, as
additional consideration for the Assets. Buyer shall have no obligation, as
guarantor or otherwise, for payment of any International Marketing
Consideration to be made by the International Marketing Entity upon
assignment of such consideration to Seller. Buyer will have no obligation to
enter into the International Marketing Agreement unless and until Xx. Xxxx
has entered into a noncompetition agreement with the Buyer containing
mutually acceptable terms and conditions.
2.3 ROYALTY. Buyer will pay Seller a royalty of nine percent (9%)
of net sales, reduced by uncollectible accounts, of the Products in excess of
(i) $5,000,000 during the year ending December 31, 2000, (ii) $6,000,000
during the year ending December 31, 2001, and (iii) $7,500,000 during the
year ending December 31, 2002. Buyer will make payment, if any is required,
of the royalty no later than 120 days after the end of the year to which such
royalty relates, accompanied by such documentation as may be agreed upon by
the parties. Buyer will promptly inform Seller if it discontinues sales of
any of the Products for any reason, including due to development of
alternative products.
2.4 ADJUSTMENT TO CASH PAYMENT. In the event that the aggregate
Inventory Value as defined herein is less than $200,000, the amount of the
cash payment to be made by Buyer to Seller pursuant to Section 2.1(a) hereof
will be reduced by the difference between the aggregate Inventory Value as
determined hereby and $200,000, provided, however, such reduction will not
exceed $175,000. Aggregate Inventory Value will be determined by a physical
inventory count and valuation conducted by Buyer not more than three days
prior to the Closing Date (the "Physical Inventory") of the Products owned by
Seller and subject to transfer to Buyer pursuant to this Agreement.
"Inventory Value" shall mean the amount invoiced to Seller by the
manufacturers of such inventory plus freight from the manufacturers to
Seller, provided, however, that Inventory Value will be recognized only (a)
for inventory of Products other than Glutasorb Ready to Use, Pro-Peptide VHN
and Prop-Peptide Vanilla (i) having a shelf life, as measured from the
expiration date of the inventory, ("Shelf Life") of eight months or more at
the date of the Physical Inventory, and (ii) for ten percent (10%) of such
inventory having a Shelf
3
Life of between six and eight months at the date of the Physical Inventory,
further provided, however, that no Inventory Value will be recognized under
(i) or (ii) of this part (a) for inventory representing greater than a
twelve-month supply of a Product based on Historical Sales of that Product
("Historical Sales" of any Product means sales of such Product for the period
six months prior to the date hereof), and (b) for the inventory of Glutasorb
Ready to Use expected to be sold between the Closing Date and January 31,
1999 based on Historical Sales of such Product, and (c) (i) if the expiration
dates of existing inventories of Pro-Peptide VHN and Pro-Peptide Vanilla are
not extended through September 30, 1999, for the inventory of Pro-Peptide VHN
expected to be sold between the Closing Date and December 31, 1998, based on
Historical Sales of such Product and for inventory of Pro-Peptide Vanilla
expected to be sold between the Closing Date and March 31, 1999, based on
Historical Sales of such product or (ii) if the expiration dates of existing
inventories of Pro-Peptide VHN and Pro-Peptide Vanilla are extended through
September 30, 1999, for the inventory of Pro-Peptide VHN and Pro-Peptide
Vanilla expected to be sold between the Closing Date and August 31, 1999
based on Historical Sales of such Products.
3. ASSUMPTION OF LIABILITIES. Except as hereinafter specifically
provided, Buyer shall not assume any liabilities or obligations of Seller and
Seller shall be solely liable for all liabilities and obligations, known or
unknown, fixed or contingent, arising from or in connection with ownership of
the Assets or operation of the Business as it relates to the Products prior
to the Closing Date, whether or not reflected in its books and records.
Subject to the conditions of this Agreement, on the Closing Date Buyer shall
assume only those liabilities and obligations of Seller, if any, (a) arising
after the Closing Date under Product Manufacturing Contracts assigned to or
assumed by Buyer, (b) arising after the Closing Date under any other
contracts, purchase orders and agreements assigned to or assumed by Buyer
pursuant to Sections 1.1(d), 1.1(f) and 1.1(i) hereof, (c) as provided in
Section 1.2(v) related to purchase money security interests, if any, and (d)
as provided in Section 5 related to accrued vacation benefits for certain
employees of Seller hired by Buyer.
4. CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Faegre & Xxxxxx
LLP, Minneapolis, Minnesota, at 10:00 a.m. on the seventh business day
following fulfillment or appropriate waiver of all of the conditions
specified in Sections 10 and 11 hereof, or such other date as Buyer and
Seller may mutually agree (the "Closing Date"). At the Closing (a) Buyer
shall (i) pay to Seller cash in the amount specified in Section 2.1(a)
hereof, (ii) deliver to Seller a certificate for the number of Shares as
specified in Section 2.1(b) hereof, (iii) deliver to Seller the International
Marketing Consideration, if any, with any such endorsement as may be
required, together with an assignment of rights to any future benefits
related to the International Marketing Consideration and any related
collateral securing payment thereof, and (iv) deliver to Seller the various
certificates, instruments and documents referred to in Section 11 hereof, and
(b) Seller shall (i) deliver to Buyer such bills of sale, assignments and
other documents of transfer reasonably required to transfer to Buyer the
interest of Seller in the Assets and (ii) deliver to Buyer the various
certificates, instruments and documents referred to in Section 10 hereof.
5. LABOR AND EMPLOYMENT MATTERS. Without limiting the generality
of Section 3 hereof, Buyer, except as otherwise provided in this Section 5,
shall not assume any employment or employee benefit obligation, or any wage
or salary payment obligation, including without limitation those arising
under any pension, profit sharing, deferred compensation, bonus, stock option,
4
severance, welfare, sick leave, vacation, wage or other employee benefit or
compensation plan, procedure, policy or practice of Seller regardless of
whether such plan, procedure, policy or practice is disclosed to Buyer. For
each employee of Seller who enters into an employment agreement with Buyer on
or prior to the Closing Date, Buyer will assume Seller's obligation, if any,
to provide such employee with up to five days of vacation to be taken in
accordance with the Vacation/PFT policy of Buyer within such employee's first
year of employment with Buyer. Seller and Buyer hereby agree and acknowledge
that Seller shall have no further obligations to Buyer or any employee who
enters into an employment agreement with Buyer on or prior to the Closing
Date in connection with or related to such employee's employment with Buyer
except as otherwise required under applicable federal or state law or as may
be provided in any contract between Seller and such employee.
6. LOSS, DESTRUCTION, CONDEMNATION OR DAMAGE TO ASSETS. If,
between the date of this Agreement and the Closing Date, tangible Assets
(other than inventory) are lost, destroyed, or condemned or suffer any
material damage, and if Buyer shall have waived the conditions precedent
contained in Section 10 hereof, where applicable, then, the number of Shares
to be transferred from Buyer to Seller pursuant to Section 2.1(b) hereof
shall be reduced by that number of Shares having an aggregate fair market
value equal to the excess of (i) the liquidation value of such Assets prior
to such loss, destruction, condemnation or damage, over (ii) the salvage
value, if any, of such Assets following such loss, destruction, condemnation
or damage. In no event shall the aggregate adjustments made pursuant to this
Section 6 exceed $25,000.
7. NONCOMPETITION AGREEMENT. On the terms and subject to the
conditions of this Agreement, on the Closing Date, Buyer and Seller will
execute and deliver a Noncompetition Agreement in form and substance mutually
agreeable to Buyer and Seller (the "Noncompetition Agreement").
8. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller hereby
represents and warrants to Buyer that, except as set forth in the disclosure
schedules accompanying this Agreement:
8.1 CORPORATE ORGANIZATION. Seller is a corporation duly
organized and validly existing, is in good standing under the laws of the
State of Minnesota, and has the corporate power and authority to own the
Assets and carry on the Business as now being conducted.
8.2 CORPORATE POWER. Seller has the corporate power to execute
and deliver this Agreement and the Noncompetition Agreement and to consummate
the transactions contemplated hereby and thereby.
8.3 CONFLICTING AGREEMENTS, GOVERNMENTAL CONSENTS. The execution
and delivery by Seller of this Agreement and the Noncompetition Agreement and
the other agreements, documents and instruments contemplated hereby, the
consummation of the transactions contemplated hereby or thereby, and the
performance or observance by Seller of any of the terms or conditions hereof
or thereof, will not (a) conflict with, or result in a breach or violation of
the terms or conditions of, or constitute a default under, or result in the
creation of any lien on any of the Assets pursuant to, the Articles of
Incorporation or By-Laws of Seller, any award of any arbitrator, or any
indenture, contract or agreement (including any agreement with Seller's
shareholders), instrument, order, judgment, decree, statute, law, rule or
regulation to which Seller or the Assets is subject, in each
5
case, the result of which would have a material adverse effect on the
Business or the financial condition of the Business, or (b) require any
filing or registration with, or any consent or approval of, any federal,
state or local governmental agency or authority.
8.4 CORPORATE AUTHORITY. The execution and delivery by Seller of
this Agreement and the Noncompetition Agreement and the other agreements,
documents and instruments contemplated hereby, and the consummation of the
transactions contemplated hereby or thereby, have been duly authorized by all
necessary corporate action on the part of Seller, subject only to the
approval by the holders of the requisite number of outstanding shares of the
common stock of Seller. This Agreement and the Noncompetition Agreement and
all other instruments required hereby to be executed and delivered by Seller
are, or when delivered will be, legal, valid and binding obligations of
Seller, enforceable in accordance with their respective terms subject only to
the approval by the holders of the requisite number of outstanding shares of
the common stock of Seller, and 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.
