EXECUTION VERSION
REDACTED - AS FILED
[PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT]
Brackets "[ ]" ARE USED TO INDICATE WHERE A PORTION OF THIS EXHIBIT HAS BEEN
OMITTED. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED
PORTIONS. A COMPLETE COPY OF THIS EXHIBIT, CONTAINING ALL OF THE OMITTED
PORTIONS, HAS BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
TOGETHER WITH THE REQUEST FOR CONFIDENTIAL TREATMENT.
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
XXXX'X LLP
AND
PACIFICHEALTH LABORATORIES, INC.
DATED AS OF FEBRUARY 22, 2006
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TABLE OF CONTENTS
ARTICLE I PURCHASE AND SALE............................................................................1
SECTION 1.1. Purchase and Sale..............................................................1
SECTION 1.2. No Assumption of Liabilities...................................................3
SECTION 1.3. Purchase Price; Payment........................................................4
SECTION 1.4. Royalty Payments...............................................................4
ARTICLE II CLOSING AND CLOSING DATE....................................................................7
SECTION 2.1. Closing and Closing Date.......................................................7
SECTION 2.2. Deliveries at Closing..........................................................7
SECTION 2.3. Certain Actions................................................................8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER...................................................9
SECTION 3.1. Existence; Authority; Qualification............................................9
SECTION 3.2. Authority; Binding Effect......................................................9
SECTION 3.3. Absence of Conflicts...........................................................9
SECTION 3.4. Governmental Consents and Filings.............................................10
SECTION 3.5. Subsidiaries..................................................................10
SECTION 3.6. Financial Statements and SEC Reports..........................................10
SECTION 3.7. Absence of Undisclosed Liabilities............................................11
SECTION 3.8. Absence of Certain Changes or Events..........................................12
SECTION 3.9. Title, Sufficiency and Condition of Assets....................................13
SECTION 3.10. Contracts.....................................................................13
SECTION 3.11. Permits.......................................................................14
SECTION 3.12. Transactions with Affiliates..................................................14
SECTION 3.13. Litigation....................................................................14
SECTION 3.14. Compliance With Laws and Other Requirements...................................15
SECTION 3.15. Intellectual Property.........................................................15
SECTION 3.16. Taxes.........................................................................17
SECTION 3.17. Disclosure....................................................................18
SECTION 3.18. Fees and Commissions..........................................................18
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER....................................................19
SECTION 4.1. Existence; Authority; Good Standing...........................................19
SECTION 4.2. Authority; Binding Effect.....................................................19
SECTION 4.3. Absence of Conflicts..........................................................19
SECTION 4.4. Governmental Consents and Filings.............................................19
SECTION 4.5. Fees and Commissions..........................................................20
SECTION 4.6. Acknowledgement of Due Diligence..............................................20
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ARTICLE V COVENANTS...................................................................................20
SECTION 5.1. General.......................................................................20
SECTION 5.2. Restrictions on Certain Actions...............................................21
SECTION 5.3. Exclusivity...................................................................21
SECTION 5.4. Tax Matters...................................................................22
SECTION 5.5. Third Party Consents..........................................................23
SECTION 5.6. Further Assurances............................................................23
SECTION 5.7. Notification of Certain Matters...............................................24
SECTION 5.8. Amendment of Disclosure Schedule..............................................24
SECTION 5.9. Competitive Activities........................................................24
SECTION 5.10. Right of First Negotiation....................................................26
SECTION 5.11. Use of Assets.................................................................27
SECTION 5.12. Bulk Sales Laws...............................................................27
SECTION 5.13. Access to Books and Records after Closing.....................................27
SECTION 5.14. Audit Rights and Certificates of Compliance...................................27
SECTION 5.15. Certain Licenses..............................................................28
SECTION 5.16. Cooperation...................................................................28
SECTION 5.17. Certain Other Covenants.......................................................29
ARTICLE VI CONDITIONS TO OBLIGATIONS OF SELLER........................................................30
SECTION 6.1. No Order......................................................................30
SECTION 6.2. Accuracy of Representations and Warranties....................................30
SECTION 6.3. Covenants and Agreements Performed............................................30
SECTION 6.4. Closing Deliveries............................................................30
ARTICLE VII CONDITIONS TO OBLIGATIONS OF BUYER........................................................31
SECTION 7.1. No Order......................................................................31
SECTION 7.2. Accuracy of Representations and Warranties....................................31
SECTION 7.3. Covenants and Agreements Performed............................................31
SECTION 7.4. Portman Consulting, License and Noncompetition Agreement......................31
SECTION 7.5. Closing Deliveries............................................................31
SECTION 7.6. Consents......................................................................32
SECTION 7.7. No Material Adverse Change....................................................32
ARTICLE VIII TERMINATION..............................................................................32
SECTION 8.1. Termination...................................................................32
SECTION 8.2. Effect of Termination.........................................................33
ARTICLE IX INDEMNIFICATION............................................................................33
SECTION 9.1. Survival of Representations and Warranties....................................33
SECTION 9.2. Indemnification of Buyer......................................................34
SECTION 9.3. Indemnification of Seller.....................................................35
SECTION 9.4. Third Party Claims............................................................36
SECTION 9.5. Indemnification Without Regard to Negligence or other Fault...................37
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ARTICLE X MISCELLANEOUS...............................................................................37
SECTION 10.1. Access to Information; Confidentiality........................................37
SECTION 10.2. Expenses......................................................................38
SECTION 10.3. Public Announcements..........................................................38
SECTION 10.4. Notices.......................................................................38
SECTION 10.5. Assignment....................................................................38
SECTION 10.6. Complete Agreement............................................................39
SECTION 10.7. Governing Law.................................................................39
SECTION 10.8. Cure of Invalid Provisions....................................................39
SECTION 10.9. Amendment; Waivers............................................................39
SECTION 10.10. Specific Performance..........................................................40
SECTION 10.11. Interpretation................................................................40
SECTION 10.12. Counterparts..................................................................40
SECTION 10.13. Force Majeure.................................................................40
SECTION 10.14. Rights Reserved...............................................................41
ARTICLE XI DEFINITIONS................................................................................41
SECTION 11.1. Certain Definitions...........................................................41
SECTION 11.2. Other Defined Terms...........................................................46
DISCLOSURE SCHEDULE
Schedule 1.1(a)(i) -- Trademarks
Schedule 1.1(a)(ii) -- Patents
Schedule 1.1(a)(iv) -- Copyrights
Schedule 1.1(a)(v) -- Web Sites
Schedule 2.2(a)(iv) -- Certain Consents
Schedule 5.9(a) -- Covered Products and Territory
Schedule 5.17(d) -- Identified Buyer Affiliates
Schedule 11.1 -- Qualifying Net Sales
Exhibit A -- Form of License Agreement
Exhibit B -- Portman Consulting, License and Noncompetition Agreement
Exhibit C -- Form of Xxxx of Sale and Assignment
Exhibit D -- Confidentiality Agreement
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (together with all Exhibits and Schedules
hereto, this "Agreement") is entered into as of February 22, 2006, by and
between Xxxx'x LLP, a Delaware limited liability partnership ("Buyer"), and
PacificHealth Laboratories, Inc., a Delaware corporation ("Seller").
WHEREAS, Seller is engaged in, among other things, the research,
development, testing, production, manufacture, marketing, sale and distribution
of products marketed under the "ACCELERADE"(R) and "ENDUROX"(R) brand names
(together with any variations, extensions or derivatives of such brand names,
the "Brand Names");
WHEREAS, Seller desires to sell and Buyer desires to purchase certain
intellectual property and other assets for the consideration and upon the terms
and subject to the conditions set forth in this Agreement;
WHEREAS, Seller desires to obtain from Buyer, and Buyer desires to
grant to Seller, a license under certain of the Assets (as hereinafter defined)
acquired by Buyer pursuant to this Agreement upon the terms, for the duration,
and subject to the conditions specified in a license agreement substantially in
the form attached hereto as Exhibit A (the "License Agreement");
WHEREAS, contemporaneously with the execution of this Agreement, and as
an integral component of the transactions contemplated by this Agreement, Xx.
Xxxxxx Xxxxxxx ("Portman"), an Affiliate of Seller, is entering into a
Consulting, License and Noncompetition Agreement, substantially in the form
attached hereto as Exhibit B (the "Portman Consulting, License and
Noncompetition Agreement"); and
WHEREAS, Buyer and Seller desire to establish certain arrangements and
agreements for future interaction and cooperation;
NOW, THEREFORE, in consideration of the premises and the provisions and
respective covenants and agreements set forth in this Agreement, the Parties
hereby agree as follows:
ARTICLE I
PURCHASE AND SALE
SECTION 1.1. Purchase and Sale. Upon the terms and subject to the
conditions set forth herein and in reliance upon the representations and
warranties made herein by each of the parties to the other, at the Closing,
Seller shall irrevocably and absolutely (subject to the provisions of Section
1.4(b)) sell, grant, convey, assign, transfer and deliver to Buyer, free and
clear of all Encumbrances (other than Permitted Encumbrances), and Buyer shall
irrevocably and absolutely (subject to the provisions of Section 1.4(b))
purchase and acquire from Seller, the following assets and properties of Seller
(wherever located) used, held or controlled by Seller (such assets and
properties of Seller to be sold, granted, conveyed, transferred, assigned and
delivered to Buyer hereunder being hereinafter collectively referred to as the
"Assets"):
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(a) all rights, title and interest of Seller, whether now in existence
or developed or acquired in the future, in and to the following, in each case to
the extent known, used, held or controlled by Seller directly or primarily
related to the research, development, testing, production, manufacture,
marketing, sale or distribution of products that are currently being or have
previously been marketed by Seller under the Brand Names or products under the
Brand Names that are currently in development by Seller (the "Acquired
Intellectual Property"):
(i) all trademarks and service marks registered or
unregistered (including those identified in Schedule 1.1(a)(i)), trade
dress (including the trade dress of various packaging currently,
previously or proposed to be used in conjunction with the Brand Names),
trade names and other marks and slogans embodying business or product
goodwill or indications of origin, all or that part of any applications
or registrations in any jurisdiction pertaining to the foregoing and
all goodwill associated therewith;
(ii) all inventions, whether patented or unpatented,
patentable or unpatentable, including all issued patents and pending
applications in any jurisdiction (including those identified in
Schedule 1.1(a)(ii)) and all provisionals, reissues, reexaminations,
continuations, divisions, continuations-in-part, renewals or extensions
thereof (the "Patent Properties"), and any existing or future filed
patents and applications that receive priority from or provide priority
to any of the Patent Properties;
(iii) all trade secrets and other confidential information,
and the right in any jurisdiction to limit the use or disclosure
thereof, and any other inventions, discoveries, improvements, ideas,
know-how, formulae, product ingredient information, product formulas,
product details, methodologies, processes, technology concepts,
technical data, memoranda, notes, reports, financial and technical
information, proprietary information, proprietary processes, clinical
data and studies, consumer or market-based research, books, records,
instruments and other information (whether now existing or, to the
extent directly or primarily related to Covered Products or other
products that are currently being or have previously been marketed by
Seller under the Brand Names or products under the Brand Names that are
currently in development by Seller, developed in the future);
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(iv) all copyrights (registered and unregistered) in writings,
designs, mask works or other works (including those identified in
Schedule 1.1(a)(iv)), and applications or registrations in any
jurisdiction for the foregoing;
(v) all Internet web sites, domain names and registrations or
applications for registration thereof identified in Schedule 1.1(a)(v)
and Seller's rights in all software code underlying such web sites and
related documentation, user manuals and training materials; and
(vi) all licenses, immunities, covenants not to xxx and the
like relating to any of the foregoing.
(b) all right and interest in (x) any claim arising from or related to
any infringement, impairment, dilution or misappropriation of the Acquired
Intellectual Property, including all unasserted claims of Seller and other
pre-existing or accrued claims relating to inventions, patent applications,
patents, copyrights, trademarks, trade secrets, trade dress, Internet domain
names and confidential information, that Seller now has or may have against any
Person and (y) all rights to causes of action, lawsuits, judgments, claims and
demands of any nature available to or being pursued by Seller to the extent
pertaining primarily to the ownership, use, function or value of any Assets,
including Seller's right to either damages or injunctive relief, or both,
whether arising by way of counterclaim or otherwise, except to the extent that
any of the foregoing are not legally assignable;
(c) to the extent transferable, all franchises, licenses, permits,
approvals and other authorizations issued or granted by any governmental
authority and all permit applications and license and permit amendment
applications submitted to any such governmental authority related to the
ownership, use, function or value of the Assets; and
(d) all claims against third parties, whether or not asserted and
whether now existing or hereafter arising (including all claims based on any
indemnities or warranties in favor of Seller) relating to any of the Assets.
SECTION 1.2. No Assumption of Liabilities. Notwithstanding any other
provision of this Agreement, Buyer is not assuming, and shall not be deemed to
have assumed or be in any way liable for or subject to or have any obligation
for or with respect to, any debts, liabilities or obligations of Seller of any
kind, nature or description whatsoever (whether absolute or contingent, known or
unknown, asserted or unasserted).
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SECTION 1.3. Purchase Price; Payment. Upon the terms and subject to the
conditions set forth herein, in reliance upon the representations, warranties,
covenants and agreements of Seller contained herein, and in exchange for the
sale, grant, conveyance, assignment, transfer and delivery of the Assets, Buyer
agrees to pay to Seller the sum of (i) Four Million Dollars ($4,000,000) (the
"Closing Payment") plus (ii) the Royalty Payments provided for in Section 1.4
(collectively, the "Purchase Price").
SECTION 1.4. Royalty Payments.
