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*** Certain information (indicated by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted material
has been filed separately with the Securities and Exchange Commission.
EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "AGREEMENT") is made and entered
into this 29th day of June, 2001, by and among Stellar Bio Systems, Inc., a
Delaware corporation ("SELLER"), American Biogenetic Sciences, Inc., a Delaware
corporation ("PARENT"), PanBio InDx Inc., a Maryland corporation ("BUYER"), and
PanBio Limited, an Australian corporation ("BUYER'S PARENT").
WHEREAS, Seller is in the business of manufacturing and distributing
worldwide (i) in vitro immunofluorescent antibody slide format immunodiagnostic
assays comprised solely of the Products (defined in Section 1.1(a)(i)) and (ii)
mouse serum used as an assay component by in vitro diagnostic assay
manufacturers (the "BUSINESS"); and
WHEREAS, Seller desires to sell and assign to Buyer, and Buyer desires
to purchase and assume from Seller, certain assets and liabilities of Seller
relating to the Business, on the terms and subject to the conditions, described
in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and other good and valuable consideration the parties agree as follows:
ARTICLE I
SALE AND PURCHASE
SECTION 1.1 Acquired Assets to be Sold and Purchased.
(a) Subject to Section 1.1(b) and other terms and conditions contained
herein, Seller shall sell, assign, transfer, convey and deliver to Buyer, and
Buyer shall purchase from Seller on the Closing Date (as hereinafter defined),
all of Seller's right, title and interest to all of the assets, properties and
rights of Seller relating to the Business of every type and description, real,
personal and mixed, tangible and intangible, known or unknown, fixed or unfixed,
xxxxxx or inchoate, accrued, absolute, contingent or otherwise, wherever located
and whether or not reflected on the books and records of Seller (all of such
assets, properties and rights hereinafter collectively referred to as the
"ACQUIRED ASSETS"), used in the Business as a going concern existing as of the
Closing Date, including but not limited to the following assets:
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(i) all of Seller's rights to the products set forth in
Schedule 1.1(a)(i) (the "PRODUCTS");
(ii) all rights and interests of Seller in and to those
contracts, agreements and leases relating to the Business and set forth
on Schedule 1.1(a)(ii) hereto, excluding, however, those contracts,
agreements or leases under which the Seller shall have an Excluded
Liability (as hereinafter defined) (collectively, the "ASSUMED
CONTRACTS");
(iii) all of Seller's inventories existing as of the Closing
Date relating to the Products, including all ingredients, finished
goods, work in progress, raw materials, marketing materials and
production, shipping and packaging supplies (the "INVENTORY");
(iv) all receivables relating to the Business existing as of
the Closing Date (the "ACCOUNTS RECEIVABLE");
(v) copies of: Seller's books, records and accounts relevant
to the operation of the Business including, without limitation,
accounting records, customer and supplier lists, contacts and files,
catalogues, brochures, pricing and other marketing information, but
excluding all such items related solely to the Excluded Liabilities or
Excluded Assets (as hereinafter defined);
(vi) all intellectual property owned by, licensed to or used
by the Seller in the Business, including, without limitation, all
inventions, discoveries, information, formulations, designs, plans,
drawings, manufacturing documentation, quality control documentation,
proprietary know-how and use and application know-how, processes,
product development records, trade secrets, procedures, specifications,
instructions, drawings, technical information, standard operating
procedures, and all similar data of all kinds used in the Business, but
excluding all such items related solely to the Excluded Liabilities or
Excluded Assets;
(vii) all of Seller's rights to the brand name and trademark
"STELLAR", and all derivatives and formatives thereof, and logos in
connection therewith, in each case whether or not registered, all
issued registrations and pending applications for registration, and
licenses (and any other rights) for the foregoing and the goodwill
associated therewith;
(viii) all of Seller's rights to letterheads, logos, telephone
numbers, post office boxes, websites, URLs, domain names and all
similar properties and data of all kinds relating to the Business;
(ix) all of Seller's right to use Seller's Uniform Product
Code in connection with those Products produced by Seller;
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(x) all of Seller's rights to the United States Food and Drug
Administration ("FDA"), United States Department of Agriculture, and
International Organization for Standardization approvals,
certifications and licenses used in the Business to the extent
assignable;
(xi) [Intentionally omitted];
(xii) any prepaid items with respect to the Business, other
than prepaid insurance premiums;
(xiii) all of Seller's rights to copyrights and copyrightable
material of all kinds, relating to the Business (the "COPYRIGHTS"), all
of which Copyrights are set forth on Schedule 1.1a(xiii) hereto;
(xiv) all of Seller's rights and interests in all real
property leased by Seller in connection with the Business identified on
Schedule 1.1(a)(xiv) (the "LEASED PREMISES"), together with the
furniture, fixtures, leasehold improvements, furnishings, machinery and
other property maintained, owned or held by Seller and which are used
in connection with the operation of the Business or the Acquired
Assets;
(xv) all of Seller's rights and interests in all computer and
other equipment, computer hardware and software, telecommunications
equipment and other tangible assets maintained, owned, licensed, leased
or held by Seller and which are used in connection with the operation
of the Business or the Acquired Assets; and
(xvi) the goodwill of the Business.
(b) Notwithstanding Section 1.1(a), the Acquired Assets shall
specifically exclude the following assets and property (the "EXCLUDED ASSETS"):
(i) cash on hand, cash equivalents, investments (including
stock, debt, instruments, options and other instruments and securities) and bank
deposits (the "CASH ASSETS");
(ii) any and all income, sales, use, corporation excise,
franchise, real property, personal property and similar tax refunds
which the Seller may be entitled to receive from any U.S. or foreign
federal, state or local governmental authorities;
(iii) any insurance policy or contract or any proceeds or
other rights thereunder;
(iv) the Seller's (A) corporate records, journals, ledgers and
books of original entry, the Seller's tax records and such documents
and (B) any other records which may be maintained by the Seller solely
with respect to the Excluded Liabilities or Excluded Assets;
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(v) all rights of the Seller under this Agreement and the
agreements and instruments delivered to the Seller by the Buyer
pursuant to this Agreement or in connection therewith;
(vi) all receivables relating to the Excluded Businesses (as
hereinafter defined);
(vii) all assets which are expressly stated in one or more of
clauses (i) through (xvi) of Section 1.1(a) as being excluded from the
Acquired Assets; and
(viii) the assets of the Parent to the extent specifically set
forth on Schedule 1.1(b)(viii) and Schedule 4.16 hereto; and
(ix) all rights relating to Parent's thrombus precursor
protein product line, Functional Intact Fibrinogen Assay product line
and antigen free mouse colony (the "EXCLUDED BUSINESSES").
SECTION 1.2 Assumed Liabilities.
(a) Subject to the provisions of Section 1.2(b), Buyer shall assume,
pay, fulfill, perform or otherwise discharge when due in accordance with their
respective terms, solely the following liabilities and obligations of Seller,
whether actual or contingent, liquidated or unliquidated, known or unknown,
relating to the Business as of the Closing Date or arising subsequent thereto
(the "ASSUMED LIABILITIES"):
(i) those (A) accounts payable of the Business existing as of
the Closing Date and (B) open purchase orders for goods not yet
invoiced and shipped and not included among the Inventory, in each case
with respect to clauses 1.2(a)(i)(A) and (B) as specifically set forth
on Schedule 1.2(a)(i) hereto and (C) accounts payable of the Business
as of the Closing not set forth on Schedule 1.2(a)(i) but paid by Buyer
in its discretion following the Closing (collectively, the "ACCOUNTS
PAYABLE");
(ii) subject to Section 1.9 hereof, all unperformed or
unfulfilled liabilities and obligations arising after the Closing under
the Assumed Contracts;
(iii) accrued vacation of Transferred Employees (as defined
hereinafter) in the amounts set forth on Schedule 1.2(a)(iii) hereto
(the "ASSUMED VACATION LIABILITY"); and
(iv) the intercompany debt or other liability of the Business
to Parent arising from the receipt by the Business of receivables after
the date hereof relating to the Excluded Businesses but in no event in
an amount to exceed $15,980.57.
(b) Other than as set forth in Section 1.2(a), Buyer shall not be
required to assume, pay, fulfill, perform or otherwise discharge any liabilities
or obligations relating to the Business
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arising prior to, and including, the Closing Date. Without limiting the
generality of the foregoing, Buyer shall not assume the following liabilities
and obligations of Seller (the "EXCLUDED LIABILITIES"):
(i) any liability or obligation under the contracts,
agreements, arrangements and understandings of Seller set forth on
Schedule 1.2(b)(i);
(ii) any accounts payable of the Business existing as of the
Closing Date (except for those identified in Schedule 1.2(a)(i));
(iii) any obligations between Seller and Bank of America with
respect to that certain loan, dated June 29, 1989, in the original
principal amount of $300,000, and any additions or amendments thereto
(the "BANK OF AMERICA OBLIGATION");
(iv) any intercompany debt or other liability between the
Business and Seller or any shareholder or affiliate of Seller other
than as set forth on Schedule 1.2(b)(iv) hereto;
(v) any liability or obligation of Seller relating to the
Excluded Businesses;
(vi) any liability or obligation of Seller to employees of
Seller, including, but not limited to, accrued vacations (other than
the Assumed Vacation Liability) severance, and stock option plans; and
(vii) any other liability or obligation of Seller not
constituting an Assumed Liability.
(c) After the Closing, Buyer shall be solely responsible for any
liability or obligation to employees of Seller arising from Buyer's hiring or
termination of any such employees and any other liability or obligation arising
from Buyer's operation of the Business.
SECTION 1.3 Purchase Price; Payment. Subject to possible adjustment
after the Closing as provided in Section 1.4, the purchase price (the "PURCHASE
PRICE") for the Acquired Assets shall be the sum of (i) One Million Two Hundred
Thousand Dollars ($1,200,000) (the "BASE PURCHASE PRICE") and (ii) the Deferred
Payments (as hereinafter defined) or Sale Deferred Payment (as hereinafter
defined), as the case may be. The Buyer and Buyer's Parent hereby jointly and
severally agree to pay the Base Purchase Price to Parent, on behalf of Seller,
in immediately available funds, at the Closing by wire transfer of U.S. currency
to Bank of New York, ABA No. 000000000, Account No. ***.
SECTION 1.4 Adjustment Amount.
(a) Three days prior to the Closing Date, Seller shall take a complete physical
count of the Inventory to be transferred on the Closing Date by Seller (which
count shall not include items of Inventory that are obsolete, lots of kits which
have expired, or not usable and saleable in
_______________________
*** Certain information (indicated by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted material
has been filed separately with the Securities and Exchange Commission.
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the ordinary course of business) (the "INCLUDED INVENTORY"), and Buyer (or its
representatives) shall be permitted to observe and participate in such physical
count being taken, it being understood that each party shall bear its own
expense in connection therewith.
(b) Two days prior to the Closing Date, Seller shall deliver to Buyer a
statement (the "INCLUDED INVENTORY STATEMENT") indicating the value of the
Included Inventory to be transferred to Seller as of the Closing Date. Buyer and
its representatives shall have the right to review all work papers and
procedures used to count and value the Included Inventory and shall have the
right to perform any other reasonable procedures necessary to verify the
accuracy thereof. Buyer and Seller shall use their good faith efforts to agree
upon the value of the Included Inventory.
