STOCK PURCHASE AGREEMENT
between
DONLAR CORPORATION
and
BIOMUNE SYSTEMS, INC.
Dated as of August 7, 2000
----------------------------
TABLE OF CONTENTS
Page
ARTICLE I AUTHORIZATION AND ISSUANCE OF THE ACQUIRED COMMON STOCK..............1
1.1 Definitions...........................................................1
1.2 Authorization of Acquired Common Stock................................1
1.3 Issuance and Purchase of the Acquired Common Stock......................1
1.4 Closing...............................................................1
ARTICLE II REPRESENTATIONS AND WARRANTIES OF BIOMUNE...........................2
2.1 Organization, Standing and Qualification..............................2
2.2 Investment Company Status.............................................2
2.3 Anti-Takeover Statutes................................................2
2.4 Power and Authority...................................................2
2.5 Authorization of Agreements, etc......................................3
2.6 Validity..............................................................3
2.7 Capitalization; Ownership of Other Entities...........................3
2.8 No Defaults...........................................................4
2.9 SEC Reports and Correspondence........................................4
2.10 No Material Adverse Change............................................5
2.11 Books and Records.....................................................5
2.12 Litigation............................................................5
2.13 Compliance............................................................5
2.14 Intellectual Property Rights..........................................6
2.15 Title to Properties; Encumbrances.....................................6
2.16 Inventory.............................................................7
2.17 Accounts Receivable...................................................7
2.18 Suppliers.............................................................7
2.19 Products..............................................................8
2.20 Environmental Matters.................................................8
2.21 Taxes.................................................................8
2.22 Insurance.............................................................9
2.23 Other Agreements......................................................9
2.24 Loans and Advances....................................................9
2.25 Assumptions and Guaranties of Indebtedness...........................10
2.26 Governmental Approvals...............................................10
2.27 Disclosure...........................................................10
2.28 Offering Exemption...................................................10
2.31 Employees............................................................11
2.32 Transactions with Affiliates.........................................11
2.33 U.S. Real Property Holding Corporation...............................11
2.34 Employees; Benefit Plans.............................................12
1
2.35 Contracts; No Defaults...............................................12
2.36 Year 2000............................................................14
2.37 Compliance with the Nasdaq Market Listing Requirements...............14
2.38 Compensation of Key Employees........................................14
ARTICLE III REPRESENTATIONS AND WARRANTEES OF THE BUYER.......................15
ARTICLE IV CONDITIONS TO THE OBLIGATIONS OF THE BUYER.........................16
4.1 Opinion of Biomune's Counsel.........................................16
4.2 Representations and Warranties To Be True and Correct................16
4.3 Performance..........................................................16
4.4 Due Diligence........................................................16
4.5 Proceedings To Be Satisfactory.......................................16
4.6 Purchase by the Buyer................................................16
4.7 Supporting Documents.................................................17
4.8 Preemptive Rights; Termination of Shareholder Agreements.............17
4.9 Other Waivers and Consents...........................................17
ARTICLE V CONDITIONS TO THE OBLIGATIONS OF BIOMUNE............................18
5.1 Representations and Warranties to be True and Correct................18
5.2 Performance..........................................................18
5.3 Proceedings to be Satisfactory.......................................18
5.4 Acton Consulting Agreement...........................................18
ARTICLE VI COVENANTS OF BIOMUNE...............................................18
6.1 Financial Statements, Reports, etc...................................18
6.2 No Issuance of Shares; Right of First Offer..........................19
6.3 Corporate Existence..................................................20
6.4 Properties, Business, Insurance......................................20
6.5 Inspection, Consultation and Advice..................................20
6.6 Restrictive Agreements Prohibited....................................20
6.7 Transactions with Affiliates.........................................21
6.8 Use of Proceeds......................................................21
6.9 Compensation.........................................................21
6.10 Bylaws...............................................................21
6.11 Granting of Options..................................................21
6.12 Compliance with Laws.................................................21
6.13 Change in Nature of Business.........................................22
6.14 Tax Payments.........................................................22
6.15 Material Changes and Litigation......................................22
6.16 New Developments.....................................................22
6.18 No Negotiation.......................................................22
6.19 Indemnification......................................................23
2
ARTICLE VII MISCELLANEOUS.....................................................24
7.1 Expenses.............................................................24
7.2 Survival of Agreements...............................................24
7.3 Remedies.............................................................25
7.4 Brokerage............................................................25
7.5 Parties in Interest..................................................25
7.6 Notices..............................................................25
7.7 Governing Law........................................................26
7.8 Entire Agreement.....................................................26
7.9 Counterparts.........................................................26
7.10 Amendments...........................................................26
7.11 Severability.........................................................26
7.12 Titles and Subtitles.................................................26
7.13 Public Announcements.................................................26
ARTICLE VIII DEFINITIONS......................................................27
8.1 "Affiliated Companies"...............................................27
8.2 "Applicable Contract"................................................27
8.3 "Common Stock".......................................................27
8.4 "Contract"...........................................................27
8.5 "Environmental Laws".................................................27
8.6 "Exchange Act".......................................................27
8.7 "GAAP"...............................................................27
8.8 "Government Entity"..................................................27
8.9 "Hazardous Material".................................................27
8.10 "Knowledge"or "to Know"..............................................27
8.11 "Laws"...............................................................28
8.12 "Liability"..........................................................28
8.13 "Major Supplier".....................................................28
8.14 "Material Adverse Effect"or "Materially Adversely Affect"............28
8.15 "Ordinary Course of Business"........................................28
8.16 "Organizational Documents"...........................................28
8.17 "Person".............................................................28
8.18 "Preferred Stock"....................................................28
8.19 "SEC"................................................................28
8.20 "SEC Reports"........................................................28
8.21 "Securities Act".....................................................28
8.22 "Stock Incentive Plans"..............................................29
8.23 "Subsidiary".........................................................29
3
Exhibits
4
Exhibit A
Schedules
Schedule 2.1(b)
Schedule 2.7
Schedule 2.8
Schedule 2.12
Schedule 2.14
Schedule 2.17
Schedule 2.24
Schedule 2.30
Schedule 2.32
Schedule 2.38
5
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is entered into as of
August 7, 2000 by and between DONLAR CORPORATION, an Illinois corporation (the
"Buyer"), and BIOMUNE SYSTEMS, INC., a Nevada corporation ("Biomune").
NOW, THEREFORE, in consideration of the respective representations,
warranties, covenants and agreements set forth herein, the parties hereto,
intending to be legally bound hereby, agree as follows:
ARTICLE I
AUTHORIZATION AND ISSUANCE OF THE ACQUIRED COMMON STOCK
1.1 Definitions. Certain capitalized terms used in the Agreement are
defined in Article VII hereof; reference to a "Schedule" or "Exhibit" is, unless
otherwise specified, to a Schedule or Exhibit to this Agreement.
1.2 Authorization of Acquired Common Stock. Biomune has duly authorized the
issuance and sale to the Buyer of an aggregate of 2,136,554 fully paid and
nonassessable shares of Common Stock, or such greater or lesser number of shares
such that after the sale the Buyer shall own 19.9% of the total of the number of
outstanding shares of Biomune's Common Stock (the "Acquired Common Stock").
1.3 Issuance and Purchase of the Acquired Common Stock. Subject to the
terms and conditions set forth herein, at the Closing (as defined in Section 1.4
hereof), Biomune shall issue and sell to the Buyer, and the Buyer shall purchase
from Biomune the Acquired Common Stock for an aggregate purchase price obtained
by multiplying (a) the number of shares of Common Stock which constitutes the
Acquired Common Stock, by (b) the average of the "last trade" price of the
Common Stock as reported on the Nasdaq SmallCap Market for the ten (10) trading
days immediately prior to the Closing Date (as defined in Section 1.4 hereof)
(the "Aggregate Purchase Price").
1.4 Closing. The closing shall take place in person or by telecopier at the
offices of Duane, Morris & Heckscher LLP, 000 Xxxx Xxxxxx Xxxxxx, Xxxxx 0000,
Xxxxxxx, Xxxxxxxx 00000, at 11:59 p.m. CDT, on August 7, 2000, or at such other
location, date and time as may be agreed upon between the Buyer and Biomune
(such closing being called the "Closing" and such date and time being called the
"Closing Date"). At the Closing, Biomune shall issue and deliver to the Buyer a
stock certificate or certificates in definitive form, registered in the name of
the Buyer, representing the Acquired Common Stock shares being purchased by the
Buyer at the Closing. As payment in full for the Acquired Common Stock shares
being purchased by the Buyer under this Agreement, and against delivery of the
stock certificate or certificates therefor, on the Closing Date the Buyer shall
deliver to Biomune a note or check payable to the order of Biomune in the amount
of its Aggregate Purchase Price.
6
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF BIOMUNE
Biomune represents and warrants to the Buyer the matters set forth in this
Article II as of the Closing Date:
2.1 Organization, Standing and Qualification.
(a) Each Affiliated Company is a corporation duly organized, validly
existing and in good standing under the Laws of its jurisdiction of
incorporation, and has all requisite corporate power and authority to own
or lease and operate its properties, to carry on its business as currently
conducted and as now proposed to be conducted, and to carry out the
transactions contemplated hereby. Each Affiliated Company is duly qualified
to do business as a foreign corporation and is in good standing under the
Laws of Utah, and no qualification is required in any other states or other
jurisdictions, except for those jurisdictions in which failure to so
qualify would not have a Material Adverse Effect upon the applicable
Affiliated Company. Seller has made available to the Buyer true, correct
and complete copies of the Organizational Documents of each Affiliated
Company, as currently in effect, and has previously made available to the
Buyer Biomune's complete corporate minute and stock books, which include
all actions of Biomune's Board of Directors and shareholders, whether by
meeting or by written consent in lieu of a meeting.
