"CONFIDENTIAL TREATMENT REQUESTED" EXHIBIT 2.1
The symbol "[*]" is used throughout this exhibit to indicate that
a portion of the exhibit has been omitted and filed separately
with the Securities and Exchange Commission.
ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of
June 21, 2000, is by and between ADVANCED POLYMER SYSTEMS, INC.,
a Delaware corporation ("Seller"), and ▇.▇. ▇▇▇▇▇▇▇ SOUTH, INC.,
a Delaware corporation ("Purchaser").
A. Seller owns and operates a manufacturing plant located at ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ (as further defined in Section
1.1.1(a), the "Plant"; an index of defined terms is set forth in
Section 8.16). At the Plant and at Seller's research facility
located at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ (the
"Research Facility"), Seller is engaged in, among other things,
developing, manufacturing and selling topical prescription, over-
the-counter and personal care products based on Seller's
proprietary Microsponge(R) and Polytrap(R) technologies. Seller
desires to divest that portion of its business (the "Transferred
Business") that relates to the development, manufacture, sale and
exploitation of: (1) bulk Microsponge microparticles and Polytrap
microagglomerates, in both loaded and unloaded forms, (2)
products utilizing the Microsponge or Polytrap technologies
intended for humans and animals for (a) external topical
applications, including without limitation all systemic, non-
systemic, and transdermal applications, but excluding application
to surgical wounds and the topical applications identified on
SCHEDULE 7.6.2, (b) external mucosal applications that are
primarily non-systemic, and (c) internal mucosal applications
that are primarily non-systemic solely as follows: (i) intraoral
applications (but excluding applications for oral surgery), (ii)
anorectal applications, and (iii) perineal/vaginal applications,
but in all cases excluding applications and claims under U.S.
Patent No. 5849327, (3) products utilizing the Microsponge or
Polytrap technologies not intended for application to humans or
animals (the "Industrial Applications"), (4) the topical pouch
technology licensed to Seller pursuant to the License Agreement
dated April 20, 2000, between Seller and U.S. Applications
Technologies, Inc. (the "Pouch Technology") and (5) other
products covered by or incorporating the claims of Seller Patents
(as defined in the Technology Transfer Agreement) transferred to
Purchaser pursuant to the Technology Transfer Agreement. For
purposes of clarity, the Transferred Business does not include,
by way of example and not by way of limitation: (A) subject to
Purchaser's exclusive rights to manufacture and load bulk
Microsponge microparticles and Polytrap microagglomerates and
further subject to Purchaser's rights under Section 7.11, the
development, sale and manufacture of any products utilizing the
Microsponge or Polytrap technologies for injectable, implantable
or systemic internal applications to humans and animals,
including without limitation oral surgery applications,
application to surgical wounds, and application to or within the
following areas for purposes that are not primarily non-systemic:
the oral cavity, gastrointestinal tract, nasal cavity, and
respiratory tract, except for the internal mucosal applications
described in 2(c) above, (B) any products not utilizing the
Microsponge or Polytrap technologies, except for the Pouch
Technology, and (C) Seller's existing calibration business as
presently conducted by its wholly-owned subsidiary APS Analytical
Standards, Inc. (all, collectively with the activities identified
on SCHEDULE 7.6.2, being the "Retained Applications"). Purchaser
is a direct subsidiary of ▇.▇. ▇▇▇▇▇▇▇ Corporation, a Delaware
corporation and an indirect subsidiary of Cardinal Health, Inc.,
an Ohio corporation ("Cardinal").
B. Subject only to the limitations and exclusions contained in
this Agreement and on the terms and conditions hereinafter set
forth, Seller desires to sell, and Purchaser desires to purchase,
Seller's assets relating to the Transferred Business.
NOW, THEREFORE, in consideration of the foregoing recitals and of
the respective covenants, agreements, representations and
warranties herein contained, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
ARTICLE I - PURCHASE AND SALE
-----------------------------
1.1 Agreement to Sell. At the Closing and except as otherwise
specifically provided in Section 2.3 hereof, Seller shall grant,
sell, convey, assign, transfer and deliver to Purchaser, upon and
subject to the terms and conditions of this Agreement, all right,
title and interest of Seller in and to the Purchased Assets, free
and clear of all mortgages, liens, pledges, security interests,
charges, claims, restrictions and other encumbrances and defects
of title of any nature whatsoever except Permitted Liens and
Permitted Exceptions.
