This Exhibit contains information of a confidential nature that has been omitted
and filed separately with the Commission. The omitted information is designated
within this Exhibit by use of capital X's, such as $(XXX), X%, or XXXXX.
EXHIBIT 10.15
ASSET PURCHASE AGREEMENT
AGREEMENT (hereinafter, together with the Exhibits annexed hereto, the
"Agreement"), made and entered into as of the 13th day of January, 1998, by and
among CHRONIMED INC., a Minnesota corporation ("Purchaser"), and DIA-SCREEN
CORPORATION, a Minnesota corporation ("Seller").
RECITALS:
1. Seller is in the business of developing, manufacturing and marketing
dry reagent diagnostic products which monitor a variety of chemistries found in
the body, including urine diagnostic and blood glucose monitoring products.
2. Purchaser desires to purchase and acquire certain assets and
business of Seller, and Seller is willing to sell said assets and business to
Purchaser, upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the purchase and sale of the assets
and of the premises and the mutual promises, covenants and conditions
hereinafter set forth, Seller and Purchaser hereby agree as follows:
ARTICLE I
DEFINITIONS
As used herein, the following terms shall have the meanings set forth
below, and where said meanings are intended, said terms shall be capitalized:
1.1 "ASSETS" shall mean all of the assets, properties and rights of
Seller, including but not limited to Inventory, Equipment, Acquired Contracts,
Permits and Approvals, Books and Records, Intellectual Property Rights,
Receivables having a cumulative value less than or equal to $30,000.00, and
Goodwill, excluding only the Excluded Assets.
1.2 "ACQUIRED CONTRACTS" shall mean those Contracts of Seller, as
defined herein, which Purchaser elects to assume. Acquired Contracts shall be
identified with specificity prior to Closing on Exhibit C-2, attached hereto and
to be acknowledged in final form by the parties in advance of Closing.
1
1.3 "BLOOD GLUCOSE PRODUCTS" shall mean Seller's existing products,
products in development, and technologies pertaining to monitoring blood
glucose, including blood glucose test strip(s) and meter(s), and more fully
described in Exhibit A hereto.
1.4 "BOOKS AND RECORDS" shall mean all of Seller's books and records
relating to the Assets or the Business including without limitation, lists of
customers and suppliers, and records with respect to pricing, volume, payment
history, cost, inventory, machinery and equipment, mailing lists, distribution
and customer lists, sales, purchasing and materials, manuals, and including any
such records which are maintained on computer.
1.5 "BUSINESS" shall mean Seller's business as described in Recital 1
above, as well as any other business in which Seller is engaged.
1.6 "CLOSING DATE" shall mean the date on which the Closing hereunder
is held. The Closing shall be held subject to the occurrence of the conditions
identified in Articles X and XI herein, at 10:00 a.m., then current Minneapolis
time, on the business day next following the Validation Date of Seller's
leukocyte urine chemistry reagent product, or at such other time or date as the
parties may mutually agree upon in writing, unless delayed by a party for
failure to satisfy conditions precedent to said party's obligations hereunder,
in which case Closing shall be held as soon as practicable after such conditions
are satisfied.
1.7 "CONTRACTS" shall mean all of Seller's right, title and interest in
and to all leases, contracts, agreements, commitments, understandings, and
orders (including but not limited to any licenses that Seller holds) which
relate to the Assets or the Business, all of which are listed on Exhibit C-1
attached hereto. An updated version of Exhibit C-1 shall be delivered at the
Closing listing the Contracts as of the Closing Date, with Purchaser to have the
opportunity to identify and assume any newly identified Contracts as Acquired
Contracts.
1.8 "EQUIPMENT" means all of Seller's tangible assets, other than the
Inventory, including but not limited to furniture, machinery, equipment,
tooling, computers and the software utilized therewith (including the source
code for the same where available to Seller), and vehicles, specifically
including but not limited to the items listed on Exhibit D.
1.9 "EXCLUDED ASSETS" shall mean only Seller's Receivables exceeding a
cumulative value of Thirty Thousand Dollars ($30,000.00), determined as of the
Closing Date, and any assets specifically listed on Exhibit E attached hereto.
1.10 "GOODWILL" shall mean all goodwill and business of Seller.
1.11 "INTELLECTUAL PROPERTY RIGHTS" shall mean all of Seller's patents,
trademarks, service marks, trade names, trademark, service xxxx and trade name
registrations, brand names, copyrights and copyright registrations, all pending
applications for any of the foregoing, and any other proprietary rights,
inventions, trade secrets, or know-how or processes used in the operation
2
of Seller's business, or owned by Seller, and any licenses granted by or to
Seller, and any other contracts, agreements, commitments or understandings to
which it is a party, which relate, in whole or in part, to Intellectual Property
Rights, all as identified in Exhibit F hereto.
1.12 "INTERIM STATEMENTS" shall mean the unaudited balance sheet of
Seller as of November 30, 1997, and related unaudited statements of income and
retained earnings of Seller for the fiscal period ending on said date, prepared
by Seller, copies of which have been provided to Purchaser.
1.13 "INVENTORY" shall mean all of Seller's inventory and supplies,
including raw materials, work in process and finished inventory, identified by
category in Exhibit G hereto.
1.14 "LEASED PREMISES" shall mean the premises leased by Seller located
at 0000 Xxxx 00xx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000, which premises
constitute the only real property used or occupied by Seller.
1.15 "LIABILITIES AND OBLIGATIONS" shall mean any indebtedness, claim,
obligation or liability of any kind or nature whatsoever, whether absolute or
contingent, liquidated or unliquidated, due or to become due, accrued or not
accrued, or otherwise.
1.16 "NET REVENUES" shall mean gross sales minus any discounts,
rebates, allowances or returns.
1.17 "PERMITS AND APPROVALS" shall mean all licenses, permits,
franchises, approvals and authorizations by governmental authorities or third
parties, actual or issuance pending, held by Seller.
1.18 "PROCESS VALIDATION" shall mean the successful completion of the
testing and development process related to the leukocyte reagent component of
Seller's Urine Chemistry Products, as identified in Exhibit H hereto.
1.19 "RECEIVABLES" shall mean Seller's accounts receivable arising from
sales of merchandise or services to customers in the ordinary course of Seller's
business net of any allowance for bad debt.
1.20 "SELLER STATEMENTS" shall mean the unaudited balance sheets of
Seller as of December 31, 1995 and December 31, 1996, and statements of income
and retained earnings of the Seller for the fiscal years ending on said dates,
prepared by Seller, copies of which have been provided to Purchaser.
1.21 "URINE CHEMISTRY AND BUN PRODUCTS" shall mean Seller's existing
products, products in development, and technologies pertaining to urine
chemistry measurement and
3
monitoring, including but not limited to the "10 TEST URINE STRIP", including
blood urea nitrogen and urine controls, all as more fully described in Exhibit B
attached hereto.
1.22 "VALIDATION DATE" shall mean the date upon which the parties agree
that successful Process Validation has been achieved for the leukocyte reagent
component of Seller's Urine Chemistry Products, as dictated by the criteria
identified in Exhibit G hereto.
ARTICLE II
PURCHASE AND SALE
2.1 PURCHASE PRICE On the Closing Date, subject to the terms and
conditions set forth in this Agreement, Seller agrees to sell and convey to
Purchaser, and Purchaser agrees to purchase, the Assets, for an amount (the
"Purchase Price") equal to:
(a) $1,800,000 (the "Fixed Payment") as may be
adjusted pursuant to Section 2.6(a) herein; plus
(b) if and only to the extent earned, the Royalty Payments as
provided in Section 2.2 below.
After the Closing, Purchaser shall prepare, in accordance with
applicable Internal Revenue Services requirements, an allocation of the Purchase
Price among the Assets. Each of the parties hereto agrees to report this
transaction consistently with said allocation, specifically including for income
tax purposes.
2.2 ROYALTY PAYMENTS Purchaser shall pay to Seller, to the extent
earned, royalties on Net Revenues derived from Purchaser's sales of Urine
Chemistry and BUN Products, pursuant to the terms and schedules herein. The
parties agree that all payments earned and paid pursuant to this Section 2.2
constitute a substantial aspect of the transaction and shall qualify and be
treated as royalties under the definition provided in IRC ss.61(e)(6) and
ss.1253. Net Revenues shall be determined on an accrual basis consistent with
Purchaser's customary accounting practices. Seller acknowledges and agrees that
Purchaser shall be free to run its business and the business acquired from
Seller in Purchaser's sole discretion, that Purchaser makes no warranty
regarding Purchaser's achievement of anticipated sales of Urine Chemistry and
BUN Products, and that Seller shall have no right to make any claims for
royalties on the grounds that if different actions had been taken by Purchaser
more Net Revenues would have been earned.
2.2.1 ANNUAL ROYALTY PERIODS Royalty accruals and Purchaser's payment
obligations shall be established on an annual basis. The first annual royalty
period shall commence on the first accounting day of the earliest to occur of:
4
(i) the first accounting month that begins nine months after
the Closing Date, or
(ii) the first accounting month beginning after the date of
FDA approval of the 10 Test Urine Strip, or
(iii) the first accounting month beginning after the date of
Purchaser's first commercial shipment of the 10 Test Urine Strip.
All royalty payments earned during a royalty period year and payable to
Seller shall be paid within 45 days following the end of the applicable royalty
period. The following terms shall dictate royalty payments earned and payable
for any annual royalty periods:
(a) ROYALTY YEAR ONE Purchaser shall pay to Seller royalties on Net
Revenues derived from the sale of Urine Chemistry and BUN Products during the
first annual royalty period at a rate of [XXX]%. Seller shall earn and Purchaser
shall become obligated to pay royalties only upon Purchaser's achievement of
sales of Urine Chemistry and BUN Products exceeding $[XXX] in Net Revenues
during the first annual royalty period. The maximum total royalties payable by
Purchaser to Seller against Net Revenues earned during the first annual royalty
period shall be $[XXX], regardless of the actual, total volume of sales during
that period. In the event Purchaser's sales of Urine Chemistry and BUN Products
during the first annual royalty period shall exceed $[XXX] in Net Revenues,
Seller shall be credited with all Net Revenues exceeding $[XXX] (generally, as
identified throughout this Section 2.2.1, the "Carryover Net Revenues"). Any
Carryover Net Revenues so credited shall be added to Purchaser's Net Revenues
earned during the second annual royalty period for purposes of determining
Seller's royalties earned and payable, subject to the caps identified below,
following the end of that second annual period. In calculating Net Revenues for
the first accounting month of the first annual royalty period, there shall be
included, in addition to Net Revenues for such month, the Net Revenues derived
from the sale of Urine Chemistry and BUN Products during the period from the
date which triggered the commencement of the royalty payment obligation to the
first day of such first accounting month.