(b) Except as set forth on Schedule 2.1(b), Biomune does not own,
directly or indirectly, or have the right or obligation to acquire, any
interest in any business, association or other Person.
2.2 Investment Company Status. Each Affiliated Company is not an
"investment company" within the meaning of the Investment Company Act of 1940.
2.3 Anti-Takeover Statutes. Biomune's Board of Directors has taken all
necessary action so that no Nevada "control share acquisition" or other similar
anti-takeover statute (including, but not limited to, Sections 78.378 - 78.3793
and Sections 78.411 - 78.444 inclusive of the Nevada Revised Statutes) or
regulation or applicable provision in Biomune's Articles of Incorporation or
Bylaws prohibits the transactions contemplated by this Agreement. To the
Knowledge of Biomune, no other state takeover statute or regulation is
applicable to the transactions contemplated by this Agreement.
2.4 Power and Authority. Biomune has the power and authority to make,
deliver and perform this Agreement and the transactions contemplated hereby. The
execution, delivery and performance of this Agreement have been duly authorized
by all necessary corporate actions. In addition, the issuance, sale and delivery
of the Acquired Common Stock in accordance with the terms of this Agreement have
been duly authorized by all requisite corporate action of Biomune. When issued,
sold and delivered in accordance with this Agreement, the Acquired Common Stock
issued hereunder will be validly issued and outstanding, fully paid for,
7
nonassessable, and will not be subject to preemptive or any other similar rights
of the shareholders of Biomune or others; provided, however, that the Acquired
Common Stock may be subject to restrictions on transfer under applicable state
and/or federal securities laws.
2.5 Authorization of Agreements, etc. The execution and delivery by Biomune
of this Agreement, the performance by Biomune of its obligations hereunder, the
issuance, sale and delivery of the Acquired Common Stock will not violate any
provision of Law, any order of any court or other agency of government, the
Organization Documents or resolution adopted by the board of directors or
shareholders of any Affiliated Company or any provision of any indenture,
agreement or other instrument to which any Affiliated Company or any of its
properties or assets is bound, or conflict with, result in a breach of or
constitute with due notice or lapse of time or both a default under, any such
indenture, agreement or other instrument, or result in the creation or
imposition of any lien, charge, restriction, claim or encumbrance of any nature
whatsoever upon any of the properties or assets of any Affiliated Company. No
provision of this Agreement violates, conflicts with, results in a breach of or
constitutes with due notice or lapse of time or both a default under, any
indenture, agreement or other instrument to which Biomune is bound or by which
the assets of Biomune are bound regardless, in each such case, of whether any
such violation, conflict, breach or default relates to Biomune or, to Biomune's
best Knowledge, to another party to any such indenture, agreement or other
instrument.
2.6 Validity. This Agreement has been duly executed and delivered by
Biomune and constitutes the legal, valid and binding obligation of Biomune,
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, moratorium or other similar Laws relating to creditor's rights and
general principles of equity and no representation is made regarding the effect
of Laws relating to competition or antitrust.
2.7 Capitalization; Ownership of Other Entities. The authorized capital
stock of Biomune immediately after the Closing shall consist of: (i) 500,000,000
shares of Common Stock, par value $.0001; and (ii) 50,000,000 shares of
Preferred Stock, par value $.0001. Immediately prior to the Closing, 8,599,900
shares of Common Stock will be validly issued and outstanding, fully paid and
nonassessable and 38,523 shares of Preferred Stock which are convertible into
1,169 shares of Common Stock will have been issued. In addition, 262,580 shares
of Common Stock are reserved for issuance under Biomune's Stock Incentive Plans
and all other rights to acquire equity securities of Biomune. The shareholders
of record and holders of subscriptions, warrants, options, convertible
securities and other rights, contingent or other, including those holding awards
under the Stock Incentive Plans to purchase or otherwise acquire equity
securities of Biomune, and the number of shares of Common Stock and the number
of such subscriptions, warrants, options, convertible securities, and other such
rights held by each or issuable to each, are as set forth in the attached
Schedule 2.7. The designations, powers, preferences, rights, qualifications,
limitations and restrictions in respect of each class and series of authorized
capital stock of Biomune are as set forth in Biomune's Articles of Incorporation
and the Certificates and Statements of Determination of Rights and Preferences
8
of the Series A and B Preferred Stock, as amended, and all such designations,
powers, preferences, rights, qualifications, limitations and restrictions are
valid, binding and enforceable and in accordance with all applicable Laws.
Except as set forth in Schedule 2.7, (i) no Person owns of record or is Known to
Biomune to own beneficially any shares of Common Stock or Preferred Stock, or
any securities or instruments convertible into Common Stock or Preferred Stock;
(ii) no subscription, warrant, option, convertible security, or other right,
contingent or other, to purchase or otherwise acquire equity securities of
Biomune from Biomune is authorized or outstanding; (iii) no options, shares or
other rights have been granted or issued under the Stock Incentive Plans; and
(iv) there is no commitment by Biomune to issue shares, subscriptions, warrants,
options, convertible securities or other such rights or to distribute to holders
of any of its equity securities any evidence of indebtedness or asset. Except as
provided for in Biomune's Articles of Incorporation or as set forth in Schedule
2.7, Biomune has no obligation, contingent or otherwise, to purchase, redeem or
otherwise acquire any of its equity securities or any interest therein or to pay
any dividend or make any other distribution in respect thereof. Except as set
forth in Schedule 2.7, to the Knowledge of Biomune, there are no voting trusts
or agreements, shareholders agreements, pledge agreements, buy-sell agreements,
rights of first refusal, preemptive rights or proxies relating to any securities
of Biomune, whether or not Biomune is a party thereto. All of the outstanding
securities of Biomune were issued in compliance with all applicable federal and
state securities laws. Biomune's only Subsidiary is Optim Nutrition, Inc., a
Utah corporation ("Optim") and Biomune owns all of the outstanding capital stock
of Optim.
2.8 No Defaults. Except as set forth in Schedule 2.8, no Affiliated Company
is in default: (a) under (i) its Organizational Documents, or (ii) any material
written, oral or implied Contract to which the Affiliated Company is a party
and, to the best Knowledge of Biomune, the other party to such Contract is not
in default thereunder; or (b) with respect to any order, writ, injunction or
decree of any court or any Government Entity which, in the aggregate, will, or
could reasonably be expected to, have a Material Adverse Effect on an Affiliated
Company's business, financial condition, results of operations or prospects.
2.9 SEC Reports and Correspondence. Biomune has filed all proxy statements,
reports and other documents required to be filed by it under the Exchange Act
from and after January 7, 1997, and Biomune has furnished the Buyer true and
correct copies of all annual reports, quarterly reports, proxy statements and
other reports under the Exchange Act filed by Biomune from and after such date,
each as filed with the SEC (collectively, the "SEC Reports" or "Financial
Reports"). On the date of filing, each SEC Report was in compliance in all
material respects with the requirements of its respective report form and did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading,
except to the extent corrected by a subsequently filed SEC Report, as of the
date hereof there is no fact or facts not disclosed in the SEC Reports that
relate specifically to Biomune and that could, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. Biomune has made
available for inspection by the Buyer copies of all correspondence between
9
Biomune and the SEC from and after January 7, 1997. The SEC Reports have been
prepared from, and are in accordance with the books and records of Biomune,
comply in all material respects with applicable accounting requirements and with
the published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited statements included in Quarterly Reports on Form 10-QSB, as
permitted by Form 10-QSB of the SEC) and fairly presented the financial position
of Biomune and its results of operation, cash flows and changes in financial
position as of and for the periods indicated, except that the unaudited interim
financial statements contained in the SEC Reports were or are subject to normal
and recurring year-end adjustments.
2.10 No Material Adverse Change. Since the date of Biomune's March 31, 2000
balance sheet (the "Balance Sheet"), there has not been any material adverse
change in the business, operations, properties, prospects, assets or condition
of any Affiliated Company, and to the Knowledge of Biomune, no event has
occurred or circumstance exists that may result in such a material adverse
change.
2.11 Books and Records. The books of account, minute books, stock record
books, ledgers, order books, and other records and documents of the Affiliated
Companies, all of which have been made available to the Buyer, are complete and
correct and have been maintained in accordance with sound business practices and
the requirements of Section 13(b)(2) of the Exchange Act (regardless of whether
or not the Affiliated Companies are subject to that Section) including the
maintenance of an adequate system of internal controls.
2.12 Litigation. Except as set forth in Schedule 2.12, there is no: (i)
litigation, action, suit, claim, proceeding or investigation pending or, to the
best of Biomune's Knowledge, threatened against or affecting an Affiliated
Company, or any of its properties or assets, at law or in equity, or before or
by any Government Entity; or (ii) governmental inquiry pending or, to the best
of Biomune's Knowledge, threatened against or affecting an Affiliated Company,
including without limitation any inquiry as to the qualification of an
Affiliated Company to hold or receive any license or permit, and, to the best of
Biomune's Knowledge, there is no basis for any of the foregoing. No Affiliated
Company has received any opinion or memorandum or legal advice from legal
counsel to the effect that it is exposed, from a legal standpoint, to any
liability that may be material to its business, prospects, financial condition,
operations, property or affairs, or which might call into question the validity
of this Agreement or any of the securities to be issued hereunder or any action
taken or to be taken pursuant hereto or thereto. Except as set forth in Schedule
2.12, there is no action or suit by an Affiliated Company pending or threatened
against others.