(a) Within 30 days after the end of each quarter (for purposes of this
Agreement, quarters shall be deemed to end on March 31, June 30, September 30
and December 31 of each year (each three month period ending on such date, a
"Fiscal Quarter")), during the [REDACTED - CONFIDENTIAL TREATMENT
REQUESTED]*period commencing on the Product Launch Date and ending on the
[REDACTED - CONFIDENTIAL TREATMENT REQUESTED]*of the Product Launch Date (the
"Royalty Payment Period"), Buyer shall prepare and deliver to Seller a statement
(a "Royalty Payment Statement") setting forth its calculation of the amount of
Qualifying Net Sales for the quarterly period then ended (a "Royalty Payment
Quarter"), together with a reasonably detailed statement of gross sales and any
deductions made from gross sales during such quarter as permitted by the
definition of Qualifying Net Sales. No later than the 45th day following the end
of each Royalty Payment Quarter during the Royalty Payment Period (and within 45
days after the last day of the Royalty Payment Period), Buyer shall pay to
Seller an amount equal to [REDACTED - CONFIDENTIAL TREATMENT REQUESTED]*of
Qualifying Net Sales for such Royalty Payment Quarter, subject to a limit of
[REDACTED - CONFIDENTIAL TREATMENT REQUESTED]*for each [REDACTED - CONFIDENTIAL
TREATMENT REQUESTED]*period [REDACTED - CONFIDENTIAL TREATMENT REQUESTED]*
during the Royalty Payment Period (the "Royalty Payment"). Seller and its
representatives shall have the right, during normal business hours and upon
reasonable advance request, to review relevant work papers and procedures used
to prepare the Royalty Payment Statement and to have reasonable access to
Buyer's financial employees involved in the preparation thereof and shall have
the right to perform reasonable procedures necessary to confirm the accuracy
thereof at its own expense. If Seller disagrees with the amount of a Royalty
Payment for the previous Royalty Payment Quarter, Seller shall give written
notice thereof to Buyer not later than 45 days after receipt of the Royalty
Payment Statement therefor (it being understood and agreed that if Seller shall
not have given written notice within such 45-day period, Seller shall be deemed
to have irrevocably agreed to such Royalty Payment amount), and Buyer and Seller
shall attempt in good faith to resolve such disagreement. If after 30 days Buyer
and Seller have not reached agreement, the matter shall be referred to an
Arbitrator who shall be instructed to use every reasonable effort to make a
determination of the Royalty Payment amount within 30 days of appointment. Buyer
shall give the Arbitrator during normal business hours access to all financial
records of Buyer relevant to a determination of such Royalty Payment amount and
to appropriate financial employees. The Arbitrator's determination shall be
final and binding on Buyer and Seller with no right of appeal and enforceable by
any court of competent jurisdiction. If the determination of such Royalty
Payment amount shows that Buyer has overpaid such amount, then Seller shall
promptly pay the amount of such overpayment to Buyer. If the determination shows
an underpayment, then Buyer shall promptly pay the amount of such underpayment
to Seller.
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(b) In the event that the Product Launch Date has not occurred on or
before [REDACTED - CONFIDENTIAL TREATMENT REQUESTED]* (the "Repurchase Option
Date"), Seller shall have the right (the "Repurchase Option") (but not the
obligation) to repurchase the Assets from Buyer for an amount to be mutually
agreed by the parties, which amount shall not exceed [REDACTED - CONFIDENTIAL
TREATMENT REQUESTED]*(the "Repurchase Price"). Buyer shall deliver to Seller
written notice no later than 30 days after the Repurchase Option Date, which
notice shall set forth the cumulative number of Cases or Case Equivalents sold
by Buyer as of the Repurchase Option Date. If such notice indicates that Buyer
has not achieved a Product Launch Date, then Seller shall have 60 days from the
date of Buyer's written notice to exercise the Repurchase Option by written
notice to Buyer. If Buyer achieves a Product Launch Date prior to the Repurchase
Option Date, Buyer shall notify Seller of this fact within 30 days and no
further notice shall be due to Seller pursuant to this provision. Within 60 days
after receipt of Seller's written notice exercising the Repurchase Option, (i)
Buyer shall convey back to Seller, free of Encumbrances (other than Permitted
Encumbrances), all right, title and interest in the Assets, and (ii) Seller
shall pay Buyer the Repurchase Price by wire transfer of immediately available
funds. Upon any such conveyance, Buyer shall not be obligated to make any future
Royalty Payment to Seller.
(c) Seller agrees that nothing in this Agreement, or in any other
agreement between Buyer and Seller, imposes any contractual, fiduciary or other
obligation on Buyer at any time to market or sell any Developed Product or
otherwise to maximize the amount of any Royalty Payment. Seller understands that
Buyer may at any time (i) discontinue developing, testing, marketing, selling
and distributing any Developed Product and/or (ii) market and sell products
under names or marks other than ACCELERADE(R) or ENDUROX(R).
(d) If in 2006 or any calendar year thereafter and prior to the first
anniversary of the Product Launch Date (i) Seller's aggregate annual sales for
its powder and gel product lines under the Brand Names are less than [REDACTED -
CONFIDENTIAL TREATMENT REQUESTED]* (such actual sales for any year, as a
percentage of [REDACTED - CONFIDENTIAL TREATMENT REQUESTED]*, the "Annual Sales
Percentage") and (ii) Buyer has expended (in cash, cash equivalents or
advertising equivalents) an aggregate of at least $[REDACTED - CONFIDENTIAL
TREATMENT REQUESTED]* for such calendar year (or prorated for any partial
calendar year) to support the Brand Names (each such calendar year a "Royalty
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Reduction Year"), then each Royalty Payment otherwise payable with respect to
the first year of the Royalty Payment Period (each a "Standard Royalty Payment")
will be reduced to an amount (a "Reduced Royalty Payment") equal to [REDACTED -
CONFIDENTIAL TREATMENT REQUESTED]*. If more than one Royalty Reduction Year has
occurred, then a similar calculation will apply for Royalty Payments with
respect to each year after the first year of the Royalty Payment Period (until
the number of years with Reduced Royalty Payments equals the number of Royalty
Reduction Years), employing the Annual Sales Percentage applicable to the second
Royalty Reduction Year to calculate the Reduced Royalty Payments in the second
year of the Royalty Payment Period, and so on (if applicable).
(e) The obligation of Buyer to make Royalty Payments pursuant to this
Agreement shall terminate immediately upon the first occurrence of any of the
following events:
(i) if prior to the second anniversary of the Product Launch
Date, Portman shall cease (other than as of the result of his death or
disability which renders him unable to perform substantial functions of
his position) to act on behalf of Seller on a full-time basis, in
either an employee or independent contractor capacity or to have made
other arrangements reasonably satisfactory to Buyer to continue
activities relevant to the Licensed Products (as defined in the License
Agreement);
(ii) upon 30 days' written notice by Buyer, if Seller breaches
any of the covenants or agreements in this Agreement or in the License
Agreement and such breach could materially and adversely affect Buyer's
rights in the Assets, or the value or reasonably expected benefit to
Buyer of the Assets, and Seller fails, within such 30 days, to cure
such breach and the effect thereof;
(iii) upon 30 days' written notice by Buyer, if (A) Portman
breaches any of the covenants in the Portman Consulting, License and
Noncompetition Agreement that address restrictions on competition,
non-disparagement or confidentiality, or materially breaches his
service obligations thereunder (considered in the aggregate), (B)
Portman fails, within 30 days after notice to Portman and Seller, to
cure such breach and the effect thereof and (C) Portman admits such
fault or is finally determined through the mediation and arbitration
provisions of such agreement to have so breached such covenants or
obligations and failed to have timely cured such breach and the effect
thereof; or
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(iv) Seller or Portman takes any action that has a detrimental
effect on the Brand Names or the Acquired Intellectual Property, and
such action (and the effect thereof) is not cured by Seller or Portman
(as applicable) within 30 days after receiving written notice from
Buyer.
ARTICLE II
CLOSING AND CLOSING DATE
SECTION 2.1. Closing and Closing Date. The closing of the purchase and
sale of the Assets (the "Closing") shall take place at the offices of Xxxxx
Xxxxx L.L.P., 0000 Xxxx Xxxxxx, Xxxxxx, Xxxxx 00000 at 10:00 a.m., Dallas, Texas
time, on the second business day after each of the conditions to the obligations
of the parties set forth in Articles VI and VII (other than any condition
relating to the making of payments or delivery of instruments or other documents
at the Closing) have been satisfied or waived, or on such other date and at such
other time as Buyer and Seller may mutually agree (the "Closing Date").
SECTION 2.2. Deliveries at Closing. At the Closing:
(a) Seller shall deliver, or cause to be delivered, to Buyer:
(i) the Xxxx of Sale and Assignment, duly executed by Seller;
(ii) instruments of assignment of the United States and
foreign letters patent, patents, patent applications, trademarks,
service marks, trademark and service xxxx registrations and
applications, copyrights and copyright registrations and applications
included in the Assets, in each case duly executed and acknowledged by
the appropriate parties;
(iii) a counterpart of the License Agreement, duly executed by
Seller;
(iv) copies of all approvals, consents and waivers of third
parties that are necessary to consummate the transactions contemplated
by this Agreement, including those set forth in Schedule 2.2(a)(iv);
(v) a copy of the resolutions of the board of directors of
Seller authorizing the execution and delivery by Seller of this
Agreement and the performance by Seller of the transactions
contemplated hereby, certified by the secretary of Seller;
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(vi) evidence reasonably acceptable to Buyer that all liens,
security interests and other Encumbrances on the Assets (other than
Permitted Encumbrances) have been released and discharged;
(vii) a legal opinion by counsel reasonably acceptable to
Buyer as to the due authorization of the transactions contemplated
hereby by all requisite corporate action on the part of Seller,
including that no vote or consent of the stockholders of Seller (except
as previously obtained) is necessary for the execution and delivery by
the Seller of this Agreement or the consummation of the transactions
contemplated hereby or evidence reasonably acceptable to Buyer that all
such action has been taken (including that the vote or consent of the
stockholders of Seller has been obtained);
(viii) such other bills of sale, deeds, general conveyances,
endorsements, assignments and other good and sufficient instruments of
sale, conveyance, transfer, assignment and delivery as Buyer may
reasonably request in order more effectively to vest in Buyer all
right, title and interest in and to the Assets, in each case duly
executed and acknowledged by Seller; and
(ix) such other certificates, instruments and documents as may
be reasonably requested by Buyer to carry out the intent and purposes
of this Agreement.
(b) Buyer shall deliver, or cause to be delivered, to Seller:
(i) the Closing Payment, by wire transfer to such account as
Seller shall have designated at least two business days prior to the
Closing Date;
(ii) a counterpart of the License Agreement, duly executed by
Buyer; and
(iii) such other certificates, instruments and documents as
may be reasonably requested by Seller to carry out the intent and
purposes of this Agreement.
SECTION 2.3. Certain Actions. At the Closing, Seller shall deliver to
Buyer copies of all Acquired Intellectual Property that is available in readable
format (including hardcopy and electronic versions) or other tangible form and
including (i) all patent prosecution and trademark files relating to the
Acquired Intellectual Property currently in possession of Seller's intellectual
property counsel, and (ii) all product ingredient information, product formulas,
product details and other product information, and shall take such additional
actions as are necessary or appropriate to put Buyer in actual possession and
operating control of the Assets.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows:
SECTION 3.1. Existence; Authority; Qualification. Seller is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Seller has all requisite corporate power and authority
to own, operate and lease its properties and assets and to carry on its business
as presently conducted. Seller is duly qualified to transact business and is in
good standing as a foreign corporation in all jurisdictions where it is required
to be so qualified, except where the failure to be so qualified would not have a
Material Adverse Affect.
SECTION 3.2. Authority; Binding Effect. Seller has all requisite
corporate power and authority, to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated
hereby, and no further corporate proceedings on the part of or with respect to
Seller, its board of directors or stockholders are necessary to approve and
authorize the execution and delivery of this Agreement, the performance by
Seller of its obligations hereunder or the consummation of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Seller and constitutes a valid and binding agreement of Seller, enforceable
against Seller in accordance with its terms.
SECTION 3.3. Absence of Conflicts. Except as set forth in Item 3.3 of
the Disclosure Schedule, none of the execution and delivery by Seller of this
Agreement, the performance by Seller of its obligations hereunder or the
consummation of the transactions contemplated hereby will (i) conflict with or
result in a violation or breach of any provision of the certificate of
incorporation or bylaws of Seller; (ii) conflict with or result in a violation
of any law, rule or regulation applicable to Seller or any of the Assets or
conflict with or result in a violation of any order, writ, injunction, decree,
judgment or ruling of any Governmental Entity applicable to Seller or, to the
extent Seller has Knowledge thereof, to any of the Assets; (iii) conflict with,
result in the breach or violation of, constitute a default under, or otherwise
adversely affect any of the terms, conditions or provisions of, any note, bond,
mortgage, indenture, deed of trust, license, franchise, permit, Contract, or
other instrument or document to which Seller is a party or by which any of the
Assets may be bound; (iv) require any consent or approval of, or notice to, or
filing or registration with, any Person, except for those consents, approvals,
notices, filings or registrations which have been obtained, given or made, as
the case may be, and which are unconditional and in full force and effect or (v)
result in the creation of, or impose on any Seller the obligation to create, any
Encumbrance, other than Permitted Encumbrances, upon any of the Assets.
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SECTION 3.4. Governmental Consents and Filings. Except for the filing
of any lien releases with the applicable Governmental Entities (which shall be
effected by Seller prior to or on the Closing Date) and the filing of
assignments of patents, registered trademarks and copyrights (which shall be
effected by Buyer upon the Closing), there is no requirement applicable to
Seller to obtain any consent of, or to make or effect any declaration, filing or
registration with, any Governmental Entity for the valid execution and delivery
of this Agreement, the due performance by Seller of its obligations hereunder or
the lawful consummation of the transactions contemplated hereby.