1.1.1 Purchased Assets. The term "Purchased Assets" shall
mean the following business operations, assets, properties and
rights of Seller existing as of the date of the Closing, except
as otherwise expressly provided in Section 1.1.2 or 2.3 hereof:
(a) All real property owned by Seller and located in
Lafayette, Louisiana (a legal description of which is attached
hereto as SCHEDULE 1.1.1(a), the "Land"), together with (i) all
buildings, fixtures, facilities and other structures and
improvements located thereon (the "Improvements"), (ii) all
rights, privileges, hereditaments and appurtenances appertaining
to the Land or to any of the Improvements, and (iii) to the
extent constituting real property under applicable law, all
fixtures, installations, machinery, equipment and other property
attached thereto or located thereon (the Land, Improvements and
other property described in this Section 1.1.1(a) collectively
referred to as the "Plant");
(b) All of Seller's interests in real property leased
by Seller in Louisiana from another and used in connection with
the Transferred Business (the "Leased Real Property"), which
interests, together with the lease relating thereto (the "Real
Property Lease"), are more particularly described on SCHEDULE
1.1.1(b).
(c) (i) All fixtures, installations, machinery,
equipment and spare parts, to the extent not constituting real
property under applicable law, vehicles, furniture, tools, office
and laboratory equipment and other personal property located at
the Plant including without limitation the items listed in
SCHEDULE 1.1.1(c)(i) of the Disclosure Schedule and (ii) the
equipment and other items located at the Research Facility listed
on SCHEDULE 1.1.1(c)(ii) of the Disclosure Schedule, (the
personal property transferred under this paragraph collectively
referred to as the "Tangible Personal Property");
(d) Seller's inventories of finished goods, work in
process, raw materials, packaging materials, other materials and
supplies held for use in the ordinary course of operating the
Plant and operating the Tangible Personal Property located at the
Research Facility, including without limitation all inventory at
the Leased Real Property and in the possession of contractors
providing outsourcing services with respect to that inventory,
but excluding in each case obsolete goods, materials and supplies
(collectively, the "Inventory");
(e) All rights, title and interest in and to the
intellectual property set forth in SCHEDULE 1.1.1(e) of the
Disclosure Schedule including all goodwill associated therewith
and all claims against third parties for past infringement
relating thereto (the "Transferred Intellectual Property");
(f) All files, books, records, data, plans and other
information relating to the Purchased Assets or the Transferred
Business, including without limitation all manufacturing
processes and procedures, analytical procedures, quality
assurance and control procedures, sampling procedures, controlled
documents, the System Technology (as defined in the Technology
Transfer Agreement), operational and environmental systems and
records, standard operating procedures, policies or other
documents relating to environmental, health and safety matters,
customer and supplier lists, equipment manuals and maintenance
records, building and equipment blueprints and specifications,
drawings and designs, real estate surveys and reports, abstracts
of title, computer software, documentation and related object and
source code (to the extent owned or assignable by Seller), and
other data used or held for use in connection with the operation
of the Transferred Business (all of the foregoing items shall
collectively be referred to as the "Books and Records"),
including without limitation those items set forth on SCHEDULE
1.1.1(f). The Seller shall have a right to retain copies of all
Books and Records reasonably related to the Retained Applications
and, subject to the terms and conditions of this Agreement
including without limitation Sections 7.3, 7.6.2 and 8.9, shall
have a right to use and cross-reference information contained in
such Books and Records solely for the Retained Applications. The
parties acknowledge and agree that (i) items in addition to the
items set forth on SCHEDULE 1.1.1(f) may constitute Books and
Records pursuant to the foregoing definition, and each party
agrees to promptly inform the other party of any additional items
that such party believes should be added to the list of Books and
Records and (ii) if Seller is required by law or regulations to
maintain the originals of any Books and Records, Seller may
deliver copies of those Books and Records to Purchaser in full
satisfaction of its obligations hereunder;
(g) All of Seller's rights under each written or oral
contract, agreement, lease, plan, instrument, registration,
license, permit or approval, or other document, commitment,
arrangement, undertaking, practice or authorization entered into
primarily or exclusively in connection with the Transferred
Business or the Purchased Assets, including those listed on
SCHEDULE 3.1.17;
(h) All rights under express or implied warranties
relating to the Transferred Business or the Purchased Assets;
(i) All prepaid expenses and deposits relating to the
Transferred Business or the Plant other than the prepaid expenses
and deposits listed on SCHEDULE 1.1.2(e); and
(j) All other properties and assets of every kind and
nature, real or personal, tangible or intangible, owned by Seller
or its Affiliates and used or held for use exclusively or
primarily in connection with the Transferred Business and not
otherwise specifically excluded under Section 1.1.2. An
"Affiliate" of a person is a person that directly, or indirectly
through one or more intermediaries, controls or is controlled by,
or is under common control with, the person specified.