2.13 Compliance. Each Affiliated Company is and has been in compliance with
all federal, state, local and foreign Laws applicable to it or to its business,
operations, properties, assets, products and services, including, but not
limited to, all rules, regulations and other Laws of the Food and Drug
Administration ("FDA") and each Affiliated Company has obtained all necessary
permits, licenses and other authorizations required to conduct its business with
10
such exceptions that do not have, and are not reasonably expected to have, a
Material Adverse Effect. Such licenses and permits are in full force and effect
and no violations have been recorded in respect of any such licenses or permits,
no proceeding is pending or, to the Knowledge of Biomune, threatened to revoke
or limit any thereof, and no notice of non-compliance, assessment or material
change has been received by an Affiliated Company. To the Knowledge of Biomune,
there is no existing Law that would prohibit or restrict an Affiliated Company
from, or otherwise adversely affect an Affiliated Company in, conducting its
business in any jurisdiction in which it is conducting business.
2.14 Intellectual Property Rights. Each Affiliated Company owns or has a
valid right to use the Intellectual Property Rights (as defined below) being
used to conduct its business as now operated and as now proposed to be operated
(a complete list of licenses, registrations and applications for registrations
of such Intellectual Property Rights is attached hereto as Schedule 2.14). To
the Knowledge of Biomune, the conduct of each Affiliated Company's business as
now operated and as now proposed to be operated does not and will not conflict
with or infringe upon the Intellectual Property Rights of others. Except as
otherwise set forth on Schedule 2.14, no claim is pending or, to the best of
Biomune's Knowledge, threatened against an Affiliated Company or its officers,
employees and consultants to the effect that any such Intellectual Property
Right owned or licensed by the Affiliated Company, or which the Affiliated
Company otherwise has the right to use, is invalid or unenforceable by the
Affiliated Company. Except pursuant to the terms of any licenses specified on
Schedule 2.14, no Affiliated Company has an obligation to compensate any Person
for the use of any such Intellectual Property Rights and no Affiliated Company
has granted any Person any license or other right to use any of the Intellectual
Property Rights of the Affiliated Company, whether requiring payment of
royalties or not. Each Affiliated Company has taken all reasonable measures to
protect and preserve the security, confidentiality and value of its Intellectual
Property Rights, including its trade secrets and other confidential information.
Except as set forth in Schedule 2.14 hereof, all employees and consultants of
each Affiliated Company involved in the design, review, evaluation or
development of products or Intellectual Property Rights have executed a
nondisclosure and assignment of inventions agreement. For purposes of this
Agreement, "Intellectual Property Rights" shall mean all forms of intellectual
property rights and protections that may be obtained including, without
limitation, all right, title and interest in and to all foreign, federal, state
and common law rights relating to: (i) patents, patent rights and all filed,
pending or potential applications for patents or patent rights, including any
reissue, reexamination, division, continuation or continuation-in-part
applications now or hereafter filed; (ii) trade secret rights and equivalent
rights; (iii) copyrights, mask works and other literary property and authors'
rights, whether or not protected by copyright or as a mask work; and (iv)
trademarks, trade names, service marks, symbols, logos, brand names and other
proprietary indicia.
2.15 Title to Properties; Encumbrances.
(a) Each Affiliated Company owns, or has a valid leasehold interest
11
in, or valid license for, all assets necessary for the conduct of its
business as currently conducted. All tangible assets of each Affiliated
Company are in a good state of maintenance and repair and adequate for use
in the Affiliated Company's business to the extent of its current
operations. The Affiliated Companies own no real property. Each Affiliated
Company enjoys peaceful and undisturbed possession under all leases under
which it is operating, and all such leases are valid and subsisting in full
force and effect without any default of the Affiliated Company thereunder
and, to the best of the Affiliated Company's Knowledge, without any default
thereunder of any other party thereto. To the Knowledge of Biomune, no
event has occurred and is continuing which, with due notice or lapse of
time or both, would constitute a default or event of default by the
Affiliated Company under any such lease or agreement or by any other party
thereto. Each Affiliated Company's possession of such property has not been
disturbed and no claim has been asserted against the Affiliated Company
that is adverse to its rights in such leasehold interests.
(b) Each Affiliated Company has good and marketable title to its
properties and assets reflected on the Financial Reports or acquired by it
since the date of the Financial Reports other than properties and assets
disposed of in the ordinary course of business since the date of the
Financial Reports, and all such properties and assets are free and clear of
mortgages, pledges, security interests, liens, charges, claims,
restrictions and other encumbrances, except for liens for current taxes not
yet due and payable and minor imperfections of title, if any, not material
in nature or amount and not materially detracting from the value or
impairing the use of the property subject thereto or impairing the
operations or proposed operations of the Affiliated Company.
2.16 Inventory. Excluding return of product in the Ordinary Course of
Business, all inventory of the Affiliated Companies, whether or not reflected in
the Balance Sheet, consists of a quality and quantity usable and salable in the
ordinary course of business, except for obsolete items and items of
below-standard quality, all of which have been written off or written down to
net realizable value in the Balance Sheet or on the accounting records of the
Affiliated Companies as of the Closing Date, as the case may be. All inventories
not written off have been priced at cost basis. The quantities of each item of
inventory (whether raw materials, work-in-progress, or finished goods) are not
excessive, but are reasonable in the present circumstances of the Affiliated
Companies.
2.17 Accounts Receivable. Except as described in Schedule 2.17, all
accounts and notes receivable and accrued interest receivable of the Affiliated
Companies have arisen in the Ordinary Course of Business and the accounts
receivable reserves reflected on the Balance Sheet are as of such date
established in accordance with GAAP consistently applied.
2.18 Suppliers. No Major Supplier has during the last twelve months
materially increased or, to the Knowledge of Biomune, threatened to materially
increase its prices or materially decreased or limited or, to the Knowledge of
the Company, threatened to materially decrease or limit its provision of
services or supplies to Biomune. During the last twelve months, there has been
no termination, cancellation or limitation of, or any material change in, the
12
business relationships of Biomune with any Major Supplier. Except for the
potential sale of the Mountain Lift product line, to the Knowledge of Biomune,
there will not be any such change in relations with any Major Supplier or the
triggering of any right of termination, cancellation or penalty or other payment
by or to any Major Supplier in connection with or as a result of the
transactions contemplated by the Agreement that could, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
2.19 Products. There are no statements, citations or decisions by the FDA
or any other Government Entity stating that any product manufactured, sold,
rented, leased, designed, distributed or marketed at any time by any Affiliated
Company (the "Products") is defective or unsafe or fails to meet any standards
promulgated by the FDA or such Government Entity. There is no (i) fact relating
to any Product that, to the Knowledge of the Affiliated Companies, may impose
upon the Affiliated Companies a duty to recall or retrofit such Product or a
duty to warn customers of a defect in such Product, (ii) latent or overt design,
manufacturing or other defect in any Product that could, to the Knowledge of
Affiliated Companies, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect or (iii) Liability for warranty claims or
returns with respect to any Product that could, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
2.20 Environmental Matters. Biomune has no Knowledge of any claim and has
not received any notice of any claim, and no proceeding has been instituted
raising any claim against any Affiliated Company or any of its real properties
now or formerly owned, leased or operated by it or other assets, alleging any
damage to the environment or violation of any Environmental Laws. Biomune has no
Knowledge of any facts that would give rise to any claim, public or private, of
violation of Environmental Laws or damage to the environment emanating from,
occurring on or affecting real properties now or formerly owned, leased or
operated by any Affiliated Company or to other assets or their use. No
Affiliated Company has stored any Hazardous Materials on real properties now or,
to the Knowledge of the Affiliated Companies, formerly owned, leased or operated
by it or has disposed of any Hazardous Materials in a manner contrary to any
Environmental Laws.
2.21 Taxes.
(a) The term "taxes" as used herein means all federal, state, local,
foreign and other net income, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, license, lease, service, service
use, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, property, windfall profits, customs duties, or other
taxes, fees, assessments or other charges of any kind whatever, together
with any interest and any penalties, additions to tax or additional amounts
with respect thereto, and the term "tax" means any one of the foregoing
taxes. The term "returns" as used herein, means all returns, declarations,
reports, statements and other documents required to be filed in respect of
taxes, and "return" means any one of the foregoing returns. The term "Code"
means the Internal Revenue Code of 1986, as amended. All citations to the
Code, or to the Treasury Regulations promulgated thereunder, shall include
13
any amendments or any substitute or successor provisions thereto.
(b) Each Affiliated Company has filed all returns required to be filed
in accordance with applicable Laws with the appropriate Government Entity
in all jurisdictions in which such returns are required to be filed. Each
Affiliated Company has paid all taxes required to have been paid by it and
adequate reserves have been established for all taxes accrued but not yet
payable. No issues have been raised and are currently pending by any taxing
authority in connection with any of the returns or taxes. No waivers of
statutes of limitation with respect to any of the returns have been given
by or requested from any Affiliated Company. All deficiencies asserted or
assessments made as a result of any examinations have been fully paid, or
are fully reflected as a Liability in the Financial Reports as being
contested and reserve therefor has been established and is fully reflected
in the Financial Reports. There are no liens for taxes other than for
current taxes not yet due and payable upon the assets of any Affiliated
Company. All elections with respect to taxes affecting the Affiliated
Companies as of the date hereof are set forth in the Financial Reports or
are annexed hereto. After the date hereof, no election with respect to
taxes will be made without the written consent of the Buyer. The Affiliated
Companies have not agreed to make, nor are they required to make, any
adjustment under Section 481(a) of the Code by reason of a change in
accounting method or otherwise. No Affiliated Company is a party to any
agreement, Contract, arrangement or plan that has resulted or would result,
separately or in the aggregate, in the payment of any "excess parachute
payments" within the meaning of Section 280G of the Code. No Affiliated
Company has and has not had a permanent establishment in any foreign
country as defined in any applicable tax treaty or convention between the
United States of America and such foreign country. Each Affiliated Company
has satisfied all federal, state, local and foreign withholding tax
requirements, including but not limited to income, social security and
employment tax.