(c) Unless Buyer, at least one day prior to the Closing Date, notifies
Seller in writing that it objects to the Included Inventory Statement, and
specifies the basis for such objection, the Included Inventory Statement shall
become final, binding and conclusive upon the parties for purposes of this
Agreement (the "CLOSING DATE INCLUDED INVENTORY STATEMENT"). If the value of the
Included Inventory on the Closing Date Included Inventory Statement is less than
$240,000, then the Base Purchase Price shall be decreased dollar for dollar by
the difference between $240,000 and the value of the Included Inventory.
SECTION 1.5 Deferred Payments.
(a) (i) Commencing with the quarter ending September 30, 2001 and
continuing through the quarter ending June 30, 2004 (the "EARN-OUT PERIOD"),
Buyer and Buyer's Parent jointly and severally agree to make quarterly payments
(each, a "DEFERRED PAYMENT") within 30 days after each quarter-end to Seller in
an amount equal to *** ; provided that all such Deferred Payments shall cease if
and when the aggregate amount of all Deferred Payments equals $540,000 and
provided further, that the Deferred Payment payable for the quarter ended
September 30, 2001 shall be based on *** generated during the period from the
Closing Date to September 30, 2001. ***.
(ii) ***
(iii) ***
(b) ***
------------------
***Certain information (indicated by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted material
has been filed separately with the Securities and Exchange Commission.
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(c) ***
(d) ***
SECTION 1.6 Allocation of the Purchase Price. The Purchase Price shall
be allocated among the Acquired Assets in the manner set forth in Schedule 1.6
for all purposes, and each of the parties shall make all appropriate tax and
other filings on a basis consistent with such allocation. The parties shall
exchange drafts of any information returns required by Section 1060 of the
Internal Revenue Code of 1986, as amended, and all similar state statutes, 10
days prior to filing any such return.
SECTION 1.7 [Intentionally Omitted].
SECTION 1.8 Closing.
(a) Subject to the terms and conditions of this Agreement, the sale and
purchase of the Acquired Assets contemplated hereby (the "CLOSING"), shall take
place at 3:00 p.m., local time, on June 29, 2001 (the "CLOSING DATE") at the
Baltimore offices of Xxxxx Xxxxxxx Xxxxxxx & Xxxxx LLP, or at such other time,
date or place as Seller and Buyer may mutually agree upon in writing; provided,
however, that prior to the Closing all of the conditions in Articles V and VI of
this Agreement shall have been satisfied or waived in writing, as the case may
be. To the extent agreed to by the parties, the Closing may take place through
the exchange of telecopied signature pages.
(b) At the Closing, Seller and Parent shall deliver, or shall cause to
be delivered, to Buyer:
(i) a duly executed xxxx of sale covering the Acquired Assets
in substantially the form attached hereto as Exhibit B;
(ii) a duly executed assignment and assumption agreement
relating to the Assumed Liabilities as set forth in Schedule 1.2(a)(i)
in substantially the form attached hereto as Exhibit C;
(iii) a duly executed assignment of trademark and recordation
of transfer rights with respect to Seller's rights to the trademark
"STELLAR" and all derivatives and formatives thereof and related
goodwill in substantially the form attached hereto as Exhibit D;
(iv) a duly executed copyright assignment with respect to
Seller's rights to Copyrights in substantially the form attached hereto
as Exhibit E;
_______________________
*** Certain information (indicated by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted material
has been filed separately with the Securities and Exchange Commission.
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(v) a duly executed assignment of domain names and trademarks
substantially in the form attached hereto as Exhibit F;
(vi) duly executed letters of transfer to the FDA
substantially in the form attached hereto as Exhibit G;
(vii) a duly executed manufacture and supply agreement
substantially in the form attached hereto as Exhibit H (the
"MANUFACTURE AND SUPPLY AGREEMENT");
(viii) evidence satisfactory to Buyer that Xxxxx Commercial
Properties, Inc. ("XXXXX") has consented to the assignment by Seller to
Buyer of that certain Lease, dated as of July 17, 1997, between
Xxxxx-Teachers Properties, Inc. and Seller, as amended by the First
Amendment to Lease, dated April 4, 2001, between Xxxxx (as successor in
interest to Xxxxx-Teacher Properties, Inc.) and Seller (the "MATERIAL
CONSENT");
(ix) all releases, satisfactions or terminations of all
mortgages, financing statements or other evidences of liens with
respect to the Acquired Assets (except as to those obligations
specifically assumed by Buyer);
(x) evidence reasonably satisfactory to Buyer that the Bank of
America Obligation has been satisfied or does not otherwise create any
lien or encumbrance on the Acquired Assets;
(xi) evidence reasonably satisfactory to Buyer that Xxxx X.
Xxxxxx has been released from all guarantee or other obligations with
respect to the Bank of America Obligation and that all collateral with
respect to such guarantee or other obligation shall have been released;
(xii) the certificate referred to in Section 5.1(c);
(xiii) all written copies in the possession of Seller or its
affiliates of the materials, methods and processes utilized in creating
the Products and all written information relating to the Trade Secrets
(as hereinafter defined);
(xiv) the opinion of counsel to Seller and Parent, dated as of
the Closing Date, addressed to Buyer and Buyer's Parent and in a form
reasonably satisfactory to counsel to Buyer and Buyer's Parent;
(xv) a good standing certificate of Seller certifying that the
Seller is in good standing in each jurisdiction in which the failure to
be so would have a material adverse effect on the Company's Business or
the Acquired Assets;
(xvi) a good standing certificate of Parent certifying that
the Parent is in good standing in its jurisdiction of formation;
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(xvii) copies of resolutions of the Board of Directors of
Seller, certified by the Secretary of Seller, authorizing the
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby;
(xviii) copies of resolutions of the Board of Directors of
Parent, certified by the Secretary of Parent, authorizing the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby; and
(xix) such other documents and instruments as shall be
required to consummate the transaction contemplated hereunder.
(c) At the Closing, Buyer and Buyer's Parent shall deliver to Seller:
(i) the Base Purchase Price referred to in Section 1.3 in the
manner set forth therein;
(ii) duly executed counterparts of those documents referred to
in Sections 1.8(b) (ii), (iii), (iv), (v), (vi), and (vii);
(iii) the certificate referred to in Section 6.1(c);
(iv) the opinion of counsel to Buyer, dated as of the Closing
Date, addressed to Seller and Seller's Parent and in a form
satisfactory to counsel to Seller and Seller's Parent;
(v) a good standing certificate of Buyer certifying that the
Buyer is in good standing in the jurisdiction of its formation;
(vi) evidence reasonably acceptable to Seller of Buyer's
Parent's corporate existence in the jurisdiction of Buyer's Parent's
formation;
(vii) copies of resolutions of the Board of Directors of
Buyer, certified by the Secretary of Buyer, authorizing the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby; and
(viii) copies of resolutions of the Board of Directors or
similar corporate authority of Buyer's Parent, certified by the
Secretary of Buyer's Parent, authorizing the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby
(d) In connection with the Closing, Seller shall promptly change its
corporate name to a name not including the word "Stellar" and shall promptly
deliver to Buyer a certified copy of
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the Certificate of Amendment of the Certificate of Incorporation filed with the
Secretary of State for the State of Delaware to effect such name change.
SECTION 1.9 Nonassignable Contracts and Authorizations.
(a) To the extent that any Assumed Contract is not capable of being
assigned or transferred without the consent or waiver of the other party thereto
or any third party (including a government or governmental unit), or if such
assignment or transfer or attempted assignment or transfer would constitute a
breach thereof or a violation of any law, decree, order, regulation or other
governmental edict, this Agreement shall not constitute an assignment or
transfer thereof, or an attempted assignment or transfer of any such Assumed
Contract.
(b) Subject to Section 1.8(b)(viii) and Section 5.5 which require
Seller to obtain the Material Consent as a condition to Buyer's obligations
under this Agreement, Seller agrees that prior to, and for a reasonable period
of time after the Closing Date not to exceed 90 days, Seller shall cooperate
with Buyer to assist Buyer in obtaining such other licenses, permits, consents,
waivers, approvals, and authorizations of third parties and governmental bodies
and agencies as are set forth on Schedule 1.9(b) hereto (the "NON-MATERIAL
CONSENTS") in connection with: (a) the execution and delivery of this Agreement;
(b) the consummation of the transactions contemplated hereby; (c) the ownership
by Buyer of the Acquired Assets; or (d) the conduct by Buyer of the Business as
currently conducted by Seller.
(c) To the extent that any Non-Material Consents or waivers are not
obtained by Seller, Seller and Buyer shall cooperate with each other to
establish, to the extent practicable, arrangements that are reasonable and
lawful as to both Seller and Buyer, and which result in the benefits and
obligations under such licenses, permits, consents, waivers, approvals, and
authorizations of third parties and governmental bodies and agencies being
apportioned in a manner that is in accordance with the purpose and intention of
this Agreement.
SECTION 1.10 Accounts Receivable. Seller agrees that it will promptly
transfer and deliver to Buyer any cash or other property which it may receive
after the Closing Date from customers of the Business who have an outstanding
account receivable in respect of the Accounts Receivable transferred to Buyer as
of the Closing Date. Buyer agrees that it will promptly transfer and deliver to
Parent any cash or other property that it may receive after the Closing Date
from customers of the Excluded Businesses.
SECTION 1.11 Designated Affiliate. It is understood and agreed between
the parties that Buyer may cause one or more of its existing or to be formed
affiliates designated by it ("DESIGNATED AFFILIATE" or "DESIGNATED AFFILIATES")
to carry out all or part of the transactions contemplated by this Agreement;
provided, however, that Buyer's Parent shall nevertheless remain liable for all
of its obligations and those of any Designated Affiliate hereunder.
ARTICLE II
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REPRESENTATIONS AND WARRANTIES OF SELLER
Seller and Parent jointly and severally represent and warrant to Buyer
and Buyer's Parent as follows:
SECTION 2.1 Organization of Seller and Parent.
(a) Seller and Parent are each corporations duly organized, validly
existing and in good standing under the laws of their respective jurisdictions
of incorporation. Seller has the corporate power and authority to own, operate
and lease the Acquired Assets and to carry on the Business as presently
conducted. Parent has the corporate power and authority to own, operate and
lease its assets and properties and to carry on its business as presently
conducted.
(b) Seller is duly qualified to do business and is in good standing in
each jurisdiction listed in Schedule 2.1(b), constituting those jurisdictions in
which the ownership or operation of the Acquired Assets or the conduct of the
Business requires such licensing or qualification, except where the failure to
be so licensed or qualified or in good standing would not have a material
adverse effect on the Business or the Acquired Assets taken as a whole.
SECTION 2.2 Authority. Seller and Parent each have all requisite power
and authority to execute, deliver and perform this Agreement and to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement by each of Seller and Parent, the performance by each of Seller and
Parent of its obligations hereunder and the consummation by each of Seller and
Parent of the transactions contemplated hereby have been duly authorized by the
Board of Directors of each of Seller and Parent, and no other corporate act or
proceeding on the part of either Seller or Parent is necessary to approve the
execution and delivery of this Agreement, the performance of either of Seller's
or Parent's obligations hereunder or the consummation of the transactions
contemplated hereby.
SECTION 2.3 Execution and Binding Effect. This Agreement has been duly
and validly executed and delivered by each of Seller and Parent and constitutes,
and the other documents and instruments to be executed and delivered by each of
Seller and Parent pursuant hereto upon their execution and delivery by each of
Seller and Parent on or prior to the Closing Date will constitute (assuming, in
each case, the due and valid authorization, execution and delivery thereof by
the other party thereto), legal, valid and binding obligations of each of Seller
and Parent, enforceable against each of Seller and Parent in accordance with
their respective terms except as such enforceability may be limited by
bankruptcy, insolvency or similar laws and by general equitable principles.