8.5 ACTIONS, SUITS, PROCEEDINGS. Except as disclosed in Schedule
8.5 hereof, there are no requests, notices, investigations, claims, demands,
actions, suits or other legal or administrative proceedings pending or, to
the best knowledge of Seller, threatened against Seller or any of its
property in any court or before any federal, state, municipal or other
governmental agency which (a) if decided adversely to Seller, would have a
material adverse effect upon the Business or the Assets, (b) seek to restrain
or prohibit the transactions contemplated by this Agreement or obtain any
damages in connection therewith, or (c) if decided adversely to Seller would
have a material adverse effect on the enforceability of this Agreement or the
Noncompetition Agreement; nor is Seller in default with respect to any order
of any court or governmental agency entered against it in respect of the
Business or the Assets.
8.6 NO MATERIAL VIOLATIONS. To its knowledge, Seller is not in
material violation of any applicable law, rule or regulation relating to the
Business or any of the Assets, which violation could have a material adverse
effect on the Business or the financial condition of the Business. To the
Seller's knowledge, there are no requests, notices, investigations, claims,
demands, actions, administrative proceedings, hearings or other governmental
claims or proceedings against Seller alleging or investigating the existence
of any such violation. Seller has provided to Buyer copies of all written
field inspection reports in its possession submitted to Seller by
governmental authorities since the inception of any of the Products.
8.7 TITLE TO PERSONAL PROPERTY. Seller has good title to all
personal property included in the Assets, free and clear of all mortgages,
liens, pledges, charges and encumbrances, except for (i) liens for taxes not
yet due or delinquent or being contested in good faith by appropriate
proceedings, (ii) liens identified in Schedule 1.2 attached hereto, (iii)
liens imposed by law and incurred in the ordinary course of business for
obligations not yet due or delinquent, and (iv) liens in respect of pledges
or deposits under workers' compensation laws.
8.8 CONDITION OF ASSETS. All of the tangible Assets are, in all
material respects, in good operating condition and repair (subject to normal
wear and tear) and are adequate and suitable for
6
the purposes for which they are currently being used. All inventory is
located at the facilities specified in Schedule 8.8 hereto.
8.9 PURCHASE CONTRACTS, SALES CONTRACTS AND OTHER CONTRACTS AND
AGREEMENTS. Schedule 8.9 hereto sets forth under the headings of "Purchase
Contracts", "Sales Contracts" or "Other Contracts and Agreements" all
contracts, indentures, guarantees, leases, commitments, distribution
agreements or other agreements related to the Business to which Seller is a
party or by which it is bound; provided, however, that with respect to
contracts, leases, commitments or other agreements involving payments
remaining to or from the Company, only those contracts, leases, commitments
or other agreements involving such payments in excess of $5,000 are set forth
on such Schedule. Seller and, to the knowledge of Seller, each other party
thereto have substantially performed all obligations required to be performed
by them to date, and are not in default in any material respect, under any of
the instruments or agreements described above. The instruments and
agreements described above which are to be assigned to Buyer hereunder are
each in full force and effect and are assignable to Buyer without the consent
of third parties, and Seller has not waived or assigned to any other person
any of its rights thereunder. Seller has delivered to Buyer true and correct
copies of all such contracts, indentures, guarantees, leases, commitments and
other agreements.
8.10 INTELLECTUAL PROPERTY RIGHTS.
(a) Seller owns or possesses, is licensed under, or otherwise has
lawful access to all patents, trade secrets, know-how, other confidential
information, trademarks, service marks, copyrights, mask works, trade names,
logos and other intellectual property, whether registered or unregistered,
necessary for the lawful conduct of the Business as it is currently
conducted. Seller has not received any notice of any infringement or
misappropriation by, or conflict from, any third party with respect to such
intellectual property rights. Seller has no knowledge of any unauthorized
use or disclosure or misappropriation of any of its intellectual property
necessary for the lawful conduct of the Business, and Seller has obtained
appropriate employee agreements and taken other reasonable steps to protect
against the unauthorized use or disclosure of such intellectual property.
(b) Schedule 1.1(j) hereto lists and describes correctly all
patents and all registered trademarks, service marks, copyrights, mask works,
trade names, logos and other registered intellectual property (and all
applications for any of the foregoing) included in the Assets, all of which
are owned of record solely in the name of Seller or are beneficially owned
solely by Seller, and have not been licensed or otherwise been made available
by Seller for use by others. All such patents and registered intellectual
property rights are in full force and effect, and will not expire or require
renewal until the respective dates (if any) set forth in Schedule 1.1(j).
Seller (i) does not own or have any license or other interest in or to any
other patents or registered trademarks, service marks, copyrights, mask
works, trade names, logos or other registered intellectual property (or
applications for any of the foregoing) used in the Business, and (ii) does
not license from others the right to use any other industrial or intellectual
property used in the Business.
(c) Except as disclosed in Schedule 1.1(j), Seller has no
knowledge that (i) any of the intellectual property rights owned or used by
Seller in the Business is invalid or unenforceable (whether due to the
existence of prior art, inequitable conduct such as patent fraud or misuse,
prior use or creation, abandonment or otherwise), (ii) any payments to
governmental agencies required to
7
maintain the effectiveness of any patents or any registered intellectual
properties have not been timely paid, or (iii) any pending applications of
Seller for patents or for registration of other intellectual property will be
denied or will be materially restricted or conditioned, or any prior art or
other information or circumstance exists which would cause such denial,
restriction or condition.
(d) Seller (i) has not received any written communications, nor
has any officer or director of Seller received any communications of any kind
from any person or entity containing any express or implied allegation that
Seller is or may be infringing any of such person's or entity's intellectual
property in connection with Seller's conduct of the Business, and (ii) is not
currently evaluating any intellectual property of another person or entity
(and has not, to Seller's knowledge, conducted any such evaluations in the
past five years) to determine whether a license thereof is necessary or
desirable in connection with Seller's conduct of the Business or whether such
intellectual property may otherwise have a material effect on the Business as
now conducted.
(e) Except as set forth in Schedule 8.10(e), there are no
judgments, orders, consent decrees or settlement agreements affecting the
Seller's production or sale of the Products.
8.11 LICENSES AND PERMITS. Schedule 1.1(k) hereto correctly
describes all material licenses and permits granted to or by Seller in
connection with the operation of the Business. Seller has all material
licenses and permits required by law or otherwise necessary for the proper
operation of the Business. To the Seller's knowledge, all licenses and
permits granted to Seller are in full force and effect, and no action to
terminate, withdraw, not renew or materially limit or otherwise change any
such license or permit is pending or has been threatened by any governmental
agency or other party. Except as discloseded in Schedule 1.1(k), to the
Seller's knowledge, the consummation of the transactions contemplated by this
Agreement will not violate the provisions of, or require Buyer to reapply
for, any such license or permit. Seller has delivered to Buyer true and
correct copies of all such licenses and permits.
8.12 TAXES. Seller has filed all federal, state and local tax
returns required to be filed by it with regard to the Products or the
Business, and has paid all federal, state and local income, profits,
franchise, sales, use, property, excise, payroll, and other taxes and
assessments (including interest and penalties) related to the Products or the
Business to the extent that such have become due. No claims for additional
taxes have been asserted against Seller and no audits are pending with
respect to any tax liabilities of Seller related to the Products or the
Business.
8.13 COMPOSITION OF ASSETS. The Assets comprise all property and
assets sufficient to conduct the Business in its present form.
8.14 INVESTMENT PURPOSE. Seller is acquiring the Shares for
investment purposes and not with a view to distribution thereof within the
meaning of the Securities Act of 1933, as amended (the "Securities Act") and
the rules and regulations thereunder.
8.15 CONTINUITY OF SELLER; NO DISTRIBUTION OF SHARES.
(a) This Agreement is not part of a plan for dissolution of Seller.
(b) Seller will make no PRO RATA or similar distribution of the
Shares to its shareholders.
8
(c) The board of directors of Seller has no current intent to
adopt resolutions to dissolve Seller or make a PRO RATA or similar
distribution of the Shares to Seller's shareholders within one year after the
Closing Date.
8.16 ACCESS TO INFORMATION REGARDING BUYER.
(a) Seller has received copies of Buyer's annual report to
shareholders and annual report on Form 10-K for the year ended December 31,
1997, and a copy of Buyer's definitive proxy statement dated March 30, 1998.
(b) Seller has received copies of Buyer's quarterly reports on
Form 10-Q for the periods ended March 31, 1998 and June 30, 1998.
(c) Seller has had the opportunity to ask questions and receive
answers concerning the terms and conditions upon which the Shares will be
issued to Seller and to obtain additional information that Buyer possesses
that is necessary to verify the accuracy of information contained in the
documents referenced in parts (a) and (b) of this Section 8.16.