(c) No Affiliated Company has ever filed: (i) an election pursuant to
Section 1362 of the Code that an Affiliated Company be taxed as an S
corporation; or (ii) a consent pursuant to Section 341(f) of the Code
relating to collapsible corporations.
2.22 Insurance. Each Affiliated Company carries insurance covering its
properties and businesses customary for the type and scope of its properties and
businesses, but in any event in the amounts sufficient to prevent the Affiliated
Company from becoming a co-insurer.
2.23 Other Agreements. To the Knowledge of the Affiliated Companies, no
Affiliated Company is a party to or otherwise bound by any written, oral or
implied Contract, or other restriction which individually or in the aggregate
could Materially Adversely Affect the business, prospects, financial condition,
operations, property or affairs of an Affiliated Company. Each Affiliated
Company and, to the best of Biomune's Knowledge, each other party thereto, have
in all material respects performed all the obligations required to be performed
by them to date, have received no notice of default and are not in material
default with due notice or lapse of time or both under any lease, agreement or
Contract now in effect to which an Affiliated Company is a party or by which it
14
or its property may be bound. No Affiliated Company has a present expectation or
intention of not fully performing all its obligations under each such Contract,
and no Affiliated Company has Knowledge of any breach or anticipated breach by
the other party to any Contract to which the Affiliated Company is a party.
2.24 Loans and Advances. Except as set forth in Schedule 2.24, no
Affiliated Company has any outstanding loans or advances to any Person or is
obligated to make any such loans or advances, except, in each case, for advances
to employees of the Affiliated Company in respect of reimbursable business
expenses anticipated to be incurred by them in connection with their performance
of services for the Affiliated Company.
2.25 Assumptions and Guaranties of Indebtedness. No Affiliated Company has
assumed, guaranteed, endorsed or otherwise become directly or contingently
liable on any indebtedness of any other Person including, without limitation,
Liability by way of agreement, contingent or otherwise, to purchase, to provide
funds for payment, to supply funds to or otherwise invest in the debtor, or
otherwise to assure the creditor against loss.
2.26 Governmental Approvals. No registration or filing with, or consent or
approval of or other action by, any federal, state or other Government Entity is
or will be necessary for the valid execution, delivery and performance by
Biomune of this Agreement and the issuance, sale and delivery of the Acquired
Common Stock other than filings pursuant to state securities laws and Regulation
D under the Securities Act, all of which filings have been made, or shall be
timely made, by Biomune in connection with the sale of the Acquired Common
Stock.
2.27 Disclosure. Biomune has fully provided the Buyer with all the
information that the Buyer has requested. To the Knowledge of Biomune, neither
this Agreement and all Schedules and Exhibits hereto, nor any other written
statements or certificates made or delivered herewith or therewith, contains any
untrue statement of a material fact or omits to state a fact necessary to make
the statements contained herein or therein not misleading. There is no fact
within the Knowledge of Biomune or any of Biomune's executive officers which has
not been disclosed herein or in writing by them to the Buyer and which
Materially Adversely Affects, or may be reasonably expected to Materially
Adversely Affect the business, properties, assets or condition, financial or
otherwise, of the Affiliated Company. Other than as stated in the Schedules,
without limiting the foregoing, Biomune has no Knowledge or belief that there
exists, or there is pending or planned, any patent, invention, device,
application or principle or any Law, standard or condition which would
Materially Adversely Affect the condition, financial or otherwise, or the
operations or prospects of Biomune or any other Affiliated Company.
2.28 Offering Exemption. Subject to the accuracy of the representations and
warranties of the Buyer set forth under Article III of this Agreement, the offer
and sale of the Acquired Common Stock is exempt from registration under the
Securities Act pursuant to Section 4(2) thereof, and under applicable state
securities and "blue sky" laws.
2.29 Brokers. Except as set forth in Article V hereof, no broker,
15
investment banker, finder, financial advisor or other Person is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based on
arrangements made by or on behalf of Biomune.
2.30 Officers.
(a) Set forth in Schedule 2.30 is a list of the names of the officers
and key employees of Biomune and each other Affiliated Company
(collectively, the "Key Employees") together with the title or job
classification of each such person and the total compensation anticipated
to be paid to each such person by Biomune or other Affiliated Company, as
applicable, in the year 2000. Except as set forth on Schedule 2.30, none of
such persons has an employment agreement or understanding, whether oral or
written, with an Affiliated Company, which is not terminable on notice by
such Affiliated Company without cost or other liability to any Affiliated
Company.
(b) To the Knowledge of the Affiliated Companies, no officer, employee
or consultant of Biomune or any other Affiliated Company is now in
violation of any term of any employment contract, patent disclosure
agreement, proprietary information agreement, noncompetition agreement,
nonsolicitation agreement, confidentiality agreement or any other similar
contract or agreement or any restrictive covenant relating to the right of
any such officer, employee or consultant to be employed or engaged by
Biomune or any other Affiliated Company because of the nature of the
business conducted or to be conducted by Biomune or any other Affiliated
Company or relating to the use of trade secrets or proprietary information
of others, and the continued employment or engagement of Biomune's and the
other Affiliated Company's officers, employees or consultants does not
subject Biomune or any other Affiliated Company or the Buyer to any
liability with respect to any of the foregoing matters.
(c) No Key Employee of Biomune or any other Affiliated Company, whose
termination, either individually or in the aggregate, could have a Material
Adverse Effect on Biomune or any other Affiliated Company, has terminated
his or her employment, or, to Biomune's Knowledge, has any present
intention of terminating his or her employment with Biomune or any other
Affiliated Company or has any health problems that could adversely affect
his or her ability to continue performing his or her duties for Biomune or
any other Affiliated Company.
2.31 Employees. Each Affiliated Company has complied with all applicable
Laws relating to the employment of labor, including provisions relating to
wages, hours, equal opportunity, collective bargaining and the payment of Social
Security and other taxes, and with the Employee Retirement Income Security Act
of 1974, as amended ("ERISA").
2.32 Transactions with Affiliates. Except as set forth in Schedule 2.32, no
director, officer, employee or shareholder of Biomune or any other Affiliated
Company or member of the family of any such person, or any corporation,
partnership, trust or other entity in which any such person or any member of the
family of any such person, has a substantial interest or is an officer,
16
director, trustee, partner or holder of more than 5% of the outstanding capital
stock thereof, is a party to any transaction with Biomune or any other
Affiliated Company, including any loan, debt or contract, agreement or other
arrangement providing for the employment of, furnishing of services by, rental
of real or personal property from or otherwise requiring payments to, any such
person or firm, or has a pecuniary interest in any supplier or customer of
Biomune or any other Affiliated Company or in any other business enterprise with
which Biomune or any other Affiliated Company conducts business.
2.33 U.S. Real Property Holding Corporation. Biomune is not now and has
never been a "United States real property holding corporation," as defined in
Section 897(c) (2) of the Code and Section 1.897-2(b) of the regulations
promulgated by the Internal Revenue Service.
2.34 Employees; Benefit Plans. No Affiliated Company is a party to any
collective bargaining agreement and is not a party to any pending or threatened
labor dispute. There is no employee of Biomune or any other Affiliated Company
whose employment is not terminable at will. Neither Biomune nor any other
Affiliated Company has any employee benefit plan.
2.35 Contracts; No Defaults.
(a) Biomune has delivered to Buyer true and complete copies of:
(i) each Applicable Contract that involves performance of
services or delivery of goods or materials by one or more Affiliated
Companies of an amount or value in excess of $25,000;
(ii) each Applicable Contract that involves performance of
services or delivery of goods or materials to one or more Affiliated
Companies of an amount or value in excess of $25,000;
(iii) each Applicable Contract that was not entered into in the
Ordinary Course of Business and that involves expenditures or receipts
of one or more Affiliated Companies in excess of $10,000;
(iv) each Applicable Contract affecting the ownership of, leasing
of, title to, use of, or any leasehold or other interest in, any real
or personal property (except personal property leases and installment
and conditional sales agreements having a value per item or aggregate
payments of less than $25,000 and with terms of less than one year);
(v) each licensing agreement or other Applicable Contract with
respect to patents, trademarks, copyrights, or other intellectual
property, including agreements with current or former employees,
consultants, or contractors regarding the appropriation or the
non-disclosure of any of the Intellectual Property Rights;
17
(vi) each collective bargaining agreement and other Applicable
Contract to or with any labor union or other employee representative
of a group of employees;
(vii) each joint venture, partnership, and other Applicable
Contract (however named) involving a sharing of profits, losses,
costs, or liabilities by any Affiliated Company with any Person;
(viii) each Applicable Contract containing covenants that in any
way purport to restrict the business activity of any Affiliated
Company of any affiliate of an Affiliated Company or limit the freedom
of any Affiliated Company or any affiliate of an Affiliated Company to
engage in any line of business or to compete with any Person;
(ix) each Applicable Contract providing for payments to or by any
Person based on sales, purchases, or profits, other than direct
payments for goods;
(x) each power of attorney that is currently effective and
outstanding;
(xi) each Applicable Contract entered into other than in the
Ordinary Course of Business that contains or provides for an express
undertaking by any Affiliated Company to be responsible for
consequential damages;
(xii) each Applicable Contract for capital expenditures in excess
of $10,000;
(xiii) each written warranty, guaranty, and or other similar
undertaking with respect to contractual performance extended by any
Affiliated Company other than in the Ordinary Course of Business; and
(xiv) each amendment, supplement, and modification (whether oral
or written) in respect of any of the foregoing.