SECTION 2.4 No Violation; Consents and Approvals. Except as provided in
Schedule 2.4, neither the execution, delivery and performance of this Agreement
by Seller and Parent nor the consummation by Seller and Parent of the
transactions contemplated hereby will (i) conflict with or violate any
provisions of either Seller's or Parent's Certificate of Incorporation, as
amended, or By-Laws; (ii) conflict with, violate or result in any breach of, or
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constitute a default whether with notice or lapse of time or both, or give rise
to any right of termination, cancellation or acceleration under any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, license,
franchise, permit, agreement, lease or other instrument or obligation to which
either Seller or Parent is a party, or by which Seller or Parent, the Business
or any of the Acquired Assets may be bound; (iii) violate any statute, ordinance
or law or any rule, regulation, order, writ, injunction or decree of any court
or of any public, governmental or regulatory body, agency or authority
applicable to either Seller or Parent in respect of the Business or any of the
Acquired Assets; (iv) require any filing, declaration or registration with, or
permit, consent or approval of, or the giving of any notice to, any public,
governmental or regulatory body, agency or authority or (v) result in the
creation of any lien upon the Acquired Assets, excluding from the foregoing
clauses (A) any consents or waivers required in connection with the Assumed
Contracts, and (B) any local filings or recordings that may be necessary to
transfer any of the Acquired Assets.
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SECTION 2.5 Financial Statements.
(a) Parent has delivered to Buyer the unaudited balance sheet,
statements of income and results of operations of Seller for the fiscal years
ended December 31, 1999 and December 31, 2000 (the "ANNUAL FINANCIALS"), and the
unaudited balance sheet, statements of income and results of operations for
Seller for the three-month period ended March 31, 2001 (the "INTERIM
FINANCIALS") (the Annual Financials and the Interim Financials are collectively
referred to herein as the "FINANCIALS"). Except as set forth in Schedule 2.5(a),
the Financials: (i) were prepared in all material respects in accordance with
the books, records and accounts of Seller and on the same basis, and consistent
with the principles utilized, by Parent in the preparation of such accounts for
inclusion in Parent's consolidated financial statements for such periods; (ii)
are true, complete and correct in all material respects; and (iii) present
fairly the results of operations for the Business for the periods referred to in
such Financials, except that none of the Financials include notes and the
Interim Financials do not include normal year-end adjustments. The Financials
were prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods covered thereby except as set forth
in Schedule 2.5(a). Seller's books, records and accounts are accurate and
complete in all material respects.
(b) Attached hereto as Schedule 2.5(b) is the unaudited pro forma
balance sheet, pro forma statements of income and pro forma results of
operations of the Seller solely with respect to the Business for the three-month
period ended March 31, 2001 (the "Pro Forma Financials"). The Pro Forma
Financials present fairly the results of operations for the Business for the
period referred to in such Pro Forma Financials.
SECTION 2.6 Absence of Certain Changes or Events. Except as set forth
in Schedule 2.6, since March 31, 2001:
(a) the Acquired Assets have not been mortgaged, pledged or subjected
to any lien or encumbrance, other than Permitted Liens (as hereinafter defined);
(b) the value of any Inventory has not been materially written down or
materially written up other than in the ordinary course of business;
(c) the Acquired Assets have not been sold or transferred other than
sales of Inventory and disposal of obsolete, damaged or defective inventory or
other Acquired Assets in the ordinary course of business;
(d) there has been no increase in the compensation of any employee of
Seller, which increase singly or in the aggregate is material, other than in the
ordinary course of business and consistent with past practice;
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(e) there has not been any change in the customary methods used in
operating the Business (including, but not being limited to, its marketing,
selling, pricing, customer service, debt collection and payment of accounts
payable practices and policies);
(f) there has not been any transaction, contract, commitment,
obligation by the Seller relating to the Acquired Assets or the Business
(including the acquisition or disposition of any assets), other than in the
ordinary course of business or as contemplated by this Agreement;
(g) the Business and the Acquired Assets have been operated in the
ordinary course;
(h) there has not been any amendment of any of the Assumed Contracts or
entering into of any new contracts or agreements, excluding purchase orders for
inventory entered into in the ordinary course of business;
(i) Seller has not declared or paid any dividend or made any
distribution, whether in cash, shares, or other property, to any of its
stockholders; and
(j) no agreements have been entered into whether in writing or
otherwise, to take any of the actions set forth in this Section 2.6.
SECTION 2.7 Certain Contracts and Commitments.
(a) Set forth in Schedule 2.7 is a list of: (i) all commitments and
agreements for the purchase of any materials or supplies that involve an
expenditure by Seller in connection with the Acquired Assets or the Business of
more than $5,000 for any one contract or $10,000 in the aggregate; (ii) all
personal property leases under which Seller in connection with the Acquired
Assets or the Business is either lessor or lessee that involve annual payments
or receipts of more than $5,000 for any one lease or $10,000 in the aggregate;
(iii) all other orders, leases, commitments, agreements, mortgages, indentures
and other agreements and instruments relating to indebtedness for borrowed money
to which Seller in connection with the Acquired Assets or the Business is a
party or by which it or its properties are bound, that may or will require
annual payments by Seller of more than $5,000; (iv) all contracts or agreements
binding on Seller in connection with the Business which contain provisions
requiring a party thereto or their affiliates not to engage in a business or
activity, including, without limitation, non-compete, non-solicitation,
confidentiality or other such provisions; (v) all government contracts and all
other agreements with customers that involve an annual payment to Seller in
connection with the Acquired Assets or the Business of more than $5,000 for any
one contract or $10,000 in the aggregate; (vi) all agreements relating to the
Intellectual Property (as hereinafter defined); and (vii) all other material
written agreements or contracts to which Seller in connection with the Business
is party or which are binding on the Business; in all cases with respect to the
contracts set forth in clauses (i) through (vii), whether or not such contracts
are in writing (the "MATERIAL CONTRACTS").
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(b) Except as set forth in Schedule 2.7, the enforceability of the
Material Contracts will not be affected in any manner by the execution and
delivery of this Agreement, the performance by Seller of its obligations
hereunder or the consummation of the transactions contemplated hereby.
(c) Except as set forth in Schedule 2.7, Seller is not in default, nor
does there exist any event that, with notice or lapse of time or both, would
constitute an event of default by Seller under any Material Contract. Except as
set forth in Schedule 2.7, each Material Contract is valid and in full force and
effect, there is no material breach or default by any other party to any
Material Contract and no other party has notified Seller of its intention to
cease to perform any services required to be performed by it or withhold any
payment required to be made to it thereunder.
(d) Seller has delivered to Buyer complete and accurate copies of all
of the Material Contracts and all amendments thereto (or Schedule 2.7 includes
an accurate and complete summary description of any such item that is not in
writing).
SECTION 2.8 Employee Plans; ERISA. Schedule 2.8 lists the names of all
officers, directors, employees and agents of Seller engaged in the conduct of
the Business, together with their respective rates of total compensation.
Schedule 2.8 also lists all employment contracts (but does not include
independent contractor agreements) and all pension, bonus, profit sharing, stock
option or other agreements or arrangements, including vacation policies, sick
pay policies and health insurance plans, providing for employee benefits to
which Seller is a party or by which Seller is bound, in each case in connection
with the Business (all such plans, programs, arrangements and agreements, the
"EMPLOYEE PLANS"). Buyer will not assume any obligation or liability under any
of the Employee Plans. Seller has paid in full to its employees, agents and
contractors all wages, salaries, commissions, bonuses and other direct
compensation for all services performed by them. Seller is not liable for any
severance pay or other payments on account of termination of former employees.
SECTION 2.9 Litigation; Judicial Proceedings. Other than as set forth
in Schedule 2.9, there are no judicial or administrative actions, proceedings or
investigations pending or, to the best of Seller's knowledge, threatened, that
question the validity of this Agreement or any action taken or to be taken by
Seller in connection with this Agreement. There is no litigation, proceeding or
governmental investigation pending or, to the best of Seller's knowledge,
threatened, or any order, injunction or decree outstanding, against Seller or
the Business.
SECTION 2.10 Acquired Assets.
(a) Seller owns good and marketable title to all of the tangible
personal property, other than the Leased Premises, that are included in the
Acquired Assets. All of the Acquired Assets, other than the Leased Premises, are
free and clear of all restrictions on or conditions to transfer or assignment
and Seller has the power and right to transfer, sell, assign, convey and deliver
the Acquired Assets to Buyer in accordance with the terms hereof, and upon
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consummation of the transactions contemplated by this Agreement, other than as
set forth on Schedule 2.10(a) hereof, Buyer will acquire title to and the right
to use the Acquired Assets, other than the Leased Premises, free and clear of
any mortgages, pledges, liens, security interests or other encumbrances, charges
rights or restrictions of any kind (collectively, "LIENS"), other than those
liens which are described in Schedule 2.10(a) (the Liens referred to in Schedule
2.10(a) are referred to herein as "PERMITTED LIENS").
(b) The Acquired Assets constitute all of the assets, properties,
licenses and other agreements which are presently being used in the Business as
presently conducted; after the transfer of the Acquired Assets to Buyer, Buyer
will have all assets, properties, non-patent licenses and other agreements
necessary to conduct the Business in the same manner as such business and
operations have been conducted prior to the date of this Agreement and the
Closing Date. At the Closing, Buyer will own or have the right to use under a
valid lease or under a valid license all of the Acquired Assets. Parent owns no
assets currently used in connection with Seller's Business, other than as set
forth on Schedule 2.10(b) hereof.
(c) The Acquired Assets are in good working order and condition,
ordinary wear and tear excepted.
SECTION 2.11 Customers and Suppliers. Schedule 2.11 contains a complete
and accurate list, with respect to the Business, of Seller's twenty largest
customers and suppliers (measured by dollar volume of purchases and sales, as
applicable) and the dollar amount of the Business which each customer and
supplier represented during the fiscal year ended December 31, 2000 and the
three months ended March 31, 2001. Except as set forth in Schedule 2.11, Seller
has received no notice that, and has no knowledge that any supplier or any
customer of Seller listed on Schedule 2.11 does not plan to continue to do
business with Buyer, or plans to reduce its supplies to or volume of orders from
Buyer or will not do business on substantially the same terms and conditions
with Buyer subsequent to the Closing Date as such supplier or customer did with
Seller before such date.
SECTION 2.12 Intellectual Property; Trade Secrets.
(a) Schedule 2.12 contains an accurate and complete (i) list of all
patents, trademarks, copyrights (registered or unregistered), trade names,
assumed names and brand names and all applications therefor, owned, used or
filed by Seller and used in the Business, (ii) list of all rights, licenses,
permissions and other agreements relating to technology, know-how, software or
processes used in the Business as currently conducted, whether proprietary to
Seller or licensed or authorized to use by others, and, to the extent
applicable, all applications therefor, owned, used or filed by Seller and (iii)
a general description of all trade secrets and know-how which are used in the
Business as currently conducted (the items set forth in clauses (i), (ii) and
(iii) above are collectively referred to herein as the "INTELLECTUAL PROPERTY").
(b) (i) In regard to the Intellectual Property, and except as set forth
in Schedule 2.12, (A) the patents, trademarks and the copyrights are
valid, subsisting and enforceable,
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and the patents, registered trademarks and registered copyrights are
duly recorded in the name of Seller and can be recorded in the name of
Buyer, and (B) Seller has, and after the Closing Buyer will have,
except as set forth in this Agreement, the sole and exclusive ownership
and right, free from any liens, mortgages, security interests, charges
or encumbrances, to use the Intellectual Property, and the consummation
of the transactions contemplated hereby will not alter or impair any
such rights.