(b) ROYALTY YEAR TWO Purchaser shall pay to Seller royalties on Net
Revenues derived from the sale of Urine Chemistry and BUN Products during the
second annual royalty period, plus any credited Carryover Net Revenues, at a
rate of [XXX]%. Seller shall earn and Purchaser shall become obligated to pay
royalties only upon Purchaser's Net Revenues on sales of Urine Chemistry and BUN
Products during the second annual royalty period, plus any Carryover Net
Revenues, exceeding $[XXX]. The maximum total royalties payable by Purchaser to
Seller against Net Revenues earned during the second annual royalty period, plus
any Carryover Net Revenues, shall be $[XXX], regardless of the actual, total
volume of sales during that second annual period. In the event Purchaser's Net
Revenues earned on sales of Urine Chemistry and BUN Products during the second
annual royalty period, plus any Carryover Net
5
Revenues, shall exceed $[XXX], Seller shall be credited with all Net
Revenues plus Carryover Net Revenues exceeding $[XXX] and up to $[XXX] as
Carryover Net Revenues. Any Carryover Net Revenues so credited shall be added to
Purchaser's Net Revenues earned during the third annual royalty period for
purposes of determining Seller's royalties earned and payable, subject to the
caps identified below, following the end of that third annual period.
(c) ROYALTY YEAR THREE Purchaser shall pay to Seller royalties on Net
Revenues derived from the sale of Urine Chemistry and BUN Products during the
third annual royalty period, plus any credited Carryover Net Revenues, at a rate
of [XXX]%. Seller shall earn and Purchaser shall become obligated to pay
royalties only upon Purchaser's Net Revenues on sales of Urine Chemistry and BUN
Products during the third annual royalty period, plus any Carryover Net
Revenues, exceeding $[XXX]. The maximum total royalties payable by Purchaser to
Seller against Net Revenues earned during the third annual royalty period, plus
any Carryover Net Revenues, shall be $[XXX], regardless of the actual, total
volume of sales during that third annual period. In the event Purchaser's Net
Revenues earned on sales of Urine Chemistry and BUN Products during the third
annual royalty period, plus any Carryover Net Revenues, shall exceed $[XXX],
Seller shall be credited with all Net Revenues plus Carryover Net Revenues
exceeding $[XXX] and up to $[XXX] as Carryover Net Revenues. Any Carryover Net
Revenues so credited shall be added to Purchaser's Net Revenues earned during
the fourth annual royalty period for purposes of determining Seller's royalties
earned and payable, subject to the caps identified below, following the end of
that fourth annual period.
(d) ROYALTY YEAR FOUR Purchaser shall pay to Seller royalties on Net
Revenues derived from the sale of Urine Chemistry and BUN Products during the
fourth annual royalty period, plus any credited Carryover Net Revenues, at a
rate of [XXX]%. Seller shall earn and Purchaser shall become obligated to pay
royalties only upon Purchaser's Net Revenues on sales of Urine Chemistry and BUN
Products during the fourth annual royalty period, plus any Carryover Net
Revenues, exceeding $[XXX]. The maximum total royalties payable by Purchaser to
Seller against Net Revenues earned during the fourth annual royalty period, plus
any Carryover Net Revenues, shall be $[XXX], regardless of the actual, total
volume of sales during that fourth annual period. In the event Purchaser's Net
Revenues earned on sales of Urine Chemistry and BUN Products during the fourth
annual royalty period, plus any Carryover Net Revenues, shall exceed $[XXX],
Seller shall be credited with all Net Revenues plus Carryover Net Revenues
exceeding $[XXX] and up to $[XXX] as Carryover Net Revenues. Any Carryover Net
Revenues so credited shall be added to Purchaser's Net Revenues earned during
the fifth annual royalty period for purposes of determining Seller's royalties
earned and payable, subject to the caps identified below, following the end of
that fifth annual period.
(e) ROYALTY YEAR FIVE Purchaser shall pay to Seller royalties on Net
Revenues derived from the sale of Urine Chemistry and BUN Products during the
fifth annual royalty period, plus any credited Carryover Net Revenues, at a rate
of [XXX]%. Seller shall earn and Purchaser shall become obligated to pay
royalties only upon Purchaser's Net Revenues on sales of Urine Chemistry and BUN
Products during the fifth annual royalty period, plus any Carryover Net
Revenues, exceeding $[XXX]. The maximum total royalties payable by Purchaser to
6
Seller against Net Revenues earned during the fifth annual royalty period, plus
any Carryover Net Revenues, shall be $[XXX], regardless of the actual, total
volume of sales during the fifth annual period. Purchaser shall have no
obligation to pay Seller royalties on Net Revenues earned in the fifth annual
period, plus any Carryover Net Revenues, exceeding $[XXX] and Purchaser's
royalty payment obligations shall terminate upon payment of royalties earned in
and due following the fifth annual royalty period.
(f) TIMING OF REVENUES. Purchaser shall make all sales Urine Chemistry
and BUN Products in the normal course of business and shall not take any action
which would defer or delay recognition of any Net Revenues from one royalty year
to the next.
(g) BEST EFFORTS. Purchaser agrees that it will use its commercially
reasonable best efforts to market and sell the Urine Chemistry and BUN Products
and, if it retains them pursuant to Section 2.3.1, the Blood Glucose Products
throughout the respective periods during which royalties on sales are payable to
the Seller.
(h) MODIFICATIONS AND IMPROVEMENTS. For purposes of calculating sales
on which royalty payments are due to the Seller, Purchaser shall pay to Seller
royalties on new or modified urine chemistry and BUN products to the extent the
Urine Chemistry and BUN Products, as conveyed herein, constitute any part of the
new or modified products. In the event Purchaser shall develop and sell urine
chemistry products incorporating test elements not presently existing or under
development by Seller or Purchaser, Purchaser shall pay to Seller royalties on
the Net Revenues derived from sales of such new or modified products only in
amounts relative to the extent that any of the 10 Test Urine Strip elements
comprise a part of the sales value of any new or modified urine chemistry test
strip.
2.2.2 CALCULATIONS AND PAYMENT FOR EACH YEAR; DISPUTE RESOLUTION The
calculation of the Net Revenues and other calculations required for royalty
payments shall be made by Purchaser and submitted to Seller in report form no
later than forty-five (45) days after the end of the subject annual royalty
period. Payment of royalties due, if any, shall be made contemporaneous with
each Net Revenue and royalties calculation report, in accordance with the
foregoing provisions.
Following the receipt of the report for each annual royalty period,
Seller shall have thirty (30) days in which to review the report and to object
to any matters shown in the report. If Seller does not make any objection in
writing within said 30-day period, the report and royalty payment for that
annual royalty period shall be deemed final and accepted by Seller without
further claim.
If Seller delivers written notice of objection within the 30-day
period, then Seller and Purchaser shall first negotiate for a period of up to
thirty (30) days in an effort to resolve their differences. If the parties are
unable to agree, the parties shall designate as arbiter a mutually acceptable
firm of independent certified public accountants, which firm shall not
ordinarily
7
provide services for either of Purchaser or Seller. Said firm shall review the
disputed items in the determination of Net Revenues for the annual royalty
period at issue, and shall make its determination as to Net Revenues for that
period. The determination made by said firm shall be final for all purposes
under this Agreement. Said firm shall use its best efforts to have its report
completed within forty-five (45) days after the matter is submitted to the firm
for determination. In the event the arbiter determines Net Revenues for the
period in dispute to vary 5% or less over Purchaser's originally reported Net
Revenue figure, Seller shall pay the arbiter firm expenses generated in
resolving the dispute. If the arbiter determines Net Revenues for the period in
dispute to be greater than 5% over Purchaser's reported Net Revenue figure,
Purchaser shall pay the expenses of the arbiter firm.
2.3 BLOOD GLUCOSE PRODUCTS Seller hereby sells all of Seller's rights,
title, and interest in the Blood Glucose Products to Purchaser subject to
Purchaser's right of acceptance as stated below. Within 60 days following
Closing, Purchaser shall notify Seller of Purchaser's election whether to
retain, or convey back to Seller, ownership of the Blood Glucose Products.
During the period from the Closing Date through the date on which Purchaser
gives such notice, Purchaser will sell to Seller Blood Glucose Products at the
rate of Purchaser's cost of production plus [XXX]%, the elements constituting
cost of production to be defined according to generally accepted accounting
principals and agreed upon by the parties prior to Closing, and Seller shall
have the right to market such Product.
2.3.1 PURCHASER'S RETENTION OF RIGHTS In the event Purchaser notifies
Seller of Purchaser's intention to retain the Blood Glucose Products Purchaser
shall, for a period of three years following Purchaser's first shipment of an
FDA approved blood glucose meter, pay to Seller royalties of [XXX]% of Net
Revenues derived from sales of Blood Glucose Products. Blood Glucose Products
royalties shall not be subject to minimum revenue thresholds or royalty caps,
however, Purchaser shall be entitled to subtract from royalties earned and due
Purchaser's costs of product research and development and any costs necessary to
obtain any required FDA product approvals. Purchaser's royalty payment
obligation shall not accrue until accumulated royalties shall have fully off-set
Purchaser's reasonable research and development costs as agreed in writing in
advance by Purchaser and Seller. Purchaser shall report Blood Glucose Products
Net Revenues and make royalty payments due to Seller pursuant to the procedures
established in Section 2.2.2. The Section 2.2.2 dispute resolution and royalty
finalization procedures shall also apply to Blood Glucose Product royalty
payment.
2.3.2 PURCHASER'S RETURN OF RIGHTS In the event Purchaser notifies
Seller of Purchaser's intention to waive and return to Seller all rights in the
Blood Glucose Products, Purchaser shall convey and Seller shall receive, without
further act or payment, all right, title and interest in the Blood Glucose
Products. If Seller, within a period of 2 years following such reconveyance,
elects either to market and sell the Blood Glucose Products or conveys to any
other party such rights, Seller grants to Purchaser and Purchaser shall have the
first option to negotiate in good faith the contract manufacturing rights for
production of the Blood Glucose Products on Seller's or any third party's
behalf. Purchaser agrees that if requested by Seller, during such 2 year period,
it will manufacture Blood Glucose Products for Seller during the first
8
year at a price of Purchaser's cost of production plus [XXX]%, and during the
second year at a price of Purchaser's cost of production plus [XXX]%.