SECTION 3.5. Subsidiaries. Except as set forth in Item 3.5 of the
Disclosure Schedule, Seller does not have any subsidiaries, nor does Seller own,
directly or indirectly, any capital stock, partnership interests, limited
liability company interests, equity securities or other ownership interests of
or in any corporation, partnership, limited liability company or other Person.
SECTION 3.6. Financial Statements and SEC Reports.
(a) The unaudited balance sheet of Seller as of September 30, 2005 (the
"Latest Balance Sheet") and the statement of income of Seller for the nine
months then ended and the audited balance sheets of Seller as of December 31,
2004, 2003 and 2002 and the audited statements of income of Seller for the years
then ended (collectively the "Financial Statements") are contained in Seller's
SEC Reports available on the SEC's XXXXX website. Except as described in Item
3.6(a) of the Disclosure Schedule, the Financial Statements have been prepared
in accordance with generally accepted accounting principles, are accurately
based on the books and records of Seller, are true and correct in all material
respects, and fairly present the financial condition of Seller, including the
Assets, at the dates thereof and its results of operations for the periods
covered thereby.
(b) Since December 31, 2003, Seller has timely filed or furnished all
material forms, reports, registration statements, certifications and documents
required to be filed or furnished by it with the Securities and Exchange
Commission (the "SEC") (the "SEC Reports"), all of which complied as of their
respective filing dates in all material respects will all applicable
requirements of the Exchange Act and the Securities Act, as applicable. True,
correct and complete copies of all such SEC Reports have been delivered to Buyer
or made available on the SEC's Internet website. None of the SEC Reports,
including the Financial Statements included or incorporated by reference
therein, at the time filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances in which
they were made, not misleading. No executive officer of Seller has failed in any
respect to make the certifications required of him or her under Sections 302 or
906 of the Xxxxxxxx-Xxxxx Act of 2002 with respect to any SEC Report.
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(c) Seller maintains disclosure controls and procedures required by
Rule 13a-15 or 15d-15 under the Exchange Act and has delivered to Buyer a
correct and complete description of such disclosure controls and procedures to
the extent related to the Business. Such disclosure controls and procedures are
effective to ensure that all material information concerning Seller and its
Subsidiaries is made known on a timely basis to the individuals responsible for
the preparation of Seller's filings with the SEC and other public disclosure
documents. Seller has disclosed to its auditors and the audit committee of
Seller's board of directors (i) any significant deficiencies in the design or
operation of internal controls which could adversely affect in any material
respect Seller's ability to record, process, summarize and report financial data
and has identified for Seller's auditors any material weaknesses in internal
controls and (ii) any fraud, whether or not material, that involves management
or other employees who have a significant role in Seller's internal controls.
Except as disclosed in Item 3.6(c) of the Disclosure Schedule, no disclosure
described in the preceding sentence relating to the Business or the Assets has
been made since December 31, 2003. Since December 31, 2003, no former or current
employee of Seller or any of its Subsidiaries has engaged in questionable
accounting or auditing practices. No attorney representing Seller or any of its
Subsidiaries, whether or not employed by Seller or any of its Subsidiaries, has
reported evidence of a violation of any securities Legal Requirements, breach of
fiduciary duty or similar violation by Seller or any of its officers, directors,
employees or agents to Seller's board of directors or any committee thereof or
to any director or officer of Seller or any of its Subsidiaries.
SECTION 3.7. Absence of Undisclosed Liabilities. Except as disclosed in
Item 3.7 of the Disclosure Schedule, Seller does not have any debts, liabilities
or obligations, whether accrued, absolute, contingent or otherwise, other than
(i) liabilities or obligations fully reflected or specifically reserved against
in the Latest Balance Sheet or disclosed in the notes thereto or (ii) current
liabilities incurred in the ordinary course of business after the date of the
Latest Balance Sheet. Except as set forth in Item 3.7 of the Disclosure
Schedule, Seller is current in the payment and performance of all of its debts,
liabilities and obligations.
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SECTION 3.8. Absence of Certain Changes or Events. Since the date of
the Latest Balance Sheet, except as set forth in Item 3.8 of the Disclosure
Schedule, the business of Seller has been conducted in the ordinary course and
consistent with past practice and none of the following has occurred:
(a) any actual or reasonably foreseeable prospective change in the
operations, assets, properties, liabilities, results of operations or financial
condition of Seller, whether or not in the ordinary course of business, which
has resulted in a Material Adverse Effect, or any event, occurrence or
development that will result in or could reasonably be expected to result in a
Material Adverse Effect;
(b) any material damage, destruction or loss (whether or not insured)
affecting the physical condition of the Assets, or the other assets or
properties of Seller or the availability thereof in connection with the conduct
of Seller's business;
(c) except as set forth in Item 3.8 of the Disclosure Schedule and
except for sales to customers in the ordinary course of business, any sale,
assignment or transfer of material tangible or intangible Assets;
(d) any mortgage, pledge, security interest or imposition of any
Encumbrance, other than Permitted Encumbrances, on any Assets;
(e) any material adverse change in the relationships between Seller on
the one hand and any suppliers, licensors, licensees, lessors, insurers, joint
venture partners or other Persons with whom Seller has material business
relationships;
(f) any revocation or termination, or any notice of any threatened
revocation or termination, of any material consents, approvals, licenses,
permits, franchises or other authorizations owned by or issued to Seller that
relate to or affect the Assets;
(g) any action or omission on the part of Seller that, if taken or
omitted to be taken after the date hereof, would cause a breach or violation of
the covenants contained in Section 5.1 or 5.2; or
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(h) any agreement or commitment to do any of the foregoing.
SECTION 3.9. Title, Sufficiency and Condition of Assets. Seller has all
right, title and interest in and to all of the Assets owned by it, free and
clear of all Encumbrances, other than Permitted Encumbrances. Upon the sale,
conveyance, transfer, assignment and delivery of the Assets in accordance with
this Agreement, Buyer will acquire all right title and interest in and to the
Assets, free and clear of all Encumbrances, liabilities, charges, levies or
assessments of any kind or character, except for Permitted Encumbrances. Without
limiting the generality of the foregoing, all Encumbrances on the Assets that
secure any Indebtedness of Seller or its Affiliates have been released and
discharged or will be released and discharged before or simultaneously with the
Closing. The Assets include all Intellectual Property Rights used by Seller or
its Affiliates or contractors in or necessary in connection with the research,
development, testing, production, manufacture, marketing, sale or distribution
by Seller or its Affiliates or contractors of Seller's products under the Brand
Names. The items of tangible personal property included in the Assets (including
all documents, studies and records) are complete and in good condition, do not
have any defects that could reasonably be expected to interfere in any material
respect with their use in connection with the Business, and are in the
possession of Seller or under its control. Except as included in the Acquired
Intellectual Property pursuant to Section 1.1(a)(v), there are no computer
software programs or software development tools, databases or compilations,
documentation, user manuals or training materials, relating to or necessary for
the operation, use or exploitation of any of the Assets.
SECTION 3.10. Contracts. Item 3.10 of the Disclosure Schedule lists all
Contracts to which Seller is a party or by which it is bound (i) that relate to
the Assets; (ii) that relate to the development, license, sublicense,
manufacture, use, sale, disclosure, distribution, reproduction, display,
performance, duplication, preparation of derivative works of, modification, or
other exploitation (collectively, "Exploitation") thereof; (iii) by which the
Assets are bound; or (iv) that are used or held for use in the Exploitation by
Seller of the Assets. Complete and correct copies of all such Contracts
(including all exhibits, schedules, amendments or modifications thereto) have
been provided to Buyer. All such Contracts are valid and in full force and
effect, have not been modified (except as set forth in Item 3.10 of the
Disclosure Schedule) and constitute the legal, valid and binding obligations of
Seller and, to the knowledge of Seller, the other parties thereto. Except as set
forth in Item 3.10 of the Disclosure Schedule, Seller is not in default, and no
written notice of alleged default has been received by Seller under any such
Contract, and, to the knowledge of Seller, no other party thereto is in default
or alleged to be in default thereunder. Except as set forth in Item 3.10 of the
Disclosure Schedule, to the extent that any such Contract is included in the
Assets, the assignment of the Assets to Buyer will not affect the continued
validity or effectiveness or alter the terms and conditions of any such
Contract.
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SECTION 3.11. Permits. Item 3.11 of the Disclosure Schedule Seller sets
forth all licenses, franchises, permits, approvals, authorizations, exemptions,
classifications, certificates, registrations and similar documents or
instruments (collectively, "Permits") that are material to the conduct of the
business operated utilizing the Assets. Seller owns or validly holds all Permits
included in the Assets and all such Permits are valid and in full force and
effect. No proceeding is pending or, to the knowledge of Seller, threatened
which could result in the revocation or termination of any such Permits, and
Seller does not know of any basis on which any such proceeding could be
commenced. The consummation of the transactions contemplated by this Agreement
will not affect the continued validity or effectiveness or alter the terms and
conditions of any such Permits.
SECTION 3.12. Transactions with Affiliates. Except as set forth in Item
3.12 of the Disclosure Schedule, with respect to the Assets or the Business
conducted by Seller utilizing the Assets, since December 31, 2000, Seller has
not purchased, acquired or leased any property or services from, or sold,
transferred or leased any property or services to, or loaned or advanced any
money to, or borrowed any money from, or guaranteed or otherwise become liable
for any Indebtedness or other obligations of, or acquired any equity,
obligations or securities of, or entered into any management, consulting or
similar fee arrangement with, or entered into or consummated any other material
transaction, agreement or arrangement with or for the benefit of, any of its
Affiliates or any of their respective directors, officers or employees. None of
the Affiliates of Seller has any ownership or other interest in the Assets.
SECTION 3.13. Litigation. There are no Proceedings pending or, to the
knowledge of Seller, currently threatened against Seller. Except as set forth in
Item 3.13 of the Disclosure Schedule, since January 1, 2001, there has been no
such Proceeding involving or relating to the Assets. To the knowledge of Seller,
there is no presently existing factual basis that is reasonably likely to result
in any such Proceeding. Seller is not subject to any judgment, order, writ,
injunction or decree of any Governmental Entity. There are no Proceedings
pending or, to the knowledge of Seller, threatened seeking to restrain, prohibit
or obtain damages in connection with this Agreement or the transactions
contemplated hereby.
SECTION 3.14. Compliance With Laws and Other Requirements. Seller is
not in violation of or in default under (i) any applicable law, ordinance,
statute, rule or regulation of any Governmental Entity or (ii) any order, writ,
injunction, judgment or decree of any arbitrator or Governmental Entity
applicable to Seller or, to the extent Seller has Knowledge of such order, writ,
injunction, judgment or decree, to any of the Assets, except, with respect only
to such matters that do not involve or relate to the Assets, for any violation
or default which has not had, and could not reasonably be expected to have, a
Material Adverse Effect. Seller is not subject to any order, writ, injunction,
judgment or decree of any arbitrator or Governmental Entity involving or
relating to the Assets. No claim is pending or, to the knowledge of Seller,
threatened with respect to any such violation or default.
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SECTION 3.15. Intellectual Property.
(a) Item 3.15(a) of the Disclosure Schedule is a complete and correct
list of all patents and patent applications, registered trademarks, registered
trade names, registered service marks and registered copyrights, and all
applications for any of the foregoing, and all material unregistered copyrights,
trademarks, trade names and service marks owned or claimed by Seller. Each item
listed in Item 3.15(a) of the Disclosure Schedule is subsisting and in full
force and effect. Each issued patent, registered trademark, registered trade
name, registered service xxxx and registered copyright listed in Item 3.15(a) of
the Disclosure Schedule has been duly issued by or registered with the
applicable federal, state, foreign or local agency, which agency is noted in
Item 3.15(a) of the Disclosure Schedule, with respect to any particular item
(based on certificates or other written documents that the Seller has received
from such agency), and has not been canceled, expired or affirmatively abandoned
except as disclosed in Item 3.15(a) of the Disclosure Schedule. Except as
otherwise set forth in Item 3.15(a), Seller is the sole and exclusive owner of
the Intellectual Property listed in Item 3.15(a) of the Disclosure Schedule.
Except as set forth in Item 3.15(a) of the Disclosure Schedule, to the Sellers'
knowledge, Seller is currently listed in the records of the appropriate federal,
foreign, state or local agency, which agency is noted in Item 3.15(a) of the
Disclosure Schedule, with respect to any particular item as the sole owner of
record of each application and registration listed thereon.
(b) There is no existing or, to Seller's knowledge, threatened
opposition, interference, cancellation proceeding (stayed or otherwise) or,
except as set forth in Item 3.15(b) of the Disclosure Schedule, other legal or
governmental proceeding before any court or registration authority in any
jurisdiction against the items listed in Item 3.15(a) of the Disclosure
Schedule, or to Seller's knowledge, any of the Intellectual Property Rights to
be transferred to Buyer pursuant to this Agreement.
(c) Item 3.15(c) of the Disclosure Schedule sets forth a complete and
accurate list of all material Contracts pertaining to the use of or granting any
right to use or practice any rights under any of the Acquired Intellectual
Property, whether Seller is the licensee or licensor thereunder, and any written
settlements or assignments relating to any of the Intellectual Property. The
consummation of the transactions contemplated hereby will not cause a breach,
termination or forfeiture of any such material Contracts. Seller has not granted
any sublicense or similar right with respect to any of the Acquired Intellectual
Property.
(d) No trade secret or confidential information or know-how that is
material to the Business or the Assets has been disclosed or authorized to be
disclosed to any third party other than pursuant to a non-disclosure agreement
that uses reasonable efforts to protect Seller's proprietary interests in and to
such trade secrets and confidential information and know-how.