(ii) Except as set forth in Schedule 2.12 or as disclosed with
respect to the Human Herpes Virus 8, within the last ten years, no
claims have been asserted by any entity or person with respect to, or
challenging or questioning, the ownership, validity, enforceability or
use of the Intellectual Property, nor, to the best knowledge of Seller,
is there a valid basis for any such claim. The use or other
exploitation of the Intellectual Property by Seller does not infringe
the rights of any other entity or person, except to the extent that
such infringement has not had and would not have a material adverse
effect on Seller, the Business or the Acquired Assets. To the best of
Seller's knowledge, no entity or person is infringing the rights of the
Seller with respect to the Intellectual Property.
(iii) Without limiting the generality of the provisions of
this Section 2.12, upon the Closing, Buyer will have the exclusive
right to use the trademark "STELLAR" in connection with the Business in
all territories in which Seller currently conducts the Business.
(c) (i) The trade secrets and know-how of Seller used in or necessary
for the Business (the "TRADE SECRETS") are the unencumbered property of
Seller, were developed by Seller and its employees with the appropriate
secrecy safeguards, are not generally known by others, and have been
maintained by Seller subject to secrecy safeguards. The individuals
identified in Schedule 2.12 are in possession of or otherwise have
authority to use the Trade Secrets and, except as otherwise identified
in Schedule 2.12, are subject to confidentiality and nondisclosure
agreements with Seller with respect thereto.
(ii) The Trade Secrets do not infringe on the rights of any
third party, except to the extent that such infringement has not had
and would not have a material adverse effect on Seller, the Business or
the Acquired Assets.
(iii) To the best of Seller's knowledge, no third party is or
has engaged in any activity which would constitute a misappropriation
or dissemination of any of the Trade Secrets, except for third parties
duly authorized by Seller and identified in Schedule 2.12. Except as
set forth in Schedule 2.12, no claim has been asserted by any entity or
person with respect to, or challenging or questioning, the ownership,
validity of or right to use the Trade Secrets, nor, to the best
knowledge of Seller, is there a valid basis for any such claim.
(iv) Seller, its agents, and employees shall not use,
disseminate or disclose, directly or indirectly, the Trade Secrets to
any party at any time before or after the
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consummation of the transactions contemplated by this Agreement, except
as permitted by this Agreement.
SECTION 2.13 Food and Drug. Seller and all of its Products are in
compliance with the Federal Food, Drug and Cosmetic Act (the "FDC ACT") and the
Federal Public Health Service Act ("PHS ACT") and all regulations promulgated
thereunder by the FDA and equivalent foreign agencies. Without limitation on the
foregoing representation and warranty:
(a) Seller is in material compliance with all applicable FDA current
good manufacturing practice requirements.
(b) Seller is registered with the FDA, to the extent such registration
is required by any FDA regulations, and Seller's Products set forth on Schedule
2.13 either have been approved by the FDA or are the subject of a premarket
notification to FDA and order from FDA declaring the Product to be substantially
equivalent to a legally marketed predicate device, to the extent such approval
or premarket notification is required by FDA regulations.
(c) Seller has investigational exemptions for all products requiring
such exemptions, and such products have not been and are not being sold or
distributed outside the terms of such investigational exemptions.
(d) To Seller's knowledge, Seller's products (i) have not caused or
contributed to a death or serious injury, or (ii) been adulterated or misbranded
such that the product would be likely to cause or contribute to a death or
serious injury.
(e) (i) Seller has no reason to believe that the FDA or any similar
regulatory body in any country outside the United States will ultimately
prohibit the marketing, sale, license or use in, respectively, the United States
or such other country, of any product proposed to be developed, produced or
marketed by Seller ("PLANNED PRODUCT"), and (ii) Seller knows of no product or
process which the FDA or any similar regulatory body in any country outside the
United States has prohibited from being marketed or used, respectively, in the
United States or such other country, which in function and composition is
substantially similar to any Planned Product.
(f) There have been no "recalls," "product corrections," "removals,"
"corrections," "market withdrawals" or "stock recoveries" as such terms are
defined in the regulations promulgated under the FDC Act with respect to the
Products during the five-year period preceding the date hereof.
SECTION 2.14 Compliance with Laws. Except as set forth in Schedule
2.14, Seller is conducting the Business in compliance in all material respects
with all statutes, laws, rules, regulations, ordinances, decrees and orders
applicable to the Products, the ownership of the Acquired Assets and the
operation of the Business (including those relating to environmental, health and
safety matters) and has not received any notice that it is in noncompliance with
any
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such statutes, laws, rules, regulations, ordinances, decrees or orders. Except
as set forth in Schedule 2.14, Seller currently holds all permits, licenses and
approvals of governmental authorities and agencies materially necessary for the
ownership of the Acquired Assets and the operation of the Business (including
those relating to environmental, health and safety matters). Except as set forth
in Schedule 2.14, Seller is in compliance in all material respects with all such
permits, licenses and approvals. The Seller is the registered owner of the
Uniform Product Code used on the Products.
SECTION 2.15 Brokers and Finders. Neither Seller nor any of its
officers, directors or employees has employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated by this Agreement.
SECTION 2.16 Accounts Receivable. Schedule 2.16 contains a complete and
accurate aged list of the Accounts Receivable of Seller as of June 29, 2001
arising from the Business (less a reserve for doubtful accounts in the amount of
$1,200 (the "Reserve") which Reserve is reasonable and has been established in
accordance with Seller's past practices). Except as set forth on Schedule 2.16,
such Accounts Receivable arose in the ordinary course of the Business for goods
delivered or services rendered to non-affiliated third parties and constitute
only valid claims and Seller has not received any written notice of any account
debtor's assertion of any defense to payment or right of setoff with respect to
such Accounts Receivable.
SECTION 2.17 Accounts Payable. The Accounts Payable arose in the
ordinary course of the operation of the Business for goods delivered or services
rendered by non-affiliated third parties to Seller solely in connection with the
operation of the Business.
SECTION 2.18 Labor Matters. Seller has complied in all material
respects with all applicable federal and state laws relating to the employment
of labor including the provisions thereof relating to wages, hours, collective
bargaining and the payment of social security and taxes and is not liable for
any arrears of wages or any tax or any penalty for failure to comply with any of
the foregoing. There is no labor strike, dispute, slowdown, or stoppage actually
pending or threatened against or affecting Seller or the Business. No
representation question exists respecting the employees of the Seller engaged in
the Business and there is no strike, work stoppage or other labor difficulty
(other than on an industry-wide basis) involving the employees of Seller engaged
in the Business, and no collective bargaining agreement with employees of Seller
engaged in the Business is in effect or is currently being negotiated.
SECTION 2.19 Insurance.
(a) Schedule 2.19 sets forth a list of all fire, liability, workmen's
compensation, directors' and officers' liability, employee liability or other
insurance held by Parent or Seller relating to, on behalf of or covering the
Business (specifying the amount of coverage for each, and describing each
pending claim thereunder).
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(b) Seller has maintained a reasonable and customary program of
insurance (which may include self-insurance) with respect to the Acquired Assets
and the Business and has insured the Acquired Assets and the Business in such
manner as may be required pursuant to any franchises, agreements, licenses or
permits applicable to the Acquired Assets or the Business.
SECTION 2.20 Taxes. There are no pending or, to the best of Seller's
knowledge, threatened actions or proceedings, assessments or collections of
income, unrelated business taxable income, capital gains, gross income, gross
receipts, transfer, value added, sales, use, service, ad valorem, franchise,
profits, license, withholding, payroll, employment, social security,
unemployment compensation, utility, excise, production, severance, stamp,
occupation, premium, real or personal property, alternative minimum,
environmental, customs duties, or other taxes, fees, levies assessments, imposts
or changes of any kind whatsoever imposed by any governmental authority
responsible for the imposition of such tax (domestic or foreign), together with
any interest and penalties, additions to tax, or additional amounts imposed by
any taxing authority, with respect to the Business or the Acquired Assets that
could subject Buyer to any liability for such taxes for the period prior to the
Closing Date or could impair any of the Acquired Assets (collectively, "TAX
ACTIONS OR PROCEEDINGS"), nor is there a basis for any Tax Actions or
Proceedings.
SECTION 2.21 Real Property.
(a) Seller and Parent do not own any real property that is used in the
Business.
(b) Schedule 2.21 sets forth a list of all of the real property leases
in effect as of the date hereof under which the Seller is a lessee, which real
property is utilized in connection with the Business. Seller has made available
to Buyer true, correct and complete copies of all such leases, including all
amendments, modifications and renewals thereof. All such leases are valid,
binding and enforceable in accordance with their terms, and are in full force
and effect as of the date hereof; there are no existing defaults by Sellers
beyond any applicable grace periods under such leases.
SECTION 2.22 Environmental Matters.
(a) No underground or aboveground storage tanks and no amount of any
substance that has been designated by any governmental entity or by applicable
federal, state, local or other applicable law to be radioactive, toxic,
hazardous or otherwise a danger to health or the environment, including, without
limitation, those infectious agents, developed and marketed in connection with
the Business, PCBs, asbestos, petroleum, urea-formaldehyde and all substances
listed as hazardous substances pursuant to the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended, or defined as a
hazardous waste pursuant to the United States Resource Conservation and Recovery
Act of 1976, as amended, and the regulations promulgated pursuant to said laws,
but excluding office and janitorial supplies and products used by the Business
that may be hazardous but have not been released into the environment, in each
case properly and safely maintained in accordance with applicable law (a
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"HAZARDOUS MATERIAL"), are present in, on or under any property, including the
land and the improvements, ground water and surface water thereof, that Seller
or any of its predecessors in interest has at any time owned, operated, occupied
or leased. There are no underground and aboveground storage tanks used in
connection with the Business.
(b) Seller has not transported, stored, used, manufactured, disposed of
or released, or exposed its employees or others to, Hazardous Materials in
violation of any law in effect on or before the Closing Date, nor has Seller
disposed of, transported, sold or manufactured any product containing a
Hazardous Material (collectively, "SELLER HAZARDOUS MATERIALS ACTIVITIES") in
violation of any rule, regulation, treaty or statute promulgated by any
governmental entity in effect prior to or as of the date hereof to prohibit,
regulate or control Hazardous Materials or any Seller Hazardous Material
Activity.
(c) Seller currently holds no environmental approvals, permits,
licenses, clearances and consents (the "ENVIRONMENTAL PERMITS") and no such
Environmental Permits are necessary for the conduct of Seller's business as it
is currently being conducted or as it is proposed to be conducted where failure
to hold such Environmental Permits would have a material adverse effect on the
Business. Seller is in compliance in all material respects with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in the laws of all governmental
entities relating to pollution or protection of health and the environment or
contained in any regulation, code, plan order, decree, judgment, notice or
demand letter issued, entered, promulgated or approved thereunder.
(d) No action, proceeding, revocation proceeding, amendment procedure,
writ, injunction or claim is pending, or to the knowledge of Seller, threatened
concerning any Environmental Permit, Hazardous Material or any Seller Hazardous
Materials Activity. There are no past or present actions, activities,
circumstances, conditions, events or incidents that could involve Seller (or any
individual or entity whose liability Seller has retained or assumed, either by
contract or operation of law) in any litigation concerning the environment,
health or safety, give rise to any claim against Seller or impose upon Seller
(or any individual or entity whose liability Seller has retained or assumed,
either by contract or operation of law) any liability including, without
limitation, common law tort liability.