8.17 RESTRICTED SHARES. Seller is aware and acknowledges that the
Shares to be transferred to it pursuant to Section 2.1(b) hereof will be
issued without registration under the Securities Act or under any state
securities laws, and, therefore, may not be sold, transferred or pledged in
the absence of an effective registration statement under the applicable
federal and state securities laws or an opinion of counsel satisfactory to
the Buyer that the transfer is exempt from registration. Seller further
acknowledges that the certificate or certificates representing the Shares to
be transferred to Seller will bear a legend restricting transfer of the
Shares as provided above. Reference is made to Section 15 hereof regarding
the agreement of Buyer to registration of the Shares for resale by Seller
under the conditions therein specified.
8.18 SHAREHOLDER APPROVAL. Seller will use its reasonable best
efforts and will cause its officers and agents to use their reasonable best
efforts to promptly secure any approval of shareholders of Seller required to
consummate the transactions contemplated by this Agreement.
8.19 BROKERS AND FINDERS. Seller has not retained or engaged any
broker, finder or other financial intermediary in connection with the
transaction contemplated by this Agreement.
8.20 FULL DISCLOSURE. No representation or warranty by Seller
contained in this Agreement or the schedules hereto, and no written
representation, statement or certificate made or furnished, or to be made or
furnished hereafter, by Seller or any officer or representative of Seller
pursuant to this Agreement or in connection with the transactions
contemplated hereby contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary to
make the representations or statements contained herein or therein not
misleading.
8.21 PROXY STATEMENT. At the time the Proxy Statement (as defined
herein) is mailed to the shareholders of Seller in order to obtain their
approval referred to in Section 10.1 and at all times subsequent to such
mailing up to and including the time of such approval, the Proxy Statement
(including all supplements thereto), with respect to all information set
forth therein relating to Seller (including its subsidiaries, if any) will
(a) comply in all material respects with applicable provisions
9
of the Securities Act, and (b) not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements contained therein, in light of the
circumstances under which they are made, not misleading.
9. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer hereby
represents and warrants to Seller as follows:
9.1 CORPORATE ORGANIZATION. Buyer is a corporation duly organized
and validly existing, is in good standing under the laws of the State of
Delaware and has the corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby.
9.2 CONFLICTING AGREEMENTS, GOVERNMENTAL CONSENTS. The execution
and delivery by Buyer of this Agreement and the other agreements, documents
and instruments contemplated hereby, the consummation of the transactions
contemplated hereby, and the performance or observance by Buyer of any of the
terms or conditions hereof, will not (a) conflict with, or result in a breach
or violation of the terms or conditions of, or constitute a default under,
the Certificate of Incorporation or By-Laws of Buyer, any award of any
arbitrator, or any indenture, contract or agreement (including any agreement
with shareholders), instrument, order, judgment, decree, statute, law, rule
or regulation to which Buyer is subject, or (b) require any filing or
registration with, or any consent or approval of, any federal, state or local
governmental agency or authority, except in connection with the registrations
rights granted hereby in Section 15.
9.3 CORPORATE AUTHORITY. The execution and delivery by Buyer of
this Agreement and the other agreements, documents and instruments
contemplated hereby, and the consummation of the transactions contemplated
hereby, have been duly authorized by all necessary corporate action on the
part of Buyer. This Agreement and all other documents and instruments
required hereby to be executed and delivered by Buyer are, or when delivered
will be, legal, valid and binding obligations of Buyer, enforceable in
accordance with their respective 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.
9.4 AUTHORIZED SHARES. All Shares to be issued by Buyer pursuant
to Section 2.1(b) hereof will, upon issuance, be duly authorized and validly
issued, fully paid and non-assessable.
9.5 BROKERS AND FINDERS. Buyer has not retained any broker,
finder or other financial intermediary in connection with the transactions
contemplated by this Agreement.
9.6 FULL DISCLOSURE. No representation or warranty by Buyer
contained in this Agreement or the exhibits hereto, and no written
representation, statement or certificate made or furnished, or to be made or
furnished hereafter, by Buyer or any officer or representative of Buyer
pursuant to this Agreement or in connection with the transactions
contemplated hereby contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary to
make the representations or statements contained herein or therein not
misleading.
9.7 PROXY STATEMENT. At the time the Proxy Statement (as defined
herein) is mailed to the shareholders of Seller in order to obtain their
approval referred to in Section 10.1 and at all times
10
subsequent to such mailing up to and including the time of such approval, the
Proxy Statement (including all supplements thereto), with respect to all
information set forth therein relating to Buyer and supplied by Buyer or on
behalf of Buyer for inclusion therein, will (a) comply in all material
respects with applicable provisions of the Securities Act, and (b) not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
contained therein, in light of the circumstances under which they are made,
not misleading.
9.8 SEC DOCUMENTS. Buyer has filed all required reports,
schedules, forms, statements and other documents with the Securities and
Exchange Commission (the "SEC") since April 1, 1996 (together with later
filed documents that revise or supersede earlier filed documents, the "Buyer
SEC Documents"). As of their respective dates, the Buyer SEC Documents
complied as to form in all material respects with the requirements of the
Securities Act or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such Buyer SEC Documents. None of the
Buyer SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. The financial statements of Buyer
included in the Buyer SEC Documents complied as of their respective dates of
filing with the SEC as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
with respect thereto, have been prepared in accordance with generally
accepted accounting principles (except, in the case of unaudited statements,
as permitted by Form 10-Q of the Exchange Act) applied on a consistent basis
during the periods involved (except as may be indicated in the notes
thereto), and fairly present the financial position of Buyer as of the dates
thereof and the results of its operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments). Except as set forth in the Buyer SEC Documents, and except for
liabilities and obligations incurred in the ordinary course of business
consistent with past practice, Buyer has no liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise) required by
generally accepted accounting principles to be set forth in a balance sheet
of Buyer or in the notes thereto which, individually or in the aggregate,
would have a material adverse effect on the business or results of operations
of Buyer.
10. CONDITIONS TO OBLIGATION OF BUYER TO CLOSE TRANSACTIONS. The
obligation of Buyer to effect the closing of the transactions contemplated by
this Agreement is subject to the satisfaction prior to or at the Closing of
the following conditions, except for any such condition expressly waived in
writing by Buyer prior to the Closing Date:
10.1 APPROVAL OF SELLER'S SHAREHOLDERS. The holders of outstanding
shares of common stock of Seller, by the requisite vote of such holders,
shall have approved this Agreement and authorized the transactions
contemplated hereby and such approval and authorization shall remain
effective as of the Closing Date.
10.2 SECRETARY'S CERTIFICATE. Seller shall have delivered to Buyer
a certificate of the Secretary of Seller, dated the Closing Date, to the
effect that the execution and delivery by Seller of this Agreement, the
Noncompetition Agreement and the other agreements, documents and instruments
contemplated hereby, and the consummation of the transaction contemplated
hereby and thereby, have been duly authorized by all necessary corporate
action on the part of Seller.
11
10.3 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Seller contained in this Agreement shall be true and correct on
the Closing Date, as if made on the Closing Date, except that any such
representation or warranty made as of a specified date (other than the date
hereof) shall only be required to be true on and as of such date.
10.4 NO ADVERSE CHANGE. There shall have occurred no material
adverse change in the Assets as a whole or the Business as it relates to the
Products or results of operations of the Business as it relates to the
Products since the date hereof.
10.5 OBSERVANCE AND PERFORMANCE. Seller shall have observed and
performed all covenants and agreements required by this Agreement to be
observed or performed by Seller on or prior to the Closing Date.
10.6 OFFICER'S CERTIFICATE. Seller shall have delivered to Buyer
a certificate of a responsible officer of Seller, dated the Closing Date, to
the effects set forth in Sections 10.3, 10.4 and 10.5 above.
10.7 SEARCHES. Buyer shall have received Uniform Commercial Code
searches against Seller from the Secretary of State of Minnesota and from
such other states and/or counties as Buyer shall reasonably request, together
with tax lien and judgment searches and disclosing no liens or security
interests against the Assets.
10.8 CONSENTS OF THIRD PARTIES. Buyer shall have received duly
executed copies of any material consents necessary to permit the assignment
of the contracts, leases, commitments and agreements described under Schedule
8.9 hereto without breach thereof.
10.9 NOTICES. Seller shall have made all filings and
registrations with all federal, state and local governmental agencies or
authorities required to be made by Seller in connection with the execution
and delivery hereof and the consummation of the purchase and sale of the
Assets contemplated hereby.
10.10 REGULATORY APPROVALS. Seller and Buyer shall have
received all authorizations, consents and approvals of governments and
governmental agencies required in connection with the purchase and sale of
the Assets contemplated by this Agreement.
10.11 LEGAL OPINION. Buyer shall have received an opinion,
dated as of the Closing Date, from Xxxxxx & Xxxxxxx LLP, counsel to Seller,
as to such matters as Buyer may reasonably request.
10.12 COPIES OF DOCUMENTS. Buyer shall have received accurate
and complete copies of all documents and instruments related to the purchase
and sale of the Assets and listed in any of the schedules to this Agreement
(and of any amendments, waivers or similar supplementary materials related
thereto).
10.13 NO LEGAL ACTION. No court or governmental authority of
competent jurisdiction shall have issued an order restraining, enjoining or
otherwise prohibiting the consummation of the purchase and sale of the Assets
contemplated by this Agreement, and no person, firm, corporation or
governmental agency shall have instituted an action or proceeding which shall
not have been
12
previously dismissed seeking to restrain, enjoin or prohibit the consummation
of the purchase and sale of the Assets contemplated by this Agreement.