(e) Except as set forth in Item 3.15(e)(i) of the Disclosure Schedule,
the conduct of the Business by Seller does not interfere with, infringe upon or
misappropriate any Intellectual Property Right owned or controlled by any third
party, nor will Buyer, to Seller's knowledge, interfere with, infringe upon or
misappropriate any Intellectual Property Right owned or controlled by any third
party as a result of the continued operation of the Assets or the Business. To
Seller's knowledge, and except as disclosed in Item 3.15(e)(ii) of the
Disclosure Schedule, no third party is interfering with, infringing upon or
misappropriating any of the Acquired Intellectual Property and no such claims
have been made against a third party by Seller. Except as disclosed in Item
3.15(e)(iii) of the Disclosure Schedule, there are no claims or suits pending
or, to Seller's knowledge, threatened, and, Seller has not received any written
notice of a third-party demand, claim or suit, alleging that Seller's activities
or the conduct of the Seller infringes or infringed upon or constitutes or
constituted the unauthorized use of the proprietary rights of any third party or
challenging the ownership, use, validity or enforceability of any of the
Intellectual Property.
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(f) Except as set forth in Item 3.15(f)(i) of the Disclosure Schedule,
all present and former employees, officers, directors and consultants of Seller
with responsibility for developing or implementing the Acquired Intellectual
Property have executed and delivered to Seller an agreement assigning to Seller
their entire right, title and interest in and to any Intellectual Property
Rights arising from services performed for Seller by such persons. The
agreements signed by the present and former employees, officers, directors and
consultants of Seller with responsibility for developing or implementing the
Acquired Intellectual Property are substantially identical to the form of
agreement included in Item 3.15(f)(ii) of the Seller Disclosure Schedule. Except
as set forth in Item 3.15(f)(iii) of the Disclosure Schedule, no present or
former officer, director, employee or consultant of Seller has any right, title
or interest, directly or indirectly, in whole or in part, in or to any of the
Acquired Intellectual Property.
(g) Except as set forth in Item 3.15(g) of the Disclosure Schedule of
the Disclosure Schedule, after the Closing, all Acquired Intellectual Property
will be fully transferable, alienable, improvable, licensable and otherwise
exploitable by Buyer without restriction and without payment of any kind to any
third party. Such rights are non-terminable and not subject to revocation,
except pursuant to the Repurchase Option.
(h) To the extent that any of the Acquired Intellectual Property has
been developed or created by a third party for Seller, Seller has a written
agreement with such third party with respect thereto and Seller has thereby
obtained ownership of, and is the exclusive owner of all such third party's
rights in such Intellectual Property by operation of law or by valid assignment.
(i) No Person who has licensed Acquired Intellectual Property to Seller
has ownership rights or license rights to improvements made by Seller in such
Acquired Intellectual Property.
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(j) The execution, delivery and performance of this Agreement, and the
consummation of the transactions contemplated hereby, will not cause the
forfeiture or termination of any Acquired Intellectual Property.
SECTION 3.16. Taxes. Except as set forth in Item 3.16 of the Disclosure
Schedule (which Item specifies the extent, if any, to which each paragraph of
this Section 3.16 is qualified by the information disclosed therein):
(a) Seller has filed or will file in a timely manner with the
appropriate taxing authorities all Tax Returns required to be filed prior to or
on the Closing Date, and each such Tax Return has been or will be prepared in
all material respects in compliance with all applicable laws and regulations and
is or will be true, accurate and complete.
(b) Seller has paid or will pay in a timely manner (i) all Taxes that
are shown to be due on such returns or pursuant to any assessment received by
Seller from any taxing authority and (ii) all other Taxes due on or prior to the
Closing Date.
(c) There are no claims for Taxes pending against Seller nor any
threatened claim for tax deficiencies against Seller for which the Assets could
be liable or for which the Buyer could be liable for a successor or transferee
and Seller does not know of any basis for such claims.
(d) There exist no actual or, to the knowledge of Seller, proposed
assessments of Taxes by any taxing authority for which there is a reasonable
possibility that the Assets could be subject or for which the Buyer could be
liable for a successor or transferee.
(e) There are no outstanding agreements or waivers that would extend
the statutory period in which a taxing authority may assess or collect a Tax for
which the Assets could be subject or for which the Buyer could be liable for a
successor or transferee.
(f) There are no Encumbrances for Taxes (other than for current Taxes
not yet due and payable) upon the Assets.
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SECTION 3.17. Disclosure. The representations and warranties made by
Seller in this Agreement, and the statements contained in the documents,
certificates and other writings furnished or to be furnished to Buyer by or on
behalf of Seller pursuant to this Agreement or in connection with the
transactions contemplated hereby, do not and will not contain any untrue
statement of material fact or information, and do not and will not omit to state
any material fact necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
SECTION 3.18. Fees and Commissions. Except as set forth in Item 3.18 of
the Disclosure Schedule, (i) Seller has not retained a financial advisor,
broker, agent, or finder or paid or agreed to pay any financial advisor, broker,
agent or finder on account of this Agreement or any transaction contemplated
hereby; (ii) Buyer shall have no liability for any fee, commission or other
payment in connection with the transactions contemplated by this Agreement; and
(iii) no Person is entitled to any finder's fee, brokerage commission or similar
payment in connection with any transaction contemplated hereby on the basis of
any act or statement made or alleged to have been made by Seller or any of its
Affiliates.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller that:
SECTION 4.1. Existence; Authority; Good Standing. Buyer is a limited
liability partnership duly formed and in good standing under the laws of the
State of Delaware. Buyer has all requisite partnership power and authority to
own, operate, and lease its properties and assets and to carry on its business
as presently conducted.
SECTION 4.2. Authority; Binding Effect. Buyer has all requisite
partnership power and authority to execute and deliver this Agreement, to
perform its obligations hereunder and to consummate the transactions
contemplated hereby, and no further corporate proceedings on the part of or with
respect to Buyer are necessary to approve and authorize the execution and
delivery of this Agreement, the performance by Buyer of its obligations
hereunder or the consummation of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by Buyer and constitutes a legal,
valid and binding agreement of Buyer, enforceable against Buyer in accordance
with its terms.
SECTION 4.3. Absence of Conflicts. None of the execution and delivery
by Buyer of this Agreement, the performance by Buyer of its obligations
hereunder or the consummation of the transactions contemplated hereby will (i)
conflict with or result in a violation or breach of any provision of the
formation documents or partnership agreement of Buyer; (ii) conflict with or
result in a violation of any order, writ, injunction, decree, judgment or ruling
of any Governmental Entity or any law, rule, or regulation applicable to Buyer;
(iii) result in the breach or violation of, or constitute a default under, any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
deed of trust, license, franchise, permit, Contract, or other instrument or
document to which Buyer is a party or by which its properties or assets are
bound, except for any of the matters referred to in clauses (i) through (iii)
above which would not reasonably be expected to restrict or prevent the
performance by Buyer of its obligations under this Agreement.
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SECTION 4.4. Governmental Consents and Filings. There is no requirement
applicable Buyer to obtain any consent of, or to make or effect any declaration,
filing or registration with, any Governmental Entity for the valid execution and
delivery of this Agreement, the due performance by Buyer of its obligations
hereunder or the lawful consummation by Buyer of the transactions contemplated
hereby, except for any such consents, declarations, filings or registrations
which, if not made or effected, could not reasonably be expected to restrict or
prevent the performance by Buyer of its obligations under this Agreement.
SECTION 4.5. Fees and Commissions. Except as previously disclosed to
Seller in writing, (i) Buyer has not retained a financial advisor, broker,
agent, or finder or paid or agreed to pay any financial advisor, broker, agent
or finder on account of this Agreement or any transaction contemplated hereby;
and (ii) no Person is entitled to any finder's fee, brokerage commission or
similar payment in connection with any transaction contemplated hereby on the
basis of any act or statement made or alleged to have been made by Buyer or any
of its Affiliates.
SECTION 4.6. Acknowledgement of Due Diligence. Seller has provided
Buyer with the opportunity to review certain documents and information relating
to the business, operations, financial condition and results of operations of
Seller, including the Disclosure Schedule and other documents delivered to Buyer
as described in this Agreement, for purposes of conducting a due diligence
review of Seller. Notwithstanding the foregoing, except to the extent that the
Disclosure Schedule qualifies the representations and warranties of Seller made
pursuant to this Agreement, information provided or made available to Buyer in
connection with its due diligence review shall not limit or otherwise affect the
rights afforded to Buyer under this Agreement, including its rights under
Articles III and IX.
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ARTICLE V
COVENANTS
SECTION 5.1. General. Except as specifically provided in this
Agreement, during the period from the date hereof until the Closing, Seller
shall (i) conduct the Business and utilize the Assets only in the ordinary
course consistent with past practice and in compliance with all applicable laws,
rules or regulations; (ii) use its reasonable best efforts to preserve the
goodwill of the Business and to preserve, maintain, and protect the properties
and assets of Seller, including the Assets; and (iii) use its reasonable best
efforts to preserve intact the business organization of Seller, to keep
available the services of its employees, and to maintain existing relationships
with licensors, licensees, suppliers, contractors, distributors, customers and
other Persons having business relationships with Seller.
SECTION 5.2. Restrictions on Certain Actions. Without limiting the
generality of the foregoing, and except as otherwise specifically provided in
this Agreement, prior to the Closing, Seller shall not, without the prior
written consent of Buyer:
(a) sell, assign, transfer, or grant any Person a license under, any of
the Assets;
(b) make any material change in the ongoing operations of Seller or the
manner in which the Business conducted with the Assets is conducted;
(c) mortgage or pledge or grant a security interest in any of the
Assets or create or suffer to exist any Encumbrance thereon, other than
Permitted Encumbrances;
(d) enter into any Contract involving or relating to the Assets, other
than any Contract entered into in the ordinary course of Seller's business
consistent with past practice;
(e) amend, modify or change any Contract relating to, or included
within the Assets;
(f) waive, release, grant or transfer any rights of value involving or
relating to the Assets;
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(g) take any action which would or might make any of the
representations or warranties of Seller contained in this Agreement untrue or
inaccurate as of any time from the date of this Agreement to the Closing or
could reasonably be expected to result in any of the conditions set forth in
this Agreement not being satisfied; or
(h) make any agreement or commitment to do any of the foregoing.
SECTION 5.3. Exclusivity. From the date hereof until the Closing Date,
Seller shall not, and shall use its best efforts to ensure that its
subsidiaries, Affiliates, directors, officers, agents and other representatives
(including, but not limited to, any investment banker, financial advisor,
attorney or accountant) do not, directly or indirectly, initiate any contact
with, solicit, encourage or enter into or continue any negotiations,
understandings or agreements with any third party with respect to, or in
connection with, or furnish or disclose any non-public information regarding
Seller or its assets and businesses to any third party in connection with, any
offer or proposal to acquire any common stock or other direct or indirect equity
or other ownership interests in Seller, any of the Assets, or any substantial
assets of Seller or any other transaction that is inconsistent with the
transactions contemplated by this Agreement. If Seller directly or indirectly
receives any offer or proposal of the type described above or any inquiry with
respect thereto, Seller shall notify Buyer within one business day after the
receipt of such offer, proposal or inquiry and shall, in any such notice to
Buyer, indicate the material terms of such offer, proposal or inquiry.
SECTION 5.4. Tax Matters.
(a) Seller shall be liable for (i) all Taxes related to the ownership
or operation of the Assets for any taxable period or portion thereof ending on
or before the Closing Date, (ii) all transfer Taxes, sales and use Taxes, have
added, goods and services and similar Taxes, if any, imposed as a result of the
sale or transfer of the Assets and (iii) all income Taxes imposed on Seller or
their Affiliates on account of the sale of the Assets (d). Buyer shall be liable
for all Taxes related to the ownership or operation of the Assets for any
taxable period or portion thereof that begins after the Closing Date.
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(b) If Buyer or any of its Affiliates receives a refund or credit of
any Taxes described in paragraph (a) above, or if Seller or any of its
Affiliates receives a refund or credit of any Taxes described in paragraph (b)
above, the party receiving such refund or credit shall, within 30 days after
receipt of such refund or credit, remit to the other party the amount of such
refund or credit.
(c) After the Closing Date, each of Seller and Buyer shall:
(i) Use its reasonable best efforts to cooperate fully in
preparing for any audits of, or disputes with taxing authorities
regarding, any Tax Returns relating to the Assets and make available to
the other and to any taxing authority as reasonably requested all
information, records, and documents relating to liabilities for Taxes
associated with the Business or the Assets as set forth in this
Agreement.
(ii) Make available to the other, as reasonably requested and
available, personnel responsible for preparing or maintaining
information, records and documents in connection with Taxes as well as
any related litigation;
(iii) Preserve all such information, records, and documents
until the expiration of any applicable statutes of limitation or
extensions thereof and as otherwise required by law; and
(iv) Provide timely notice to the other in writing of any
pending or threatened tax audits or assessments related to the Assets
for periods beginning prior to the Closing Date and furnish the other
with copies of all correspondence received from any taxing authority in
connection with any tax audit or information request with respect to
any such period.
SECTION 5.5. Third Party Consents. Seller shall use reasonable best
efforts to obtain all consents, approvals, orders, authorizations, and waivers
of, and to effect all declarations, filings, and registrations with, all third
parties (including Governmental Entities) that are necessary, required, or
deemed by Buyer to be desirable to enable Seller to transfer the Assets to Buyer
as contemplated by this Agreement and to otherwise consummate the transactions
contemplated hereby. All such consents, approvals, orders, authorizations,
waivers, declarations, filings, registrations and releases shall be in a form
and in substance reasonably acceptable to Buyer. All costs and expenses of
obtaining or effecting any and all of the consents, approvals, orders,
authorizations, waivers, declarations, filings, registrations, and releases
referred to in this Section 5.5 shall be borne by Seller.