SECTION 2.23 Permits. To Seller's knowledge, Seller owns or holds all
non-patent licenses, franchises, permits and other governmental authorizations
necessary for the continued operation of the Business (including those relating
to environmental, health and safety matters) (the "PERMITS"). A complete list of
the Permits is set forth in Schedule 2.23. The Permits are valid, and Seller has
not received any notice that any governmental authority intends to modify,
cancel, terminate or fail to renew any Permit. No present or former stockholder,
officer, manager, member or employee of Seller or any affiliate thereof, or any
other individual or entity owns or has any proprietary, financial or other
interest (direct or indirect) in any Permits. Seller has conducted and is
conducting the Business in compliance with the requirements, standards, criteria
and conditions set forth in the Permits and other applicable orders, approvals,
variances, rules and regulations and is not in violation of any of the
foregoing. The transactions
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contemplated by this Agreement will not result in a default under, or a breach
or violation of, or adversely affect the rights and benefits afforded to Seller
by any Permit.
SECTION 2.24 Disclosure. All agreements, schedules, exhibits,
documents, or certificates, furnished or to be furnished to Buyer by or on
behalf of Seller in connection with this Agreement are true, complete and
accurate in all respects, and no representation or warranty made in this
Agreement or information furnished pursuant hereto to Buyer (including
information contained in the schedules or documents referred to herein) contains
any untrue statement of a fact or fails to include a fact necessary in order to
make the statements contained herein or therein, in light of the circumstances
under which they are made, not misleading.
SECTION 2.25 Intercompany Receivables. There are no intercompany
receivables or other amounts due to Seller from Parent or an affiliate of
Seller.
SECTION 2.26 Sale Transaction. As of the date hereof, Parent is not
currently engaged in the negotiation of a Sale Transaction (as defined herein).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer and Buyer's Parent jointly and severally represent and warrant to
Seller and Parent as follows:
SECTION 3.1 Organization of Buyer. Buyer and Buyer's Parent are each
corporations duly organized, validly existing and in good standing under the
laws of their respective jurisdictions of organization.
SECTION 3.2 Authority. Buyer and Buyer's Parent each have all requisite
power and authority to execute, deliver and perform this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by each of Buyer and Buyer's Parent, the performance by each of
Buyer and Buyer's Parent of its obligations hereunder and the consummation by
each of Buyer and Buyer's Parent of the transactions contemplated hereby have
been duly authorized by the Board of Directors of each of Buyer and Buyer's
Parent, and no other corporate act or proceeding on the part of either Buyer or
Buyer's Parent is necessary to approve the execution and delivery of this
Agreement, the performance of either of Buyer's or Buyer's Parent obligations
hereunder or the consummation of the transactions contemplated hereby.
SECTION 3.3 Execution and Binding Effect. This Agreement has been duly
and validly executed and delivered by each of Buyer and Buyer's Parent and
constitutes, and the other documents and instruments to be executed and
delivered by each of Buyer and Buyer's Parent pursuant hereto upon their
execution and delivery by each of Buyer and Buyer's Parent on or prior to the
Closing Date will constitute (assuming, in each case, the due and valid
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authorization, execution and delivery thereof by the other party thereto),
legal, valid and binding obligations of each of Buyer and Buyer's Parent,
enforceable against each of Buyer and Buyer's Parent in accordance with their
respective terms except as such enforceability may be limited by bankruptcy,
insolvency or similar laws and by equitable principles.
SECTION 3.4 No Violation; Consents and Approvals. Except as provided in
Schedule 3.4, neither the execution, delivery and performance of this Agreement
by Buyer and Buyer's Parent nor the consummation by Buyer and Buyer's Parent of
the transactions contemplated hereby will (i) conflict with or violate any
provisions of Buyer's Certificate of Incorporation or By-Laws or Buyer's
Parent's Constitution; (ii) conflict with, violate or result in any breach of,
or constitute a default (or give rise to any right of termination, cancellation
or acceleration) under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, franchise, permit, agreement, lease or other
instrument or obligation to which either Buyer or Buyer's Parent is a party or
by which Buyer or Buyer's Parent or any of their properties or assets may be
bound; (iii) violate any statute, ordinance or law or any rule, regulation,
order, writ, injunction or decree of any court or of any public, governmental or
regulatory body, agency or authority applicable to either Buyer or Buyer's
Parent or by which any of their properties or assets may be bound; or (iv)
require any filing, declaration or registration with, or permit, consent or
approval of, or the giving of any notice to, any public, governmental or
regulatory body, agency or authority, excluding from the foregoing clauses (A)
any consents or waivers required in connection with the Assumed Contracts, and
(B) any local filings or recordings that may be necessary to transfer any of the
Acquired Assets.
SECTION 3.5 Litigation. There are no claims, actions, suits,
proceedings or investigations pending or, to Buyer's knowledge, threatened by or
against Buyer with respect to the transactions contemplated hereby, at law or in
equity or before or by any Federal, state, municipal, foreign or other
governmental department, commission, board, agency, instrumentality or
authority.
SECTION 3.6 Brokers and Finders. Neither Buyer nor any of its officers,
directors or employees have employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated by this Agreement.
ARTICLE IV
COVENANTS
SECTION 4.1 Conduct of Business Before Closing.
(a) Between the date hereof and the Closing Date, without the written
consent of Buyer, Seller shall not:
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(i) make any change in the customary methods used in operating
the Business (including, but not being limited to, its marketing,
selling, pricing, customer service, debt collection and payment of
accounts payable practices and policies), or otherwise conduct the
Business other than in the ordinary course of Seller's business;
(ii) make any sale, transfer, lease or other disposition of
any Acquired Assets or mortgage, pledge or otherwise create a security
interest in any of the Acquired Assets other than Permitted Liens and
other than in the ordinary course of business;
(iii) grant any increase in compensation to employees of
Seller which increases singly or in the aggregate are material;
(iv) cease the sale and distribution of any of the Products
other than in the ordinary course of business with respect to seasonal
or promotional items;
(v) fail to maintain the books, accounts and records of the
Business on a basis consistent with past practice;
(vi) create, incur or assume any indebtedness (except for
accounts payable in the ordinary course of business) for money borrowed
in connection with the Business;
(vii) modify or change in any way any existing lease, license,
contract or other document;
(viii) effect any transaction with any other entity or person,
the terms of which are not commercially reasonable or are other than on
an arm's length basis;
(ix) take any action that would cause any of the
representations and warranties made by Seller in this Agreement not to
remain true and correct;
(x) undertake any action or engage in any omission that shall
impair or jeopardize the Seller's rights to the Intellectual Property;
(xi) not declare or pay any dividend or make any distribution,
whether in cash, shares, or other property, to any of its stockholders;
(xii) pay any amounts to third parties in satisfaction of
obligations of the Seller's stockholders; or
(xiii) enter into any contract, agreement, commitment or
arrangement with respect to any of the actions prohibited by the
foregoing.
(b) From the date hereof until the Closing Date, Seller shall keep
Buyer advised of any significant decisions concerning the business or prospects
of the Business and shall use its
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best efforts to preserve the business and prospects of the Business, including
without limitation the goodwill of its employees, and assure that each supplier
and customer of Seller continues to do business on substantially the same terms
and conditions as such supplier or customer did with Seller before such date.
Seller shall consult with and shall obtain the consent of Buyer for any
significant decisions.
SECTION 4.2 Access to Properties. Between the date hereof and the
Closing Date, Seller shall permit Buyer and its counsel, accountants, auditors
and other representatives and advisors full access, upon reasonable notice, to
all of the premises, staff, offices, properties, books and records, contracts
and commitments of Seller and to third parties doing business with Seller. The
representations and warranties contained in Article II shall not be affected or
deemed waived by reason of the fact that any of Buyer, its counsel, its
accountants, its auditors or its other representatives and advisors know or
discover or should have known or discovered that any such representation or
warranty is or might be inaccurate in any respect.
SECTION 4.3 Confidentiality. In the event that this Agreement
terminates without the purchase and sale of the Acquired Assets having taken
place, the parties and their respective affiliates and agents (i) shall hold in
confidence and refrain from using all non-public information received in
connection with the transactions contemplated in this Agreement and (ii) shall
return promptly all such non-public information to the party to which such
information relates.
SECTION 4.4 Best Efforts. Each party hereto shall use its best efforts
to fulfill its conditions to closing and otherwise to consummate the
transactions contemplated by this Agreement.
SECTION 4.5 Certain Notifications. At all times prior to the Closing,
each party hereto shall as promptly as reasonably practicable notify the other
in writing of the occurrence of any event as to which it obtains knowledge that
is reasonably likely to result in the failure of a condition specified in
Article V or Article VI hereof.
SECTION 4.6 Employee Matters. Effective as of the Closing Date, Buyer
shall make offers of at will employment to those employees of Seller who are
identified on Schedule 4.6 hereto at the compensation levels set forth on such
Schedule but otherwise on such terms and conditions as are applicable to the
other employees of Buyer, and effective immediately prior to the Closing, the
employment of those employees accepting such offers of employment (collectively,
the "TRANSFERRED EMPLOYEES") will be terminated by Seller. Buyer will offer its
employee benefit plans and programs to the Transferred Employees on the same
terms offered to other employees and will grant the Transferred Employees credit
for service with the Seller for eligibility and vesting purposes under Buyer's
plans and programs. Seller will remain responsible for all benefits of
Transferred Employees (and their respective beneficiaries) accruing prior to the
Closing Date, including, without limitation, (i) any obligations under any
employee benefit plan, program or arrangement maintained by or contributed to by
Seller, (ii) any continuation coverage rights under Seller's health plan to
which the Transferred Employees may be entitled, and (iii) any severance
obligations and bonus retention or related obligations, if any,
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whether or not under the terms of specific employment agreements between Seller
and the Transferred Employees; provided, however, that Buyer will assume the
Assumed Vacation Liability. To the extent permitted by Seller's insurers, Buyer
shall have the right but not the obligation to assume Seller's worker's
compensation coverage with respect to the Transferred Employees.
SECTION 4.7 Conduct of Business After Closing. Until such time as the
earlier to occur of (i) the aggregate of the Deferred Payments equaling $540,000
or (ii) the third anniversary of the Closing, Buyer shall use good faith and
commercially reasonable efforts to promote the ***.
SECTION 4.8 Access to Records. For a period of three years after the
Closing, Buyer shall permit Seller, at Seller's expense, upon Seller's
reasonable request with at least 10 days' notice, to inspect records, books and
other documents relating to the Business or the Acquired Assets, wherever
located, for the purposes of preparing tax returns and financial statements and
responding to tax audits, in all cases solely with respect to matters arising
prior to the Closing date.
SECTION 4.9 Seller Non-Compete.
(a) The following terms when used in this Section 4.9 shall have the
following meanings:
"COMPETITION" means (i) the marketing, development,
manufacture, sale of the Products or offering or promoting the Products for
sale, and (ii) any business that is competitive with the Business as it is now
operated.
"DIRECTLY OR INDIRECTLY" means as an individual, partner,
shareholder, director, officer, principal, agent or employee.
"PERSON" means an individual, corporation, partnership, joint
venture, trust or other entity.
"RESTRICTED TERRITORY" means all territories worldwide, which
is where Seller currently does business.
(b) Seller and Parent shall not, for a period of five years after the
date hereof, directly or indirectly, engage in any Competition in the Restricted
Territory; provided, that Seller and Parent may, without violating this covenant
own as a passive investment not in excess of 2% of
------------------
***Certain information (indicated by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted material
has been filed separately with the Securities and Exchange Commission.