1.1.2 Excluded Assets. Notwithstanding the foregoing, the
Purchased Assets shall not include any of the following (the
"Excluded Assets"):
(a) The patents and trademarks set forth on SCHEDULE
1.1.2(a) of the Disclosure Schedule;
(b) The contract rights relating to the Transferred
Business or the Plant and set forth on SCHEDULE 1.1.2(b) of the
Disclosure Schedule;
(c) All tangible properties of Seller located at the
Research Facility that are not set forth on SCHEDULE 1.1.1(c)(ii)
of the Disclosure Schedule;
(d) All cash on hand and on deposit in banks, cash
equivalents and investments, and all accounts, notes and
royalties receivable;
(e) The prepaid expenses and deposits listed on
SCHEDULE 1.1.2(e);
(f) All tangible personal property disposed of or
consumed in the ordinary course of business between the date
hereof and the Closing Date;
(g) The corporate seals, certificates of
incorporation, minute books, stock books, tax returns, books of
account or other records having to do with the corporate
organization of Seller;
(h) All insurance policies relating to the
Transferred Business, including policies relating to property,
liability, business interruption, health and workers'
compensation and lives of officers of Seller;
(i) Pension, profit sharing or savings plans and
trusts and the assets thereof and any other benefit plan set
forth on SCHEDULE 3.1.19 of the Disclosure Schedule;
(j) Any contracts entered into by Seller or by which
Seller or any of the Purchased Assets is bound, other than the
Assumed Contracts; and
(k) Seller's rights under this Agreement and the
other Purchaser's Documents.
1.2 Agreement to Purchase. At the Closing, Purchaser shall
purchase the Purchased Assets from Seller, upon and subject to
the terms and conditions of this Agreement and in reliance on the
representations, warranties, covenants and agreements of Seller
contained herein, in exchange for the Purchase Price. In
addition, Purchaser shall assume at the Closing and agree to pay,
discharge or perform, as appropriate, the Assumed Liabilities.
Except for the Assumed Liabilities, Purchaser shall not assume or
be responsible for any liabilities or obligations of Seller or
otherwise relating to any of the Purchased Assets.
1.3 The Purchase Price.
1.3.1 Payment of Purchase Price. The Cash Payment and the
Earnout Payment are hereinafter sometimes referred to,
collectively, as the "Purchase Price" and shall be paid as
follows:
(a) Cash Payment. At the Closing, Purchaser shall
pay to Seller an aggregate amount equal to $25,000,000, reduced
by the amount of the liabilities assumed by Purchaser pursuant to
Section 1.4.1(b) (the "Cash Payment").