10.14 CLOSING DOCUMENTS. Buyer shall have received such bills
of sale, assignments and other documents of transfer reasonably required to
transfer to Buyer the interests of Seller in the Assets consistent with the
terms of this Agreement.
10.15 NONCOMPETITION AGREEMENT. Seller shall have entered into
the Noncompetition Agreement.
10.16 DISTRIBUTION AGREEMENT. Seller shall have terminated all
distribution agreements, independent representative agreements and the VHA,
Inc. purchase agreement, as listed in Schedule 8.9, related to the Products
and shall have provided evidence of such termination satisfactory to Buyer.
10.17 SETTLEMENT OF CLAIMS. All material litigation and claims
related to the Products shall have been resolved to the reasonable
satisfaction of Buyer.
11. CONDITIONS TO OBLIGATION OF SELLER TO CLOSE TRANSACTIONS.
The obligation of Seller to effect the closing of the transactions
contemplated by this Agreement is subject to the satisfaction prior to or at
the Closing of the following conditions, except for any such condition
expressly waived in writing by Seller prior to the Closing Date:
11.1 APPROVAL OF SELLER'S SHAREHOLDERS. The holders of
outstanding shares of common stock of Seller, by the requisite vote of such
holders, shall have approved this Agreement and authorized the transactions
contemplated hereby and such approval and authorization shall remain
effective as of the Closing Date.
11.2 SECRETARY'S CERTIFICATE. Buyer shall have delivered to
Seller a certificate of the Secretary of Buyer, dated the Closing Date, to
the effect that the execution and delivery by Buyer of this Agreement and the
other agreements, documents and instruments contemplated hereby, and the
consummation of the transactions contemplated hereby, have been duly
authorized by all necessary corporate action on the part of the Buyer.
11.3 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Buyer contained in this Agreement shall be true and correct on
the Closing Date, as if made on the Closing Date, except that any such
representation or warranty made as of a specified date (other than the date
hereof) shall only be required to be true on and as of such date.
11.4 OBSERVANCE AND PERFORMANCE. Buyer shall have observed and
performed all covenants and agreements required by this Agreement to be
observed or performed by Buyer on or prior to or at the Closing Date.
11.5 OFFICER'S CERTIFICATE. Buyer shall have delivered to Seller
a certificate of a responsible officer of Buyer, dated the Closing Date, to
the effects set forth in Sections 11.3 and 11.4 above.
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11.6 CONSENTS OF THIRD PARTIES. Seller shall have received duly
executed copies of any material consents necessary to permit the assignment
of the contracts, leases, commitments and agreements described in Schedule
8.9 hereto without breach thereof.
11.7 NOTICES. Buyer shall have made all filings and registrations
with all federal, state and local governmental agencies or authorities
required to be made by Buyer in connection with the execution and delivery
hereof and consummation of the purchase and sale of the Assets contemplated
hereby.
11.8 REGULATORY APPROVALS. Seller and Buyer shall have received
all authorizations, consents and approvals of governments and governmental
agencies required in connection with the purchase and sale of the Assets
contemplated by this Agreement.
11.9 LEGAL OPINION. Seller shall have received an opinion, dated
the Closing Date, from Faegre & Xxxxxx LLP, counsel to Buyer, as to such
matters as Seller may reasonably request.
11.10 NO LEGAL ACTIONS. No court or governmental authority of
competent jurisdiction shall have issued an order restraining, enjoining or
otherwise prohibiting the consummation of the purchase and sale of the Assets
contemplated by this Agreement, and no person, firm, corporation or
governmental agency shall have instituted an action or proceeding which shall
not have been previously dismissed seeking to restrain, enjoin or prohibit
the consummation of the purchase and sale of the Assets contemplated by this
Agreement.
11.11 INTERNATIONAL MARKETING AGREEMENT. If Xxxxxxx X. Xxxx
and Buyer have entered into a mutually satisfactory noncompetition agreement,
Buyer and the International Marketing Entity shall have entered into the
International Marketing Agreement as described in Section 2.2 hereof.
11.12 NASDAQ LISTING.
(a) The Common Stock of Buyer shall continue to be listed for
trading on the Nasdaq National Market or The Nasdaq SmallCap Market.
(b) The Shares shall have been approved for listing, upon official
notice of issuance, on the Nasdaq National Market or The Nasdaq SmallCap
Market.
11.13 CONSENT OF BUYER TO SETTLEMENT AGREEMENT. Buyer shall
have consented to be bound by the terms of any settlement agreement resolving
the lawsuit described in Schdule 8.5 hereof to the extent required by such
settlement agreement.
12. EXCLUSIVE MARKETING PRIOR TO CLOSING. Contemporaneously with
the execution of this Agreement, and pending the Closing, Buyer and Seller
are entering into an exclusive marketing agreement (the "Marketing
Agreement") substantially in the form of Exhibit A hereto.
13. OPERATION OF BUSINESS PRIOR TO CLOSING; COOPERATION. Seller
agrees that, from the date of this Agreement to the Closing:
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13.1 MAINTENANCE OF BUSINESS. Seller will use reasonable efforts
to preserve intact the business organization of the Business, keep available
the services of key employees on terms no less favorable to Seller than those
on which such employees are presently employed, and preserve for Buyer the
goodwill of suppliers, customers and others having business relationships
with the Business. Seller will maintain its books and records related to the
Business during such period in a manner consistent with past practice.
13.2 EMPLOYEES. Seller will not hire any new employees for the
Business, or effect any increase in compensation or employee benefits for its
employees engaged in operating the Business.
13.3 NO DISPOSITION OF ASSETS. Seller will not sell, transfer,
dispose of or abandon any portion of the Assets, except in the ordinary
course of business and consistent with past practice.
13.4 NO ADDITIONAL LIENS. Seller will not permit any of the
Assets to become subject to any mortgage, lien, charge or encumbrance, other
than liens imposed by law and incurred in the ordinary course of business for
obligations not yet due or delinquent, and liens identified in Schedule 1.2
attached hereto.
13.5 NO MODIFICATION OF AGREEMENTS. Seller will not modify or
amend any material contract, lease, commitment or agreement to be assigned to
or assumed by Buyer hereunder, or waive or assign to any third party any of
its rights under any such contract, lease, commitment or agreement.
13.6 MAINTENANCE OF TANGIBLE ASSETS. Seller will maintain all
tangible Assets in good order and repair, ordinary wear and tear excepted.
13.7 NO EXTRAORDINARY AGREEMENTS. Seller will not enter into any
contract or agreement that relates to the Business or Assets and that
contains terms or conditions inconsistent with past business practices of
Seller or the continued operation of the Business as a going concern.
13.8 MAINTENANCE OF INSURANCE. Seller will continue to carry all
existing policies of insurance relating to the Assets, or will effect
renewals or replacements thereof in substantially the same form and amount,
and providing substantially the same coverage, as such existing policies.
13.9 ACCOUNTS RECEIVABLE; ACCOUNTS PAYABLE. With respect to the
Business, Seller will continue to collect its accounts receivable and pay its
accounts payable in accordance with its past business practices.
13.10 INVENTORIES; SUPPLIES. With respect to the Business,
Seller will maintain its inventories and other consumable materials and
supplies at levels as reasonably required to conduct the Business.
13.11 COOPERATION. Seller will furnish to Buyer all
information concerning Seller, the Business and the Assets required for
inclusion in any statement or application made by Buyer to any governmental
body in connection with the transactions contemplated by this Agreement (all
of which information Seller represents, warrants and covenants shall when
furnished be true and complete in all material respects). Without limiting
the foregoing sentence, Seller will reasonably cooperate with Buyer in good
faith to obtain all consents and approvals required from governmental
15
and regulatory authorities and private third parties necessary to consummate
the transactions contemplated hereby and to enable the Buyer thereafter to
carry on the Business without material disruption. Seller will inform Buyer
when Seller believes that the extent of services provided by Seller's
employees under this Section 13.11 or under Section 14.4 requires
compensation from Buyer. Thereafter, Buyer and Seller will mutually agree
upon the terms for such services. No payments made under the Marketing
Agreement will be considered compensation for services provided by Seller's
employees under this Section 13.11 or under Section 14.4. Buyer will
reimburse Seller for the documented fees and expenses, if any, of Seller's
independent auditors or other third parties that are charged solely for
services performed by them in connection with this Section 13.11.
13.12 INSPECTION RIGHTS. Seller will permit employees and
agents of Buyer during normal business hours and on reasonable notice to
Seller to inspect the Assets and to inspect all contracts, agreements, other
documents and records reflecting or reasonably relating to the Assets or the
Business. All information and records obtained by Buyer pursuant to this
Section 13.12 shall be maintained as confidential and shall not be disclosed
to any third party without the prior written consent of Seller except in
response to legal process or to the extent required to comply with applicable
law. Buyer will not be obligated to maintain as confidential any information
obtained from Seller which is publicly available, readily ascertainable from
public sources, known to Buyer at the time the information was disclosed or
which is rightfully obtained from a third party. The obligations of
confidentiality arising under this Section 13.12 shall survive the
termination or abandonment of this Agreement.
13A. COVENANTS OF BUYER.
13A.1 NASDAQ LISTING. Buyer will file an application for
listing of additional shares in accordance with the rules of the Nasdaq Stock
Market in order to have the Shares approved for listing on the Nasdaq
National Market or The Nasdaq SmallCap Market and will use its best efforts
to have such application approved by the Nasdaq National Market or The Nasdaq
SmallCap Market prior to Closing.