2.4 LIABILITIES Purchaser shall not assume or become liable for any
Liabilities and Obligations of Seller, except only for liabilities arising under
the Acquired Contracts and only with respect to actions and transactions
occurring under the Acquired Contracts from and after the Closing Date.
Without limiting the generality of the foregoing, it is specifically
understood and agreed as follows:
(a) Purchaser is offering employment to the employees of
Seller identified in Exhibit X hereto. Persons accepting employment
with Purchaser shall be given credit for the period of their employment
by Seller in determining eligibility for all Purchaser's employee
benefit and similar programs which have any waiting, vesting or similar
requirement. Such persons employed by Purchaser shall be deemed to have
elected participation in such programs as of January 1, 1998. Seller
shall be responsible for any and all Liabilities and Obligations owed
to its employees, including but not limited to any termination
payments, accrued vacation pay, unpaid wages, including those accruing
to Seller through the Closing Date. All such obligations of Seller to
employees shall be satisfied, or arrangements for the satisfaction
thereof acceptable to Purchaser shall be made, on or before the Closing
Date.
(b) Purchaser assumes no liability with respect to any
qualified benefits, retirement, deferred compensation, profit sharing,
stock purchase or stock option plans maintained by Seller on behalf of
its employees ("SELLER'S PLANS"). In the event Seller or employees of
Seller who may become employed by Purchaser elect to participate in
Purchaser's employee benefits, retirement, profit sharing or stock
option purchase plans following Closing, Seller or its employees shall
bear the expense of liquidating any of Seller's Plans, if liquidated by
Seller, and reinvesting or rolling-over any individual contributions to
the Seller's Plan into plans maintained by Purchaser.
(c) Purchaser has no obligation with respect to Seller's
obligations to customers which are first to be performed before the
Closing Date or which arise from products shipped before the Closing
Date or from finished goods acquired by Purchaser from Seller,
including any claims for failure to perform, for breach of warranty, or
for product liability. Seller shall satisfy all such obligations at its
expense. If Seller does not satisfy such obligations promptly,
Purchaser shall have the right to satisfy such obligations and charge
the amount required to satisfy such obligations to Seller.
9
(d) All Liabilities and Obligations that Seller has to
suppliers or creditors shall be promptly paid and satisfied by Seller,
or adequate provision made therefore, at or before Closing, so as to
avoid any adverse impact upon the Business and Assets in the hands of
Purchaser.
2.5 INDEMNIFICATION AGAINST NON-ASSUMED LIABILITIES Excepting solely
the Purchaser's liabilities under the Acquired Contracts, Seller shall
indemnify, defend, save and hold Purchaser harmless from and against all claims,
demands, losses, expenses, and liabilities, including but not limited to
reasonable attorneys' fees, arising in any fashion out of any non-assumed
Liabilities and Obligations of Seller.
2.6 PAYMENTS The Purchase Price shall be paid as follows:
(a) By payment of $1,800,000 of the Fixed Payment at Closing,
as may be adjusted by the following:
(i) Purchaser has lent Seller certain amounts
pursuant to a $250,000 Promissory Note dated October 15, 1997.
To the extent any amounts, including accrued interest, remain
unpaid under said Promissory Note, said amounts shall be
applied and credited against the $1,800,000 due at Closing.
(ii) Seller has assigned and Purchaser has assumed
certain personal property capital leases, identified as
Acquired Contracts in Exhibit C-2. The Fixed Payment payable
at Closing shall also be reduced in an amount equal to the net
present value, discounted at 10%, of the personal property
capital leases assumed by Purchaser.
(b) By payment of the royalty payments if, as and when
provided in Sections 2.2 and 2.3.
The payment at Closing shall be made in the form of a cashiers or
certified check or by wire transfer of immediately available funds.
All payments made hereunder are subject to the terms and conditions
herein set forth, and will be made by Purchaser in reliance upon the
representations, warranties, covenants and agreements contained herein.
2.7 RECEIVABLES Seller has engaged in, and will continue to engage in,
the practice of selling or factoring its Receivables. To the extent that any
Receivables have been sold or factored in part or in whole prior to the Closing
Date, Purchaser shall not acquire the factored portion of any Receivables and
shall have no interest therein. If Seller has Receivables as of the Closing Date
which have not been sold or factored in part or in whole (the "NON-FACTORED
10
RECEIVABLES"), Purchaser shall be entitled to the first $30,000.00 collected on
the Non-factored Receivables and Seller shall be entitled to keep and retain any
amounts in excess of $30,000.00 collected on the Non-factored Receivables.
Seller's Receivables, and the Non-factored Receivables, are identified in
Exhibit I hereto.
Seller shall assign and Purchaser shall assume at Closing all rights to
the Non-factored Receivables. Seller shall notify all Non-factored Receivables
accounts directing further payment to Purchaser. Purchaser shall have the sole
right, consistent with prudent business practices, to collect the Non-factored
Receivables until Purchaser has collected $30,000.00. If Purchaser shall collect
any amounts in excess of $30,000.00 from the Non-factored Receivables, Purchaser
shall remit to Seller such excess collected sums. If Seller wishes to engage in
further collection efforts with respect to any Unfactored Receivables which
remain uncollected after the earlier of Purchaser's collection of $30,000.00 or
one year following the Date of Closing, Purchaser shall assign such Non-factored
Receivables to Seller, without recourse, and Seller shall be free to pursue
collection on its own behalf and at its own expense subject only to the
requirement that Seller not unduly interfere with Purchaser's relationships with
any ongoing customer's Business.
2.8 WARRANTY OBLIGATIONS Copies of Seller's standard warranties (the
"Standard Warranties") for its products, including copies of prior versions of
the warranties which may be still in effect for some products, are attached
hereto as Exhibit J. Seller represents that the time period for Seller's
standard warranties in no event exceeded two (2) years from the date the
products were sold.
Purchaser, at the expense of Seller, shall satisfy Seller's warranty
obligations for products sold by Seller to customers in the ordinary course of
business by Seller prior to the Closing Date, and for finished goods Inventory
acquired by Purchaser from Seller, but Purchaser's agreement to satisfy such
warranty obligations is expressly subject to and limited by the following
agreements and understandings:
(a) Purchaser's obligations are limited to, and in no event
shall exceed in any respect the obligations expressly set forth in the
standard warranties; and
(b) Purchaser shall have no obligation with respect to any
product more than three (3) years after the date on which such product
was sold by Seller; and
(c) In no event shall Purchaser have any obligation beyond
either repairing or replacing the defective product or refunding the
purchase price paid by Seller's customer to Seller in the ordinary
course of business therefor.
11
Seller shall provide to Purchaser information regarding its product
coding and any other appropriate assistance to enable Purchaser to determine
when products meet the timing requirements set forth in this section.
Purchaser shall report all warranty fulfillment expenses incurred by
Purchaser in Purchaser's annual royalty report to Seller, as identified in
Section 2.2.2. Purchaser shall be entitled to off-set any royalties due Seller
by warranty fulfillment expenses incurred by Purchaser provided that such
expenses shall not exceed the reasonable costs of replacing the defective
product plus shipping costs.
This Section shall not create any obligations of Purchaser to any third
parties, including but not limited to customers of Seller, except that Purchaser
will be responsible for warranty service that Purchaser actually provides to
such customers in accordance with Purchaser's standard terms and conditions for
warranty service, as they may change.
2.9 PRODUCT LIABILITY, INSURANCE Seller is responsible for (and as
provided in Section 2.5 is indemnifying Purchaser against) all product
liability, all liability for injuries to persons or property, and all other
Liabilities and Obligations with respect to products manufactured by Seller
before the Closing Date, specifically including finished goods Inventory
acquired by Purchaser from Seller ("ACQUIRED INVENTORY"); provided, however,
that Seller is not responsible in the case of Acquired Inventory to the extent
the liability is due to a failure by Purchaser to store such Acquired Inventory
in a reasonably prudent manner or to monitor the status of such Acquired
Inventory in accordance with good manufacturing practices. As additional support
for said obligation, but not in limitation thereof, for a period of not less
than three or more years after Closing, Seller shall maintain product liability
insurance with respect to all such products which insurance satisfies the
requirements of Exhibit K attached hereto. Purchaser shall be added as an
additional named insured in accordance with the specifications set forth on
Exhibit K.
In order to assist both parties to determine respective responsibility
for a product which gives rise to a claim by a third person, (a) Seller shall
provide to Purchaser detailed information regarding the dating and coding used
by Seller to identify products sold by Seller and such other information as
Purchaser may reasonably request, and (b) Purchaser shall utilize a dating and
coding system to identify products manufactured and sold after Closing by
Purchaser which coding system shall be distinguishable from that utilized by
Seller, and also shall provide such information as Seller may reasonably
request.
2.10 PRORATIONS Seller and Purchaser agree to the following prorations
and allocation of costs in connection with this Agreement and the transactions
contemplated hereby:
(a) All operating costs of the Assets and the Business related
thereto, such as but not limited to utilities, rent and other charges
under leases, shall be allocated between Seller and Purchaser based
upon the Closing Date, such that Seller shall pay that portion of the
12
operating costs pertaining to that period of time up to the Closing
Date, and Purchaser shall pay that portion of the operating costs on
and after the actual Closing Date.
(b) All salary or wages, vacation pay, and other unpaid
employee benefits shall be paid by Seller in accordance with Section
2.4(a).
2.11 PERSONAL PROPERTY LEASES Except as identified as Acquired
Contracts in Exhibit C-2, Purchaser assumes no personal property leases of
Seller and Seller indemnifies Purchaser, pursuant to Section 2.5, with respect
to any unassumed personal property leases.