(b) Calculation of Earnout Payment. Purchaser agrees
to make additional payments (the "Earnout Payments" and each, an
"Earnout Payment"), to Seller based on the amount of Gross Profit
earned during the Earnout Years. Except as set forth in the next
two succeeding sentences, the aggregate amount of Earnout
Payments for all Earnout Years shall not exceed $26,500,000 (the
"Earnout Maximum"). The Earnout Maximum shall not apply to Gross
Profit from sales of products utilizing the Microsponge and
Polytrap technologies for Industrial Applications. For purposes
of determining the portion of an Earnout Payment attributable to
Gross Profit from sales of products utilizing the Microsponge and
Polytrap technologies for Industrial Applications, the percentage
of the Earnout Payment treated as paid with respect to such Gross
Profit shall be equal to the amount of revenues earned by
Purchaser and its Affiliates from the sale of such products to
parties that are not Affiliates of Purchaser divided by the total
revenues of Purchaser and its Affiliates taken into account in
calculating Gross Profit for that Earnout Year.
The "Earnout Years" means the three twelve-month periods
commencing on the first day of the month immediately following
the month in which the Closing occurs (or such other date as the
parties agree) and ending on the first, second and third
anniversary of such date and each such period is an "Earnout
Year."
"Gross Profit" shall mean the sum of (i) Net Sales less
Fully-Burdened Manufacturing Costs plus (ii) Applicable Affiliate
Profits.
"Net Sales" shall mean all revenues accrued to Purchaser,
determined in accordance with generally accepted accounting
principles ("GAAP"), arising directly out of activities of the
Transferred Business (and shall specifically include amounts
received from Seller pursuant to Section 7.6.3, all amounts
received by Purchaser under the Assumed Contracts (specifically
including amounts payable by ▇.▇. ▇▇▇▇▇▇▇ Corporation, an
Affiliate of Purchaser, to Seller pursuant to the Joint
Agreement), any royalties, license fees, option fees received
from third parties, and any amounts received from third parties
to buy-out any royalty obligations), less the exclusions set
forth below and the following deductions to the extent
attributable to such accrued revenues: (A) cash and trade
discounts actually allowed and taken; (B) credits or refunds
actually allowed for spoiled, damaged, outdated or returned
goods; and (C) sales taxes, import duties and other excise taxes.
"Net Sales" shall exclude (I) all revenues on which Purchaser is
obligated to pay a royalty or license fee to Seller under the
Technology Transfer Agreement, (II) all revenues arising out of
the supply of products to Seller, (III) all revenues of Purchaser
from the sale of products to Affiliates and (IV) all revenues
described in clause (x) of the definition of Applicable Affiliate
Profits.
"Fully Burdened Manufacturing Costs" shall mean all costs
incurred directly by the manufacturing or Plant warehousing and
Plant customer service functions of the Transferred Business and
all costs allocated to the manufacturing and Plant warehousing
and Plant customer service functions of the Transferred Business
as determined in accordance with GAAP as consistently applied in
the same manner as applied by Seller prior to the Closing except
for variations therefrom required to correct errors in GAAP as
applied by Seller and to reflect any changes in accounting
principles mandated by the Financial Accounting Standards Board
or the Securities and Exchange Commission, including without
limitation: (i) salaries and wages including without limitation
direct labor costs; (ii) payroll taxes; (iii) contract labor;
(iv) fringe benefits; (v) facilities (including leasehold
improvements and leased warehouse costs) and equipment related
expenses; (vi) recruitment and relocation; (vii) telephone,
computer networking and facsimile expenses; (viii) supplies and
direct materials; (ix) development and prototype materials; (x)
freight and transportation; (xi) training and education; (xii)
travel expenses; (xiii) data processing costs; (xiv) royalties
and amortization of license fees; (xv) insurance; (xvi)
professional services; (xvii) depreciation and amortization on
the Plant and equipment included in the Purchased Assets (based
on the depreciated book value of such assets as of the Closing
Date) plus depreciation and amortization of capital equipment
acquired after the Closing Date; (xviii) outside purchased and
outsourced services, including packaging, provided by persons
that are not Affiliates of Purchaser; (xix) Plant warehousing and
Plant customer service; and (xx) accounting costs, but excluding
all such costs to the extent they relate directly to the revenues
excluded from Net Sales pursuant to (I), (II), (III) and (IV) in
the definition of Net Sales above (provided that the exclusion of
(III) and (IV) shall not apply in the calculation of Applicable
Affiliate Profits).