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SECTION 5.6. Further Assurances. Seller hereby covenants and agrees
with Buyer, and its successors and assigns, that from time to time after the
execution and delivery of this Agreement, at Buyer's reasonable request and
without further consideration, Seller shall (i) execute, deliver, acknowledge,
file and record, or cause to be executed, delivered, acknowledged, filed and
recorded, such further bills of sale, deeds, general conveyances, endorsements,
assignments and other good and sufficient instruments of sale, conveyance,
transfer, assignment or delivery and such further consents, certifications,
affidavits and assurances that may be reasonably required in order to vest in
Buyer all right, title and interest in and to the Assets or otherwise to
consummate and make effective the transactions contemplated by this Agreement
upon the terms and conditions set forth herein and (ii) take, or cause to be
taken, all actions and do, or cause to be done, all such things as may be
reasonably required in order to put Buyer in actual possession and operating
control of the Assets or otherwise to accomplish the purposes of this Agreement.
Furthermore, in the event that on or after the Closing Date the Seller receives
any mail, courier package, telegraph message, facsimile transmission, purchase
order, service request or other document that relates to the Assets (other than
as may relate to Seller's activities under the License Agreement), such
documents shall be forwarded, no later than one business day after the date of
receipt thereof by any of the Sellers, using a nationally recognized overnight
delivery service for next-day delivery, to Buyer.
SECTION 5.7. Notification of Certain Matters. Seller shall give prompt
notice to Buyer of (i) the occurrence or non-occurrence of any event the
occurrence or non-occurrence of which would be likely to cause any
representation or warranty contained in Article III to be untrue or inaccurate
at or prior to the Closing and (ii) any failure of Seller to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
Seller hereunder. Buyer shall give prompt notice to Seller of (i) the occurrence
or non-occurrence of any event the occurrence or non-occurrence of which would
be likely to cause any representation or warranty contained in Article IV to be
untrue or inaccurate at or prior to the Closing and (ii) any failure of Buyer to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by Buyer hereunder. The delivery of any notice pursuant to this
Section 5.7 shall not be deemed to (i) modify the representations or warranties
hereunder of the party delivering such notice, (ii) modify the conditions set
forth in Articles VI and VII or (iii) limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
SECTION 5.8. Amendment of Disclosure Schedule. Seller agrees that, with
respect to the representations and warranties contained in Article III, Seller
shall have the continuing obligation until the Closing promptly to supplement or
amend the Disclosure Schedule with respect to any matter hereafter arising or
discovered which, if existing or known at the date of this Agreement, would have
been required to be set forth or described in the Disclosure Schedule. For all
purposes of this Agreement, including for purposes of determining whether the
conditions set forth in Article VII have been fulfilled, the Disclosure Schedule
shall be deemed to include only that information contained therein on the date
of this Agreement and shall be deemed to exclude all information contained in
any supplement or amendment thereto.
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SECTION 5.9. Competitive Activities.
(a) Seller agrees that, during the period beginning on the date of this
Agreement and ending [REDACTED - CONFIDENTIAL TREATMENT REQUESTED]* (the
"Non-Competition Period"), it will not, directly or indirectly (whether acting
alone or through any of its Affiliates, as a member of a partnership or a joint
venture, as a shareholder of a corporation or in conjunction with any Person or
in any other capacity whatsoever and whether by investing in, or holding
securities of, any corporation or other entity, advancing or lending any funds
to, making available any facilities, equipment or other assets to any Person or
assisting or participating in any other transaction or arrangement whatsoever),
engage in any of the following activities:
(i) except as provided in the License Agreement or required by
this Agreement, conduct or engage in or participate in any business or
activity for the purpose of the research, development or testing of
products of the type described in Schedule 5.9(a) hereto (the "Covered
Products") in the geographical area specified in Schedule 5.9(a) hereto
(the "Territory"); or
(ii) except as provided in the License Agreement, conduct or
engage in or participate in any business or activity involved in the
marketing, sale or distribution of Covered Products in the Territory,
or solicit or accept business from any Person, for the purpose of
providing Covered Products in the Territory; provided, that Seller may
engage in solicitation of, and sales by Buyer of Covered Products to
any Person on behalf of Buyer.
(b) Notwithstanding the provisions of paragraph (a) above, Seller may
own less than 1% of a class of securities of a company whose securities are
publicly traded and registered under Section 12 of the Securities Exchange Act
of 1934, as amended (so long as Seller does not assist or participate in conduct
of the business of such company otherwise than through the ownership of such
securities).
(c) Seller expressly acknowledges and agrees that (i) this Section 5.9
contains reasonable limitations as to time, geographical area and scope of
activity which were negotiated by the parties at arm's-length, (ii) Seller has
heretofore been directly or indirectly engaged in the development, sale or
distribution of Covered Products in a substantial portion of the Territory and
(iii) in light of the activities heretofore engaged in by Seller, the interests
of the parties hereto and the nature of the transactions contemplated by this
Agreement, Section 5.9 is reasonable and does not impose a greater restraint on
Seller than is necessary to protect the goodwill and other business interests
associated with the business to be conducted utilizing the Assets.
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(d) It is expressly understood and agreed that if any of the provisions
of this Section 5.9 is held to be unreasonably broad, oppressive or
unenforceable by a court or other Governmental Entity, such court or other
Governmental Entity (i) shall narrow the Non-Competition Period and the
Territory, as applicable, or shall otherwise endeavor to reform the scope of
such provisions in order to ensure that the application thereof is not
unreasonably broad, oppressive or unenforceable and (ii) to the fullest extent
permitted by law, shall enforce such provisions as so reformed.
SECTION 5.10. Right of First Negotiation.
(a) Seller hereby agrees that, from the Closing Date until the sixth
anniversary of the Product Launch Date, Buyer shall have a first right of
negotiation with respect to any products, inventions, trade secrets, or other
Intellectual Property Rights that Seller or any Affiliate of Seller determines
to sell, license, co-market, co-distribute or otherwise commercialize, and any
joint venture, strategic alliance or other collaborative business arrangement or
transaction with respect to any such products, inventions, trade secrets or
other Intellectual Property Rights (any of the foregoing a "Potential
Opportunity"), unless Seller determines in its sole discretion to commercialize
such products without a commercial partner; provided, however, that this first
right of negotiation shall not apply to any arrangement that results directly
from negotiations which are generally identified in Item 5.10(a) of the
Disclosure Schedule and which Seller can conclusively show to have been
initiated by Seller prior to the Closing Date.
(b) Seller shall provide written notice to Buyer of any Potential
Opportunity that is subject to the first right of negotiation under this Section
5.10. Such notice shall provide reasonable detail regarding such Potential
Opportunity, including all of the material terms that are known or anticipated
at the time of such notice.
(c) After receipt of written notice from Seller as described in
subsection (b) above, Buyer shall have 10 days to exercise its first right of
negotiation by providing written notice to Seller. During the 10 day period
following receipt of written notice by Buyer, Seller shall provide Buyer with
reasonable access to Seller's officers, employees and agents, during regular
business hours and at Buyer's cost and expense, and shall provide Buyer with
such further information as Buyer shall reasonably request; provided, that
information provided pursuant to this Section 5.10 shall be subject to the
confidentiality provisions of this Agreement.
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(d) If Buyer elects to exercise its first right of negotiation, Buyer
and Seller shall negotiate exclusively and in good faith for a period of not
less than 60 days regarding such Potential Opportunity. If following good faith
negotiations effected in accordance with this Section 5.10, Seller determines
not to enter into a binding agreement with Buyer, Seller will be entitled to
pursue the Potential Opportunity without further restriction under this Section
5.10 and Buyer shall have no other claim or right under this Section 5.10 with
respect thereto. Nothing in this Section 5.10 shall be deemed to limit or
diminish the obligations of Seller under any other provision of this Agreement
(including Section 5.9).
SECTION 5.11. Use of Assets. From and after the Closing Date,
Seller shall not use the Brand Names or any derivatives thereof or any names
deceptively similar thereto or any of the other Assets in any of Seller's
present or future business operations or for any other purpose except as
permitted in the License Agreement.
SECTION 5.12. Bulk Sales Laws. The parties hereby waive compliance
with any applicable Bulk Sales Laws in connection with the sale of the Assets.
Seller hereby agrees to indemnify Buyer and hold it harmless from and against
any and all demands, claims, actions, causes of action, losses, damages,
liabilities, costs and expenses (including fees and disbursements of counsel)
arising as a result of any failure to comply with applicable Bulk Sales Laws in
connection with the sale of the Assets.
SECTION 5.13. Access to Books and Records after Closing.
(a) From and after the Closing Date, Buyer shall allow Seller and its
representatives, upon reasonable prior notice, to inspect and copy during normal
business hours the books and records included in the Assets, to the extent
necessary in order and to permit Seller to comply with its obligations under
federal income tax and state tax laws.
(b) From and after the Closing Date, Seller shall allow Buyer and its
representatives, upon reasonable prior notice, to inspect and copy any of
Seller's books and records that relate to the Assets during normal business
hours, to the extent necessary in order to comply with its obligations under law
or when otherwise reasonably necessary for the business operations of Buyer.
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SECTION 5.14. Audit Rights and Certificates of Compliance.
(a) Not later than 15 days following the end of each Fiscal Quarter
during the Royalty Payment Period, Seller shall deliver to Buyer an officer's
certificate executed by Seller's Chief Financial Officer, which officer's
certificate shall attest that Seller is in compliance with its covenants and
obligations pursuant to this Agreement; provided it is understood that Seller's
failure to deliver any such certificate shall suspend Buyer's obligation to make
any Royalty Payments pursuant to this Agreement.
(b) Not later than January 31 of 2007 and each year thereafter through
and including the first anniversary of the Product Launch Date, Seller shall
deliver to Buyer an officer's certificate executed by Seller's Chief Financial
Officer, which officer's certificate shall attest as to the Actual Sales
Percentage (as defined in Section 1.4(d)) for the previous year, and specify
with reasonable detail the calculation thereof; provided it is understood that
Seller's failure to deliver any such certificate shall suspend Buyer's
obligation to make any Royalty Payments pursuant to this Agreement.
(c) For a period of 30 days following the end of each Fiscal Quarter
during the Royalty Payment Period and for a period of 30 days following the
delivery of any officer's certificate required to be delivered on behalf of
Seller pursuant to this Agreement, Seller shall afford Buyer's employees and
consultants reasonable access to the facilities, books and records and employees
of Seller to verify Seller's compliance with its covenants and obligations
hereunder.
SECTION 5.15. Certain Licenses. At the Closing, Buyer and Seller will
enter into the License Agreement. Pursuant to the License Agreement, (i) Buyer
shall grant to Seller an exclusive, limited, royalty-free license to use certain
of the Acquired Intellectual Property in order to allow Seller to continue to
market and sell its existing products under the Brand Names in powder, gel and
pill forms only (and such other forms as to which Buyer may from time to time
consent in writing) and for an agreed term, and (ii) Seller shall grant to Buyer
and its Affiliates, for an agreed term, a royalty-free license to use the name
"PacificHealth Laboratories" for certain purposes.
SECTION 5.16. Cooperation. For a period beginning on the Closing Date
and ending [ON THE SIXTH ANNIVERSARY OF THE PRODUCT LAUNCH DATE]*, (i) Seller
shall provide to Buyer free of charge such training and other support and
assistance as is reasonably requested from time to time by Buyer regarding the
research, development, enhancement, testing, production, manufacture, marketing,
sale and distribution of the Developed Products and (ii) Seller shall use
commercially reasonable efforts to cooperate with Buyer in promoting the Brand
Names. Without limiting the foregoing, for a period beginning on the Closing
Date and ending [REDACTED - CONFIDENTIAL TREATMENT REQUESTED]* Seller shall, to
the best of its ability at the time, collaborate with Buyer in activities
designed to develop and enhance the products offered under the Brand Names,
which activities are anticipated to involve development of new ideas for
clinical research, development of new product concepts, providing scientific
input with regard to clinical research funded by Buyer, and related efforts.
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SECTION 5.17. Certain Other Covenants.
(a) Seller agrees to execute any and all powers of attorney,
applications, registrations, assignments, declarations, affidavits, and any
other papers in connection therewith, which Buyer deems necessary to perfect the
right, title and interest of the Acquired Intellectual Property, in Buyer.
Seller further agrees to testify in any legal proceedings, sign all lawful
papers, execute all divisional, continuation, continuation-in-part, reissue and
substitute applications, make lawful oaths and declarations, and generally do
everything possible to vest title of the Acquired Intellectual Property in Buyer
and to aid Buyer to obtain and enforce proper protection for the Acquired
Intellectual Property in all countries.
(b) In the event that Seller develops or acquires Intellectual Property
Rights that are Enhancements to the Acquired Intellectual Property, Seller
agrees to promptly disclose and irrevocably assign to Buyer such Enhancements,
at no cost to Buyer. Seller agrees further to execute any and all powers of
attorney, applications, assignments, declarations, affidavits, and any other
papers in connection therewith, which Buyer deems necessary to perfect the
right, title and interest of such Enhancements in Buyer.
(c) Seller agrees to fully comply with its ongoing duty to disclose
information material to patentability to the United States Patent & Trademark
Office (37 C.F.R. 1.56), with regard to any pending or future filed patent
applications of the Acquired Intellectual Property.
(d) From and after the Closing Date, (i) Seller shall not, and shall
use commercially reasonable efforts to cause its employees, officers, directors,
agents and Affiliates to not, make any statement (orally or in writing) which
disparages Buyer or its Affiliates identified on Schedule 5.17(d) (as updated
from time to time by written notice to Seller, the "Identified Buyer
Affiliates") or any of their products (including any Developed Product),
presents Buyer or the Identified Buyer Affiliates or any such product in an
unfavorable light or otherwise materially xxxxx the commercial viability of any
such product, and (ii) Buyer shall not, and shall use commercially reasonable
efforts to cause its employees, officers, directors, agents and Affiliates to
not, make any statement (orally or in writing) which disparages Seller or any
product marketed by Seller (including any product marketed by Seller under the
Brand Names), presents Seller or any such product in an unfavorable light or
otherwise materially xxxxx the commercial viability of any such product;
provided, however, that Buyer shall have no further obligation pursuant to this
Section 5.15(d)(ii) in the event of a Change in Control of Seller or termination
of the License Agreement. Notwithstanding the foregoing, this paragraph (d)
shall not prohibit any Person from making a statement that has a potential
negative effect if such statement (i) is not made recklessly or with intention
to harm the other party or its Affiliates, their products or the Brand Names;
(ii) is reasonable and based upon facts published in peer-reviewed scientific
studies; and (iii) is necessary in order to respond accurately to a direct
question from the media regarding the scientific properties or effects of a
product with respect to which the Person making the statement is an expert;
provided, that the Person making the statement uses reasonable efforts to avoid
making a statement that would be viewed as disparaging the other party, its
Affiliates, its products or the Brand Names.