13A.2 BLUE SKY APPROVAL. Buyer will file all documents
required to obtain, prior to Closing, all necessary approvals under state
securities laws, if any, required to carry out the transactions contemplated
by this Agreement, will pay all expenses incident thereto and will use its
reasonable best efforts to obtain such approvals.
13A.3 PROXY STATEMENT. Buyer will furnish, or cause to be
furnished, to Seller all the information concerning Buyer required for
inclusion in the proxy statement (the "Proxy Statement") for the meeting of
Seller's shareholders at which this Agreement and the transactions
contemplated hereby will be submitted to for approval, and Buyer shall
cooperate with Seller in the preparation of the Proxy Statement. Any
financial statement for any fiscal year provided under this Section 13A must
include the audit opinion of Buyer's independent accountant, and the consent
of such accountant to use such opinion in the Proxy Statement. Buyer agrees
promptly to notify Seller if at any time prior to such meeting the Proxy
Statement becomes incorrect or incomplete in any material respect with regard
to any information furnished by Buyer for inclusion in the Proxy Statement,
and to provide Seller with the information needed to correct such inaccuracy
or omission.
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14. POST-CLOSING TRANSITIONAL MATTERS.
14.1 INVOICES FOR EXISTING OR PREVIOUSLY SHIPPED INVENTORY OF
PRODUCTS. With respect to any purchase orders or contracts assumed by Buyer
pursuant to Section 1.1(d) hereof, in the event that Buyer receives,
subsequent to the Closing, an invoice from a product manufacturer for any
item of inventory of Products (i) existing and owned by the Seller as of the
Closing Date the value of which was included in calculating the aggregate
Inventory Value pursuant to Section 2.4 hereof was satisfied or (ii) included
within Products shipped by Seller prior to the Closing, Buyer shall promptly
deliver to Seller a copy of such invoice. Seller shall review such invoice
and shall, within five business days of delivery of such invoice to Seller,
deliver to Buyer documentation, signed by the product manufacturer, of any
adjustment to the amounts reflected on such invoice. On the sixth business
day after delivery of a copy of such invoice to Seller, Buyer shall have the
right, in its sole discretion, either to pay such invoice, as adjusted, and
be promptly reimbursed therefor by Seller or demand payment of such invoice,
as adjusted, by Seller. Seller agrees to reimburse Buyer for any such
invoice amount so paid or to pay any such invoice amount, as requested by
Buyer, promptly upon receipt from Buyer of instructions to make such a
payment. Nothing in this Section 14.1 shall be deemed to prevent Seller from
disputing with the product manufacturer any amounts paid by Seller, and
retaining any amounts remitted by the product manufacturer as a result of any
such dispute.
14.2 DELIVERY OF TANGIBLE ASSETS. Promptly after the Closing Date,
Seller shall make the tangible Assets available to Buyer at Seller's
facilities at Xxxxx 000, 0000 00xx Xxxxxx Xxxxx, Xxxxxxxxxxx, Xxxxxxxxx and
shall cooperate with Buyer's personnel in arranging for the orderly assembly,
packing and shipment which shall be at Buyer's expense of all tangible Assets
to such locations as Buyer shall specify; provided, however, that (a)
machinery, equipment and tooling, if any, in the possession of third parties
for production purposes shall be left in their possession and Seller and
Buyer shall jointly notify and confirm to such third parties that Buyer has
purchased such assets from Seller; (b) Buyer shall be entitled if it so
desires to continue to store inventory of the Products at the facilities of
the Seller through November 30, 1998 and (c) Buyer shall, with Seller's
assistance, identify any books and records the originals of which should
remain in the possession of Seller. In consideration of the use of the
Seller's facilities to store inventory of the Products, Buyer agrees to pay
Seller $3,000 per month pro rated on a daily basis from the Closing Date
through the last date upon which any inventory of the Products is stored at
the facilities of the Seller.
14.3 DELIVERY AND ASSIGNMENT OF INTERNATIONAL MARKETING
CONSIDERATION. Immediately upon the Closing, Buyer will inform the
International Marketing Entity of the Closing; obtain from the International
Marketing Entity the International Marketing Consideration; and tender the
International Marketing Consideration with any such endorsement as may be
required, and with an assignment of any future benefits related to the
International Marketing Consideration and any related collateral securing
payment thereof in form approved by Seller, to Seller.
14.4 TRANSITIONAL CONSULTING. The parties contemplate that Buyer
will, for a period of nine months after the Closing Date, periodically
require the advice and assistance of a number of Seller's scientific,
technical, regulatory and marketing executives and employees who are familiar
with the history and current status of the Business. Seller will, so long as
such persons remain employed by Seller or any other entity affiliated with
Seller, make such persons reasonably available to assist Buyer in
interpreting and reconciling the books, records and correspondence
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transferred to Buyer hereunder, responding to customer inquiries and
complaints, providing information about regulatory matters and the status of
and issues being considered in pending regulatory proceedings, and otherwise
carrying forward the Business. Buyer and Seller will use their reasonable
best efforts to schedule the availability of the appropriate executives and
employees of Seller in such manner that will not materially delay, impede or
otherwise adversely affect either Buyer's pursuit of the Business or Seller's
pursuit of its remaining business. Buyer will use its reasonable best
efforts to reduce its reliance on Seller's personnel as soon as reasonably
possible following the date hereof. Seller will inform Buyer when Seller
believes that the extent of services provided by Seller's employees under
this Section 14.4 or under Section 13.11 requires compensation from Buyer.
Thereafter, Buyer and Seller will mutually agree upon the terms for such
services. No payments made under the Marketing Agreement will be considered
compensation for services provided by Seller's employees under this Section
14.4 or under Section 13.11.
14.5 USE OF NUTRITION MEDICAL NAME. Buyer will have the right to
use the name "Nutrition Medical" and any related trademarks or symbols in
connection with the Products for a period commencing on the Closing Date and
ending one year after the Closing Date.
14.6 USE OF PURCHASED SUPPLIES. Subject to any applicable laws,
rules or regulations, Buyer shall be entitled following the Closing or
Subsequent Closing, if any, to use up any then existing supplies of packaging
or promotional materials bearing Seller's name.
14.7 USE OF OFFICE SPACE. Each employee of Seller hired by Buyer
will continue to have access to, and working from, the office space assigned
to such employee in the facility of the Seller until the earlier of November
30, 1998 or the date upon which such employee is instructed by Buyer to begin
working from Buyer's facility. Buyer will be allowed to use Seller's copy
machine(s) and fax machine(s), provided that Buyer purchases paper and other
supplies for such use. In consideration of the use of office space, Buyer
agrees to pay Seller the amounts enumerated in Schedule 14.7 hereof from the
Closing Date through the last date upon which any employee under Buyer's
employment works from a facility of Seller.
14.8 ACCOUNTS RECEIVABLE REMITTANCES. If Seller receives payments
on accounts receivable for sales of the Products made by Buyer, it will
promptly remit such payments to Buyer. If Buyer receives payments on
accounts receivable for sales of Products made by Seller, it will promptly
remit such payments to Seller.
15. REGISTRATION REQUIREMENTS.
15.1 REQUIRED REGISTRATION. Following the Closing, and to
facilitate resale of the Shares by Seller to the public following the
Closing, Buyer shall promptly prepare and file (in any event no later than 45
days of the Closing Date) a registration statement under the Securities Act
covering all of the Shares issued to Seller and shall use its reasonable best
efforts to cause such registration statement to become effective. Buyer
shall be obligated to prepare, file and cause to become effective only one
registration statement (on Form S-3 or any successor form promulgated by the
SEC) pursuant to this Section 15.1, and to pay the expenses associated with
such registration statement. In the event that Buyer shall not be eligible
to use Form S-3, Buyer shall be obligated to prepare, file and cause to
become effective one registration statement on Form X-0, X-0 or other
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applicable form or any other successor form promulgated by the SEC at Buyer's
election, in which case references herein to "Form S-3" shall be deemed to
refer to such other form. In Buyer's sole discretion, such registration
statement may include Shares of Common Stock of Buyer held by other
shareholders of Buyer.