For purposes of clarity and without limiting the express
provisions of this Agreement, the parties intend that, for
purposes of calculating the amount of any Earnout Payment, the
definitions of Net Sales, Fully Burdened Manufacturing Costs and
Gross Profit shall coincide as closely as possible to those used
by the Seller for the Transferred Business prior to the Closing,
except for changes thereto required to give effect to the express
terms of this Agreement and changes thereto to the extent
required to correct errors in GAAP as applied by Seller and to
reflect any changes in accounting principles mandated by the
Financial Accounting Standards Board or the Securities and
Exchange Commission.
Applicable Affiliate Profits shall be calculated with
respect to products arising directly out of the Transferred
Business sold by Purchaser or its Affiliates to third parties if,
prior to the sale of such products to an unrelated third party,
one or more Affiliate of Purchaser (A) performs manufacturing or
packaging or other applicable services with respect to the
product or (B) purchases from Purchaser components of the product
sold to the third party. "Applicable Affiliate Profits" shall
mean the excess of (x) revenues accrued by the entity that makes
the sale (whether it be Purchaser or an Affiliate of Purchaser)
of products arising directly out of the Transferred Business to
unrelated third parties from the sale of such products over (y)
the sum of (a) the Fully Burdened Manufacturing Costs
attributable to such products, (b) the fully burdened
manufacturing costs incurred by Affiliates of Purchaser to render
the manufacturing and packaging and other applicable services
with respect to such products, (c) gross profit earned by
Affiliates of Purchaser on the manufacturing and packaging and
other applicable services provided by Affiliates of Purchaser in
amounts not in excess of profits customarily earned by such
Affiliates in performing comparable services for unrelated third
parties, (d) cash and trade discounts actually allowed and taken;
credits or refunds actually allowed for spoiled, damaged,
outdated or returned goods; and sales taxes, import duties and
other excise taxes, in each case to the extent attributable to
such products. The calculation of Applicable Affiliate Profits
shall be determined in accordance with GAAP, as consistently
applied in the same manner as applied by the applicable Affiliate
of Purchaser prior to the Closing except for variations therefrom
required to correct errors in GAAP as applied by such Affiliate
and to reflect any changes in accounting principles mandated by
the Financial Accounting Standards Board or the Securities and
Exchange Commission. In calculating "Applicable Affiliate
Profits," the following shall be excluded: (I) all revenues on
which Purchaser is obligated to pay a royalty or license fee to
Seller under the Technology Transfer Agreement, (II) all revenues
arising out of the supply of products to Seller, (III) all
revenues arising out of sales of finished products by Affiliates
of Purchaser engaged in the distribution of products to
providers, retailers, pharmacies and others and (IV) all revenues
relating to products that are the subject of the Joint Agreement.
(i) The Earnout Payments shall be calculated for each
of the Earnout Years in accordance with the following schedule:
Earnout Payment for First Earnout Year
--------------------------------------
Amount of Gross Profit Earned Amount of Earnout Payment
----------------------------- -------------------------
< $[*] [*]
> or = to $[*] and < or $[*] plus [*]% of Gross Profit
= $[*] in excess of $[*]
> $[*] and < or = $[*] $[*] plus [*]% of Gross Profit
in excess of $[*]
> $[*] $[*] plus [*]% of Gross Profit
in excess of $[*]
Earnout Payment for Second Earnout Year
---------------------------------------
Amount of Gross Profit Earned Amount of Earnout Payment
----------------------------- -------------------------
< or = $[*] [*]
> $[*] and < or = $[*] [*]% of Gross Profit in excess
of $[*]
> $[*] and < or = $[*] $[*] plus [*]% of Gross Profit
in excess of $[*]
> $[*] $[*] plus [*]% of Gross Profit
in excess of $[*]
Earnout Payment for Third Earnout Year
--------------------------------------
Amount of Gross Profit Earned Amount of Earnout Payment
----------------------------- -------------------------
< or = $[*] [*]
> $[*] and < or = $[*] [*]% of Gross Profit in excess
of $[*]
> $[*] and < or = $[*] $[*] plus [*]% of Gross Profit
in excess of $[*]
> $[*] $[*] plus [*]% of Gross Profit
in excess of $[*]
(ii) At the written request of Seller following any
applicable three-month period, within 60 days following the end
of the first three-month period within the Earnout Years and each
subsequent three-month period within the Earnout Years (other
than a three-month period ending at the end of an Earnout Year),
Purchaser shall deliver to Seller a reasonably detailed statement
setting forth the calculation of Gross Profit, Net Sales, Fully
Burdened Manufacturing Costs and Applicable Affiliate Profits
with respect to that three-month period. Within 60 days
following the end of each Earnout Year, Purchaser shall deliver
to Seller a reasonably detailed statement setting forth the
calculation of the Earnout Payment owed to Seller with respect to
that Earnout Year, if any (an "Earnout Notice"), together with
the Earnout Payment calculated by Purchaser to be due (subject to
offset in accordance with Sections 6.4 and 7.6.4(d)). During the
21-day period following delivery of an Earnout Notice, Seller and
its representatives shall be permitted to discuss the preparation
of the Earnout Notice with Purchaser and its representatives.