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(e) If Buyer sells or assigns all or substantially all of the Assets to
a third party at any time prior to the end of the Royalty Payment Period, then
Buyer shall cause such purchaser or assignee to agree in writing to be bound by
the obligations to make Royalty Payments pursuant to Section 1.4.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF SELLER
The obligation of Seller to consummate the transactions contemplated by
this Agreement shall be subject to the fulfillment on or prior to the Closing
Date of all of the following conditions, any one or more of which may be waived,
in whole or in part, by Seller:
SECTION 6.1. No Order. No Governmental Entity shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation,
injunction or other order (whether temporary, preliminary or permanent) which is
in effect and has the effect of making the transactions contemplated by this
Agreement illegal or otherwise restraining or prohibiting the consummation of
such transactions.
SECTION 6.2. Accuracy of Representations and Warranties. Each
representation and warranty of Buyer contained in this Agreement shall be true
and correct (in the case of representations and warranties qualified as to
materiality) or true and correct in all material respects (in the case of
representations and warranties that are not so qualified) as of the Closing Date
with the same effect as though made on the Closing Date.
SECTION 6.3. Covenants and Agreements Performed. Buyer shall have
complied on or before the Closing Date in all material respects with each of its
covenants and agreements contained in this Agreement to be performed on or
before the Closing Date.
SECTION 6.4. Closing Deliveries. Buyer shall have executed and
delivered at the Closing the documents and instruments described in Section
2.2(b).
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ARTICLE VII
CONDITIONS TO OBLIGATIONS OF BUYER
The obligation of Buyer to consummate the transactions contemplated by
this Agreement shall be subject to the fulfillment on or prior to the Closing
Date of all of the following conditions, any one or more of which may be waived,
in whole or in part, by Buyer:
SECTION 7.1. No Order. No Governmental Entity shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation,
injunction or other order (whether temporary, preliminary or permanent) which is
in effect and has the effect of making the transactions contemplated by this
Agreement illegal or otherwise restraining or prohibiting the consummation of
such transactions.
SECTION 7.2. Accuracy of Representations and Warranties. Each
representation and warranty of Seller contained in this Agreement shall be true
and correct (in the case of representations and warranties qualified as to
materiality) or true and correct in all material respects (in the case of
representations and warranties that are not so qualified) as of the Closing Date
with the same effect as though made on the Closing Date.
SECTION 7.3. Covenants and Agreements Performed. Seller shall have
complied on or before the Closing Date in all material respects with each of the
covenants and agreements of Seller contained in this Agreement to be performed
on or before the Closing Date.
SECTION 7.4. Portman Consulting, License and Noncompetition Agreement.
Portman shall continue to be employed on a full-time basis by Seller in the
capacity of CEO and shall have entered into the Portman Consulting, License and
Noncompetition Agreement, which shall be in full force and effect.
SECTION 7.5. Closing Deliveries. Seller shall have executed and
delivered at the Closing, or caused to be executed and delivered, the documents
and instruments described in Section 2.2(a).
SECTION 7.6. Consents. Seller shall have obtained all the consents to
the transactions contemplated this Agreement that are listed in Item 3.3 of the
Disclosure Schedule.
SECTION 7.7. No Material Adverse Change. Since September 30, 2005,
there shall not have been any material adverse change in the business,
prospects, operations, assets, liabilities, financial condition or results of
operations of Seller.
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ARTICLE VIII
TERMINATION
SECTION 8.1. Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing:
(a) by mutual written consent of Buyer and Seller;
(b) by either Buyer or Seller, if there shall be promulgated any
statute, rule or regulation of a Governmental Entity that makes consummation of
the transactions contemplated hereby illegal or if a Governmental Entity shall
have issued an order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the consummation of the
transactions contemplated hereby, and such order, decree, ruling or other action
shall have become final and nonappealable;
(c) by Buyer, if:
(i) the Closing shall not have occurred by March 1, 2006
(provided that the right to terminate this Agreement under this clause
(i) shall not be available if the failure of Buyer to fulfill any of
its obligations under this Agreement or its misrepresentation or breach
of warranty hereunder has been a primary cause of the fact that the
Closing has not occurred); or
(ii) there has been a material breach by Seller of any
covenant or agreement, or an inaccuracy in any representation or
warranty, of Seller contained in this Agreement and such breach or
inaccuracy has not been cured by Seller within 30 days after receipt by
them of written notice thereof from Buyer; or
(d) by Seller, if:
(i) the Closing shall not have occurred by March 1, 2006
(provided that the right to terminate this Agreement under this clause
(i) shall not be available if the failure by Seller to fulfill any of
its obligations under this Agreement or its misrepresentation or breach
of warranty hereunder has been a primary cause of the fact that the
Closing has not occurred); or (ii) there has been a material breach by
Buyer of any covenant or agreement, or a material inaccuracy of any
representation or warranty, of Buyer contained in this Agreement and
such breach or inaccuracy has not been cured by Buyer within 30 days
after receipt by it of written notice thereof from Seller.
SECTION 8.2. Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 8.1 by Buyer or Seller, written notice
thereof shall forthwith be given to the other party specifying the provision
hereof pursuant to which such termination is made, and this Agreement shall have
no effect other than as set forth in this Section 8.2, and there shall be no
liability hereunder on the part of Buyer or Seller or any of their respective
directors, officers, employees, stockholders or representatives, except that the
agreements contained in this Section 8.2 and Articles IX and X shall survive the
termination hereof. Nothing contained in this Section 8.2 shall relieve any
party from liability for damages actually incurred for breach of any covenant or
agreement, or for the inaccuracy of any representation or warranty, contained
herein.
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ARTICLE IX
INDEMNIFICATION
SECTION 9.1. Survival of Representations and Warranties. The
representations and warranties contained in this Agreement and in any
certificate, instrument or document delivered pursuant hereto in which any
representations or warranties are made by a party shall survive the Closing for
a period of 24 months, except for the representations contained in Sections 3.1,
3.2, 3.8(c), 3.8(d), 3.9, 3.15, 3.16, 3.18, 4.1 and 4.2, which shall survive
until the expiration of the applicable statute of limitations. Such
representations and warranties shall not be deemed to be merged into or
superseded by any provisions set forth in any instrument of sale, conveyance,
assignment or transfer or any other document delivered pursuant to this
Agreement or in connection with the transactions contemplated hereby, and shall
not be affected by any due diligence review or investigation made by or on
behalf of any party. Rights to indemnification provided under this Agreement
shall survive until the expiration of the applicable statute of limitations,
except that rights to indemnification against breaches of any representations
and warranties shall only survive until the expiration of such representations
and warranties in accordance with the first sentence of this Section 9.1;
provided, however, that such rights to indemnification shall thereafter continue
in full force and effect insofar as they relate to claims of which the
Indemnifying Party has received notice, specifying the facts and circumstances
of the claim in reasonable detail (to the extent known) and specifying the
provision of this Agreement under which such claim is made, prior to the
applicable expiration date. The provisions of this Article IX set forth the
exclusive remedies for any breach of representations or warranties set forth in
Articles III or IV of this Agreement, except with respect to fraudulent
misrepresentation.
SECTION 9.2. Indemnification of Buyer. Seller agrees to indemnify and
hold Buyer and its Affiliates and their respective directors, officers and
stockholders (collectively, the "Buyer Indemnified Parties"), harmless from and
against, and pay or reimburse the Buyer Indemnified Parties for, any and all
damages, claims, actions, causes of action, losses, liabilities, deficiencies or
expenses, whether or not resulting from third-party claims (including reasonable
attorney's fees) incurred by such Person (collectively referred to herein as
"Indemnified Losses"), to the extent that they arise out of or are based upon
any of the following:
(a) any breach by Seller of any representation or warranty contained in
this Agreement;
(b) any breach by Seller of any covenant or agreement contained in this
Agreement;
(c) any Seller Retained Liabilities;
(d) any Permitted Encumbrance which arose during or related to any
period prior to the Closing Date;
(e) any claim that (i) the Assets or any part thereof infringes the
Intellectual Property Rights of any Person or constitutes an unlawful
disclosure, use or misappropriation of another Person's trade secrets; or (ii)
Buyer's use of the Assets in the operation of the Business infringes,
misappropriates or otherwise wrongfully uses the Intellectual Property Rights of
any third party, unless such claim: (A) is based solely upon modifications made
by Buyer to the Acquired Intellectual Property or to products currently or
previously marketed or sold by Seller ("Seller's Products") and (B) without such
modifications made by Buyer to the Acquired Intellectual Property or Seller's
Products, Buyer's use of the Assets in the operation of the Business would not
otherwise have infringed, misappropriated or otherwise wrongfully used such
Intellectual Property Rights of such third party; or (iii) the marketing or sale
of Covered Products (including any products that fall within Class 5 and/or
Class 32 of the International Schedule of Classes of Goods and Services) bearing
the ACCELERADE or ENDUROX trademarks, infringes the trademark rights of any
third party;
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(f) any Taxes for which Seller is liable pursuant to Section 5.4; or
(g) any product liability or similar claim based on or relating to the
Assets to the extent that such claim arises with respect to events or
occurrences that took place on or prior to the Closing Date.
Notwithstanding the foregoing, the right of the Buyer Indemnified Parties to be
indemnified pursuant to paragraph (a) above for breaches of representations or
warranties shall not arise unless and until the aggregate amount of Indemnified
Losses for which it is entitled to indemnification pursuant to such paragraph
equals or exceeds $[40,000]* (the "Basket Amount"), in which case Seller shall
provide indemnification for the full amount of such Indemnified Losses,
including the Basket Amount; provided, however, that none of such limitations
shall limit or otherwise affect any Buyer Indemnified Party's right to be
indemnified pursuant to paragraphs (b)-(g) above. Buyer may set off any amount
that Seller is obligated to pay Buyer hereunder (including any amount owed by
Seller under this Article IX) against any Royalty Payments that Buyer is
obligated to pay Seller under this Agreement, provided that the amount that
Seller is obligated to pay Buyer hereunder has been agreed by the parties or
resolved by formal arbitrative or judicial process; provided further, that to
the extent an amount that Buyer would otherwise set off against a Royalty
Payment has not yet been agreed by the parties or resolved by formal arbitrative
or judicial process, Buyer may deposit the amount that it would otherwise be
entitled to set off against the Royalty Payment into an interest-bearing escrow
account at an independent escrow agent pending final agreement or resolution.
SECTION 9.3. Indemnification of Seller. Buyer agrees to indemnify and
hold Seller and its Affiliates and their respective directors, officers and
stockholders (collectively, the "Seller Indemnified Parties") harmless from and
against, and pay or reimburse the Seller Indemnified Parties for, any and all
Indemnified Losses which the Seller Indemnified Parties may sustain or incur, to
the extent that they arise out of or are based upon any of the following:
(a) any breach by Buyer of any representation or warranty contained in
this Agreement;
(b) any breach by Buyer of any covenant or agreement contained in this
Agreement; or
(c) any product liability or similar claim based on or relating to the
Assets to the extent that such claim arises with respect to events or
occurrences that take place after the Closing Date (other than such claims that
are based on, relate to or arise from Seller's operations under the License
Agreement).
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Notwithstanding the foregoing, the right of the Seller Indemnified Parties to be
indemnified pursuant to paragraph (a) of this Section 9.3 for breaches of
representations or warranties shall not arise unless and until the aggregate
amount of Indemnified Losses for which it is entitled to indemnification
pursuant to such paragraph equals or exceeds the Basket Amount, in which case
Buyer shall provide indemnification for the full amount of such Indemnified
Losses, including the Basket Amount.
SECTION 9.4. Third Party Claims. If Buyer or Seller, as the case may be
(singly or collectively, the "Indemnified Party"), shall receive notice of an
action asserting a liability for which it is indemnified under this Article IX,
it shall promptly notify, and in the case of indemnification sought under
Sections 9.2(a) and 9.3(a) within 30 days of receipt by the Indemnified Party of
legal process or other written notification of the commencement of an action
asserting such liability, the party against whom indemnity is sought (the
"Indemnifying Party"). The failure to notify the Indemnifying Party shall not
relieve the Indemnifying Party from its obligations to provide indemnification
hereunder, except to the extent its defense of the action is materially
prejudiced thereby. Any such claim may be defended by any insurer whose policy
covers the liability for such claim and provides for a defense thereof. In
addition, the Indemnifying Party may participate in the defense of such action
and may assume the defense with counsel satisfactory to the Indemnified Party if
(a) the Indemnified Party agrees to assumption thereof by the Indemnifying Party
or (b) the Indemnifying Party shall have confirmed in writing (without
reservation or qualification) its obligation to provide indemnification for the
liability asserted in such action. If the Indemnifying Party assumes the
defense, the Indemnifying Party will not settle the claim without the prior
written consent of the Indemnified Party, which shall not be unreasonably
withheld, conditioned or delayed. If the Indemnified Party, based on advice of
counsel, shall reasonably conclude that the Indemnified Party's interests in
such action are materially inconsistent with those of the Indemnifying Party or
that it may have defenses that are different from or in addition to those
available to the Indemnifying Party, the Indemnified Party may use separate
counsel to protect such interests and assert such defenses and otherwise
participate in the defense of such action. If the Indemnifying Party shall
assume the defense with counsel satisfactory to the Indemnified Party, the
Indemnifying Party shall not be liable for any legal expenses (other than
investigation expenses) subsequently incurred by the Indemnified Party, unless
the Indemnified Party shall have employed separate counsel in accordance with
the preceding sentence.