15.2 REGISTRATION PROCEDURES. Buyer will:
(a) prepare and file with the SEC a registration statement with
respect to the Shares issued to Seller, and use its reasonable best efforts
to cause such registration statement to become and remain effective until the
earlier of two years from the date upon which such registration statement is
declared effective by the SEC (the "Effective Time") or the date that all
Shares registered on such registration statement have been sold by Seller;
(b) prepare and file with the SEC such amendments to such
registration statement and supplements to the prospectus contained therein as
may be necessary to keep such registration statement effective for the period
described in clause (a) above;
(c) notify Seller as to the filing of any such registration
statement and of all amendments or supplements thereto;
(d) subject to Section 15.7 hereof, prepare promptly upon request
of Seller or any underwriter for Seller, during the period during which Buyer
is obligated to keep any such registration statement effective, such
amendment or amendments to such registration statement and such prospectus or
prospectuses as may be reasonably necessary to permit compliance with the
requirements of Section 10(a)(3) of the Securities Act;
(e) furnish Seller with copies of such opinions of counsel and
accountants' "comfort" letters as it reasonably may request with respect to
the registration of the Shares, any registration statement covering the
Shares and the financial statements included therein;
(f) in connection with the preparation and filing of each
registration statement registering Shares under the Securities Act, give
Seller and any underwriter, and their respective counsel and accountants, the
opportunity to participate in the preparation of such registration statement,
each prospectus included therein or filed with the SEC, and each amendment
thereof or supplement thereto, and will give each of them such access to its
books and records and such opportunities to discuss the business of Buyer
with its officers and the independent accountants who have certified its
financial statements as shall be necessary, in the opinion of Seller and such
underwriters, or their respective counsel, to conduct a reasonable
investigation within the meaning of the Securities Act;
(g) subject to Section 15.7 hereof, prepare and promptly file with
the SEC and promptly notify Seller of the filing of any amendments or
supplements to such registration statement or prospectus as may be necessary
to correct any statements or omissions if, at any time when a prospectus
relating to the Shares is required to be delivered under the Securities Act,
any event with respect to Buyer shall have occurred as a result of which any
such prospectus or any other prospectus as then in effect would include an
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading;
19
(h) furnish to Seller and to the underwriters, if any, of the
Shares to be registered such reasonable number of copies of the registration
statement, preliminary prospectus, final prospectus, prospectus supplements
and such other documents as Seller or such underwriters may reasonably
request in order to facilitate the public offering of the Shares;
(i) use its reasonable best efforts to register or qualify the
Shares covered by such registration statement under such state securities or
blue sky laws of such jurisdictions as Seller may reasonably request in
writing, except that Buyer shall not for any purpose be required to execute a
general consent to service of process or to qualify to do business as a
foreign corporation in any jurisdiction wherein it is not so qualified;
(j) notify Seller, promptly after it shall receive notice thereof,
of the time when such registration statement has become effective;
(k) notify Seller promptly of any request by the SEC for the
amending or supplementing of such registration statement or prospectus or for
additional information;
(m) subject to Section 15.7 hereof, prepare and file with the SEC,
promptly upon the request of Seller or any underwriter, any amendments or
supplements to such registration statement or prospectus which, in the
opinion of counsel for Seller (and concurred in by counsel for Buyer), is
required or advisable under the Securities Act in connection with the
distribution of the Shares by Seller;
(n) advise Seller, promptly after it shall receive notice or
obtain knowledge thereof, of the issuance of any stop order by the SEC
suspending the effectiveness of such registration statement or any amendment
thereto or the initiation or threatening of any proceeding for that purpose
and promptly use its reasonable best efforts to prevent the issuance of any
stop order or to obtain its withdrawal if such stop order should be issued;
and
(o) not file any amendment or supplement to such registration
statement or prospectus to which Seller shall have reasonably objected on the
grounds that such amendment or supplement does not comply in all material
respects with the requirements of the Securities Act, after having been
furnished with a copy thereof at least five business days prior to the filing
thereof, unless in the opinion of counsel for Buyer the filing of such
amendment or supplement is reasonably necessary to protect Buyer from any
liabilities under any applicable federal or state law and such filing will
not violate applicable law.
15.3 DELAYED EFFECTIVENESS OF REGISTRATION STATEMENT. If the
registration statement with respect to the Shares has not become effective on
or prior to 180 days after the Closing Date, Buyer will issue to Seller, as
liquidated damages, that number of Shares equal to ten percent (10%) of the
Shares issued to Buyer pursuant to Section 2.1(b) of this Agreement. The
registration statement will be amended to cover the Shares, if any, issued
pursuant to this Section 15.3. The Shares, if any, issued pursuant to this
Section 15.3 will, upon issuance, be duly authorized and validly issued,
fully paid and non-assessable.
15.4 EXPENSES. With respect to such registration, Buyer shall
bear the following fees, costs and expenses: all registration, filing and
NASD fees, printing expenses, fees and disbursements of counsel and
accountants for Buyer, all internal Buyer expenses, and all legal
20
fees and disbursements and other expenses of complying with state securities
or blue sky laws of any jurisdictions in which the Shares are to be
registered or qualified. Fees and disbursements of counsel and accountants
for Seller, as the selling security holder, underwriting discounts and
commissions and transfer taxes and any other expenses incurred by Seller not
expressly included above shall be borne by Seller, provided that Buyer shall
bear up to $1,250 of the fees and expenses of counsel to Seller in connection
with the registration provided for by this Section 15, provided, however that
in the event that Buyer is unable to register the Shares on Form S-3 Buyer
shall bear the full fees and expenses of counsel to Seller in connection with
the registration provided for by this Section 15.
15.5 INDEMNIFICATION. With respect to such registration:
(a) Buyer will indemnify and hold harmless Seller, its directors
and officers, and any underwriter (as defined in the Securities Act) for
Seller and each person, if any, who controls Seller or such underwriter
within the meaning of the Securities Act, from and against, and will
reimburse Seller and each such director, officer, underwriter and controlling
person with respect to, any and all loss, damage, liability, cost and expense
(including legal fees) to which Seller or any such director, officer,
underwriter or controlling person may become subject under the Securities
Act, the Exchange Act or otherwise, insofar as such losses, damages,
liabilities, costs or expenses are caused by any untrue statement or alleged
untrue statement of any material fact contained in such registration
statement, any prospectus contained therein or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances in which they
were made, not misleading, or any violation or alleged violation by Buyer of
the Securities Act, the Exchange Act, any state securities law or any
regulation promulgated under the Securities Act, the Exchange Act or any
state securities law; provided, however, that Buyer will not be liable in any
such case to the extent that any such loss, damage, liability, cost or
expense arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission so made in conformity with
information furnished by Seller, such director, officer, underwriter or such
controlling person in writing specifically for use in the preparation thereof.
(b) Seller will indemnify and hold harmless Buyer, its directors
and officers, any controlling person and any underwriter from and against,
and will reimburse Buyer, its directors and officers, any controlling person
and any underwriter with respect to, any and all loss, damage, liability,
cost or expense (including legal fees) to which Buyer or any controlling
person and/or any director, officer or underwriter may become subject under
the Securities Act, the Exchange Act or otherwise, insofar as such losses,
damages, liabilities, costs or expenses are caused by any untrue or alleged
untrue statement of any material fact contained in such registration
statement, any prospectus contained therein or any amendment or supplement
thereto, or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was so made in reliance upon and in strict
conformity with written information furnished by Seller specifically for use
in the preparation thereof.
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(c) Promptly after receipt by an indemnified party pursuant to the
provisions of paragraph (a) or (b) of this Section 15.5 of notice of the
commencement of any action involving the subject matter of the foregoing
indemnity provisions such indemnified party will, if a claim thereof is to be
made against the indemnifying party pursuant to the provisions of said
paragraph (a) or (b), promptly notify the indemnifying party of the
commencement thereof; but the omission to so notify the indemnifying party
will only relieve it from liability to the extent that such failure to so
notify shall materially adversely prejudice the indemnifying party in the
defense of any such claim. In case such action is brought against any
indemnified party and it notifies the indemnifying party of the commencement
thereof, the indemnifying party shall have the right to participate in, and,
to the extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party, provided, however, if the defendants
in any action include both the indemnified party and the indemnifying party
and the indemnified party shall have reasonably concluded that there may be
legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party, or
if there is a conflict of interest which would prevent counsel for the
indemnifying party from also representing the indemnified party, the
indemnified party or parties shall have the right to select separate counsel
to participate in the defense of such action on behalf of such indemnified
party or parties. After notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party pursuant to
the provisions of said paragraph (a) or (b) for any legal or other expense
subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation, unless (i) the
indemnified party shall have employed counsel in accordance with the proviso
of the preceding sentence, (ii) the indemnifying party shall not have
employed counsel reasonably satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after the notice of
the commencement of the action, or (iii) the indemnifying party has
authorized in writing the employment of counsel for the indemnified party at
the expense of the indemnifying party. No indemnifying party, in the defense
of any such claim or litigation shall, except with the prior written consent
of the indemnified party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving
by the claimant or plaintiff to the indemnified party of a release from all
liability in respect to such claim or litigation in form and substance
reasonably satisfactory to the indemnified party.
15.6 CONTRIBUTION.
(a) If the indemnification provided for in Section 15.5 from the
indemnifying party is unavailable to or unenforceable by the indemnified
party in respect to any losses, claims, damages, liabilities or expenses
referred to herein, then the indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault
of the indemnifying party and indemnified party in connection with the
actions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The
relative fault of such indemnifying party and indemnified party shall be
determined by reference to, among other things, whether any action in
question, including any untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact, has been made by,
or relates
22
to information supplied by, such indemnifying party or indemnified party, and
the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action. The amount paid or payable by
a party as a result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include, subject to the limitations set
forth in Section 15.5, any legal or other fees or expenses reasonably
incurred by such party in connection with any investigation or proceeding.
(b) Buyer and Seller agree that it would not be just and equitable
if contribution pursuant to this Section 15.6 were determined by pro rata
allocation or by any other method of allocation which does not take into
account the equitable considerations referred to in Section 15.6(a). No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
(c) If indemnification is available under Section 15.5, the
indemnifying party shall indemnify each indemnified party to the full extent
provided in Section 15.5 without regard to the relative fault of the
indemnifying party or indemnified party or any other equitable consideration
provided for in this Section 15.6.