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the outstanding capital stock of a corporation which engages in Competition if
such capital stock is a security which is actively listed on an established
national securities exchange or the Nasdaq National Market.
(c) Seller and Parent shall not, directly or indirectly, for itself or
on behalf of any other Person, induce or attempt to induce any Transferred
Employee to leave his or her employment with Buyer at any time within three
years from the Closing Date.
(d) Seller and Parent acknowledge that in view of the nature of the
Business and the business objectives of Buyer in acquiring it, and the
consideration paid to Seller therefor, the foregoing territorial and time
limitations are reasonable and properly required for the adequate protection of
Buyer and that in the event that any such territorial or time limitation is
deemed to be unreasonable and is then reduced by a court of competent
jurisdiction, then, as reduced, the territorial and/or time limitation shall be
enforced.
(e) Seller and Parent further acknowledges that the remedy at law for
any breach by them of the agreements contained in this Section 4.9 may be
inadequate and that Buyer will be entitled to seek injunctive relief without
being required to prove actual damages or post bond. This Section 4.9
constitutes an independent and severable covenant and if any or all of the
provisions of this Section 4.9 are held to be unenforceable for any reason
whatsoever, it will not in any way invalidate or affect the remainder of this
Agreement which will remain in full force and effect.
(f) Notwithstanding anything in this Section 4.9, if, at any time
within the five year period after Closing, Parent is a party to a transaction
(whether by means of merger, consolidation, sale of substantially all of its
assets, or otherwise) as a result of which the persons who were the owners of
the capital stock of the Parent immediately prior to such transaction hold less
than a majority of the voting power of the surviving entity immediately after
the transaction (collectively, a "SALE TRANSACTION") and the other party to such
transaction was engaged in Competition in the Restricted Territory prior to the
date of entering into an agreement with Parent, then nothing in this Section 4.9
shall restrict the freedom of the other party or the surviving entity to engage
in Competition after completion of such transaction.
SECTION 4.10 Supplemental Disclosure. Until the Closing Date, Seller
shall have the continuing obligation to promptly supplement or amend the
Schedules to this Agreement 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 Schedules to this Agreement;
provided, however, that for the purpose of the rights and obligations of the
parties hereunder, any such supplemental or amended disclosure shall not be
deemed to have been disclosed as of the date of this Agreement unless so agreed
to in writing by Buyer, and, accordingly, shall have no effect on Seller's
liability or obligations under this Agreement.
SECTION 4.11 Non-Interference Agreement. Seller and Parent each
covenant and agree that neither they nor any person or entity directly or
indirectly controlling, controlled by or
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under common control with them will, at any time after the Closing, directly or
indirectly, for whatever reason, whether for its or their own account or for the
account of any other person, firm, corporation or other organization: (i)
solicit, deal with or otherwise interfere with any of the Business' existing or
potential contracts or relationships with any affiliate, employee, officer,
director or any independent contractor whether the person is employed by or
associated with the Business on the Closing Date or at any time thereafter; (ii)
solicit, accept, deal with or otherwise interfere with the continuance of
supplies to Buyer (or the terms relating to such supplies), from any suppliers
who have been supplying goods, materials or services used in the Business to
Seller at any time during the last five years prior to the date of this
Agreement; (iii) solicit, accept, deal with or otherwise interfere with any of
the Business' existing or potential contracts or relationships with any
independent contractor, customer, client or consultant of the Business, or any
person who is a bona fide or prospective independent contractor, customer,
client or consultant thereof; or (iv) solicit or otherwise interfere with any
existing or proposed contract between the Business and any other party
whatsoever. In the event that there is a Sale Transaction and the other party to
such transaction was engaged in Competition in the Restricted Territory prior to
the date of entering into an agreement with Parent, then this Section 4.11 shall
be null and void.
SECTION 4.12 Cooperation. Seller and Parent each agree both before and
after the Closing hereunder (i) to give full cooperation to Buyer (including
without limitation giving written notice as requested by Buyer and referring all
telephone inquiries regarding, relating to or in connection with the Business to
Buyer) to encourage each supplier and customer of Seller to continue to do
business with Buyer subsequent to the Closing Date as such supplier or customer
did with Seller before such date and (ii) to cooperate fully with Buyer in order
to effect the transfer of, and assure Buyer of the continued benefit and full
enjoyment of, the Acquired Assets and the Business, including, without
limitation, the prompt execution and delivery of all instruments and documents
of conveyance reasonably requested by Buyer, and the carrying out of any other
acts reasonably requested by Buyer, to more fully vest or confirm title in Buyer
in and to the Acquired Assets.
SECTION 4.13 Covenant Not to Disclose.
(a) Seller and Parent each agree that as the owner of the Business,
such party possesses certain data and knowledge of operations of the Business
which are proprietary in nature and confidential, including, without limitation,
the Trade Secrets. Seller and Parent each covenant and agree that they will not,
at any time after the Closing, reveal, divulge or make known to any person
(other than Buyer) or use for its own account or for the account of any person,
firm, corporation or other organization, any confidential or proprietary
manufacturing method, record, data, Trade Secret, pricing policy, bid amount,
bid strategy, rate structure, personnel policy, method or practice of soliciting
or obtaining or doing business by the Business, or any other confidential or
proprietary information or Intellectual Property whatsoever relating to the
Business or Buyer or its affiliates, whether or not obtained with the knowledge
and permission of Buyer or its affiliates. Seller and Parent each further
covenant and agree that they shall not divulge any such confidential or
proprietary information about Buyer or Buyer's Parent
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which they may acquire during any transition period in which they assist or
consult with Buyer or its affiliates to facilitate the transfer and the
continued success of the Business, respecting such confidential and proprietary
information in trust for the sole benefit of Buyer and its affiliates and their
successors and assigns.
(b) With respect to the materials, methods and processes used in
creating the Products and with respect to any other written information relating
to the Trade Secrets, Seller will, at the Closing, deliver to Buyer all written
copies of the materials, methods and processes and written information relating
to the Products and the Trade Secrets in its possession. Seller has no knowledge
of any other persons or entities that have written copies of the materials,
methods and processes or written information relating to the Trade Secrets.
Seller has previously delivered to Buyer copies of agreements of confidentiality
executed by employees of the Seller.
SECTION 4.14 No-Shop. Seller and Parent agrees that neither they nor
any of their officers, directors, employees, agents or representatives
(including, without limitation, any investment banker, attorney or accountant
retained by it) will, directly or indirectly, initiate, solicit, entertain or
negotiate, or approve, or enter into any agreement or understanding with respect
to, any acquisition, merger, consolidation, recapitalization, restructuring or
similar transaction involving the Business or the Acquired Assets during the
period commencing the date hereof and ending July 13, 2001.
SECTION 4.15 Post-Closing Adjustment. On the date 120 days following
the Closing Date (the "CALCULATION DATE"), Buyer shall calculate the dollar
amount collected from Accounts Receivable (other than any accounts receivable
due from *** included in the Acquired Assets (the "ACCOUNTS RECEIVABLE COLLECTED
AMOUNT"). In the event that (i) the Accounts Receivable Collected Amount plus
the face amount as of the Closing Date of the *** Receivable minus (ii) the
aggregate dollar amount of Accounts Payable (including the face amount of any
account payable due *** as of the Closing Date) (the "AR/AP CALCULATION AMOUNT")
is less than $200,000, Buyer shall have the right to offset the amount by which
the AR/AP Calculation Amount is less than $200,000 against the next Deferred
Payment(s) due Seller, provided, however, that the amount of any such offset
shall be reduced by the Excess Inventory Amount (the "Final Offset Amount").
Alternatively, Buyer may elect to be paid the Final Offset Amount by Seller
within five days following the Calculation Date. In the event that the Accounts
Receivable Collected Amount plus the face amount as of the Closing Date of the
*** Receivable minus the aggregate dollar amount of Accounts Payable (including
the face amount of any account payable due *** as of the Closing Date) is in
excess of $200,000, Buyer shall remit such excess to Seller within five days
following the Calculation Date. As used herein, the Excess Inventory Amount
shall equal the lesser of (i) the amount by which the value of the Included
Inventory as set forth on the Closing Date Included Inventory Statement is in
excess of $240,000 or (ii) $20,000.
SECTION 4.16 Removal of Specified Equipment. Buyer acknowledges that
Parent has certain property and equipment currently located on the Leased
Premises as set forth on Schedule 4.16 hereto ("SPECIFIED EQUIPMENT"). Buyer
shall provide desk space for one employee of
_______________________
*** Certain information (indicated by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted material
has been filed separately with the Securities and Exchange Commission.
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Parent from the Closing Date until the earlier to occur of (i) 60 days following
the Closing Date or (ii) the removal of the Specified Equipment from the Leased
Premises. Parent shall be responsible for removing the Specified Equipment
within 60 days following the Closing Date and Buyer agrees to provide Parent
with reasonable access to the Leased Premises for such purposes. Parent shall
use customary care in removing such Specified Equipment and shall be responsible
for all damages resulting from such removal.
ARTICLE V
CONDITIONS TO BUYER'S OBLIGATIONS
The obligations of Buyer are subject to the fulfillment, prior to or on
the Closing Date, of each of the following conditions, any of which may be
waived in whole or in part by Buyer as provided herein.
SECTION 5.1 Representations and Warranties of Seller and Parent to be
True; Performance by Seller; Certificate.
(a) The representations and warranties of Seller and Parent contained
in this Agreement shall be true and correct in all material respects on the date
hereof and as of the Closing Date with the same effect as though such
representations and warranties had been made or given again at and as of the
Closing Date, except for any representation or warranty expressly stated to have
been made or given as of a specified date, which, at the Closing Date, shall be
true and correct in all material respects as of the date expressly stated.
(b) Seller shall have performed and complied in all respects with all
of its agreements, covenants and conditions required by this Agreement to be
performed or complied with by it prior to or at the Closing Date.
(c) Each of Seller and Parent shall have delivered to Buyer a
certificate of its president or any vice president certifying the fulfillment of
the conditions set forth in this Section 5.1.
SECTION 5.2 No Material Adverse Change. Since the date of the execution
of this Agreement there shall not have occurred an event or condition which has
resulted in a material adverse change in the financial condition, business,
assets, net worth, personnel, prospects or affairs of the Business and Seller
shall not have suffered any loss (whether or not insured) by reason of physical
damage caused by fire, earthquake, flood, wind, accident or other calamity which
affects the value of the Business or any of the Acquired Assets.
SECTION 5.3 Consents. The Material Consent shall have been obtained.
SECTION 5.4 No Proceeding or Litigation.
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(a) No preliminary or permanent injunction or other order shall have
been issued by any court of competent jurisdiction, whether federal, state or
foreign, or by any governmental or regulatory body, whether federal, state or
foreign, nor shall any statute, rule, regulation or executive order be
promulgated or enacted by any governmental authority, whether federal, state or
foreign, which prevents the consummation of the transactions contemplated in
this Agreement.
(b) No suit, action, claim, proceeding or investigation before any
court, arbitrator or administrative, governmental or regulatory body, whether
federal, state or foreign, shall have been commenced and be pending against
Seller or Buyer or any of their respective affiliates, associates, officers or
directors seeking to prevent the sale of the Acquired Assets or the Business or
asserting that the sale of the Acquired Assets or the Business would be illegal.
SECTION 5.5 Closing Deliveries. Seller and Parent shall have delivered
to Buyer all deliveries to be made to it pursuant to Section 1.8(b).
SECTION 5.6 Closing Date Included Inventory Statement. Buyer shall have
agreed to the value of the Included Inventory as set forth on the Closing Date
Included Inventory Statement in its sole discretion.