Purchaser and its representatives shall reasonably cooperate with
Seller to enable Seller to review Purchaser's records and records
of Purchaser's Affiliates necessary in order to determine the
accuracy of the Earnout Payment, including but not limited to,
access and review of Purchaser's general ledger with respect to
the applicable revenues. Any information disclosed to or made
available to Seller or its representatives shall be subject to
the provisions of Section 8.9.1.
(iii) If, within 21 days after Purchaser delivers an
Earnout Notice to Seller, Seller does not notify Purchaser that
Seller objects to the calculation of the Earnout Payment, Seller
shall be deemed to have accepted the calculation of the Earnout
Payment for that Earnout Year and it shall be deemed to be final
and binding upon the parties.
(iv) If, within 21 days after Purchaser delivers an
Earnout Notice to Seller, Seller notifies Purchaser that Seller
believes modifications are required to be made to the amount of
the Earnout Payment or that Seller requires additional
information regarding the calculation of the Earnout Payment,
then Seller and Purchaser shall, for a period of 30 days after
Seller's notice, negotiate in good faith toward a resolution of
the disagreement. If such disagreement is resolved during such
30-day period, Purchaser shall pay to Seller the amount of any
shortfall under the agreed-upon Earnout Payment or Seller shall
pay Purchaser the amount paid by Purchaser in excess of the
agreed-upon Earnout Payment, in each case within 5 days after
such resolution. If such disagreement is not resolved by the end
of such 30-day period, the calculation of the proper Earnout
Amount shall be determined by an independent accounting firm of
national reputation selected by the Seller and acceptable to the
Purchaser (the "Independent Accountant"). In such event, the
determination by the Independent Accountant shall be made in
accordance with the terms of this Agreement and on the basis of
such procedures as the Independent Accountant, in its reasonable
judgment, deems applicable and appropriate, taking into account
the nature of the issues, the amount(s) in dispute, the terms of
this Agreement and the respective positions asserted by the
parties. The Independent Accountant shall review only the
calculation of the Earnout Payment and the basis on which it is
made, including if the calculations were made as required by
Section 1.3.1(b) and as promptly as practicable deliver to Seller
and Purchaser a statement in writing setting forth its
determination as to the proper calculation of the Earnout Payment
for the applicable Earnout Year, and such determination shall be
final and binding upon the parties without any further right of
appeal. Purchaser shall pay any short-fall in the Earnout
Payment as determined by the Independent Accountant to Seller
within 5 days after such determination, or Seller shall pay any
excess of the amount delivered by Purchaser over the Earnout
Payment as determined by the Independent Accountant to Purchaser
within 5 days after such determination. If the Independent
Accountant determines that Purchaser's calculation were correct
or would have resulted in any overpayment or in an underpayment
of less than 5% of the Earnout Payment determined by the
Independent Accountant, Seller shall be responsible for all
charges of the Independent Accountant, and if the Independent
Accountant determines that Purchaser's calculation would have
resulted in an underpayment of 5% or more of the Earnout Payment
determined by the Independent Accountant, then Purchaser shall be
responsible for all charges of the Independent Accountant.