(b) To the Knowledge of the Affiliated Companies, no officer,
director, agent, employee, consultant, or contractor of any Affiliated
Company is bound by any Contract that purports to limit the ability of such
officer, director, agent, employee, consultant, or contractor to (A) engage
in or continue any conduct, activity, or practice relating to the business
of any Acquired Company, or (B) assign to any Affiliated Company or to any
other Person any rights to any invention, improvement, or discovery.
(c) Each Contract identified or required to be identified in Part
2.35(a) is in full force and effect and is valid and enforceable in
accordance with its terms.
(d) Except as set forth in other Schedules to this Agreement:
(i) each Affiliated Company is, and at all time since January 1,
18
1997 has been, in full compliance with all applicable terms and
requirements of each Contract under which such Affiliated Company has
or had any obligation or Liability or by which such Affiliated Company
or any of the assets owned or used by such Affiliated Company is or
was bound;
(ii) each other Person that has or had any obligation or
Liability under any Contract under which an Affiliated Company has or
had any rights is, and at all times since January 1, 1997 has been, in
full compliance with all applicable terms and requirements of such
Contract;
(iii) to the Knowledge of the Affiliated Companies, no event has
occurred or circumstance exists that (with or without notice or lapse
of time) may contravene, conflict with, or result in a violation or
breach of, or give any Affiliated Company or other Person the right to
declare a default or exercise any remedy under, or to accelerate the
maturity or performance of, or to cancel, terminate, or modify, any
Applicable Contract; and
(iv) no Affiliated Company has given to or received from any
other Person, at any time since January 1, 1997, any notice or other
communication (whether oral or written) regarding any actual, alleged,
possible, or potential violation or breach of, or default under, any
Contract.
(e) There are no renegotiations of, attempts to renegotiate, or
outstanding rights to renegotiate any material amounts paid or payable to
any Affiliated Company under current or completed Contracts with any Person
and no such Person has made written demand for such renegotiation.
(f) The Contracts relating to the sale, design, manufacture, or
provision of Products or services by the Affiliated Companies have been
entered into in the Ordinary Course of Business and have been entered into
without the commission of any act alone or in concert with any other
Person, or any consideration having been paid or promised, that is or would
be in violation of any Law.
2.36 Year 2000. Each Affiliated Company's computer system and software
including all software and applications developed for or sold to any customer or
client, and all other systems of Biomune are able to accurately process date
data, including but not limited to, calculating, comparing and sequencing from,
into and between the twentieth century through year 1999, the year 2000 and the
twenty-first century, including leap year calculations. To the Knowledge of
Biomune, it is not aware of any inability on the part of any service provider to
any Affiliated Company to timely remedy such service provider's own deficiencies
in respect of the year 2000 problem.
2.37 Compliance with the Nasdaq Market Listing Requirements. Biomune has
fully disclosed to Buyer all communications with Nasdaq regarding its SmallCap
19
Market listing since January 1, 2000.
2.38 Compensation of Key Employees. Biomune has not increased or otherwise
changed the compensation of, or paid any bonuses to, any Key Employee at any
time during the period commencing 90 days prior to the date of this Agreement
through the date of this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTEES OF THE BUYER
The Buyer represents and warrants to Biomune that on the date the Buyer
purchases the Acquired Common Stock:
(a) the Buyer is an "accredited investor" within the meaning of Rule
501 under the Securities Act;
(b) the Buyer has sufficient Knowledge and experience in investing in
companies similar to Biomune in terms of Biomune's stage of development so
as to be able to evaluate the risks and merits of its investment in Biomune
and it is able financially to bear the risks thereof, and it has been
afforded the opportunity during the course of negotiating the transactions
contemplated by this Agreement to ask questions of, and to secure such
information from, the Affiliated Companies and their officers and directors
as it deems necessary to evaluate the merits of entering into such
transactions. All such questions have been answered satisfactorily and the
Buyer or its counsel have received and reviewed the due diligence materials
delivered to it/them by the Affiliated Companies;
(c) the Buyer understands that the Acquired Common Stock shares have
not been registered under the Securities Act and the Buyer understands that
no shares can be sold unless they are first registered under the Securities
Act or unless an exemption from such registration is available;
(d) the Buyer is acquiring the Acquired Common Stock for its own
account for investment only, and not as a nominee and not with a view
towards distribution of any part thereof, and that the Buyer has no present
intention of selling, granting any participation in, or otherwise
distributing the same;
(e) the Buyer understands that the Acquired Common Stock has not been
registered under the Securities Act. The Buyer also understands that the
Acquired Common Stock is being offered and sold pursuant to an exemption
from registration contained in the Securities Act based in part upon the
Buyer's representations contained in the Agreement;
(f) the execution, delivery and performance by the Buyer of this
Agreement have been duly authorized by all requisite action of it. Upon
20
execution and delivery, this Agreement will be a valid and binding
obligation of the Buyer, enforceable in accordance with its terms, except
as limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other Laws of general application affecting enforcement of creditors'
rights and general principles of equity that restrict the availability of
equity remedies;
(g) the Buyer is duly organized and validly existing and has the power
and authority to enter into this Agreement;
(h) the Buyer has adequate net worth and means of providing for its
current needs and personal contingencies to sustain a complete loss of its
investment in Biomune;
(i) the Buyer has no contract, arrangement or understanding with any
broker, finder or similar agent with respect to the transactions
contemplated by this Agreement; and
(j) the Buyer's principal place of business is the address set forth
in Section 7.6 hereof.
ARTICLE IV
CONDITIONS TO THE OBLIGATIONS OF THE BUYER
The obligation of the Buyer to purchase and pay for the Acquired Common
Stock being purchased by it on the Closing Date is, at its option, subject to
the satisfaction, on or before the Closing Date, of the following conditions:
4.1 Opinion of Biomune's Counsel. The Buyer shall have received from Durham
Xxxxx & Xxxxxxx, counsel for Biomune, an opinion dated the Closing Date as to
the matters set forth in Exhibit A.
4.2 Representations and Warranties To Be True and Correct. The
representations and warranties contained in Article II shall be true, complete
and correct on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date, and the
President and Treasurer of Biomune shall have certified to the Buyer in writing
to such effect.
4.3 Performance. Biomune shall have performed and complied with all
agreements contained herein required to be performed or complied with by it
prior to or at the Closing Date, and the President and Treasurer of Biomune
shall have certified to the Buyer in writing to such effect and to the further
effect that all of the conditions set forth in this Article IV have been
satisfied.
4.4 Due Diligence. The Buyer shall have completed its due diligence
investigation of Biomune and shall be satisfied in its sole discretion in all
respects with the findings thereof.
21
4.5 Proceedings To Be Satisfactory. All corporate and other proceedings to
be taken by Biomune in connection with the transactions contemplated hereby and
all documents incident thereto shall be reasonably satisfactory in form and
substance to the Buyer and its counsel, and the Buyer and its counsel shall have
received all such counterpart originals or certified or other copies of such
documents as they reasonably may request.
4.6 Purchase by the Buyer. Subject to payment by the Buyer of the Aggregate
Purchase Price for the Acquired Common Stock on the Closing Date, Biomune shall
have delivered a stock certificate or certificates representing the Acquired
Common Stock.
4.7 Supporting Documents. The Buyer and its counsel shall have received
copies of the following documents:
(i) (A) a certificate of the Secretary of State of Nevada dated as of
a recent date as to the due incorporation and good standing of Biomune; and
(B) a certificate of the Secretary of State of Utah as to the good standing
of Biomune with the State of Utah.
(ii) a certificate of the Secretary or an Assistant Secretary of
Biomune dated the Closing Date and certifying: (A) that attached thereto is
a true and complete copy of the Bylaws of Biomune as in effect on the date
of such certification; (B) that attached thereto is a true and complete
copy of all resolutions adopted by the Board of Directors or the
shareholders of Biomune authorizing the execution, delivery and performance
of this Agreement, the issuance, sale and delivery of the Acquired Common
Stock and that all such resolutions are in full force and effect and are
all the resolutions adopted in connection with the transactions
contemplated by this Agreement; (C) that Biomune's Articles of
Incorporation have not been amended since the date of the last amendment
referred to in the certificate delivered pursuant to clause (i)(A) above;
and (D) to the incumbency and specimen signature of each officer of Biomune
executing this Agreement, and any of the stock certificates representing
the Acquired Common Stock and any certificate or instrument furnished
pursuant hereto and a certification by another officer of Biomune as to the
incumbency and signature of the officer signing the certificate referred to
in this clause (ii); and
(iii) such additional supporting documents and other information with
respect to the operations and affairs of Biomune as the Buyers or its
counsel reasonably may request.
4.8 Preemptive Rights; Termination of Shareholder Agreements. All
shareholders of Biomune having any preemptive, first refusal or other rights
with respect to the issuance of the Acquired Common Stock shall have irrevocably
waived the same in writing. All shareholder agreements, voting agreements,
registration rights agreements and similar agreements relating to the capital
stock of Biomune shall have been terminated by all parties to such agreements.
4.9 Other Waivers and Consents. Biomune shall have obtained all other
22
necessary waivers or consents to the execution of this Agreement and the related
agreements.
4.10 Stockholder Approvals. As required by applicable Law, this Agreement
shall have been approved and adopted by the requisite vote of the stockholders
of Biomune and Buyer and the issuance of the Acquired Common Stock pursuant to
this Agreement shall have been approved by the requisite vote of the
stockholders of Biomune.
ARTICLE V
CONDITIONS TO THE OBLIGATIONS OF BIOMUNE
The obligations of Biomune to sell and issue the Acquired Common Stock
being sold by it on the Closing Date is subject to the satisfaction, on or
before the Closing Date, of the following conditions:
5.1 Representations and Warranties to be True and Correct. The
representations and warranties contained in Article III shall be true, complete
and correct on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date, and the
President and Treasurer of the Buyer shall have certified to Biomune in writing
to such effect.