ARTICLE III
DELIVERIES BY SELLER
3.1 SELLER'S DELIVERIES On the Closing Date, subject to the terms and
conditions set forth in this Agreement, Seller shall make the following
deliveries:
(a) Xxxx of Sale, assignments, certificates of title, and
other instruments of conveyance reasonably requested by Purchaser;
(b) Assignment and Assumption Agreement for Acquired
Contracts, in the form appearing as Exhibit W hereto;
(c) Assignments of Intellectual Property Rights;
(d) A current certified search showing all financing
statements, and federal and state tax liens, on file against the
Assets, together with appropriate releases or termination statements
for any security interests or liens against the Assets;
(e) All Agreements duly executed by Seller and Xxxx Xxxxxx,
Xxxxxx Xxxxx and Xxxx Xxxxxxx, attached as Exhibit N hereto;
(f) The Consulting or Employment Agreements duly executed by
Xxxx Xxxxxx, Xxxxxx Xxxxx and Xxxx Xxxxxxx, attached as Exhibit S
hereto; and
(g) All other items or documents necessary or appropriate
hereunder.
13
3.2 PURCHASER'S DELIVERIES On the Closing Date, subject to the terms
and conditions set forth in this Agreement, Purchaser shall make the following
deliveries:
(a) Payment of the amount Fixed Payment payable at Closing;
(b) Assignment and Assumption Agreement duly executed on
behalf of Purchaser, Exhibit W;
(c) The Agreements referenced in Section 3.1(e) and 3.1(f)
duly executed by Purchaser; and
(d) All other items or documents necessary or appropriate
hereunder.
ARTICLE IV
CLOSING
The Closing hereunder shall take place at the offices of Xxxx, Plant,
Xxxxx, Xxxxx & Xxxxxxx, P.A., on the Closing Date, or at such other place as may
be mutually agreed upon in writing by Purchaser and Seller.
ARTICLE V
INVESTIGATION
From and after the date hereof and through the Closing Date, Seller
shall afford to the officers and representatives of Purchaser full access to the
Assets, properties and records of Seller in order that Purchaser may have full
opportunity to make such investigation at reasonable times as it shall desire of
the Assets, business and affairs of Seller, and Seller shall provide to
Purchaser reasonable assistance in the conduct of said investigation by
Purchaser.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
OF THE SELLER
Seller represents and warrants to Purchaser that, except as
specifically set forth on Exhibit L hereto, entitled Representations and
Warranties: Exceptions and Disclosures, the following
14
statements are true and correct as of the date of this Agreement and will be
true and correct on the Closing Date as if made on said Date:
6.1 SELLER'S ORGANIZATION
(a) Seller is a corporation duly organized and existing and in
good standing under the laws of the state of Minnesota and is entitled
to own or lease its properties and to carry on its business as and in
the places where such properties are now owned, leased or operated, or
such business is now conducted. Subject to obtaining shareholder
approval of the sale of its assets contemplated by this Agreement,
Seller has full power and authority to sell, convey, assign, transfer
and deliver the Assets as herein provided, and all corporate and other
proceedings necessary to be taken by Seller in connection with the
transactions provided for by this Agreement and necessary to make the
same effective have been duly and validly taken, and this Agreement has
been duly and validly executed and delivered by Seller and constitutes
a valid and binding obligation of Seller enforceable in accordance with
its terms.
(b) Seller is qualified to do business as a foreign
corporation in all jurisdictions in which the nature of Seller's
business, the location of its assets or other factors require it to be
so qualified.
(c) The shareholders of Seller are listed on Exhibit M. No
other persons or entities hold stock or other equity interests in
Seller. Seller does not have any subsidiaries, nor does it have any
equity interest in any corporation, partnership, limited liability
company, or other business entity.
(d) Seller was formerly named Genesis Labs, Inc. In 1993,
Seller merged with Dia-Screen Corporation (the "Predecessor"). In 1996,
Seller changed its name to its present name. The assets of Seller
include all of the previous material assets of Genesis Labs, Inc. and
Predecessor, except for such assets which have been disposed of or sold
in the ordinary course of business.
6.2 TITLE Except as set forth on Exhibit L, Seller has good and
marketable title to the Assets, free and clear of any mortgages, liens, security
interests, pledges, easements or encumbrances of any kind or nature whatsoever.
At the Closing, Seller will convey good and marketable title to the Assets to be
sold hereunder, free and clear of any and all mortgages, liens, security
interests, pledges, easements, or encumbrances of any kind or nature whatsoever.
6.3 FINANCIAL STATEMENTS The Seller Statements are materially true,
complete and correct and have been prepared in accordance with generally
accepted accounting principles
15
consistently followed throughout the periods indicated, with exception of the
absence of footnotes. The Seller Statements fairly present the financial
condition and assets and liabilities (whether accrued, absolute, contingent or
otherwise) of Seller as of the dates indicated and the results of operation of
Seller for the periods then ended.
6.4 INTERIM STATEMENTS The Interim Statements are materially true,
complete and correct and have been prepared in accordance with generally
accepted accounting principles, consistently followed (subject, however, to
normal year-end adjustments none of which will be materially adverse, and to the
absence of footnotes). The Interim Statements fairly and accurately present the
financial condition and assets and liabilities (whether accrued, absolute,
contingent or otherwise) of Seller as of the dates indicated and the results of
operations of Seller for the periods then ended.
6.5 LIABILITIES Except as and to the extent reflected or reserved
against in the Interim Statements, or otherwise disclosed herein, Seller had, as
of the date of such Statements, no Liabilities or Obligations. As of the date of
this Agreement, Seller is not subject to and does not have any Liabilities and
Obligations, except as disclosed in the Interim Statements, and except for such
Liabilities and Obligations as have arisen in the ordinary course of business of
Seller since the date of said Interim Statements, none of which newly arisen
Liabilities and Obligations have a material adverse effect upon the Assets, or
Seller, its organization, business, properties or financial condition.
6.6 OTHER OPERATIONS Seller does not have any business, division, other
operations, subsidiaries, affiliates or controlled corporations or entities
other than the Business and Assets conveyed herein. During the past four years,
Seller and any subsidiaries, affiliates or controlled entities of Seller have
not sold, transferred or otherwise disposed of any company, business, division
or operation, providing products or services which compete with the services
provided by Seller.
6.7 NON-BREACH The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby by Seller will not (a)
result in a breach of any of the terms or conditions of, or constitute a default
under, any mortgage, note, bond, indenture, agreement, license or other
instrument or obligation (including any "Contracts") to which Seller is now a
party or by which it, on any of its properties or assets may be bound or
affected, or (b) violate any order, writ, injunction or decree of any court,
administrative agency or governmental body.
6.8 CONTRACTS Except as listed in Exhibit C-1, Seller is not a party to
any written or oral:
(i) contract, agreement, commitment or understanding for the
provision of goods, and/or services;
16
(ii) contract, agreement, commitment or understanding for the
employment of any officer, consultant, director or employee;
(iii) contract, agreement, commitment or understanding with
any labor union;
(iv) contract, agreement, commitment or understanding for the
purchase of any materials, supplies or equipment or for the
manufacturing of products;
(v) contract, agreement, commitment or understanding from
suppliers of products or services;
(vi) license or franchise contract, agreement, commitment or
understanding, either as licenser or licensee or franchiser or
franchisee, including any related to intellectual property, or
distributor, dealership or sales agency contract, agreement or
understanding;
(vii) lease for real or personal property under which Seller
is a lessor or lessee, or contract, commitment, agreement or
understanding to purchase or sell real property or a material amount of
personal property;
(viii) pension, profit-sharing, bonus, deferred compensation,
retirement or stock option or stock purchase plan in effect with
respect to employees or others;
(ix) contract, agreement, commitment or understanding granting
to any person the right to use any property or property right of
Seller, including any trademark or patent licensing agreement, contract
or understanding;
(x) plan, contract, agreement, commitment or understanding
providing for insurance for any officer, director or employee or member
of their families;
(xi) construction contract;
(xii) contract, agreement, commitment or understanding
containing covenants by Seller not to compete in any line of business
or with any person;
(xiii) joint venture contract, agreement, commitment or
understanding or partnership or arrangement or other agreement
involving a sharing of profits; or
17
(xiv) contract, agreement, commitment or understanding
relating to the borrowing or lending of money by Seller, providing for
letters of credit delivered or to be delivered (including but not
limited to letters of credit delivered to providers), or providing for
any mortgage, lien or security interest upon any of the Assets; or
(xv) any guaranties or indemnification's by Seller, except for
Seller's obligations resulting from the endorsement of checks deposited
for collection;
(xvi) any contract, agreement, commitment or understanding
calling for payments by Seller in excess of $1,000;
(xvii) other material contract, agreement, commitment or
understanding.
Seller has provided to Purchaser true, current, correct and complete
copies (or accurate written descriptions in the case of oral Contracts) of all
of the Contracts.
Seller has performed all obligations required to be performed by it to
date under, and Seller and each other party to each Contract is not in default
under each of the Contracts, and there are no facts which, with notice and/or
the passage of time would constitute a default in any material respect. Each of
the Contracts is in full force and effect. Upon request of Purchaser, Seller
shall assign to Purchaser any or all of the Contracts. Except as stated on
Exhibit C-1, each of said Contracts is assignable without consent.
6.9 INVENTORY; RECEIVABLES The Inventory reflected on the Interim
Statement is valued at the lower of cost or market, except as disclosed to
Purchaser, and has not been written down since the date of the Interim
Statements. The cost of all such inventory has been determined on the basis of
consistent accounting practices for at least eighteen months preceeding this
Agreement.
The items of Inventory which will be sold to Purchaser hereunder will
be in good condition and not obsolete, and will be of a quality and quantity
usable by Seller in the ordinary course of its business.
All of the Receivables represent actual sales made by Seller in the
ordinary course of its business, and the amount thereof and the reserve therefor
reflected on the Seller Statements and the Interim Statements are in accordance
with generally accepted accounting principles. None of the obligors under the
Receivables of Seller have refused to pay, or given notice that it will refuse
to pay, the full amount or any portion thereof, except as may be reflected in
customary accounting reserves. Certain of the Receivables have been factored as
noted in Section 2.7 of this Agreement.
18
6.10 EQUIPMENT Except as may be set forth on Exhibit D, all items
included in the Equipment are located on the Leased Premises, and are in good
condition and repair, ordinary wear and tear excepted.
6.11 REAL ESTATE; LEASED PREMISES Seller does not own, and Seller, as
well as the Predecessor, has never owned, any real property.