(c) Payment Method. All payments under this
Agreement shall be payable by wire transfer of immediately
available funds to such account as the receiving party shall
designate in writing to the paying party.
1.3.2 Allocation of Purchase Price. The Purchase Price and
the Assumed Liabilities shall be allocated among the Purchased
Assets acquired hereunder as described on SCHEDULE 1.3.2 of the
Disclosure Schedule. Seller and Purchaser shall file all
applicable federal, state, local and foreign tax returns
consistent with the allocation set forth on SCHEDULE 1.3.2.
1.4 Liabilities and Obligations of Seller.
1.4.1 Assumed Liabilities. At the Closing, Purchaser shall
assume and agree to pay, discharge or perform, as appropriate,
the following, and only the following, liabilities and
obligations of Seller set forth in Sections 1.4.1(a) and (b) (the
"Assumed Liabilities"):
(a) all liabilities and obligations of Seller in
respect of the Assumed Contracts that are disclosed in the text
of the Assumed Contracts as delivered to Purchaser and accrue
subsequent to the effective time of the Closing, including
without limitation any obligation to supply product or components
of products to a third party pursuant to the terms of an Assumed
Contract identified on SCHEDULE 3.1.17; provided, that, without
limiting the generality of the foregoing, Purchaser shall not,
and does not, assume or agree to pay, discharge or perform (i)
any liabilities or obligations required to be performed by Seller
prior to the Closing Date, (ii) any liabilities or obligations
arising out of any breach by Seller of any provision of any
Assumed Contract prior to the Closing Date, or the date of
assignment if later, or (iii) amounts owed by Seller for goods
purchased by Seller, or services provided to Seller, prior to the
Closing Date; and
(b) the liability of Seller as of the Closing for
accrued vacation and accrued sick pay for Transferring Employees
who commence employment with Purchaser immediately following the
Closing.
1.4.2 Liabilities and Obligations Retained by Seller. In
no event, however, shall Purchaser assume or incur, nor does
Purchaser assume or incur, any liability or obligation of Seller,
under this Section 1.4 or otherwise, in respect of any of the
following:
(a) any malpractice, product liability or similar
claim for injury to person or property, regardless of when made
or asserted, which arises out of or is based upon any express or
implied representation, warranty, agreement or guarantee made by
Seller, or alleged to have been made by Seller, or which is
imposed or asserted to be imposed by operation of law, in
connection with any service performed or product licensed, sold,
distributed, leased or manufactured by or on behalf of Seller on
or prior to the Closing Date, in each case including without
limitation any claim relating to any product delivered in
connection with the performance of such service and any claim
seeking recovery for special, incidental or consequential
damages, including without limitation lost revenues or income;
(b) any federal, state or local income or other tax
(i) payable with respect to operation of the Purchased Assets or
the Transferred Business on or prior to the Closing, or the other
business, assets, properties or operations of Seller or any of
its subsidiaries, or (ii) incident to or arising as a consequence
of the negotiation or consummation of this Agreement and the
transactions contemplated hereby by Seller;
(c) any liability or obligation under or in
connection with Excluded Assets;
(d) any liability or obligation arising prior to or
as a result of the Closing to any present or former employees,
agents, independent contractors or consultants of Seller, whether
or not employed or engaged by Purchaser after the Closing,
including any liability for accrued salaries, wages, payroll
taxes, severance pay entitlements, health, medical, retirement,
vacation or deferred compensation benefits or any other
obligations or expenses arising out of or relating to the
employment by Seller of its employees or Seller's termination of
such employees, including the terminations effected by Seller
pursuant to this Agreement. Seller shall retain and shall assume
and discharge all liabilities and costs under the Consolidated
Omnibus Budget Reconciliation Act, as amended ("COBRA")
(including liabilities for violations thereof) as to those
employees of Seller that do not commence employment with
Purchaser immediately following the Closing for all "qualifying
events" (as defined in COBRA) occurring with respect to Seller's
employees and their dependents prior to and on the Closing Date,
including qualifying events that occur as a result of the sale of
the Purchased Assets contemplated by this Agreement;
(e) any liability or obligation of Seller arising or
incurred in connection with the negotiation, preparation and
execution of this Agreement and the transactions contemplated
hereby and the fees and expenses of counsel, accountants and
other experts;
(f) any liability or obligation with respect to the
return of goods manufactured on or prior to the Closing Date by
Seller and in the possession of suppliers, distributors,
resellers or customers;
(g) any liability or obligation with respect to the
grant of any equity interest in Seller or any other company or
any options, warrants or other rights to acquire any such
interest or any security exchangeable for or convertible into any
such interest, including without limitation any such obligation
expressly set forth in any Assumed Contract; or
(h) any other liability or obligation of Seller other
than as expressly set forth in Section 1.4.1.