SECTION 9.5. Indemnification Without Regard to Negligence or other
Fault. It is the express intention of the parties hereto that each Indemnified
Party shall be entitled to indemnification as provided in this Article XI,
without regard to any limitations contained in anti-indemnification, express
negligence or other similar laws. Accordingly, such party shall be indemnified
and held harmless from and against all Indemnified Losses as to which indemnity
is provided for under this Article IX notwithstanding that any such Indemnified
Losses arise out of or result from the ordinary, strict, sole or contributory
negligence or other fault of the Indemnified Party.
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ARTICLE X
MISCELLANEOUS
SECTION 10.1. Access to Information; Confidentiality. Until the
Closing, Seller shall afford to Buyer and its officers, attorneys, accountants
and other authorized representatives reasonable access to all personnel and
historical records regarding the Assets which, in the reasonable judgment of
Buyer, are necessary to enable Buyer to conduct its due diligence relating to
the proposed acquisition. Seller will furnish the representatives of Buyer
during such period with all information as such representatives may reasonably
request and cause the employees, accountants and attorneys of Seller to
cooperate fully with such representatives in connection with such review and
examination. All documents, records and information provided to Buyer or its
officers, attorneys, accountants and representatives shall be subject to the
terms of section 5 of the letter of intent, dated November 17, 2005 (as amended,
the "Confidentiality Agreement") between Seller and Buyer; provided, however,
that the obligations of Buyer and its Affiliates under the Confidentiality
Agreement (except as they relate to information concerning the businesses or
operations of Seller not relating to the Assets) shall terminate and cease to be
of any further force or effect as of the Closing Date. The obligations of Buyer
and its Affiliates under the Confidentiality Agreement as they relate to
information concerning the businesses or operations of Seller other than
relating to the Assets, shall continue in full force and effect after the
Closing Date. No investigation by Buyer or its representatives shall limit the
effectiveness of the representations, warranties, covenants or agreements of
Seller herein or the right of Buyer to obtain indemnification as provided by
this Agreement. Seller acknowledges and agrees that irreparable damage would
occur in the event that at any time after the Closing Date any confidential
information regarding the Assets, this Agreement, the transactions and
agreements contemplated hereby, Buyer or its Affiliates or their respective
business, is disclosed to or utilized on behalf of any Person which is or may
eventually be in competition with Buyer. Accordingly, Seller covenants and
agrees that it will not, directly or indirectly, without the prior written
consent of Buyer, use (except as expressly authorized under the License
Agreement) or disclose any of such confidential information, except to
attorneys, accountants and authorized representatives of Seller; provided,
however, that confidential information shall not be deemed to include
information which was or becomes generally available to the public other than as
a result of disclosure by Seller or its Affiliates. Notwithstanding the
foregoing provision of this Section 10.1, Seller may disclose any confidential
information to the extent that in the opinion of Seller's counsel, Seller is
legally compelled to do so, provided that prior to making such disclosure,
Seller advises and consults with Buyer regarding such disclosure and provided
further that Seller discloses only that portion of such confidential information
as is legally required to be disclosed.
SECTION 10.2. Expenses. Each party shall pay its own expenses and costs
relating to the negotiation, execution and performance of this Agreement.
SECTION 10.3. Public Announcements. Seller and Buyer will consult with
each other before issuing, and will provide each other reasonable advance
opportunity to review and comment upon, any press release, report, filing or
other public statements (or relevant portions thereof) relating to this
Agreement or the transactions contemplated hereby and shall not issue any such
press release or make any such report, filing or public statement prior to such
consultation, except as may be required by applicable law, court process or by
obligations pursuant to any listing agreement with any national securities
exchange.
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SECTION 10.4. Notices. Any notices or other communications required or
permitted hereunder shall be given in writing and shall be sufficient if
delivered personally or sent by certified or registered mail, postage prepaid,
to the address of the principal place of business of the parties, or to such
other address as shall be furnished in writing by such party, and any such
notice or communication shall be effective and be deemed to have been given as
of the date so mailed; provided that any notice or communications changing any
of the addresses of the parties shall be effective and deemed given only upon
its receipt.
SECTION 10.5. Assignment. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective legal representatives, successors and permitted assigns;
provided, however, that except as expressly provided herein, neither this
Agreement nor any of Seller's rights, interests, or obligations hereunder shall
be assigned by Seller (by operation of law or otherwise) without the prior
written consent of Buyer, which consent shall not be unreasonably withheld.
Buyer shall give Seller written notice of any assignment by Buyer. Any assignee
of Buyer shall agree in writing to be bound by all of the terms and conditions
of this Agreement, whereupon Buyer shall be immediately and fully released from
all obligations under this Agreement.
SECTION 10.6. Complete Agreement. This Agreement (including the
Schedules and Exhibits hereto and the Disclosure Schedule) and the License
Agreement, Portman Consulting, License and Noncompetition Agreement, and the
other documents delivered at the Closing contain the entire understanding of the
parties with respect to the transactions contemplated hereby and supersede all
prior arrangements or understandings with respect thereto. There are no
restrictions, agreements, promises, warranties, covenants, or undertakings other
than those expressly set forth herein or therein.
SECTION 10.7. Governing Law. This Agreement and all matters relating to
this Agreement shall be governed by and construed in accordance with the laws of
the State of Texas, without giving effect to the choice of law principles
thereof.
SECTION 10.8. Cure of Invalid Provisions. If any provision of this
Agreement is held to be illegal, invalid or unenforceable under present or
future laws effective during the term of this Agreement, such provision shall be
fully severable, and this Agreement shall be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
and the remaining provisions hereof shall remain in full force and effect and
shall not be affected by the illegal, invalid or unenforceable provision or by
its severance from this Agreement; provided, however, that if such illegal,
invalid or unenforceable provision may be made legal, valid and enforceable by
limitation thereof, then the provision shall be revised and reformed to make it
legal, valid and enforceable to the maximum extent permitted by law.
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SECTION 10.9. Amendment; Waivers. The terms and provisions of this
Agreement may be modified or amended only by a written instrument executed by
each of the parties hereto, and compliance with any term or provision hereof may
be waived only by a written instrument executed by each party entitled to the
benefits of the same. Except as expressly provided herein to the contrary, no
failure to exercise any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege granted hereunder.
SECTION 10.10. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with the terms hereof. Accordingly,
the parties agree that each of them shall be entitled to seek injunctive relief
to prevent breaches of the terms of this Agreement and to seek specific
performance of the terms hereof, in addition to any other remedy now or
hereafter available at law or in equity, or otherwise.
SECTION 10.11. Interpretation. The headings herein are for convenience
of reference only, do not constitute a part of this Agreement and shall not be
deemed to limit, extend or otherwise affect the meaning of any of the provisions
hereof. The words "include," "includes" and "including" shall be deemed to be
followed by the words "without limitation." Unless otherwise specifically
provided for herein, the term "or" shall not be deemed to be exclusive. Any
reference to "ordinary course of business" shall be deemed to mean "ordinary,
usual and regular course of business consistent with past practices."
SECTION 10.12. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
SECTION 10.13. Force Majeure. Any delays in or failures of performance
by either party under this Agreement shall not be considered a breach of this
Agreement if and to the extent caused by occurrences beyond the reasonable
control of the party affected, including: acts of God; the intervention of any
governmental authority; strikes or the concerted acts of workers; fires; floods;
explosions; riots; wars; rebellion; and sabotage. Any time for performance
hereunder shall be extended by the actual time of delay caused by such
occurrence; provided, that if any such delaying cause shall continue for more
than 60 calendar days, the party injured by the inability of the other to
perform shall have the right, upon written notice, to terminate this Agreement.
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REDACTED
SECTION 10.14. Rights Reserved. Buyer acknowledges that the principal
business of Seller is to develop, commercialize and license nutritional
products. Buyer acknowledges that Seller is presently, and in the future may
continue to be, engaged in developing products and technology (including for
appetite suppression, management of type 2 diabetes and postoperative muscle
recovery) that do not involve and are not related to Covered Products, do not
compete with or support competition with Covered Products, and do not infringe
the Acquired Intellectual Property. None of this Agreement, the License
Agreement or the Portman Consulting, License and Noncompetition Agreement (other
than Section 5.10 of this Agreement) shall be construed to limit or affect
Seller's right to engage in an asset sale, joint venture, strategic alliance,
distribution agreement or any other business relationship with any other company
(including any company that may presently or in the future sell, distribute or
otherwise market Covered Products) so long as such transaction, arrangement or
relationship does not involve or relate to, or compete or support competition
with, Covered Products or involve the infringement of the Acquired Intellectual
Property. Any transaction or relationship involving only products and technology
that do not involve or relate to Covered Products, do not compete with or
support competition with Covered Products, and do not infringe on the Acquired
Intellectual Property will not be deemed a violation of Section 5.9.
ARTICLE XI
DEFINITIONS
SECTION 11.1. Certain Definitions. The following terms shall have the
meanings ascribed to them below:
"Affiliate" means any Person that controls, is controlled by or is
under common control with the Person in question, including any officer,
director or shareholder thereof.
"Arbitrator" means an arbitrator agreed upon by the parties or, if the
parties are unable to agree within 60 days, an arbitrator selected by the
American Arbitration Association.
"Xxxx of Sale and Assignment" means the Xxxx of Sale and Assignment to
be executed as of the Closing Date by Seller, substantially in the form of
Exhibit C.
"Bulk Sales Laws" means any version of Article 6 of the Uniform
Commercial Code adopted by any state or any similar law relating to the sale of
inventory, equipment or other assets in bulk.
"Business" means the business involving the research, development,
testing, production, manufacture, marketing, sale and distribution of Developed
Products and other Covered Products.
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REDACTED
"Case or Case Equivalent" means the amount reasonably specified by
Buyer as a unit of measurement for purposes of this Agreement; provided, it is
understood and agreed that a Case Equivalent shall generally equal such amount
as is required to ultimately deliver [REDACTED - CONFIDENTIAL TREATMENT
REQUESTED]*; provided, further, that Buyer may make reasonable adjustments for
alternate means of packaging and/or delivery which are consistent with industry
practices and Buyer's internal metrics.
"Change in Control of Seller" means the occurrence of any of the
following events:
(a) Any Person shall file (or be required to file) a Schedule 13D under
the Exchange Act disclosing that such Person has become the beneficial owner of
a number of shares of Equity Securities of Seller which represent more than 50%
of the aggregate voting power of the outstanding Equity Securities of Seller;
(b) Any Person shall file (or be required to file) a Schedule 13D under
the Exchange Act disclosing that such Person has become the beneficial owner of
a number of Equity Securities of Seller which represent more than 30% of the
aggregate voting power of the outstanding Equity Securities of Seller, and
within 12 months after the date of such acquisition of beneficial ownership of
such Equity Securities, individuals who, as of the date of such acquisition,
constituted the Board of Directors of Seller (the "Incumbent Directors") cease
for any reason to constitute at least a majority of the Board of Directors of
Seller; provided, however, that any individual becoming a director subsequent to
such date whose election, or recommendation or nomination for election by the
stockholders of Seller, was approved by a vote of at least a majority of the
Incumbent Directors (acting separately or as part of any action taken by the
board of directors (or comparable body) or any committee thereof) shall be
considered as though such individual were an Incumbent Director; provided, that
such individual was not the nominee of the Person that acquires such beneficial
ownership, or otherwise nominated or elected by or at the direction of such
Person as part of any plan or arrangement involving a change of control of
Seller;
(c) There shall be consummated any merger, consolidation, business
combination or other transaction (or a series of related transactions) as a
result of which a number of Equity Securities of Seller (or any surviving
company resulting from such transaction) which represent more than 50% of the
aggregate voting power of the outstanding Equity Securities of Seller (or such
surviving company) shall be beneficially owned, directly or indirectly, by
Persons who did not either (i) own such Equity Securities prior to the
transaction (or series of transactions), or (ii) receive such securities in
respect of the conversion or exchange of common stock of Seller in the
transaction;
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REDACTED
(d) Any Person shall acquire, by sale, transfer or conveyance in any
one transaction or series of related transactions, assets or earning power
aggregating to more than 50% of the assets or earning power of the applicable
entity and its Subsidiaries, taken as a whole;
(e) A transfer, sale or other disposition of all or substantially all
of Seller's assets to a Person that is not an Affiliate of Seller; or
(f) The execution and delivery of any Contract by Seller or any of its
Affiliates providing for the consummation of any of the foregoing transactions
or any public announcement by the applicable entity of the execution and
delivery of any such Contract.
"Contract" means any contract, subcontract, letter contract, agreement,
purchase order, delivery order, arrangement, understanding or other instrument,
obligation or commitment or any kind or character (whether oral or written).
"Developed Products" means products previously, currently or in the
future marketed under the Brand Names or that utilize, are based upon, or relate
to the Acquired Intellectual Property.
"Disclosure Schedule" means the Disclosure Schedule prepared by Seller
and delivered to Buyer which is attached to this Agreement.
"Encumbrances" means title defects, charges, liens, mortgages, pledges,
claims, security interests, options, restrictions, and other encumbrances of
every type and description, whether imposed by law, agreement, understanding or
otherwise.
"Enhancements" means any inventions, ideas, discoveries, know how,
confidential information or other Intellectual Property Rights, whether now in
existence or created in the future, that are improvements to the Acquired
Intellectual Property.