5.2 Performance. The Buyer shall have performed and complied with all
agreements contained herein required to be performed or complied with by it
prior to or at the Closing Date, and the President and Treasurer of the Buyer
shall have certified to the Buyer in writing to such effect and to the further
effect that all of the conditions set forth in this Article V have been
satisfied.
5.3 Proceedings to be Satisfactory. All corporate and other proceedings to
be taken by the Buyer in connection with the transactions contemplated hereby
and all documents incident thereto shall be reasonably satisfactory in form and
substance to Biomune and its counsel, and Biomune and its counsel shall have
received all such counterpart originals or certified or other copies of such
documents as they reasonably may request.
5.4 Acton Consulting Agreement. The Buyer shall have entered into a
consulting Agreement with Xxxxxxx Xxxxx in form and substance substantially
similar to the Consulting Agreement attached hereto as Exhibit "B."
ARTICLE VI
COVENANTS OF BIOMUNE
Biomune covenants and agrees that, unless the Buyer otherwise agrees in
writing by action of a majority of the shares of Common Stock held by the Buyer,
until Buyer shall no longer own at least 5% of the outstanding shares of
Biomune.
23
6.1 Financial Statements, Reports, etc. Biomune shall maintain proper books
of accounts and records and shall deliver to Buyer:
(a) as soon as available and in any event within 90 days after the end
of each fiscal year of Biomune, a copy of the annual audit report for such
year for Biomune including therein a balance sheet of Biomune as of the end
of such fiscal year and the statements of income, retained earnings and of
changes in financial position of Biomune for such fiscal year, prepared in
accordance with GAAP by a firm of independent public accountants selected
by the Buyer and accompanied by an opinion of the accounting firm;
(b) as soon as available and in any event within 45 days after the end
of each fiscal quarter in each fiscal year of Biomune a balance sheet of
Biomune and the statements of income and retained earnings as of the end of
such quarter, and of changes in financial position of Biomune for such
quarter and for the period commencing at the end of the previous fiscal
year and ending with the end of such quarter, unaudited but prepared in
accordance with GAAP subject to year-end adjustments and as otherwise
permitted by Form 10-QSB of the SEC and certified by the Chief Executive
Officer or Chief Financial Officer of Biomune, in each case with
comparative statements for the corresponding period in the prior fiscal
year;
(c) promptly following receipt by Biomune, each audit response letter,
accountant's management letter and other written report submitted to
Biomune by its independent public accountants in connection with an annual
or interim audit of the books of Biomune;
(d) promptly after the commencement thereof, notice of all actions,
suits, claims, proceedings, investigations and inquiries of the type
described in Section 2.12 that could Materially Adversely Affect Biomune;
(e) promptly upon sending, making available or filing the same, all
press releases, reports and financial statements that Biomune sends or
makes available to its shareholders generally; and
(f) promptly, from time to time, such other information regarding the
business, prospects, financial condition, operations, property or affairs
of Biomune as the Buyer reasonably may request.
6.2 No Issuance of Shares; Right of First Offer. Biomune shall not issue
any of its securities other than debt securities with no equity feature without
Buyer's prior written consent. In the event Buyer so consents to any issuance of
securities by Biomune, Biomune shall, prior to any issuance by Biomune of any of
its securities other than debt securities with no equity feature, offer to the
Buyer by written notice the right, for a period of 30 days, to purchase the
Buyer's pro rata portion of such securities (as defined below) for cash at an
amount equal to the price or other consideration for which such securities are
to be issued; provided, however, that the first offer rights of the Buyer
pursuant to this Section 6.2 shall not apply to securities issued: (A) upon
24
conversion of any of the Preferred Shares; (B) as a stock dividend or upon any
subdivision of shares of Common Stock, provided that the securities issued
pursuant to such stock dividend or subdivision are limited to additional shares
of Common Stock; (C) pursuant to subscriptions, warrants, options, convertible
securities, or other rights that are listed in Schedule 2.7 as being outstanding
on the Closing Date; (D) solely in consideration for the acquisition, whether by
merger or otherwise, by Biomune of all or substantially all of the stock or
assets of any other entity where such acquisition was approved by the Buyer; (E)
pursuant to an underwritten public offering; or (F) pursuant to the exercise of
options to purchase Common Stock granted to employees, directors or consultants
of Biomune, not to exceed in the aggregate 262,580 shares, appropriately
adjusted to reflect stock splits, stock dividends, combinations of shares and
the like with respect to the Common Stock, less the number of shares as so
adjusted issued pursuant to options outstanding on the date of this Agreement
and listed in Schedule 2.7 pursuant to clause (C) above (the shares exempted by
this clause (F) being hereinafter referred to as the "Reserved Employee
Shares"). For purposes of this Section 6.2, the Buyer's pro rata portion shall
be an amount equal to the total number of securities to be offered by Biomune
multiplied by a fraction, the numerator of which is the number of shares of
Common Stock held by Buyer and the denominator of which is the sum of the total
number of shares of Common Stock that are issued and outstanding. Biomune's
written notice to the Buyer shall describe the securities proposed to be issued
by Biomune and shall specify the number, price and payment terms. The Buyer may
accept Biomune's offer as to the full number of securities offered to it or any
lesser number, by written notice thereof given by it to Biomune prior to the
expiration of the aforesaid 30-day period, in which event Biomune shall promptly
sell and the Buyer shall buy, upon the terms specified, the number of securities
agreed to be purchased by the Buyer. Biomune shall be free at any time prior to
60 days after the expiration of such 30-day period, to offer and sell to any
third party or parties the number of such securities not agreed by the Buyer to
be purchased by it, at a price and on payment terms no less favorable to Biomune
than those specified in such notice of offer to the Buyer. However, if such
third party sale or sales are not consummated within such 60-day period, Biomune
shall not sell such securities as shall not have been purchased within such
period without again complying with this Section 6.2.
6.3 Corporate Existence. Biomune shall maintain, and shall cause each other
Affiliated Company to maintain, its corporate existence and all of its rights
and licenses necessary to maintain its business in full force and effect.
6.4 Properties, Business, Insurance. Biomune shall maintain, and shall
cause each other Affiliated Company to maintain, as to its properties and
business, with financially sound and reputable insurers, insurance against such
casualties and contingencies and of such types and in such amounts as is
consistent with its Ordinary Course of Business.
6.5 Inspection, Consultation and Advice. Biomune shall permit, and shall
cause each other Affiliated Company to permit, the Buyer and its
representatives, upon reasonable advance notice to Biomune, to visit and inspect
any of the properties of the Affiliated Companies, examine their books and
records and take copies and extracts therefrom, discuss the affairs, finances
25
and accounts of the Affiliated Companies with their officers, employees and
public accountants and Biomune hereby authorizes, and shall cause each other
Affiliated Company to authorize, said accountants to discuss with the Buyer and
such designees such affairs, finances and accounts, and consult with and advise
the management of Biomune and each other Affiliated Company as to its affairs,
finances and accounts, all at reasonable times and upon reasonable notice.
6.6 Restrictive Agreements Prohibited. No Affiliated Company shall become a
party to any agreement that by its terms restricts Biomune's performance of this
Agreement or Biomune's Articles of Incorporation.
6.7 Transactions with Affiliates. Except as set forth in Schedule 6.7, or
as otherwise approved by the Board of Directors of Biomune after the Closing
Date, Biomune shall not enter into any transaction with any director, officer,
employee or holder of more than 5% of the outstanding capital stock of any class
or series of capital stock of Biomune, member of the family of any such person,
or any corporation, partnership, trust or other entity in which any such person,
or member of the family of any such person, is a director, officer, trustee,
partner or holder of more than 5% of the outstanding capital stock thereof,
except for transactions on customary terms related to such person's employment.
6.8 Use of Proceeds. Biomune shall use the proceeds from the sale of the
Acquired Common Stock solely as working capital in accordance with Schedule 6.8.
6.9 Compensation. Biomune, through its President, may pay, accrue or
otherwise provide compensation and bonuses to any employee in any amounts that
he or she deems reasonable; provided, however, that Biomune shall not, without
Buyer's prior written consent, after recommendation by the President: (a) award
or grant any options to Key Employees for the purchase of Common Stock or
Preferred Stock or award, grant, issue or sell any Common Stock or Preferred
Stock to any Key Employees; (b) increase the base salary paid, accrued or
otherwise provided to any of the Key Employees in or with respect of any fiscal
year by an amount in excess of 10% of such base salary in or with respect of the
prior fiscal year, provided that no such increase may be effected until after
the first anniversary of the Closing Date; or (c) pay bonuses to Key Employees
for any fiscal year.
6.10 Bylaws. Biomune shall at all times cause its Bylaws to provide that
unless otherwise required by the laws of the state of its incorporation, (a) any
one director and (b) any holder or holders of at least 19.9% of the outstanding
shares of Common Stock, shall have the right to call a meeting, respectively, of
the Board of Directors or shareholders. Biomune shall at all times maintain
provisions in its Bylaws and Articles of Incorporation indemnifying all
directors against Liability and absolving all directors from Liability to
Biomune and its shareholders to the maximum extent permitted under the laws of
the state of its incorporation. Biomune's Bylaws shall provide that at least one
of the directors designated solely by a holder of at least 19.9% of the
outstanding shares of Common Stock will be a member of any committee created by
26
the Board of Directors.
6.11 Granting of Options. Biomune shall not grant to any of its officers,
employees or consultants options to purchase Common Stock or any security
convertible into Common Stock or change the pricing or other terms of any
outstanding options without Buyer's prior written consent.
6.12 Compliance with Laws. Biomune shall comply, and shall cause each other
Affiliated Company to comply, with all applicable Laws, noncompliance with which
could Materially Adversely Affect an Affiliated Company's business or condition,
financial or otherwise.