Seller does not lease or otherwise use or occupy any real property
other than the Leased Premises. The Leased Premises are in good condition,
normal wear and tear excepted. The heating, air conditioning, plumbing and
electrical systems serving the Leased Premises are in good operating order,
ordinary wear and tear excepted, and there is no material defect or wear and
tear to the Leased Premises, or any other material deterioration, or damage,
which prohibit or impair the continued use of the Leased Premises, or would
require any material expenditure for repair or replacement. Seller has not
received notice that the Leased Premises or the building in which they are
located do not comply with municipal, state and federal statutes, ordinances,
rules and regulations applicable to the construction of the buildings and their
actual use.
To the best of Seller's knowledge there are not: (i) any transformers,
capacitors or other appliances in use or stored in the Leased Premises which
contain PCB's; (ii) any urea-formaldehyde insulation or any asbestos in the
Leased Premises; or (iii) any hazardous substance or hazardous waste
(hereinafter a "Hazardous Substance"), as defined in the Comprehensive
Environmental Response Compensation and Liability Act of 1980 ("CERCLA"), or the
Resource Conservation and Recovery Act of 1976 ("RCRA") or any other applicable
federal, state or local environmental laws, statutes or regulations or as
defined in 42 U.S.C. 3251, as amended, located anywhere in the Leased Premises,
except for Hazardous Substances which are stored and disposed of in compliance
with applicable law. No activity has been conducted by Seller at the Leased
Premises or adjoining properties which has given rise to, or may give rise to,
any liability or obligation under any applicable federal, state or local
environmental protection, health, safety, or similar law, whether statutory or
common law, except as disclosed in Exhibit T.
Seller has not engaged in the business of generating, transporting,
storing, treating or disposing of Hazardous Substances in or about the Leased
Premises, except as disclosed in Exhibit T. To the best of Seller's knowledge,
the Leased Premises have not been used for the storing or disposal of waste or
for storing or disposal of Hazardous Substances prior to or during the period
that Seller has been a tenant of the Leased Premises, except as disclosed in
Exhibit T.
6.12 ASSETS COMPLETE The Assets which will be sold by Seller and
acquired by Purchaser at Closing include all Assets used in or necessary for the
operation of the Business, including but not limited to all tangible property
presently located at the Leased Premises, and excluding title to assets leased
under personal property leases, disclosed as Contracts hereunder, and
non-material items of personal property owned by employees. Seller does not
lease or otherwise use any property owned by third parties in its operations,
except as may occur under
19
leases disclosed as Contracts hereunder. Since December 31, 1996 no assets of
any kind used by the Seller have been removed, transferred or disposed of except
for sales of inventory and utilization of supplies in the ordinary course of
business of Seller.
6.13 LITIGATION Except as disclosed in Exhibit U, there are no claims,
actions, suits, proceedings or investigations (whether or not purportedly on
behalf of Seller) pending or threatened against or affecting Seller or the
Assets, at law or in equity or admiralty or before or by any federal, state,
municipal or other governmental department, commission, board, agency or
instrumentality, domestic or foreign, nor has any such action, suit, proceeding
or investigation been pending during the 12-month period preceding the date
hereof. There are no facts or circumstances which might give rise to or
constitute the basis for any such claim, action, suit, proceeding or
investigation. Seller is not operating under or subject to, or in default with
respect to, any order, writ, injunction or decree of any court or federal,
state, municipal or other governmental department, commission, board, agency or
instrumentality, domestic or foreign.
6.14 COMPLIANCE WITH LAWS Seller has complied with, and the Assets
comply with, all applicable laws, regulations and orders applicable to Seller or
the Assets, including without limitation the Food, Drug and Cosmetic Act,
CERCLA, RCRA, the Occupational Safety & Health Act, the Clean Air Act, the Clean
Water Act, the Toxic Substances Control Act, the Safe Drinking Water Act, and
the Refuse Act, and the present uses by Seller of the Assets do not violate any
such laws, regulations and orders.
6.15 INTELLECTUAL PROPERTY Exhibit F lists all patents, trademarks,
service marks, trade names, trademark, service xxxx and trade name
registrations, brand names, copyrights and copyright registrations, all pending
applications for any of the foregoing, and any other proprietary rights,
inventions, trade secrets, or know-how or processes (hereinafter the foregoing
are collectively referred to as "Intellectual Property") used in the operation
of Seller's business, or owned by Seller, and any licenses granted by or to
Seller, and any other contracts, agreements, commitments or understandings to
which it is a party, which relate, in whole or in part, to Intellectual
Property. Said Exhibit F further includes a brief description of the filing,
registration or issuance dates of any such Intellectual Property. Seller owns or
is licensed to use, under licenses disclosed herein, all Intellectual Property
used by it in the conduct of its business as currently conducted or planned to
be conducted, and, except as may exist under licenses disclosed herein, no other
person, including but not limited to any shareholder of Seller, owns or has any
interest in any such Intellectual Property. The use by Seller of any such
Intellectual Property, and the conduct by Seller of its business, does not
infringe on the rights of any third party, and no claim has been asserted to
such effect or otherwise affecting any Intellectual Property of Seller. To the
best of Seller's knowledge, no other party is infringing upon any Intellectual
Property of Seller. The Intellectual Property to be assigned, transferred and
conveyed to Purchaser hereunder constitutes all the Intellectual Property used
or owned by Seller in the conduct of its business, or in connection with the
Assets.
Except as set forth on Exhibit L, Seller has taken all steps reasonably
necessary to protect, and to maintain the confidentiality of, its confidential
information and trade secrets,
20
including, but not limited to, having its employees and consultants enter into
confidentiality agreements. The confidentiality agreements presently in
existence for the benefit of Seller are listed on Exhibit N. All such agreements
may and will be assigned to Purchaser at the Closing hereunder except as such
agreements relate to the Blood Glucose Products if such Products are returned to
the Seller in accordance with Section 2.3.2 of this Agreement.
6.16 LABOR CONTROVERSIES There are no disputes or controversies pending
or to the best knowledge of Seller, threatened, between Seller and (i) any union
or (ii) any of Seller's employees. Seller is not currently subject to (i) any
threats of strikes or work stoppages, or (ii) any organizational efforts or
demands for collective bargaining or any union organization. Seller is in
substantial compliance with applicable labor laws. Seller is not party to any
collective bargaining agreements.
6.17 PENSION AND PROFIT SHARING PLANS; BENEFITS Seller has no pension
or profit sharing plans which cover any of its employees, except as referenced
on Exhibit C-1. All contributions required to be made or accrued prior to the
Closing Date to any such plans shall have been paid or adequate provision made
therefor.
Exhibit C-1 contains a complete list of all employee benefits provided
by Seller to its employees including but not limited to any disability, medical,
dental, workers compensation, health insurance, life insurance, vacation,
benefits plans, incentive plans, fringe benefit plans and any other material
plans, programs, agreements or arrangements which provide benefits to any
current or former employee of Seller.
All the accrued or reasonably anticipated obligations of Seller,
whether arising by operation of law, by contract or by past custom, for payments
by it to trust or other funds, or to any governmental agency with respect to
unemployment compensation benefits or social security benefits, or to employees
for accrued vacation benefits, holiday pay, bonuses, other forms of compensation
or any other benefits for employees of Seller shall have been paid prior to
Closing or, if due after Closing, shall be paid when due under applicable laws,
regulations, or provisions of benefit plans or policies as the case may be. In
no event shall Purchaser assume or be responsible for past or future obligations
of Seller to any employee, including any obligations to pay salary, benefits,
severance pay, vacation pay or other benefits to any employee, regardless of
whether such employees are hired by Purchaser.
6.18 CHANGES IN SUPPLIERS AND CUSTOMERS Except as to matters related to
Xxxxx Do Pharmaceutical Co., Ltd., the resolution of which is pursuant to
Section 10.2 as a condition to closing the transaction contemplated by this
Agreement, Seller is not aware of any facts which indicate that any of the
significant customers of Seller intends to cease being a customer of Seller (or
intends to not continue as customer with Purchaser after the Closing hereunder),
nor is Seller aware of any facts which indicate that any supplier or provider of
services to Seller intends to
21
cease doing business with Seller, or to not do business with Purchaser after the
Closing hereunder, whether as a result of the transactions contemplated hereby
or otherwise.
6.19 CONDUCT OF BUSINESS Except as disclosed in Exhibit L, since
December 31, 1996 and until the Closing Date, Seller has not and will not have:
(i) incurred any Liabilities or Obligations (absolute or
contingent), except for Liabilities and Obligations disclosed in the
Interim Statements, or in the Exhibits annexed hereto, and except for
such Liabilities and Obligations as have arisen in the ordinary course
of business of Seller since the date of the Interim Statements, none of
which newly arisen Liabilities and Obligations have a material adverse
effect upon Seller, the Assets, or Seller's organization, business,
properties, or financial condition;
(ii) mortgaged, pledged or subjected to any lien, charge or
other encumbrance, any of the Assets, tangible or intangible;
(iii) sold or transferred any assets included in the Assets,
other than sales of inventory or utilization of supplies in the
ordinary course of business;
(iv) sold, assigned or transferred any Intellectual Property,
or other intangible assets of Seller or relating to the Assets or
Seller's business, or included in the Assets;
(v) suffered any extraordinary losses or waived any rights of
substantial value relating to Seller's business or the Assets;
(vi) suffered any damage, destruction or loss to any Assets,
whether or not covered by insurance;
(vii) entered into any transaction involving or relating to
Seller's business or the Assets other than in the ordinary course of
business;
(viii) except in the normal course of business, increased the
compensation payable, or to become payable by Seller to any of its
employees including, but not limited to, any bonus payment or deferred
compensation;
(ix) made or suffered any amendment or termination of any
Contracts (including licenses);
(x) increased any benefits to employees of Seller under
pension, insurance or other employee benefit programs;
(xi) changed its methods of accounting in any respect;
22
(xii) except as disclosed to Purchaser, failed to pay its
payables or other obligations or liabilities when due in the ordinary
course of business;
(xiii) acquired a significant portion of the assets or stock
of any person or business entity;
(xiv) suffered a termination of, or amended, any license or
permit.
(xv) paid any dividends or distributions to or made any other
payments or transfers of money or property to any shareholders of
Seller or persons or entities related to or affiliated with or
controlled by any of such shareholder, except for the payment of normal
salary (not bonuses) in the ordinary course of business.