ARTICLE VI
CONDITIONS TO SELLER'S OBLIGATIONS
The obligations of Seller under this Agreement are subject to the
fulfillment, prior to or on the Closing Date, of each of the following
conditions, all or any of which may be waived in whole or in part by Seller as
provided herein.
SECTION 6.1 Representations and Warranties of Buyer and Buyer's
Parent to be True; Performance by Buyer; Certificate.
(a) The representations and warranties of Buyer and Buyer's Parent
contained in this Agreement shall be true and correct in all material respects
on the date hereof and as of the Closing Date with the same effect as though
such representations and warranties had been made or given again at and as of
the Closing Date, except for any representation or warranty expressly stated to
have been made or given as of a specified date, which, at the Closing Date,
shall be true and correct in all material respects as of the date expressly
stated.
(b) Buyer shall have performed and complied in all respects with all of
its agreements, covenants and conditions required by this Agreement to be
performed or complied with by it prior to or at the Closing Date.
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(c) Each of Buyer and Buyer's Parent shall have delivered to Seller a
certificate of its president or any vice president dated the Closing Date and
certifying the fulfillment of the conditions set forth in this Section 6.1.
SECTION 6.2 Consents. All notices to, and declarations, filings and
registrations with and consents, approvals and waivers from governmental and
regulatory agencies required to consummate the transactions contemplated hereby
shall have been obtained.
SECTION 6.3 No Proceeding or Litigation.
(a) No preliminary or permanent injunction or other order shall have
been issued by any court of competent jurisdiction, whether federal, state or
foreign, or by any governmental or regulatory body, whether federal, state or
foreign, nor shall any statute, rule, regulation or executive order be
promulgated or enacted by any governmental authority, whether federal, state or
foreign, which prevents the consummation of the transactions contemplated in
this Agreement.
(b) No suit, action, claim, proceeding or investigation before any
court, arbitrator or administrative, governmental or regulatory body, whether
federal, state or foreign, shall have been commenced and be pending against
Seller or Buyer or any of their respective affiliates, associates, officers or
directors seeking to prevent the sale of the Acquired Assets or the Business or
asserting that the sale of the Acquired Assets or the Business would be illegal.
SECTION 6.4 Closing Deliveries. Buyer and Buyer's Parent shall have
delivered to Seller all deliveries to be made to it pursuant to Section 1.8(c).
SECTION 6.5 Closing Date Included Inventory Statement. Seller shall
have agreed to the value of the Included Inventory as set forth on the Closing
Date Included Inventory Statement in its sole discretion.
ARTICLE VII
INDEMNIFICATION
SECTION 7.1 Survival of Representations and Warranties. The
representations and warranties of Seller in Article II and Buyer in Article III
and all other obligations of the parties hereunder, shall survive the Closing
and, except for (i) the representation set forth in Section 2.20 which shall
survive the Closing until the expiration of the applicable statutory period of
limitation, giving effect to any waiver, mitigation or extension thereof; and
(ii) the Surviving Obligations (as hereinafter defined), which shall continue in
effect in accordance with their respective terms, shall expire on December 31,
2002 (the "CUT-OFF DATE"). Thereafter, except as provided in the next succeeding
sentence, no claim may be brought arising under or in connection with this
Agreement or any of the transactions contemplated hereby, except for a breach by
a party of its obligations under any of the Surviving Obligations. If written
notice of a claim has been given by a party prior to the Cut-Off Date, then the
relevant representation,
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warranty or other obligation shall survive as to such claim until the claim has
been finally resolved. For purposes of this Agreement, the term "SURVIVING
OBLIGATIONS" shall refer to the obligations contained in Sections 2.1, 2.2, 2.3,
2.4, 2.10, 3.1, 3.2, 3.3, 3.4, 4.3, 4.8, 4.9, 4.11, 4.12, 4.13, 7.2(a)(iii),
7.3(a)(iii), 7.4, 7.7, the remaining provisions of Article VII insofar as they
relate to Surviving Obligations, Article X and the Manufacture and Supply
Agreement.
SECTION 7.2 Indemnification by Seller and Parent.
(a) Except as otherwise limited by this Article VII, Buyer and its
officers, directors, employees, agents, successors and assigns shall be
indemnified and held harmless, jointly and severally, by Seller and Parent, from
any and all liabilities, losses, damages, claims, costs and expenses, interest,
awards, judgments and penalties (including, without limitation, reasonable legal
costs and expenses) actually suffered or incurred by it (hereinafter a "BUYER
LOSS"), actually arising out of or resulting from:
(i) the breach of any representation or warranty by
Seller or Parent contained herein or in any document delivered
hereunder at the Closing;
(ii) the breach of any covenant or agreement by
Seller or Parent contained herein or in any document delivered
hereunder at the Closing;
(iii) any claims arising out of or relating to any
action that occurred or condition that existed in the Business
on or prior to the Closing Date, other than Assumed
Liabilities;
(iv) any failure to comply with the provisions of any
applicable bulk sales laws;
or
(v) the failure of Seller to pay or otherwise
discharge the Excluded Liabilities.
(b) Indemnification for any Buyer Loss under clause (i) of paragraph
(a) above shall be payable by the Seller and Parent hereunder only if the
aggregate amount of all such Buyer Losses hereunder exceeds $25,000 (the
"THRESHOLD"), but thereafter Buyer shall be entitled to recovery from the first
dollar of loss. The maximum aggregate liability of Seller and Parent for
indemnification claims for Buyer Losses under clause (i) of paragraph (a) above
shall be $1,200,000 (the "INITIAL CAP"), which Initial Cap shall be reduced by
$25,000 on each monthly anniversary of the Closing Date (the "ADJUSTED CAP");
provided that the maximum aggregate liability of Seller and Parent for each
Buyer Loss shall be equal to the Adjusted Cap as of the date of the Notice of
Claim (as herein defined) for each such Buyer Loss. There shall be no maximum
liability for claims for Buyer Losses under clauses (ii) through (v) of
paragraph (a) above.
SECTION 7.3 Indemnification by Buyer.
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(a) Except as otherwise limited by this Article VII, Seller and its
officers, directors, employees, agents, successors and assigns shall be
indemnified and held harmless by Buyer from any and all liabilities, losses,
damages, claims, costs and expenses, interest, awards, judgments and penalties
(including, without limitation, reasonable legal costs and expenses) actually
suffered or incurred by it (hereinafter a "SELLER LOSS") actually arising out of
or resulting from:
(i) the breach of any representation or warranty by
Buyer contained herein or in any document delivered hereunder
at the Closing;
(ii) the breach of any covenant or agreement by Buyer
contained herein or in any document delivered hereunder at the
Closing; or
(iii) the failure of Buyer to pay or otherwise
discharge the Assumed Liabilities or any other liability or
obligations incurred by Buyer in connection with the Acquired
Assets or its operation of the Business from and after the
Closing Date.
(b) Indemnification for any Seller Loss under clause (i) of paragraph
(a) above shall be payable by the Buyer and Buyer's Parent hereunder only if the
aggregate amount of all such Seller Losses hereunder exceeds the Threshold, but
thereafter Seller shall be entitled to recovery from the first dollar of loss.
The maximum aggregate liability of the Buyer and Buyer's Parent for
indemnification claims for Seller Losses under clauses (i) of paragraph (a)
above shall be equal to the Adjusted Cap as calculated from time to time;
provided that the maximum aggregate liability of Buyer and Buyer's Parent for
each Seller Loss shall be equal to the Adjusted Cap as of the date of the Notice
of Claim for each such Seller Loss.
SECTION 7.4 General Indemnification Provisions.
(a) For the purposes of this Section 7.4, the term "INDEMNITEE" shall
refer to the person or entity indemnified, or entitled, or claiming to be
entitled to be indemnified, pursuant to the provisions of Section 7.2 or 7.3, as
the case may be; the term "INDEMNITOR" shall refer to the person or entity
having the obligation to indemnify pursuant to such provisions; and "LOSSES"
shall refer to the "SELLER LOSSES" or the "BUYER LOSSES", as the case may be.
(b) An Indemnitee shall give written notice (a "NOTICE OF CLAIM") to
the Indemnitor within 10 business days after the Indemnitee has knowledge of any
claim (including a Third Party Claim, as hereinafter defined) which an
Indemnitee has determined has given or could give rise to a right of
indemnification under this Agreement. No failure to give such Notice of Claim
shall affect the indemnification obligations of the Indemnitor hereunder, except
to the extent Indemnitor can demonstrate such failure materially prejudiced such
Indemnitor's ability to successfully defend the matter giving rise to the claim.
The Notice of Claim shall state the nature of the claim, the amount of the Loss,
if known, and the method of computation thereof, all with reasonable
particularity and containing a reference to the provisions of this Agreement in
respect of which such right of indemnification is claimed or arises.
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(c) The obligations and liabilities of an Indemnitor under this Article
VII with respect to Losses arising from claims of any third party that are
subject to the indemnification provisions provided for in this Article VII
("THIRD PARTY CLAIMS") shall be governed by and contingent upon the following
additional terms and conditions: Indemnitee at the time it gives a Notice of
Claim to Indemnitor of the Third Party Claim shall advise Indemnitor that it
shall be permitted, at its option, to assume and control the defense of such
Third Party Claim at its expense and through counsel of its choice if it gives
prompt notice of its intention to do so to Indemnitee and confirms that the
Third Party Claim is one with respect to which Indemnitor is obligated to
indemnify. In the event Indemnitor exercises its right to undertake the defense
against any such Third Party Claim as provided above, Indemnitee shall cooperate
with Indemnitor in such defense and make available to Indemnitor all witnesses,
pertinent records, materials and information in its possession or under its
control relating thereto as is reasonably required by Indemnitor. Similarly, in
the event Indemnitee is, directly or indirectly, conducting the defense against
any such Third Party Claim, Indemnitor shall cooperate with Indemnitee in such
defense and make available to it all such witnesses, records, materials and
information in its possession or under its control relating thereto as is
reasonably required by Indemnitee. Except for the settlement of a Third Party
Claim which involves the payment of money only and for which Indemnitee is
totally indemnified by Indemnitor and which Indemnitor may settle without
Indemnitee's consent, no Third Party Claim may be settled by Indemnitor without
the written consent of Indemnitee which consent shall not be unreasonably
withheld. Similarly, no Third Party Claim may be settled by Indemnitee without
the written consent of Indemnitor, which consent shall not be unreasonably
withheld.
SECTION 7.5 Adjustment of Liability. Any indemnifiable Seller Loss or
Buyer Loss, as the case may be, shall be reduced by any tax benefit accruing to
the indemnified party on account of the indemnification payment and by the
amounts actually recovered by the indemnified party from its insurance carriers
and any amounts recovered by such party subsequent to the payment by the
indemnifying party hereunder with respect to the same claim shall be remitted to
such indemnifying party, except that such remittance shall not exceed the amount
of the indemnification payment made by such indemnifying party. Buyer agrees
after the Closing Date to maintain insurance coverage substantially equivalent
to the coverage currently maintained by Seller to the extent that such policies
provide coverage for Buyer Losses, provided that such insurance coverage is
available at commercially reasonable rates and upon commercially reasonable
terms.
SECTION 7.6 Exclusive Remedy. From and after the Closing, neither party
hereto shall be liable or responsible in any manner whatsoever to the other
party, whether for indemnification or otherwise, except for indemnity as
expressly provided in this Article VII which provides the exclusive remedy and
cause of action of the parties hereto with respect to any matter arising out of
or in connection with this Agreement, except for any breaches of the Manufacture
and Supply Agreement or Sections 4.9, 4.11, 4.12 and 4.13 of this Agreement.