"Equity Securities" means (i) with respect to any corporation, all
shares, interests, participations or other equivalents of capital stock of such
corporation, however designated, (ii) with respect to any limited liability
company, all limited liability company interests, membership interests or other
equity interests in such limited liability company and (iii) with respect to any
partnership, all partnership interests or other equity interests in such
partnership.
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REDACTED
"Exchange Act" means the Securities Exchange Act of 1934, as amended to
date.
"Governmental Entity" means any court or tribunal in any jurisdiction
(domestic or foreign) or any federal, state, municipal, domestic, foreign or
other administrative agency, department, commission, board, bureau or other
governmental authority or instrumentality.
"Indebtedness" means, with respect to any Person, any indebtedness of
such Person in respect of borrowed money or evidenced by bonds, notes,
debentures or similar instruments or letters of credit (or reimbursement
agreement in respect thereof) or representing capital lease obligations that
would appear as a liabilities on a balance sheet of such Person prepared in
accordance with United States generally accepted accounting principles, as well
as all indebtedness of others secured by a lien, security interest or other
encumbrance on any asset of such Person (whether or not such indebtedness is
assumed by such Person) and, to the extent not otherwise included, the guarantee
by such Person of any indebtedness of any other Person.
"Intellectual Property Rights" means all rights in and to: (i)
trademarks and service marks (registered or unregistered), trade dress, trade
names and other marks and slogans embodying business or product goodwill or
indications of origin, all or that part of any applications or registrations in
any jurisdiction pertaining to the foregoing and all goodwill associated
therewith; (ii) all inventions whether patented or unpatented, patentable or
unpatentable, including all issued patents and pending applications in any
jurisdiction; (iii) all trade secrets and other confidential information, and
any discoveries, improvements, ideas, know-how, formulae, methodologies,
processes, technology concepts, computer programs, technical data, memoranda,
notes, reports, financial and technical information, proprietary information,
proprietary processes, clinical studies, books, records, instruments and other
information; (iv) all copyrights (registered and unregistered) in writings,
designs, mask works or other works, and applications or registrations in any
jurisdiction for the foregoing; and (v) all Internet web sites, domain names and
registrations or applications for registration thereof.
"Knowledge" (and any correlative terms such as "to the knowledge of" or
"known to" or any similar phrase) means anything actually known by Seller, its
officers, directors or employees, including anything that becomes known to them
in connection with the transactions contemplated by this Agreement.
"Legal Requirement" means any domestic, foreign or international law,
treaty, ordinance, statute, rule or regulation of any Governmental Entity or any
Order.
"Material Adverse Effect" means any event or occurrence that, together
with any other event or occurrence to which the definition relates, has resulted
or could reasonably be expected to result in a material adverse effect on the
business, assets, results of operation, condition (financial or otherwise) or
prospects of Seller.
"Order" means any decision, judgment, order, writ, injunction, decree,
award or determination of any Governmental Entity.
"Permitted Encumbrances" means liens for Taxes not yet delinquent or
which are being contested in good faith by appropriate proceedings, provided
that adequate reserves with respect to contested taxes are maintained on the
Latest Balance Sheet.
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REDACTED
"Person" means an individual, corporation, limited liability company,
association, joint stock company, trust, partnership, joint venture,
unincorporated organization, a government or any department or agency thereof,
or any other legal entity.
"Proceedings" means all proceedings, actions, suits, investigations or
inquiries in or before any arbitrator or Governmental Entity.
"Product Launch Date" means the first date on [REDACTED - CONFIDENTIAL
TREATMENT REQUESTED]*as Buyer shall determine in its sole discretion.
"Qualifying Net Sales" means has the meaning specified in Schedule
11.1.
"Securities Act" means the Securities Act of 1933, as amended to date.
"Seller Retained Liabilities" means any and all debts, liabilities and
obligations of Seller of any kind, nature or description whatsoever (whether
absolute or contingent, known or unknown, asserted or unasserted), including:
(a) any liabilities for or relating to any Indebtedness of Seller;
(b) any liabilities relating to any action, suit, inquiry,
investigation or other proceeding pending or threatened against Seller (whether
or not covered by insurance);
(c) any liabilities or obligations arising from or relating to a breach
or violation by Seller of the terms of any law, ordinance, statute, rule or
regulation of any Government Authority;
(d) any liabilities or obligations arising from or relating to any
breach or violation by Seller of any Contract;
(e) any liabilities or obligations resulting from the termination of
any employment relationship or other employment-related action, including any
obligations in respect of severance pay and other similar benefits and claims
for wrongful discharge, breach of contract, unfair labor practice, employment
discrimination, unemployment compensation or workers' compensation;
(f) any liabilities or obligations for Taxes for which Seller is
responsible under the terms of this Agreement;
(g) any debts, liabilities or obligations arising out of or relating to
the use or exploitation of rights and interests in any of the Assets before the
Closing Date; and
(h) any and all other liabilities and obligations of Seller or any of
its Affiliates.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, limited liability company or other entity of which a majority of
the voting power of the Equity Securities or other ownership interests having
ordinary voting power to elect a majority of the board of directors or other
similar managing body of such corporation, partnership, limited liability
company or other entity are owned by such Person.
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REDACTED
"Taxes" means any and all taxes, assessments, fees and similar charges,
including any federal, state, local or foreign income, gross receipts, business,
alternative or add on minimum, capital gains, license, payroll, employment,
excise, occupation, premium, environmental (including taxes under Section 59A of
the Internal Revenue Code of 1986, as amended), customs duties, stamp, stamp
duties, unclaimed property capital stock, franchise, profits, withholding,
social security (or similar), national insurance contributions, unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added goods and services, estimated, or other similar tax,
assessment, fee or charge of any kind whatsoever and any liability under
Treasury Regulation Section 1.1502-6 (or any similar provision of state, local,
or foreign law), as a transferee or successor, by contract, or otherwise, in
each case, including any interest, penalty, or addition thereto.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
SECTION 11.2. Other Defined Terms. Each of the terms set forth below
has the meaning set forth in the Section set forth opposite such term:
TERM SECTION
---- -------
ACCELERADE Preamble
Acquired Intellectual Property 1.1
Agreement Preamble
Annual Sales Percentage 1.4(d)
Assets 1.1
Basket Amount 9.2
Brand Names Preamble
Buyer Preamble
Buyer Indemnified Parties 9.2
Closing 2.1
Closing Date 2.1
Closing Payment 1.3
Confidentiality Agreement 10.1
Covered Products 5.9(a)(i)
ENDUROX Preamble
Exploitation 3.10
Financial Statements 3.6
Fiscal Quarter 1.4
Incumbent Directors 11.1
Indemnified Losses 9.2
Indemnified Party 9.4
Indemnifying Party 9.4
Identified Buyer Affiliates 5.17(d)
Latest Balance Sheet 3.6
License Agreement Preamble
Non-Competition Period 5.9
Patent Properties 1.1(a)(ii)
Permits 3.11
Portman Preamble
Portman Consulting, License and
Noncompetition Agreement Preamble
Potential Opportunity 5.10(b)
Purchase Price 1.3
Reduced Royalty Payment 1.4(d)
Repurchase Option Date 1.4(b)
Repurchase Option 1.4(b)
Repurchase Price 1.4(b)
Royalty Payment 1.4(a)
Royalty Payment Period 1.4(a)
Royalty Payment Statement 1.4(a)
Royalty Payment Quarter 1.4(a)
Royalty Reduction Year 1.4(d)
SEC 3.6(a)
SEC Reports 3.6(a)
Seller Preamble
Seller Indemnified Parties 9.3
Standard Royalty Payment 1.4(d)
Territory 5.9(a)(i)
* * *
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REDACTED
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.
BUYER:
XXXX'X LLP
By:______________________________
Name:
Title:
SELLER:
PACIFICHEALTH LABORATORIES, INC.
By:______________________________
Name:
Title:
1
REDACTED
DISCLOSURE SCHEDULE
1
REDACTED
SCHEDULE 1.1(A)(I)
TRADEMARKS
Application/
Registration No. Trademark Status
--------------- --------- ------
FEDERAL:
76-537986 (DESIGN ONLY) Registered
76-537987 ACCELERADE (and Design) Registered
76-537988 ARE YOU ACCELERADED? Registered
76-564326 ACCEL GEL (Stylized) Registered
76-337391 POWERING MUSCLES Registered
76-096182 ACCELERADE Registered
75-614117 OPTIMUM RECOVERY RATIO Registered
75-614119 (DESIGN ONLY) Registered
75-560480 R4 (Stylized) Registered
75-027605 ENDUROX Registered
75-214632 ENDUROX PROHEART Abandoned
75-179076 ENDUROX EXCEL Abandoned
75-179075 ENDUROX ACTIVE Abandoned
INTERNATIONAL:
1,122,170 ACCELERADE (CANADA) Registered
TMA 497,754 ENDUROX (CANADA) Registered
3071855 ACCELERADE (CHINA) Registered
2001-104987 ACCELERADE (JAPAN) Registered
4167993 ENDUROX (JAPAN) Registered
18874/2001 ACCELERADE (HONG KONG) Registered
01-100,249 ACCELERADE (COLOMBIA) Registered
10.1-023 ACCELERADE (VENEZUELA) Registered
T01/18001E ACCELERADE (SINGAPORE) Registered
002459956 ACCELERADE (EUROPE) Registered
2,359,000 ACCELERADE (ARGENTINA) Registered
894943 ACCELERADE (AUSTRALIA) Registered
823.933.032 ACCELERADE (BRAZIL) Registered
90048699 ACCELERADE (TAIWAN) Registered
538,408 ENDUROX (MEXICO) Registered
425231 ENDUROX (EUROPE) Registered
739007 ACCELERADE (MEXICO) Registered
1.1(a)(1)-1
REDACTED
SCHEDULE 1.1(A)(II)
PATENTS
Patent/
Application No. Title Status
-------------- ----- ------
UNITED STATES:
US 5,585,101 Method to Improve Performance During Exercise Using Issued December 17,
the Ciwuji Plant 1996.
US 6,051,236 Composition for Optimizing Muscle Performance During Issued April 18, 2000.
Exercise
US 6,989,171 Sports Drink Composition for Enhancing Glucose Uptake Issued January 24,
and Extending Endurance During Physical Exercise 2006.
USSN 09/824,357 Sports Drink Composition for Enhancing Glucose Uptake Abandoned.
and Extending Endurance During Physical Exercise
[REDACTED - CONFIDENTIAL [REDACTED - CONFIDENTIAL TREATMENT REQUESTED]* Pending - Filed
TREATMENT REQUESTED]* January 20, 2006.
[[REDACTED - CONFIDENTIAL [REDACTED - CONFIDENTIAL TREATMENT REQUESTED]* Pending - Filed
TREATMENT REQUESTED]* January 23, 2006.
FOREIGN (NON-U.S.):
[REDACTED - CONFIDENTIAL [REDACTED - CONFIDENTIAL TREATMENT REQUESTED]* Pending.
TREATMENT REQUESTED]*
2000 AU 0016200 Composition for Optimizing Muscle Performance During Abandoned.
Exercise
[REDACTED - CONFIDENTIAL [REDACTED - CONFIDENTIAL TREATMENT REQUESTED]* Pending.
TREATMENT REQUESTED]*
2001 ZA 0004738 Composition for Optimizing Muscle Performance During Granted 2001/4728.
Exercise
[REDACTED - CONFIDENTIAL [REDACTED - CONFIDENTIAL TREATMENT REQUESTED]* Pending.
TREATMENT REQUESTED]*
CA 2240677 Method to Improve Performance During Exercise Using Abandoned.
the Ciwujia Plant
1997 AU 0014214 Method to Improve Performance During Exercise Using Abandoned.
the Ciwujia Plant
1996 EP 0944396 Method to Improve Performance During Exercise Using Abandoned.
the Ciwujia Plant
1997 JP 0522942 Method to Improve Performance During Exercise Using Abandoned.
the Ciwujia Plant
1.1(a)(ii)-2
REDACTED
SCHEDULE 1.1(A)(V)
INTERNET WEB SITES AND DOMAIN NAMES
xxxxxxxxxx.xxx
xxxxxxxX0.xxx
xxxxxxxxxxxxxxx.xxx
xxxxxxxx.xxx
xxxxxxxxxxxxxxxxxx.xxx
xxxxxxxxxxx.xxx
xxxxxxxxxx.xxx
1.1(a)(v)-1
REDACTED
SCHEDULE 2.2(A)(IV)
CERTAIN CONSENTS
1. Hormel Health Labs LLC
2. Fidelity Funding Business Credit Ltd.
2.2(a)(iv)-1
REDACTED
SCHEDULE 5.9(A)
COVERED PRODUCTS AND TERRITORY
COVERED PRODUCTS
Sports drinks
Sports hydration drinks
Sports energy drinks
Post-exercise recovery drinks
TERRITORY
[REDACTED - CONFIDENTIAL TREATMENT REQUESTED]*
5.9(a)-1
REDACTED
SCHEDULE 5.17(D)
IDENTIFIED BUYER AFFILIATES
[REDACTED - CONFIDENTIAL TREATMENT REQUESTED]*
5.17(d)-1
REDACTED
SCHEDULE 11.1
QUALIFYING NET SALES
"Qualifying Net Sales" means, with respect to any period, the dollar amount of
gross sales by Buyer and its Affiliates of Developed Products, less the
following customer discounts related to such sales:
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ACTIVITY DEFINITION EXAMPLE
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[REDACTED - CONFIDENTIAL TREATMENT REQUESTED]*
11.1-1
REDACTED
EXHIBIT A
FORM OF LICENSE AGREEMENT
A - 1
REDACTED
EXHIBIT B
PORTMAN CONSULTING, LICENSE AND NONCOMPETITION AGREEMENT
B - 1
REDACTED
EXHIBIT C
FORM OF XXXX OF SALE AND ASSIGNMENT
C - 1
REDACTED
EXHIBIT D
CONFIDENTIALITY AGREEMENT
D - 1