6.20 TAXES, TAX RETURNS Except as to the filing of tax returns for
1996, Seller has duly and timely filed all federal, state and local tax returns
and reports required to be filed by it, and has paid all taxes (including all
interest, penalties, assessments and deficiencies) due or claimed to be due
under such duly filed tax returns or has made provision therefor. Seller is not
delinquent, and there are no material, asserted or assessed deficiencies that
have not been settled, with respect to the payment of any income, sales, use and
withholding taxes or other taxes. There are no alleged material tax deficiencies
proposed or discussed by the IRS or other appropriate tax authority (whether or
not such matters have been settled) that are likely to be proposed or asserted
against Purchaser or the Assets if Purchaser continues to operate Seller's
business after the Closing in substantially the same manner as it has been
operated by Seller. To the best knowledge of Seller and Shareholders, no tax
returns of Seller filed or required to be filed are being examined, nor has any
action, audit, proceeding or investigation been threatened, by the Internal
Revenue Service or other appropriate taxing authority.
6.21 EMPLOYEES Seller is not aware that any employees of Seller intend
to cease their employment with Seller, or to not accept employment or consulting
arrangements with Purchaser if offered, whether as a result of the transactions
contemplated hereby or otherwise.
6.22 LICENSES AND PERMITS All licenses, permits, franchises, approvals
and governmental authorizations required for Seller, the Business, the Assets,
or their operations, are listed on Exhibit O. No other licenses, permits,
franchises, approvals or other governmental authorizations are required for
Seller, its business, the Assets or their operations as heretofore conducted by
Seller. True, current, correct and complete copies of such licenses, permits,
franchises, approvals, and governmental authorizations have been delivered by
Seller to Purchaser. Seller has performed in all material respects all
obligations required to be performed by it to date under, and is not in default
under, any such licenses, permits, franchises, approvals, or governmental
authorizations or the laws, regulations and requirements of the licensing and
23
permit authorities. All such licenses, permits, franchises, approvals, and
governmental authorizations are in full force and effect. Except as required to
continue its business in Blood Glucose Products if returned by Purchaser
pursuant to Section 2.3.2, as set forth on Exhibit L, all such licenses,
permits, franchises, approvals, and governmental authorizations will be assigned
to Purchaser at the Closing.
6.23 CUSTOMERS Exhibit P lists all material customers of Seller and all
former customers who, during the time period since January 1, 1995, previously
constituted material customers.
6.24 SUPPLIERS Exhibit P attached hereto lists all material suppliers
of products or services to Seller.
6.25 PERFORMANCE FOR CUSTOMERS Except as listed on Exhibit L, Seller
presently is in compliance in all material respects with all contracts with
customers which presently are in effect. Since January 1, 1995, except as set
forth on Exhibit L, (i) Seller has complied in all material respects with all
contracts with customers, and (ii) there have been no material claims by or
disputes with customers.
6.26 PRODUCTS AND WARRANTIES; INSURANCE Set forth on Exhibit J is a
description or reference to all warranties made by Seller with respect to
products sold by Seller during the last three (3) years. During the past three
(3) years, Seller has maintained quality control and quality standards with
respect to the products manufactured and sold by Seller consistent with industry
standards and governmental (including FDA) requirements, and has not adversely
altered the quality of such products in any material respect. Except as listed
on Exhibit L, there have been no material departures by Seller or by products
sold by Seller from such standard warranties in the last three (3) years.
Seller has fully and accurately disclosed its information relating to
returns or other claims (whether due to warranties or otherwise) of products to
Seller during the past three years.
Exhibit L details the product liability claims which have been made
during the past four (4) years against Seller with respect to products sold by
Seller, or with respect to predecessor products to the products sold by Seller.
Said Exhibit L includes, without limitation, brief descriptions of the basis of
any such claims, the outcome of the claim, including any amounts that had to be
paid with respect thereto, and whether such claim was covered by insurance
carried by Seller.
6.27 STATUS OF PRODUCTS AND APPROVALS Exhibit Q attached hereto lists
all the products which are currently being marketed by Seller as well as all
products which are currently under development by Seller. Said Exhibit Q further
specifies those products which have, and those products which require or which
might require, registration with or approval by the FDA (hereinafter "FDA
Approval"). In the case of each such product which has FDA Approval, said
24
FDA Approval is currently in full force and effect, and there is no basis for
any adverse change in or withdrawal of such FDA Approval.
In the case of those products which require or might require FDA
Approval, where such Approval has not yet been obtained, said Exhibit Q
specifies the expected schedule for obtaining said Approval. Except as listed on
said Exhibit Q, there are no reasons to believe that the said Approvals will not
be received substantially within such time frame.
In the case of those products still under development, except as set
forth on Exhibit Q, there are no material reasons to conclude that such products
would not be viable in the United States and any other markets for which they
are targeted.
Exhibit Q also sets forth comparable information to that required above
with respect to other countries where products are being marketed or are planned
to be marketed, including providing information regarding any governmental
approvals which exist and the status of any approvals which are being sought.
6.28 MATERIAL CHANGE Since the date of the most recent Seller Statement
there has been no material change in the condition, financial or otherwise, of
Seller, Seller's business, or the Assets from that shown in said Statement,
except changes occurring in the ordinary course of business, which changes have
not materially adversely affected the Assets, or Seller's organization,
business, properties or financial condition.
No statute, order, judgment, writ, injunction, decree, permit, rule or
regulation of any court or governmental or regulatory body has been adopted or
entered, or is proposed to be adopted or entered, which may materially and
adversely affect Seller, the Assets or the business of Seller. There has been no
event or occurrence affecting Seller, the Assets, or the business of Seller
which may have a material adverse effect upon Seller's business, prospects or
Assets.
6.29 DISCLOSURE No representation or warranty made by Seller herein or
in any agreements, certificates or documents delivered in connection with this
Agreement contains any untrue statement of a material fact or omits to state a
material fact necessary to make such representation or warranty not misleading.
25
ARTICLE VII
REPRESENTATIONS AND WARRANTIES BY PURCHASER
Purchaser represents and warrants to Seller that the following
statements are true and correct as of the date of this Agreement and will be
true and correct on the Closing Date as if made on said date:
7.1 ORGANIZATION AND STANDING Purchaser is a corporation duly
organized, existing and in good standing under the laws of the state of
Minnesota.
7.2 NO CONFLICT The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not (a) result in a
breach of any of the terms or conditions of, or constitute a default under, any
mortgage, note, bond, indenture, agreement, license or other instrument or
obligation to which Purchaser is a party or by which it or any of its properties
or assets may be bound or affected, or (b) violate any order, writ, injunction
or decree of any court, administrative agency or governmental body, or (c)
conflict with or result in the breach of the terms, conditions or provisions of
the Articles of Incorporation or By-Laws of the Purchaser.
7.3 AUTHORITY Purchaser has full power and authority to enter into this
Agreement and to carry out the transactions contemplated hereby, and all
corporate and other proceedings required to be taken by Purchaser in connection
with this Agreement and the transactions contemplated hereby and necessary to
make the same effective have been duly and validly taken. This Agreement
constitutes a valid and binding obligation of Purchaser and is enforceable in
accordance with its terms.
ARTICLE VIII
COVENANTS OF THE SELLER
8.1 ACTIONS Seller will not take or permit to be taken any action or do
or permit to be done anything in the conduct of its business or otherwise, which
would be contrary to or in breach of any of the terms, conditions or provisions
of this Agreement, or which would cause any of the representations and
warranties of Seller to be untrue as of the Closing Date or any time thereafter.
8.2 FEES Seller shall pay all fees and disbursements of counsel and
accountants for Seller arising in connection with this Agreement and the
transactions contemplated hereby.
26
8.3 FURTHER ASSURANCES On the Closing Date, and from time to time
thereafter, at the request of Purchaser, Seller will execute and deliver to
Purchaser all such assignments, endorsements and other documents, and take such
other action as Purchaser may reasonably request in order more effectively to
transfer and assign to Purchaser the Assets transferred to Purchaser pursuant to
this Agreement, to confirm the title of Purchaser thereto and to assist
Purchaser in exercising its rights with respect thereto and under this
Agreement.
8.4 CONSENTS Seller has obtained, or by the Closing Date will obtain,
all consents which are required in connection with the assignment of any
Contracts or other arrangements to Purchaser pursuant to this Agreement, and any
other consents or approvals which are required in connection with the closing of
this Agreement and the consummation of the transactions contemplated hereby.
8.5 DATA TRANSFER Prior to the Closing Date, Seller shall cooperate
with Purchaser in arranging for Seller's data relating to the Assets and the
Business to be immediately transferred to Purchaser's computer system at the
time of the Closing. This will include using its best efforts, in consultation
with Purchaser's MIS personnel, to have such data formatted in such a way that
it will effectively transfer to Purchaser's system and to have tapes or other
media ready to transfer to Purchaser at the date of the Closing. After the
Closing, Seller shall continue to cooperate, on a reasonable basis, with
Purchaser in arranging for the transfer of data to Purchaser in a method that is
efficient and compatible with Purchaser's computer system, to the extent
reasonably feasible.
ARTICLE IX
NO BROKERS OR FINDERS
Seller and Purchaser represent and warrant to each other that each did
not directly or indirectly engage any person, corporation or partnership to
bring about the consummation of the transactions contemplated herein, and, that
no person, corporation or partnership is entitled to a broker's commission,
finder's fee or any similar compensation upon the consummation of the
transactions contemplated herein. If this representation and warranty is
breached by either Seller or Purchaser, the breaching party shall indemnify and
hold harmless the other party from any and all claims, demands, liabilities and
obligations (and any and all expenses and costs incurred in connection with or
in defending against the same), which may arise due to any third party's claim
as a broker or finder.
27
ARTICLE X
CONDITIONS PRECEDENT TO OBLIGATIONS
OF PURCHASER
The obligations of Purchaser hereunder are subject to the conditions
that, on or before the Closing Date:
10.1 LEUKOCYTE VALIDATION The leukocyte reagent component of Seller's
Urine Chemistry Product shall have achieved Process Validation on or before
January 15, 1998. In the event Process Validation shall not have been achieved
on or before January 15, 1998, Purchaser shall have the sole discretion to:
(a) waive such condition precedent and proceed with Closing;
(b) postpone Closing to a date and time determined by
Purchaser, with reservation of right to further exercise at that time
any of the alternatives identified in this Section 10.1; or
(c) terminate this Agreement.