6.13 Change in Nature of Business. Biomune shall not, and shall cause each
other Affiliated Company not to, make any material change in the nature of its
business to something unrelated to that conducted on the Closing Date, except as
approved by the Buyer.
6.14 Tax Payments. Biomune shall, and shall cause each other Affiliated
Company to, prepare and timely file all tax returns required to be filed by it,
and Biomune shall, and shall cause each other Affiliated Company to, timely pay
any taxes and estimated taxes, including additions to tax, interest and
penalties, required to be paid by Biomune after the date hereof. All transfer,
excise or other taxes payable to any jurisdiction in the United States and
outside the United States by reason of the sale and transfer of the Acquired
Common Stock pursuant to this Agreement shall be paid or provided for by
Biomune. All federal and state income tax returns of the Affiliated Companies
for any period shall be prepared and signed by a nationally recognized
accounting firm. The preparation of such returns shall be at an Affiliated
Company's expense.
6.15 Material Changes and Litigation. Biomune shall use reasonable efforts
to promptly notify of the Buyer of any material adverse change in the business,
properties, assets or condition of any Affiliated Company, financial or
otherwise, as distinguished from general information about the biopharmaceutical
and nutraceutical industries or general market and economic conditions and of
any litigation or governmental proceeding or investigation pending or, to the
Knowledge of Biomune, threatened against any Affiliated Company, or against any
officer, director, Key Employee or principal shareholder, which, if adversely
determined, would Materially Adversely Affect an Affiliated Company's present or
then contemplated business, properties, assets or conditions, financial or
otherwise.
6.16 New Developments. Biomune shall cause, and shall cause each other
Affiliated Company to cause, all technological developments, patentable or
unpatentable inventions, discoveries or improvements by any Affiliated Company's
employees or consultants to be documented in accordance with industry practice
and, where possible and appropriate, to file and prosecute, on a timely basis,
United States and foreign patent, copyright, trademark, mask work or other
Intellectual Property Rights applications relating to and protecting the
Affiliated Company's inventions, discoveries or developments on behalf of the
Affiliated Company.
27
6.17 Assets. Except for the sale of the Mountain Lift product line and
sales of Purizer Corporation common stock, in either case only if the sale
proceeds are used for satisfaction of outstanding accounts payable owed to
independent third parties, Biomune shall not, and shall cause each other
Affiliated Company not to, sell (other than sales of inventory in the Ordinary
Course of Business), lease, or otherwise dispose of any asset or property,
including Intellectual Property Rights, of any Affiliated Company or mortgage,
pledge or permit the imposition of any lien or other encumbrance on any asset or
property, including Intellectual Property Rights, of any Affiliated Company.
6.18 No Negotiation. Biomune shall not, and shall cause each other
Affiliated Company not to, directly or indirectly solicit, initiate, or
encourage any inquiries or proposals from, discuss or negotiate with, provide
any non-public information to, or consider the merits of any unsolicited
inquiries or proposals from, any Person (other than Buyer) relating to any
transaction involving the sale of the business or assets (other than sales of
inventory in the Ordinary Course of Business) of any Affiliated Company, or any
of the capital stock of any Affiliated Company, or any merger, consolidation,
business combination, or similar transaction involving any Affiliated Company.
Nothing contained in this Section 6.18 shall prohibit the Board of Directors of
Biomune from furnishing information to, or entering into discussions or
negotiations with, any Person that makes an unsolicited bona fide proposal to
acquire an Affiliated Company pursuant to a merger, consolidation, business
combination, or similar transaction, if, and only to the extent that, (a) the
Board of Directors of Biomune, after consultation with and based upon the advice
of independent legal counsel, determines in good faith that such action is
required for the Board of Directors of Biomune to comply with its fiduciary
duties to stockholders imposed by law, (b) prior to furnishing such information
to, or entering into discussions or negotiations with, such person, Biomune
provides written notice to Buyer to the effect that it is furnishing information
to, or entering into discussions or negotiations with, such person, and (c)
Biomune keeps Buyer informed, on a current basis, of the status and details of
any such discussions or negotiations.
6.19 Indemnification.
(a) In addition to all rights and remedies available to the Buyer at
law or in equity, Biomune shall indemnify, defend and hold harmless the
Buyer and any parent, subsidiary, associate, affiliate, partner,
shareholder, director, officer, employee or agent of the Buyer (all of the
foregoing are collectively referred to as the "Indemnified Parties") from
and against and pay on behalf of or reimburse such party as and when
incurred all losses, including, without limitation, diminutions in value,
Liabilities, demands, claims, actions or causes of action, costs, damages,
judgments, debts, settlements, assessments, deficiencies, taxes, penalties,
fines or expenses, whether or not arising out of any claims by or on behalf
of any third party, including interest, penalties, reasonable attorneys'
fees and expenses and all reasonable amounts paid in investigation, defense
or settlement of any of the foregoing (collectively, "Losses") which any
such party may suffer, sustain or become subject to, as a result of, in
28
connection with, or relating to or by virtue of:
(i) any material misrepresentations or material breach of
warranty on the part of Biomune under Article II;
(ii) any material misrepresentation in or material omission from
any of the representations or warranties contained in any certificate,
document or instrument or the Schedules delivered to the Buyer by or
on behalf of Biomune in connection herewith;
(iii) any material nonfulfillment or breach of any covenant or
agreement on the part of Biomune under this Agreement or under any
certificate, document or instrument delivered in connection therewith;
or
(iv) any action, demand, proceeding, investigation or claim by
any third party, including, without limitation, Government Entities
against or affecting an Affiliated Company or any of their affiliates
which, if successful, would give rise to or evidence the existence of
or relate to a material breach of (A) any of the material
representations or warranties at the time made or (B) the covenants of
Biomune.
(b) All indemnification rights hereunder shall survive the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereunder for a period of two years, regardless of any
investigation, inquiry or examination made for or on behalf of, or any
Knowledge of, the Buyer and/or any of the other Indemnified Parties or the
acceptance by the Buyer of any certificate or opinion.
(c) If for any reason the indemnity provided for in this Section 6.19
is unavailable to any Indemnified Party or is insufficient to hold each
such Indemnified Party harmless from all such Losses arising with respect
to the transactions contemplated hereunder, then Biomune and the
Indemnified Party shall each contribute to the amount paid or payable by
such Loss in such proportion as is appropriate to reflect not only the
relative benefits received by Biomune on the one hand, and such Indemnified
Party on the other, but also the relative fault of Biomune on the one hand,
and the Indemnified Party on the other, as well as any relevant equitable
considerations. In addition, Biomune agrees to reimburse any Indemnified
Party upon demand for all reasonable expenses, including legal counsel
fees, incurred by such Indemnified Party or any such other person in
connection with investigating, preparing or defending any such action or
claim. The indemnity, contribution and expense reimbursement obligations
that Biomune has under this Section 6.19 shall be in addition to any
liability that Biomune may otherwise have. Biomune further agrees that the
indemnification and reimbursement commitments set forth in this Agreement
shall apply whether or not the Indemnified Party is a formal party to any
such lawsuits, claims or other proceedings.
(d) Any indemnification of either the Buyer or any other Indemnified
Party by Biomune pursuant to this Section 6.19 shall be effected by wire
29
transfer of immediately available funds from Biomune to an account
designated by the Buyer or such other Indemnified Party within 15 days
after the determination thereof.
ARTICLE VII
MISCELLANEOUS
7.1 Expenses. Each party hereto will pay its own expenses in connection
with the transactions contemplated hereby, whether or not such transactions
shall be consummated.
7.2 Survival of Agreements. All covenants, agreements, representations and
warranties made herein or in any other agreement, or any certificate or
instrument delivered to the Buyer pursuant to or in connection with this
Agreement, shall survive the Closing for a period of two years.
7.3 Remedies. In case any one or more of the representations, warranties,
covenants or agreements set forth in this Agreement shall have been breached by
any party hereto, the party or parties entitled to the benefit of such
representations, warranties, covenants or agreements may proceed to protect and
enforce their rights either under the Indemnification provisions of this
Agreement or by suit in equity and/or action at law, including, but not limited
to, an action for damages as a result of any such breach and/or an action for
specific performance of any such covenant or agreement contained in this
Agreement. The rights, powers and remedies of the parties under this Agreement
are cumulative and not exclusive of any other right, power or remedy which such
parties may have under any other agreement or law. No single or partial
assertion or exercise of any right, power or remedy of a party hereunder shall
preclude any other or further assertion or exercise thereof.
7.4 Brokerage. Biomune or the Buyer, as applicable, will indemnify and hold
harmless the Buyer or Biomune, as applicable, against and in respect of any
claim for brokerage or other commissions relative to this Agreement or to the
transactions contemplated hereby, based in any way on agreements, arrangements
or understandings made or claimed to have been made with any third party.
7.5 Parties in Interest. All representations, covenants and agreements
contained in this Agreement by or on behalf of any of the parties hereto shall
bind and inure to the benefit of the respective successors and assigns of the
parties hereto whether so expressed or not. Without limiting the generality of
the foregoing, all representations, covenants and agreements benefiting the
Buyer shall inure to the benefit of any and all subsequent holders from time to
time of the Acquired Common Stock.