15.7 RIGHT TO SUSPEND SALES. Buyer may suspend sales of Shares
under the registration statement for a limited time, which in no event shall
be longer than 90 days, if (a) such sales would materially adversely affect,
or would be improper in view of (or improper without disclosure in a
prospectus or other filing with the SEC), a proposed financing,
reorganization, recapitalization, merger, acquisition, consolidation or
similar transaction or other development involving or with respect to Buyer
(including, without limitation, through the premature disclosure thereof) or
(b) Buyer is conducting a public offering of capital stock (including during
the effectiveness of any registration statement pertaining thereto) and the
managing underwriter concludes in its reasonable judgment that sales of
Shares held by the Seller would materially adversely affect the success of
the offering. Buyer will promptly notify Seller any time sales of Shares
under the registration statement are suspended and will promptly notify
Seller of the termination of any such suspension.
16. LIMITATIONS ON TRANSACTIONS IN SHARES.
16.1 NO DISTRIBUTION OF SHARES. Seller agrees not to distribute
the Shares to its shareholders as a part of the transactions contemplated
hereby and not to sell or otherwise transfer any Shares except in accordance
with applicable federal and state securities laws and otherwise in accordance
with the terms and conditions hereof.
16.2 LIMITATIONS ON RESALE OF THE SHARES. Seller agrees that it
will not sell or otherwise transfer any Shares except pursuant to the
registration statement described in Section 15 hereof during the two-year
period following the Closing Date and, further, that any such sales or
transfers will be limited as follows:
(a) immediately upon effectiveness of the above-mentioned
registration statement, Seller may sell or transfer up to 10% of the Shares;
23
(b) during each of the first through the sixth months following
the Closing Date (the month of the Closing Date being counted as the first
such month), Seller may sell or transfer up to an additional 5% of the Shares
per month; and
(c) during each of the seventh through the twelfth months
following the Closing Date, Seller may sell or transfer up to an additional
10% of the Shares per month.
The foregoing percentages are intended to be cumulative, such that
any amounts not sold within such limitations at the time or within the period
permitted shall continue to be available for sale at any time during the
remainder of the one-year period following the Closing Date.
17. TAXES, FEES AND OTHER EXPENSES.
17.1 TAXES AND FEES. Seller shall be responsible for and shall pay
all sales, transfer or similar taxes or governmental charges, if any, with
respect to the sale and purchase of the Assets, whether levied against the
Assets, Seller or Buyer.
17.2 EXPENSES. Except as otherwise provided herein, each party
shall pay all of the costs and expenses incurred by it in negotiating and
preparing this Agreement (and all other agreements, certificates, instruments
and documents executed in connection herewith), in soliciting any required
shareholder approval for this Agreement, in performing its obligations under
this Agreement, and in otherwise consummating the transactions contemplated
by this Agreement, including without limitation its attorneys' fees and
accountants' fees.
18. INDEMNIFICATION BY SELLER.
18.1 GENERALLY. Seller hereby agrees to defend, indemnify and hold
harmless Buyer against and with respect to:
(a) Any and all liabilities and obligations arising from or in
connection with ownership of the Assets or operation of the Business, as it
relates to the Assets, on or prior to the Closing Date, whether or not
reflected in Seller's books and records and whether or not readily apparent
on or prior to the Closing Date;
(b) Without limiting the generality of the foregoing, any and all
products liability or similar claims in respect of Products sold or delivered
by Seller on or prior to the Closing Date;
(c) Any and all loss, injury, damage or deficiency resulting from
any misrepresentation, omission or breach of warranty on the part of Seller
under this Agreement or any other agreement, instrument or document
contemplated hereby;
(d) Any and all loss, injury, damage or deficiency resulting from
any non-fulfillment of any covenant or agreement on the part of Seller under
this Agreement; and
(e) Any and all demands, claims, actions, suits, proceedings,
assessments, judgments, costs and legal and other expenses incident to any of
the foregoing.
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(f) Any and all liabilities and obligations arising from or in
connection with the performance by Seller of Seller's obligations under the
Marketing Agreement.
18.2 SETTLEMENT AND COMPROMISE. Seller shall not settle or
compromise any demands, claims, actions, suits or proceedings for which Buyer
has sought indemnification from Seller unless it shall have given Buyer not
less than 15 days prior written notice of the proposed settlement or
compromise and afforded Buyer an opportunity to consult with Seller regarding
the proposed settlement or compromise.
18.3 TERMINATION OF INDEMNIFICATION. The right to indemnification
under this Section 18 to the extent based on any misrepresentation or breach
of warranty shall terminate twelve months after the Closing Date except (a)
for (i) any claim based on the untruth or inaccuracy of any representation or
warranty of Seller contained in Section 8.12 hereof or (ii) any claim based
on the untruth or inaccuracy of any other representation or warranty made
herein or in any statement, certificate or schedule furnished hereunder with
an intent to deceive or defraud or with reckless disregard for the truth or
accuracy thereof, and (b) that with respect to any pending claim for
indemnity hereunder which shall have been made within twelve months after the
Closing Date, the right to indemnity shall not terminate until the final
determination and satisfaction of such claim.
18.4 LIMITATIONS. No claim for indemnification under this Section
18 shall be made by Buyer unless and until the aggregate amount of such
claims by Buyer shall exceed $5,000. Seller shall be liable for a maximum of
$175,000 of payments made under this Section 18.
19. INDEMNIFICATION BY BUYER.
19.1 GENERALLY. Buyer hereby agrees to defend, indemnify and hold
harmless Seller against and with respect to:
(a) Any and all liabilities and obligations arising from or in
connection with ownership of the Assets or operation of the Business, as it
relates to the Assets, after the Closing Date, except to the extent Seller is
required to indemnify Buyer in respect thereof pursuant to Section 18.1;
(b) Without limiting the generality of the foregoing, any and all
products liability claims or similar claims in respect of Products sold or
delivered by Buyer after the Closing Date;
(c) Any and all loss, injury, damage or deficiency resulting from
any misrepresentation, omission or breach of warranty on the part of Buyer
under this Agreement or any other agreement, instrument or document
contemplated hereby;
(d) Any and all loss, injury, damage or deficiency resulting from
any non-fulfillment of any covenant or agreement on the part of Buyer under
this Agreement; and
(e) Any and all demands, claims, actions, suits or proceedings,
assessments, judgments, costs and legal and other expenses incident to any of
the foregoing.
(f) Any and all liabilities and obligations arising from or in
connection with the performance by Buyer of Buyer's obligations under the
Marketing Agreement, except to the extent Seller is required to indemnify
Buyer in respect thereof pursuant to Section 18.1.
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19.2 SETTLEMENT AND COMPROMISE. Buyer shall not settle or
compromise any demands, claims, actions, suits or proceedings for which
Seller has sought indemnification from Buyer unless it shall have given
Seller not less than 15 days prior written notice of the proposed settlement
or compromise and afforded Seller an opportunity to consult with Buyer
regarding the proposed settlement or compromise.
19.3 TERMINATION OF INDEMNIFICATION. The right to indemnification
under this Section 19 to the extent based on any misrepresentation or breach
of warranty shall terminate twelve months after the Closing Date except (a)
for any claim based on the untruth or inaccuracy of any representation or
warranty made herein or in any statement, certificate or schedule furnished
hereunder with an intent to deceive or defraud or with reckless disregard for
the truth or accuracy thereof, and (b) that with respect to any pending claim
for indemnity hereunder which shall have been made within twelve months after
the Closing Date, the right to indemnity shall not terminate until the final
determination and satisfaction of such claim
19.4 LIMITATIONS. No claim for indemnification under this Section
19 shall be made by Seller unless and until the aggregate amount of such
claims by Seller shall exceed $5,000. Buyer shall be liable for a maximum of
$175,000 of payments made under this Section 19.
20. TERMINATION OF AGREEMENT. This Agreement may be terminated at
any time prior to the Closing Date only as follows:
20.1 MUTUAL CONSENT. By mutual consent of Buyer and Seller.
20.2 BREACH OF AGREEMENT. By Buyer giving written notice to Seller
if Seller is in breach, or by Seller giving written notice to Buyer if Buyer
is in breach, in any material respect of any representation, warranty or
covenant contained in this Agreement and such breach shall not have been
cured by the fourteenth calendar day after the giving of such notice.
20.3 DELAYED CLOSING. By Buyer giving written notice to Seller, or
by Seller giving written notice to Buyer, if the transactions contemplated by
this Agreement shall not have been consummated by December 31, 1998, unless
such failure shall be due to the failure of the party seeking to terminate
this Agreement to perform or observe the covenants, agreements and conditions
hereof to be performed or observed by such party at or before the Closing
Date.
20.4 GOVERNMENT ACTION. By Buyer or Seller if any court of
competent jurisdiction in the United States or other United States
governmental body shall have issued an order, decree or ruling or taken any
other action restraining, enjoining or otherwise prohibiting the consummation
of the transactions contemplated by this Agreement and such order, decree,
ruling or other action shall have become final and non-appealable.