10.2 XXXXX DO RELEASE Seller shall obtain and deliver to Purchaser, as
a condition to Closing and the several obligations of the parties created
herein, a comprehensive waiver and release of claims executed by Xxxxx Do
Pharmaceutical Co., Ltd, of Jinhae City Republic of Korea, for the benefit of
Seller, Purchaser, their agents and employees, and in a form reasonably
acceptable to Purchaser.
10.3 REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING The representations
and warranties of Seller contained in this Agreement or in any certificate or
document delivered pursuant to the provisions hereof or in connection with the
transactions contemplated hereby shall be true on and as of the Closing Date as
though such representations and warranties were made at and as of such date.
10.4 COMPLIANCE WITH THE AGREEMENT Seller shall have performed and
complied with all agreements and conditions required by this Agreement to be
performed or complied with by it prior to or at the Closing Date.
10.5 CERTIFICATE Seller shall deliver to Purchaser a certificate of an
officer of Seller dated the Closing Date, certifying in such detail as Purchaser
may request to the fulfillment of the conditions specified in Sections 10.2 and
10.3.
28
10.6 DELIVERIES The documents required under Article III hereof shall
be tendered by Seller for delivery to Purchaser at the Closing.
10.7 OPINION OF SELLER'S COUNSEL Purchaser shall have received an
opinion of counsel to Seller, dated the Closing Date, substantially in the form
of Exhibit R hereto.
10.8 INJUNCTION On the Closing Date, there shall be no effective
injunction, writ, preliminary restraining order or any order of any nature
issued by a court of competent jurisdiction directing that the transactions
provided for herein or any of them not be consummated as herein provided.
10.9 CASUALTY Prior to the Closing Date, the business and the Assets of
Seller, or any portion thereof, shall not have been adversely affected in any
material way as a result of any fire, accident, flood or other casualty or act
of God or the public enemy.
10.10 ADVERSE DEVELOPMENT There shall have been no developments in the
business of Seller, or in the Assets, between the date of the Interim Statements
and the Closing Date which would have a materially adverse effect on Seller's
business or the Assets.
10.11 AGREEMENTS WITH CERTAIN OFFICERS AND EMPLOYEES The Agreements
attached hereto as Exhibit S shall have been executed and delivered by Seller
and Messrs. Murray, Moyer, and Xxxxxxx to Purchaser.
10.12 OTHER EMPLOYEES Purchaser shall have received assurances
satisfactory to Purchaser that a satisfactory number of the employees other than
the Shareholders who Purchaser wishes to hire will accept employment with
Purchaser as of the Closing Date.
10.13 ASSIGNMENTS All required consents to Assignments for all material
Contracts and for the lease for the Leased Premises shall have been received.
10.14 INVESTIGATIONS Purchaser shall be satisfied, in its sole
discretion, with the results of its legal, accounting, business, environmental
and other due diligence review of Seller's business and the Assets.
10.15 APPROVAL The Board of Directors of Purchaser shall have approved
this Agreement and the transactions contemplated hereby.
29
ARTICLE XI
CONDITIONS PRECEDENT TO THE OBLIGATIONS
OF SELLER
The obligations of the Seller hereunder are subject to the conditions
that, on or before the Closing Date:
11.1 REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING The representations
and warranties of Purchaser contained in this Agreement or in any certificate or
document delivered pursuant to the provisions hereof or in connection with the
transactions contemplated hereby, shall be true on and as of the Closing Date as
though such representations and warranties were made at and as of such date.
11.2 PURCHASER'S COMPLIANCE WITH THE AGREEMENT Purchaser shall have
performed and complied with all agreements and conditions required by this
Agreement to be performed or complied with by it prior to or at the Closing
Date.
11.3 OFFICERS' CERTIFICATE Purchaser shall deliver to the Seller a
certificate of an officer or authorized signer of Purchaser, dated the Closing
Date, certifying in such detail as the Seller may request to the fulfillment of
the conditions specified in Sections 11.1 and 11.2.
11.4 INJUNCTION There shall be no effective injunction, restraining
order or order of any nature issued by a court of competent jurisdiction which
shall direct that this Agreement, or any of the transactions provided for
herein, not be consummated as herein provided.
11.5 AGREEMENTS WITH CERTAIN OFFICERS AND EMPLOYEES Purchaser shall
have executed and delivered the Agreements appearing in Exhibit S.
11.6 APPROVAL The Board of Directors and Shareholders of Seller shall
have approved this Agreement and the transactions contemplated hereby.
11.7 OPINION OF PURCHASER'S COUNSEL Seller shall have received an
opinion of counsel to Purchaser dated the Closing Date, substantially in the
form of Exhibit V hereto.
11.8 ASSUMPTIONS BY PURCHASER Purchaser shall assume the obligations of
Seller identified in and pursuant to the agreement listed on Exhibit W hereto.
30
ARTICLE XII
INDEMNIFICATION
12.1 SELLER'S INDEMNIFICATION OF BUYER Seller hereby agrees that,
notwithstanding the Closing and the delivery of instruments of conveyance,
Seller will indemnify, defend, save and hold Purchaser and its stockholders,
directors, employees, agents and affiliates (collectively "Indemnified Persons
of Seller") harmless from and against any and all liabilities, losses, damages,
claims, deficiencies, costs and expenses (including, without limitation,
reasonable attorney fees and other costs and expenses incident to any suit,
action or proceeding) arising out of or resulting from and will pay to Purchaser
the amount of damages suffered thereby together with any amount which it may pay
or become obligated to pay (collectively "Buyer's Damages") on account of:
(a) the breach or inaccuracy of any warranty or representation
by Seller herein or any misstatement of a fact or facts herein made by
Seller;
(b) the failure by Seller to state or disclose a material fact
herein necessary in order to make the facts herein stated or disclosed
not misleading;
(c) any failure of Seller to perform or observe any term,
provision, covenant or condition hereunder on the part of it to be
performed or observed; or
(d) any act performed, transaction entered into, or state of
facts suffered to exist by Seller in violation of the terms of this
Agreement.
In the event of any claim by an Indemnified Person of Seller under this
Article XII, such Person shall be entitled to exercise all remedies provided by
law and/or equity with respect thereto; in addition upon delivery of written
notice of a claim hereunder specifying the claim in reasonable detail, Purchaser
shall be entitled to escrow with an independent third party the amount of such
claim by deducting the amount of such claim from any amounts due Seller until
such claim is resolved.
12.2 PURCHASER'S INDEMNIFICATION OF SELLER Purchaser hereby agrees
that, notwithstanding the Closing and the delivery of instruments of conveyance,
Purchaser will indemnify, defend, save and hold Seller and its stockholders,
directors, employees, agents and affiliates (collectively "Indemnified Persons
of Purchaser") harmless from and against any and all liabilities, losses,
damages, claims, deficiencies, costs and expenses (including, without
limitation, reasonable attorney fees and other costs and expenses incident to
any suit, action or proceeding) arising out of or resulting from and will pay to
Seller the amount of damages
31
suffered thereby together with any amount which it may pay or become obligated
to pay (collectively, "Seller's Damages") on account of:
(a) the breach or inaccuracy of any warranty or representation
by Purchaser herein or any misstatement of a fact or facts herein made
by Purchaser;
(b) the failure by Purchaser to state or disclose a material
fact herein necessary in order to make the facts herein stated or
disclosed not misleading;
(c) any failure of Purchaser to perform or observe any term,
provision, covenant or condition hereunder on the part of it to be
performed or observed; or
(d) any act performed, transaction entered into, or state of
facts suffered to exist by Purchaser in violation of the terms of this
Agreement.
In the event of any claim by an Indemnified Person of Purchaser under
this Article XII, such Person shall be entitled to exercise all remedies
provided by law and/or equity with respect thereto.
12.3 LIMITATION ON AMOUNTS. Seller shall have no liability (for
indemnification or otherwise) with respect to the matters described in clauses
(a), (b), (c) and (d) of Section 12.1 until the total of all Purchaser's Damages
with respect to such matters exceeds $25,000.00. Purchaser shall have no
liability (for indemnification or otherwise) with respect to the matters
described in clauses (a), (b), (c) and (d) of Section 12.2 until the total of
all Seller's Damages with respect to such matters exceeds $25,000.00.
12.4 PROCEDURE FOR INDEMNIFICATION - THIRD PARTY CLAIMS.
(a) Promptly after receipt by an indemnified party under
Section 12.1 or 12.2 of notice of the commencement of any proceeding
against it, such indemnified party will, if a claim is to be made
against an indemnifying party under such Section, give notice to the
indemnifying party of the commencement of such claim, but the failure
to notify the indemnifying party will not relieve the indemnifying
party of any liability that it may have to any indemnified party,
except to the extent that the indemnifying party demonstrates that the
defense of such action is prejudiced by the indemnifying party's
failure to give such notice.
(b) If any proceeding referred to in Section 12.4(a) is
brought against an indemnified party and it gives notice to the
indemnifying party of the commencement of such proceeding, the
indemnifying party will be entitled to participate in such proceeding
and, to the extent that it wishes (unless the indemnifying party is
also a party to such proceeding and the indemnified party determines in
good faith that joint representation would be inappropriate), to assume
the defense of such proceeding with counsel
32
satisfactory to the indemnified party and, after notice from the
indemnifying party to the indemnified party of its election to assume
the defense of such proceeding, the indemnifying party will not, as
long as it diligently conducts such defense, be liable to the
indemnified party under this Section 12 for any fees of other counsel
or any other expenses with respect to the defense of such proceeding,
in each case subsequently incurred by the indemnified party in
connection with the defense of such proceeding, other than reasonable
costs of investigation. If the indemnifying party assumes the defense
of a proceeding, (i) it will be conclusively established for purposes
of this Agreement that the claims made in that proceeding are within
the scope of and subject to indemnification; (ii) no compromise or
settlement or such claims may be effected by the indemnifying party
without the indemnified party's consent unless the sole relief provided
is monetary damages that are paid in full by the indemnifying party;
and (iii) the indemnified party will have no liability with respect to
any compromise or settlement of such claims effected without its
consent. If notice is given to an indemnifying party of the
commencement of any proceeding and the indemnifying party does not,
within ten days after the indemnified party's notice is given, give
notice to the indemnified party of its election to assume the defense
of such proceeding, the indemnifying party will be bound by any
determination made in such proceeding or any compromise or settlement
effected by the indemnified party.