SECTION 7.7 Right of Offset. With respect to any Losses as to which
Buyer is entitled to indemnification pursuant to this Article 7 and amounts owed
Buyer from Seller or
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Parent under the Manufacture and Supply Agreement, Buyer shall have the right to
offset such Losses or amounts against Buyer's obligation to make the Deferred
Payments set forth in Section 1.5. This right of offset shall be in addition to
every other remedy of Buyer given under this Agreement including the right of
offset provided for in Section 4.15 of this Agreement. Any dispute among the
parties arising out of or relating to this Section 7.7 shall be subject to
arbitration in accordance with Article IX hereof.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1 Termination of Agreement. This Agreement may be terminated
at any time prior to the Closing:
(a) by mutual written consent of Buyer and Seller; or
(b) by either Buyer or Seller, if the Closing shall not have occurred
on or before July 13, 2001.
SECTION 8.2 Procedure and Effect of Termination. In the event of
termination of this Agreement by either or both of the parties pursuant to
Section 8.1 hereof, 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 forthwith become void and there shall be no
liability on the part of the parties hereto (or their respective officers,
directors or affiliates) except (a) as set forth in Sections 4.3 and 10.1 hereof
and (b) nothing herein shall relieve either party from liability for any willful
breach hereof.
SECTION 8.3 Amendment. This Agreement may not be amended except by an
instrument in writing signed by Buyer, Seller and Parent.
SECTION 8.4 Waiver. Except as otherwise provided in this Agreement, any
failure of either of the parties to comply with any provision hereof may be
waived by the party entitled to the benefit thereof only by a written instrument
signed by the party granting such waiver, but such waiver or failure to insist
upon strict compliance with such provision shall not operate as a waiver of or
estoppel with respect to any subsequent or other failure.
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ARTICLE IX
ARBITRATION
The parties shall initially attempt in good faith to resolve any
significant controversy, claim, or dispute arising out of or relating to this
Agreement or the Manufacture and Supply Agreement, or the breach or validity of
each such agreement (hereinafter collectively referred to as "DISPUTE") through
at least one face-to-face negotiation between senior executives of the rank of
at least Vice President at the place of business of the party of whom the
meeting is first requested. Disputes which cannot be amicably resolved by the
settlement discussions referenced above shall be submitted to binding
arbitration conducted under the auspices of the American Arbitration Association
(the "AAA") pursuant to the AAA Commercial Rules. The arbitration shall be
conducted before three (3) neutral arbitrators, one selected by each party and
the third to be selected by the other two. The arbitration shall be governed by
Delaware law as set forth in the Delaware Uniform Arbitration Act, Del. Code
Xxx. tit. 10 Sections 5702-5725, and judgment upon the award rendered by
the arbitrators may be entered and enforced by any court having jurisdiction
thereof. Any arbitration shall take place in the city or county where the party
that did not initiate the dispute is located. The prevailing party shall be
entitled to recover its reasonable costs and attorneys' fees. Notwithstanding
anything to the contrary set forth herein, injunctive or equitable relief shall
be available for violations of Sections 4.3, 4.8, 4.9, 4.11, 4.12, 4.13 and 4.14
hereof.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 Expenses. All costs and expenses, including, without
limitation, fees and disbursements of counsel, financial advisors and
accountants, incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs and
expenses, whether or not the Closing shall have occurred.
SECTION 10.2 Consents. Whenever this Agreement requires a permit or
consent by or on behalf of either party hereto, such consent shall be given in
writing in a manner consistent with the requirements for a waiver of compliance
as set forth in Section 8.4.
SECTION 10.3 Assignment; Parties in Interest. This Agreement and all of
the provisions hereof shall be binding upon and inure to the benefit of, and be
enforceable by, the parties hereto and their respective successors and permitted
assigns, but neither this Agreement nor any of the rights, interests or
obligations herein shall be assigned by any party hereto without the prior
written consent of the other party.
SECTION 10.4 Further Assurances. Each of the parties hereto agrees
that, from and after the Closing, upon the reasonable request of any other party
hereto and without further
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consideration, such party will execute and deliver to such other party such
documents and further assurances and will take such other actions (without cost
to such party) as such other party may reasonably request in order to carry out
the purpose and intention of this Agreement.
SECTION 10.5 Entire Agreement. This Agreement and the Exhibits,
Schedules and the other writings referred to herein or delivered pursuant hereto
which form a part hereof contain the entire understanding of the parties with
respect to the subject matter hereof. This Agreement supersedes all prior
agreements.
SECTION 10.6 Headings. The Article and Section headings contained in
this Agreement are for reference purposes only and will not affect in any way
the meaning or interpretation of this Agreement.
SECTION 10.7 Notices. All notices, claims, certificates, requests,
demands and other communications hereunder will be in writing (or in the form of
a facsimile transmission) addressed as provided below and will be (i) delivered
by hand, (ii) transmitted by facsimile with receipt confirmed, (iii) delivered
by overnight courier service with confirmed receipt or (iv) mailed by first
class U.S. mail, postage prepaid and registered or certified, return receipt
requested:
(a) If to Seller:
American Biogenetic Sciences, Inc.
0000 Xxxxx Xxxxxx
Xxxxxxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxxx
Telecopy No.: (000) 000-0000
with a copy to:
Xxxxx X. Xxxxxxxx, Esq.
Brown, Rudnick, Freed & Gesmer
Xxx Xxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Telecopy No.: (000) 000-0000
(b) If to Parent:
American Biogenetic Sciences, Inc.
0000 Xxxxx Xxxxxx
Xxxxxxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxxx
Telecopy No.: (000) 000-0000
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(c) If to Buyer:
c/o PanBio Limited
000 Xxxxxxxx Xxxx
XXXXXXX XXX 0000, XXXXXXXXX
Email: Xxx_Xxxxxxx@XxxXxx.xxx.xx
Attn: Xxx Xxxxxxx, Chief Executive Officer
Telecopy No.: 61-733571222
with a copy to:
Xxxxx Xxxxxxx Xxxxxxx & Xxxxx LLP
0000 Xxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, XX 00000-0000
Attention: Xxxxxxxx X. Xxxxx, Esq.
Telecopy No.: (000) 000-0000
or to such other address as the person to whom notice is to be given may have
previously furnished to the other in writing in the manner set forth above.
SECTION 10.8 Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Maryland
without regard to its provisions concerning conflicts or choice of law.
SECTION 10.9 Counterparts; Facsimile. This Agreement may be executed in
one or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which when taken together shall constitute one and the same agreement.
This Agreement may be executed by facsimile, with ink copies to follow promptly
thereafter.
SECTION 10.10 Bulk Sales Law. Buyer waives compliance by Seller with
the provision of any applicable bulk sales laws, it being understood that Seller
shall remain fully liable and Seller and Parent shall indemnify Buyer for any
and all losses or liabilities incurred by Buyer as a result of non-compliance
with any applicable bulk sales laws.
SECTION 10.11 Transfer Taxes. All excise, sales, value added, use,
registration, stamp, transfer and similar taxes, levies, charges and fees
(including all real estate transfer taxes) incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by Seller.
Buyer and Seller shall cooperate in providing each other appropriate resale
exemption certificates and other appropriate tax documentation.
SECTION 10.12 Definition of Seller's Knowledge. As used in this
Agreement, the phrase "to the best of Seller's knowledge" and any similar phrase
shall mean the actual knowledge as of the date of this Agreement of the
executive officers of Seller upon reasonable
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inquiry of those employees of Seller listed in Schedule 10.12. Notwithstanding
the foregoing, with respect to the representation set forth in Section 2.13, the
phrase "to the best of Seller's knowledge" shall be deemed to include
constructive knowledge of all documents in the possession of Xxxx X. Xxxxxx with
respect to regulatory matters involving Seller.
SECTION 10.13 Public Announcements. All public announcements relating
to this Agreement or the transactions contemplated hereby shall be made at such
time and in such manner as the parties hereto shall mutually and reasonably
agree, except that nothing in this Agreement shall prevent a party hereto from
making any disclosure in connection with the transactions contemplated by this
Agreement to the extent required by law or to the extent necessary to satisfy
its contractual obligations, provided that prior notice of such disclosure is
given to the other party. In accordance with the foregoing, the parties shall
mutually agree in writing on the content of any such public announcements and
there shall be no material revisions to any such approved public announcements
without the prior written consent of the other party.
SECTION 10.14 U.S. Dollars. All monetary amounts set forth herein are
in U.S. dollars.
SECTION 10.15 Incorporation of Schedules. The Schedules to this
Agreement are incorporated herein by reference.
{Signatures appear on the following page.}
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officers of Seller, Parent, Buyer and Buyer's Parent as
of the date first above written.
STELLAR BIO SYSTEMS, INC.
By:__________________________________
Name: ___________________________
Title: ___________________________
AMERICAN BIOGENETIC SCIENCES, INC.
By:__________________________________
Name: ___________________________
Title: ___________________________
PANBIO INDX INC.
By:__________________________________
Name: ___________________________
Title: ___________________________
PANBIO LIMITED
By:__________________________________
Name: ___________________________
Title: ___________________________
42
SCHEDULES
Schedule 1.1(a)(i) Products
Schedule 1.1(a)(ii) Assumed Contracts
Schedule 1.1(a)(xiii) Copyrights
Schedule 1.1(a)(xiv) Leased Premises
Schedule 1.1(b)(viii) Excluded Businesses
Schedule 1.2(a)(i) Accounts Payable
Schedule 1.2(a)(iii) Assumed Vacation Liability
Schedule 1.2(b)(i) Excluded Liabilities
Schedule 1.2(b)(iv) Intercompany Debt/Liability
Schedule 1.5 *** Products
Schedule 1.6 Allocation of Purchase Price
Schedule 1.9(b) Non-Material Consents
Schedule 2.1(b) Seller Jurisdictions
Schedule 2.4 No Violations; Consents and Approvals
Schedule 2.5(a) Financials
Schedule 2.5(b) Pro Forma Financials
Schedule 2.6 Absence of Certain Changes or Events
Schedule 2.7 Certain Contracts and Commitments
Schedule 2.8 Employee Plans; ERISA
Schedule 2.9 Litigation; Judicial Proceedings
Schedule 2.10(a) Permitted Liens
Schedule 2.10(b) Parent's Assets
Schedule 2.11 Customers and Suppliers
Schedule 2.12 Intellectual Property; Trade Secrets
Schedule 2.13 Food and Drug
Schedule 2.14 Compliance with Laws
Schedule 2.16 Accounts Receivable
Schedule 2.19 Insurance
Schedule 2.21 Real Property
Schedule 2.23 Permits
Schedule 3.4 No Violations; Consents and Approvals
Schedule 4.6 Employee Matters
Schedule 4.16 Specified Equipment
Schedule 10.12 Definition of Seller's Knowledge
------------------
*** Certain information (indicated by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted material
has been filed separately with the Securities and Exchange Commission.
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EXHIBITS
Exhibit A Quarterly Calculation of *** Product Revenues
Certificate
Exhibit B Xxxx of Sale
Exhibit C Assignment and Assumption Agreement
Exhibit D Assignment of Trademarks and Recordation
of Transfer Rights
Exhibit E Assignment of Copyrights
Exhibit F Assignment of Domain Names and Trademarks
Exhibit G Letters of Transfer
Exhibit H Manufacture and Supply Agreement
------------------
*** Certain information (indicated by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted material
has been filed separately with the Securities and Exchange Commission.
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