21. NONSOLICITATION. Until the termination of this Agreement in
accordance with Section 20, Seller will not, directly or indirectly, through
any officer, director, agent, affiliate, employee or otherwise, solicit,
initiate or encourage submission of any proposal or offer from any person,
group or entity relating to any acquisition of the Products or the Business
(an "Acquisition Proposal"); will not participate in any negotiations or
discussions regarding or furnish to any other person any information with
respect to, or otherwise cooperate in any way with, assist or participate in,
facilitate or encourage, any effort or attempt by any other person or
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entity to do or seek such acquisition; will inform any person making inquiry
with respect to such acquisition of this Agreement; and will inform Buyer of
any such inquiry; provided, that in response to an Acquisition Proposal made
without any solicitation, initiation or encouragement by Seller or any
officer, director, agent, affiliate or employee thereof, Seller may (i)
furnish information to any person pursuant to a confidentiality agreement no
more favorable to such person than any confidentiality agreement that may be
entered into between Buyer and Seller, and (ii) participate in negotiations
regarding such Acquisition Proposal, in each case if and only to the extent
that the Board of Directors of Seller shall have concluded in good faith
based on the advice of outside counsel that such action is required for the
Board of Directors of Seller to comply with its fiduciary duties under
applicable law. If any Acquisition Proposal is received or indicated to be
forthcoming, Seller shall notify Buyer immediately of such Acquisition
Proposal, including the material terms and conditions of such Acquisition
Proposal.
22. SALE OF ADDITIONAL PRODUCT.
22.1 ADDITIONAL PRODUCT. Seller is the owner of an additional
product, L-Emental Plus ("LEP"), that is not one of the Products for purposes
of this Agreement. Pending the mutually satisfactory resolution of certain
litigation relating to LEP, Buyer may be interested in purchasing Seller's
rights to LEP pursuant to a separate purchase agreement to be negotiated by
Buyer and Seller (the "LEP Agreement").
22.2 RIGHT OF FIRST REFUSAL. Pending negotiation and execution of
the LEP Agreement, Seller will not at any time assign, transfer, convey or
otherwise dispose of any of its rights to LEP unless Seller has first (a)
received from a Qualifying Offeror (as hereinafter defined) a BONA FIDE
written offer for such rights, in form and substance such that acceptance
thereof by signature of an officer of Seller would cause formation of a
legally binding contract for such disposition (a "Qualifying Offer") and (b)
complied in full with the following provisions:
(i) Seller will give written notice to Buyer of each
Qualifying Offer, including a complete copy thereof, the identify of the
Qualifying Offeror, purchase price, rights and other assets involved and all
other terms and conditions thereof (the "Notice").
(ii) With respect to each Qualifying Offer, Buyer shall have
21 days after receipt of the Notice in which to elect to purchase such rights
on the same terms and conditions as those contained in the Qualifying Offer.
(iii) If Buyer gives notice of its election to purchase such
rights within such 21-day period, then Buyer and Seller will proceed to close
the transfer of such rights on the terms set forth in such Qualifying Offer.
(iv) If Buyer gives notice of its election not to purchase
such rights or fails to give any notice to Seller within such 21-day period,
Buyer will be deemed to have waived its rights with regard to such Qualifying
Offer, and Seller will have 60 days after the end of such 21-day period in
which to accept such Qualifying Offer and close the disposition contemplated
therein on the terms set forth in such Qualifying Offer. If the disposition
contemplated by such
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Qualifying Offer has not been closed by the end of such 60-day period, then
Seller's right to do so shall lapse and terminate at the end of such 60-day
period, such Qualifying Offer shall be deemed to have lapsed and all rights
granted to Seller hereunder shall again be subject to all of the provisions
hereof.
22.3 QUALIFYING OFFEROR. For purposes of this Section 22, a
"Qualifying Offeror" shall mean a person or entity which (a) is not under any
legal or contractual disability preventing completion of the related
Qualifying Offer and (b) is financially ready, willing and able to complete
the transaction being proposed.
22.4 TERMINATION OF RIGHT OF FIRST REFUSAL. Buyer's rights under
this Section 22 shall terminate and be of no further force one year after the
Closing Date.
23. ASSIGNMENT. This Agreement may not be assigned by either
party hereto without the prior written consent of the other. This Agreement
shall be binding upon and shall inure to the benefit of the parties hereto,
their successors and permitted assigns, and no person, firm or corporation
other than the parties, their successors and permitted assigns shall acquire
or have any rights under or by virtue of this Agreement.
24. COVENANT OF FURTHER ASSURANCES. From time to time after the
Closing, at the request of Buyer and without further consideration, Seller
will execute and deliver such other instruments of transfer and take such
other actions as Buyer may reasonably require to transfer the acquired Assets
to, and vest title of the acquired Assets in, Buyer, and to put Buyer in
possession of the acquired Assets. In the event that it shall be necessary
for Seller to qualify to do business as a foreign corporation in any state
after the Closing in order for Buyer to enforce any material claim, Seller
shall so qualify promptly upon written request of Buyer.
25. CONFIDENTIALITY AND NONDISCLOSURE. Seller covenants and
agrees from and after the date hereof to maintain in strict confidence and
not to use or disclose to others the industrial and intellectual property of
Seller to be transferred to Buyer pursuant to this Agreement.
26. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained herein, and all other written
representations and warranties of Buyer and Seller contained in the
instruments executed in connection with the consummation of the transactions
provided for herein, shall survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby until
twelve months after the Closing Date; provided, however, that the foregoing
shall not bar the parties hereto, and their respective successors and
assigns, from asserting at any time thereafter any cause of action based on
(a) the untruth or inaccuracy of any representation or warranty of Seller
contained in Section 8.12 hereof, or (b) the untruth or inaccuracy of any
other representation or warranty made herein or in any statement, certificate
or schedule furnished hereunder with an intent to deceive or defraud or with
reckless disregard for the truth or accuracy thereof.
27. PUBLIC ANNOUNCEMENT. Any and all public announcements of any
kind or nature whatsoever concerning the transactions contemplated hereby
made before, on or after the Closing Date shall require the prior written
approval of Buyer and Seller.
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28. ENTIRE AGREEMENT. This Agreement, including the exhibits and
schedules attached to this Agreement, and other agreements contemplated
hereby constitutes the entire agreement and understanding between Seller and
Buyer with respect to the sale and purchase of the Assets and the other
transactions contemplated by this Agreement. All prior representations,
understandings and agreements between the parties with respect to the
purchase and sale of the Assets and the other transactions contemplated by
this Agreement are superseded by the terms of this Agreement.
29. AMENDMENT AND WAIVER. Any provision of this Agreement may be
amended or waived only by a writing signed by the party against which
enforcement of the amendment or waiver is sought.
30. CHOICE OF LAW. This Agreement shall be construed and
interpreted in accordance with the laws of the State of Minnesota, without
giving effect to the conflict of laws provision thereof, as though all acts
and omissions related to this Agreement occurred in the State of Minnesota.
31. ARBITRATION. Except as provided below, any controversy or
claim arising out of or relating to this Agreement, including disputes
relating to its formation, or the breach thereof, shall be settled by
arbitration in Minneapolis, Minnesota, at a time and location designated by
the arbitrator, but not exceeding 90 days after a demand for arbitration has
been made. Arbitration shall be conducted by the American Arbitration
Association in accordance with its Rules of Commercial Arbitration, and
judgment upon the award rendered by the arbitrator may be entered in any
court having jurisdiction thereof. The arbitrator shall be agreed to by both
Buyer and Seller and shall be a retired state or federal judge or any
attorney who has practiced business litigation for at least 10 years. If
Buyer and Seller cannot agree upon the arbitrator within 10 days after a
demand for arbitration has been made, the arbitrator shall be selected in
accordance with the rules of the American Arbitration Association.
Arbitration will be conducted pursuant to the provisions of this Agreement,
and the Commercial Arbitration Rules of the American Arbitration Association.
Limited civil discovery shall be permitted for the production of documents
and taking of depositions. Unresolved discovery disputes may be brought to
the attention of, and may be decided by, the arbitrator. The arbitrator
shall assess the costs and expenses of the arbitration against the parties in
such proportion as may be fair and equitable. Nothing herein contained shall
bar either party from seeking equitable remedies in a court of appropriate
jurisdiction.
32. SEVERABILITY. The provisions of this Agreement shall, where
possible, be interpreted so as to sustain their legality and enforceability,
and for that purpose the provisions of this Agreement shall be read as if
they cover only the specific situation to which they are being applied. The
invalidity or unenforceability of any provision of this Agreement in a
specific situation shall not affect the validity or enforceability of that
provision in other situations or of other provisions of this Agreement.
33. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be considered an original.
34. NOTICES. All notices given pursuant to this Agreement shall
be in writing and shall be delivered by hand or sent by United States
registered mail, postage prepaid, addressed as follows (or to another address
or person as a party may specify on notice to the other):
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(i) If to Seller:
Nutrition Medical, Inc.
Xxxxx 000
0000 00xx Xxxxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: President
(ii) If to Buyer:
GalaGen Inc.
0000 Xxxxxxxxx Xxxxxx Xxxxx
Xxxxx Xxxxx, Xxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx
35. BULK TRANSFER LAWS. Buyer acknowledges that Seller will not
comply with the provisions of any bulk transfer laws of any jurisdiction in
connection with the transactions contemplated by this Agreement.
36. DEFINITION OF KNOWLEDGE. For purposes of this Agreement,
"knowledge" shall mean the actual knowledge of an executive officer or
director of Seller or Buyer, as the case may be, and including such knowledge
as a reasonably prudent person in such position would have obtained upon the
exercise of reasonable diligence.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date and
year first above written.
GALAGEN INC.
By /s/ Xxxxxxx Xxxxxx
------------------------------------
Its Chief Financial Officer
--------------------------------
NUTRITION MEDICAL, INC.
By /s/ Xxxxx X. Xxxxxxx
------------------------------------
Its Corporate Secretary
--------------------------------
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