12.5 NOTICE PRIOR TO CLOSING. No party hereto shall be deemed to have
breached any representation, warranty, or covenant if (i) the other party hereto
has been notified prior to the Closing of the breach of, or inaccuracy in, or of
any facts or circumstances constituting or resulting in the breach of or
inaccuracy in, such representation, warrant or covenant, and (ii) such other
party has permitted the Closing to occur and, for purposes of this Agreement, is
thereby deemed to have waived such breach or inaccuracy; provided, however, that
a disclosure pursuant to this Section 12.5 shall not prejudice the rights of the
parties pursuant to Article X or XI hereof not to consummate the transactions
contemplated by this Agreement.
ARTICLE XIII
NATURE AND SURVIVAL OF REPRESENTATIONS
All statements contained in any documents, certificates or other
instruments delivered by or on behalf of Seller or Purchaser pursuant to this
Agreement or in connection with the transactions contemplated hereby shall be
deemed representations and warranties by Seller or Purchaser hereunder. All
representations and warranties and agreements made by Seller or Purchaser in
this Agreement or in any documents, certificates, or other instruments delivered
33
pursuant hereto shall survive the Closing hereunder (and any investigation at
any time made by or on behalf of Seller or Purchaser).
ARTICLE XIV
NOTICES
All notices, requests, demands, and other communications hereunder
shall be in writing and shall be deemed to have been duly given if delivered or
mailed first-class postage prepaid:
(a) To the Seller:
Dia-Screen Corporation
0000 X. 00xx Xxxxxx
Xxxxxxxxxxx, XX 00000
with a copy thereof to:
Xxxx X. Xxxxxx
0000 Xxxxx Xxx Xxxxxx
Xxxxx, XX 00000
and a copy to:
Xxxxxxx X. Xxxxxx
Xxxxxxxxxx & Xxxxx, P.A.
1100 International Centre
000 Xxxxxx Xxxxxx Xxxxx
Xxxxxxxxxxx, XX 00000
(b) To Purchaser:
Chronimed Inc.
Suite 250, Ridgedale Office Center
00000 Xxxxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx
Chief Executive Officer
34
with a copy thereof to:
Xxxx X. Xxxxxx
Xxxx, Plant, Xxxxx, Xxxxx & Xxxxxxx, P.A.
3400 City Center
00 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
or to such other address or to such other person as Purchaser or Seller shall
have last designated by notice to the other.
ARTICLE XV
MODIFICATION
With the exception of the provisions of paragraph 15 of the letter of
intent between the parties hereto dated October 15, 1997 which continues in full
force and effect and which shall survive any termination of this Agreement if
the transaction contemplated by this Agreement is not consummated, this
Agreement supersedes all prior agreements or understandings between the parties
with respect to its subject matter hereof, and contains the entire agreement
between the parties hereto with respect to the transactions contemplated herein
and shall not be modified or amended except by an instrument in writing signed
by or on behalf of the parties hereto.
ARTICLE XVI
EXPENSES
Whether or not the transactions contemplated hereby are consummated,
each of the parties hereto shall pay its own expenses incurred in connection
with the authorization, preparation, execution or performance of this Agreement
and all transactions contemplated hereby, including without limitation all fees
and expenses of agents, representatives, counsel and accountants.
35
ARTICLE XVII
ASSIGNMENT; NO THIRD PARTY RIGHTS
This Agreement shall not be assignable by any party hereto without the
prior written consent of the other party, except that Purchaser may assign any
of its rights under this Agreement to any subsidiary or affiliate of Purchaser.
This Agreement will be binding upon and inure to the benefit of the parties
hereto and their successors and permitted assigns. Nothing expressed or referred
to in this Agreement will give any person or entity other than the parties to
this Agreement any legal or equitable right, remedy or claim under or with
respect to this Agreement.
ARTICLE XVIII
MINNESOTA LAW TO GOVERN
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Minnesota.
ARTICLE XIX
WAIVER
The rights and remedies of the parties to this Agreement are
cumulative. All waivers by any party of their rights or remedies under this
Agreement must be in writing to be effective. Neither the failure to exercise,
nor any delay in the exercise of, any right or remedy under this Agreement will
operate as a waiver of such right or remedy, and no single or partial exercise
of any right or remedy will preclude any other or further exercise of such right
or remedy.
ARTICLE XX
COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same instrument.
36
ARTICLE XXI
HEADINGS
The headings in this Agreement are for convenience of reference only
and shall not be deemed to alter or affect any provision thereof. Reference to
numbered "articles," "sections," "paragraphs" and "subparagraphs," and to
lettered "Exhibits" refer to articles, sections, paragraphs and subparagraphs of
this Agreement and Exhibits annexed thereto.
ARTICLE XXII
ACCESS TO BOOKS AND RECORDS
Under the terms of this Agreement, Purchaser is receiving some of the
books and records which relate to Seller's business relating to the Assets,
while Seller is retaining other records. Each party agrees that for a period of
three (3) years from the Closing Date, said party shall preserve any books and
records relating to the Assets and the related business, and that during such
period it will afford to the other party access to all such books and records at
reasonable business hours and upon reasonable notice. After the termination of
said three-year period each party shall be free to dispose of any such records
in such form as it pleases, unless the other party has requested said records.
If the other party has made such a request, the party receiving the request
either shall give to the requesting party the originals or copies of such
records, or may retain such records subject to the requesting party's continuing
right to inspect the same.
ARTICLE XXIII
CHANGE OF NAME
At any time on or after Closing, upon request of Purchaser, Seller
shall change its corporate name to a name that does not bear any similarity to
Seller's present name, and which does not include either of the words "Dia" or
"Screen" or variants thereof.
37
ARTICLE XXIV
PUBLIC ANNOUNCEMENTS
The parties agree that prior to the Closing Date, any and all public
communications concerning this Agreement and the purchase and sale of the Assets
by Purchaser, and the timing, manner and content of such disclosures, shall be
subject to the mutual agreement of Seller and Purchaser, except that it is
understood that Purchaser, after first advising Seller, shall be permitted to
make such announcements as are required by law or the NASDAQ NMS, or which are
deemed advisable by Purchaser.
ARTICLE XXV
TERMINATION
25.1 TERMINATION EVENTS. This Agreement may, by notice given prior to
or at the Closing, be terminated:
(a) by either Purchaser or Seller if a material breach of any
provision of this Agreement has been committed by the other party and
such breach has not been waived;
(b) (i) by Purchaser if any of the conditions in Article X has
not been satisfied as of the Closing Date or if satisfaction of such a
condition is or becomes impossible (other than through failure of
Purchaser to comply with its obligations under this Agreement) and
Purchaser has not waived such condition on or before the Closing Date;
or (ii) by Seller, if any of the conditions in Article XI has not been
satisfied of the Closing Date or if satisfaction of such a condition is
or becomes impossible (other than through the failure of Seller to
comply with their obligations under this Agreement) and Seller has not
waived such condition on or before the Closing Date;
(c) by mutual consent of Purchaser and Seller; or
(d) by either Purchaser or Seller if the Closing has not
occurred (other than through the failure of any party seeking to
terminate this Agreement to comply fully with its obligations under
this Agreement) on or before March 31, 1998, or such later date as the
parties may agree upon.
25.2 EFFECT OF TERMINATION. Each party's right of termination under
Section 25.1 is in addition to any other rights it may have under this Agreement
or otherwise, and the exercise of a right of termination will not be an election
of remedies. If this Agreement is terminated pursuant to Section 25.1, all
further obligations of the parties under this Agreement will terminate, except
38
that the obligations in Articles XV and XVI and Section 25.3 will survive;
provided, however, that if this Agreement is terminated by a party because of
the breach of the Agreement by the other party or because one or more of the
conditions to the terminating party's obligations under this Agreement is not
satisfied as a result of the other party's failure to comply with its
obligations under this Agreement, the terminating party's right to pursue all
legal remedies will survive such termination unimpaired.
25.3 CONFIDENTIALITY. If the transactions contemplated by this
Agreement are not consummated for any reason, each party will return to the
other all written materials, and copies of such materials, provided to it by
such other party. In such event, the Confidentiality Agreement of the parties
dated October 15, 1997 shall remain in full force and effect and shall survive
the termination of this Agreement.
ARTICLE XXVI
ARBITRATION
26. ARBITRATION. Any dispute arising out of or relating to this
Agreement or the alleged breach of it, or the making of this Agreement,
including claims of fraud in the inducement, or any dispute arising from the
employment relationship for its termination, including any claim of
discrimination, shall be discussed between the disputing parties in a good faith
effort to arrive at a mutual settlement of any such controversy. If,
notwithstanding, such dispute cannot be resolved, such dispute shall be settled
by binding arbitration. Judgment upon the award rendered by the arbitrator may
be entered in any court having jurisdiction thereof. The arbitrator shall be a
retired state or federal judge or an attorney who has practiced business
litigation for at least 10 years. If the parties cannot agree on an arbitrator
within 20 days, any party may request that the chief judge of the District Court
for Hennepin County, Minnesota, select an arbitrator. Arbitration will be
conducted pursuant to the provisions of this Agreement, and the commercial
arbitration rules of the American Arbitration Association, unless such rules are
inconsistent with the provisions of this Agreement, but without submission of
the dispute to such Association. Limited civil discovery shall be permitted for
the production of documents and taking of depositions. Unresolved discovery
disputes may be brought to the attention of the arbitrator who may dispose of
such dispute. Except as provided below with respect to injunctions, the
arbitrator shall have the authority to award any remedy or relief that a court
of this state could order or grant; provided, however, that punitive or
exemplary damages shall not be awarded. The arbitrator may award to the
prevailing party, if any, as determined by the arbitrator, all of its costs and
fees, including the arbitrator's fees. Unless otherwise agreed by the parties,
the place of any arbitration proceedings shall be Hennepin County, Minnesota.
39
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
PURCHASER:
CHRONIMED INC.
BY: /s/ Xxxxxx X. Xxxxx
-----------------------------------
Xxxxxx X. Xxxxx
ITS: Senior Vice President
SELLER:
DIA-SCREEN CORPORATION
BY: /s/ Xxxx X. Xxxxxx
-----------------------------------
Xxxx X. Xxxxxx
ITS: President and Executive Officer
40