7.6 Notices. All notices, requests, consents and other communications
hereunder shall be in writing and shall be delivered in person or sent by
overnight delivery or by certified or registered mail, return receipt requested,
addressed as follows:
30
(a) if to Biomune, at Biomune Systems, Inc., 00 Xxxx Xxxxxxxxxx, Xxxxx
000, Xxxx Xxxx Xxxx, Xxxx 00000, telecopier: (000) 000-0000, Attention:
President, with a copy to Xxxxx X. Xxxxxxx, Esquire, Durham Xxxxx &
Xxxxxxx, 000 Xxxx Xxxxxxxx, Xxxxx 000, Xxxx Xxxx Xxxx, Xxxx 00000,
telecopier: (000) 000-0000;
(b) if to the Buyer, at Donlar Corporation, 0000 Xxxxx Xxxxxx Xxxxxx,
Xxxxxxx Xxxx, Xxxxxxxx 00000, telecopier: (000) 000-0000, Attention:
Xxxxxxxx X. Xxxxxx, with a copy to Xxxx Xxxxx, Esquire, Duane, Morris &
Heckscher LLP, 000 Xxxx Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, XX 00000,
telecopier: (000) 000-0000;
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others.
All notices, consents or other communications required or permitted to be given
under this Agreement shall be deemed to have been duly given (i) when delivered
personally, (ii) three business days after being mailed by first class mail,
postage prepaid, or (iii) one business day after being sent by a reputable
overnight delivery service, postage or delivery charges prepaid, to the parties
at their respective addresses stated on the signature page of this Agreement.
Notices may also be given by telecopier and shall be effective on the date
transmitted if confirmed within 24 hours thereafter by a signed original sent in
the manner provided in the preceding sentence.
7.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Nevada notwithstanding any
conflicts-of-law doctrines of such state or any other jurisdiction to the
contrary. EACH OF THE PARTIES HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY
JURY IN ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF THIS AGREEMENT.
7.8 Entire Agreement. This Agreement, including the Schedules hereto,
together with the other writings referred to herein or delivered pursuant hereto
which form a part hereof, constitutes the sole and entire agreement of the
parties with respect to the subject matter hereof. All Schedules hereto are
hereby incorporated herein by reference.
7.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.10 Amendments. This Agreement may not be amended or modified, and no
provisions hereof may be waived, without the written consent of Biomune and the
Buyer.
7.11 Severability. The invalidity or unenforceability of any term, phrase,
clause, paragraph, restriction, covenant, agreement or other provision hereof
shall in no way affect the validity or enforceability of any other provision, or
any part thereof, but this Agreement shall be construed as if such invalid or
31
unenforceable term, phrase, clause, paragraph, restriction, covenant, agreement
or other provision had never been contained herein unless the deletion of such
term, phrase, clause, paragraph, restriction, covenant, agreement or other
provision would result in such a material change as to cause the covenants and
agreements contained herein to be unreasonable or would materially and adversely
frustrate the objectives of the parties as expressed in this Agreement.
7.12 Titles and Subtitles. The titles and subtitles used in this Agreement
are for convenience only and are not to be considered in construing or
interpreting any term or provision of this Agreement.
7.13 Public Announcements. Biomune and Buyer shall consult with each other
before issuing any press release or otherwise making any public statement
relating to the subject matter of this Agreement and shall not issue any such
press release or make any such public statement prior to such consultation and
without the consent of the other party which shall not be unreasonably withheld,
except as may be required by federal securities laws.
ARTICLE VIII
DEFINITIONS
8.1 "Affiliated Companies" means Biomune and its Subsidiaries,
collectively.
8.2 "Applicable Contract" means any Contract (a) under which any Affiliated
Company has or may acquire any rights, (b) under which any Affiliated Company
has or may become subject to any obligation or Liability, or (c) by which any
Affiliated Company or any of the assets owned or used by it is or may become
bound.
8.3 "Common Stock" means Biomune's common stock, $.0001 par value.
8.4 "Contract" means any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
8.5 "Environmental Laws" means any and all Laws, permits, concessions,
grants, franchises, licenses, agreements or governmental restrictions relating
to pollution and the protection of the environment or the release of any
materials into the environment, including but not limited to those relating to
hazardous substances or wastes, air emissions and discharges to waste or public
systems.
8.6 "Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any successor federal statute, and the rules and regulations of the SEC
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Exchange Act shall include reference to the comparable
section, if any, of any successor federal statute.
32
8.7 "GAAP" means United States generally accepted accounting principles as
in effect from time to time.
8.8 "Government Entity" means any supranational, national, foreign,
federal, state or local judicial, legislative, executive, administrative or
regulatory body or authority.
8.9 "Hazardous Material" means any and all pollutants, toxic or hazardous
wastes or any other substances, including but not limited to biomedical waste,
that might pose a hazard to health or safety, the removal of which may be
required or the generation, manufacture, refining, production, processing,
treatment, storage, handling, transportation, transfer, use, disposal, release,
discharge, spillage, seepage, or filtration of which is or shall be restricted,
prohibited or penalized by any applicable Law (including, without limitation,
asbestos, urea formaldehyde foam insulation and polychlorinated biphenyls).
8.10 "Knowledge" or "to Know" means actual knowledge after reasonable
investigation.
8.11 "Laws" includes any foreign, federal, state, or local law, statute,
rule, regulation, Order or other restriction of any court or other Government
Entity.
8.12 "Liability" means any debt, liability or obligation, whether known or
unknown, asserted or unasserted, accrued, absolute, contingent or otherwise,
whether due or to become due.
8.13 "Major Supplier" means a supplier of $50,000 or more in materials
and/or services to Biomune or any other Affiliated Company during the last
twelve months.
8.14 "Material Adverse Effect" or "Materially Adversely Affect" means any
event or change which has a material adverse effect on (a) the properties,
business, prospects, operations, earnings, assets, liabilities or the condition
(financial or otherwise) of the Affiliated Companies taken as a whole, whether
or not in the Ordinary Course of Business, (b) the ability of Biomune and any of
the other Affiliated Companies to perform its obligations under this Agreement
or (c) the validity or enforceability of this Agreement.
8.15 "Ordinary Course of Business" an action taken by a Person will be
deemed to have been taken in the "Ordinary Course of Business" only if: (a) such
action is consistent with the past practice of such Person (including with
respect to quality and frequency) and is taken in the ordinary course of the
normal day-to-day operations of such Person; and (b) such action is not required
to be authorized by the board of directors of such Person (or by any Person or
group of Persons exercising similar authority.
8.16 "Organizational Documents" means the articles or certificate of
incorporation and the bylaws of a corporation; the partnership agreement and any
statement of partnership of a general partnership; the limited partnership
agreement and the certificate of the limited partnership of a limited
33
partnership; any charter or similar document adopted or filed in connection with
the creation, formation, or organization of a Person; and any amendment to any
of the foregoing.
8.17 "Person" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Government Entity.
8.18 "Preferred Stock" means Biomune's preferred stock, $.0001 par value.
8.19 "SEC" means the United States Securities and Exchange Commission.
8.20 "SEC Reports" has the meaning ascribed thereto in Section 2.9.
8.21 "Securities Act" shall mean the Securities Act of 1933, as amended, or
any successor federal statute, and the rules and regulations of the SEC
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Securities Act shall include reference to the
comparable section, if any, of any successor federal statute.
8.22 "Stock Incentive Plans" means Biomune's 1992 Stock Incentive Plan,
1993 Stock Incentive Plan, 1995 Stock Incentive Plan, 1996 Stock Incentive Plan
and 1999 Stock Incentive Plan, and any other stock incentive plans adopted by
Biomune.
8.23 "Subsidiary" with respect to any Person (the "Owner") means any
corporation or other Person of which securities or other interests having the
power to elect a majority of that corporation's or other Person's board of
directors or similar governing body, or otherwise having the power to direct the
business and policies of that corporation or other Person (other than securities
or other interests having such power only upon the happening of a contingency
that has not occurred) are held by the Owner or one or more of its Subsidiaries.
(Signature page follows.)
34
IN WITNESS WHEREOF, Biomune and the Buyer have executed this Agreement
as of the day and year first above written.
BIOMUNE SYSTEMS, INC.
By:
Title:
DONLAR CORPORATION
By:
Title:
35
EXHIBIT A
1. The Agreement has been duly authorized, executed and delivered by Biomune and
constitutes a legal, valid and binding obligation of Biomune, enforceable
against Biomune in accordance with its terms, subject to bankruptcy,
reorganization, insolvency and other similar Laws affecting the enforcement of
creditors' rights in general and to general principles of equity.
2. The authorized capital stock of Biomune consists of 500,000,000 shares of
Common Stock, $.0001 par value, and 50,000,000 shares of Preferred Stock.
8,599,900 shares of Common Stock and 38,523 shares of Preferred Stock are
outstanding. As a result of the delivery of certificates to Buyer and the
payment to Biomune being made at the Closing, Buyer is acquiring ownership of
the Acquired Common Stock free and clear of all adverse claims.
3. Each Affiliated Company is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation, with full
corporate power and authority to own its properties and to engage in its
business as presently conducted or contemplated, and is duly qualified and in
good standing as a foreign corporation under the laws of each other jurisdiction
in which it is authorized to do business as set forth in Schedule 2.1(a). All of
the outstanding capital stock of each Subsidiary of Biomune is owned or record
by Biomune, free and clear of all adverse claims.
4. Neither the execution and delivery of the Agreement nor the consummation of
any or all the transactions contemplated thereby (a) breaches or constitutes a
default (or an event that, with notice or lapse of time or both, would
constitute a default) under any agreement or commitment to which any Affiliated
Company is a party, (b) violates any statute, law, regulation or rule, or any
judgment, decree or order of any court or other Government Entity applicable to
any Affiliated Company, or (c) violates any provision of the Organizational
Documents of any Affiliated Company.
5. No consent, approval or authorization of, or declaration, filing or
registration with, any Government Entity is required in connection with the
execution, delivery and performance of the Agreement or the consummation of the
transactions contemplated thereby.
36
Schedule 6.8
Use of Proceeds
Purpose Approximate Amount
Current payables $ 350,000
Acton loan 201,000
Fairness opinion - merger 125,000
Legal/accounting for merger proxy 100,000
General working capital 324,000
----------------
Total: $ 1,100,000
37