1.5 Proration of Certain Items. With respect to certain
expenses incurred in the operation of the Transferred Business at
the Plant, the following prorations shall be made, with Seller
paying to Purchaser all prorations for which it is responsible at
the Closing:
1.5.1 Taxes. Real and personal ad valorem property taxes
shall be apportioned at the Closing as of the Closing Date, based
upon a calendar year (as opposed to a fiscal year) and based on
current tax bills if available and, if not available, based on
the most recent tax assessments and tax rates available with
appropriate subsequent adjustment when bills for the current year
are received. Seller shall be responsible for all Taxes accruing
prior to the Closing Date. If the Closing Date will occur before
the tax rate or assessment is fixed, the apportionment of such
real and personal ad valorem property taxes at the Closing shall
be upon the basis of 105% of the tax rate for the preceding year
applied to the most recent assessed valuation.
1.5.2 Utilities. All utilities, water and sewer charges up
to the Closing Date (based on meter readings three days prior to
the Closing Date, plus per diem adjustments to the Closing Date
on which the parties agree) shall be the responsibility of
Seller.
1.5.3 Personal Property Leases. The next payment due to
lessors after the Closing Date with respect to any leased
vehicles or equipment that are assigned to and assumed by
Purchaser shall be apportioned between Seller and Purchaser based
on the number of days in such period before and after the Closing
Date, with Seller being responsible for all such amounts accruing
prior to the Closing Date.
Appropriate cash payments by Seller or Purchaser, as the case may
require, shall be made from time to time, as soon as practicable
after the facts giving rise to the obligation for such payments are
known, to give effect to the prorations provided for in this Section
1.5.
ARTICLE II - CLOSING AND THIRD PARTY CONSENTS
---------------------------------------------
2.1 Time and Place of Closing. Subject to the provisions of
Section 8.1 hereof, the closing (the "Closing") of the
transactions contemplated by this Agreement shall take place at
10:00 A.M., local time, on July 25, 2000, or such other time as
the parties may mutually agree at the offices of ▇.▇. ▇▇▇▇▇▇▇,
Inc., ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ or
on such other date and at such other place as may be mutually
agreed upon in writing by Purchaser and Seller. The date of the
Closing is sometimes herein referred to as the "Closing Date."
At the Closing, possession and operating control of the Purchased
Assets shall be delivered and/or tendered by Seller to Purchaser
and title to the Purchased Assets shall pass to Purchaser upon
such delivery or tender of the Purchased Assets.
2.2 Items to be Delivered at Closing. At the Closing and
subject to the terms and conditions herein contained:
(a) Seller shall deliver to Purchaser the following:
(i) a duly executed (and notarized as appropriate)
Act of Cash Sale Document (Deed), Lease Assignment and Assumption
Agreement, Patent Assignment, Assignment of Trademarks, ▇▇▇▇ of
Sale and Assignment and Assumption Agreement in the forms
attached hereto as EXHIBITS ▇-▇, ▇-▇, ▇-▇, ▇-▇, A-5 and A-6,
respectively;
(ii) actual possession and operating control of
all of the Purchased Assets;
(iii) a duly executed Technology Transfer
Agreement in the form of EXHIBIT B hereto (the "Technology
Transfer Agreement");
(iv) a Support and Services Agreement in the form
of EXHIBIT C hereto (the "Support Agreement") duly executed by
Seller;
(v) a Supply Agreement in the form of EXHIBIT D
hereto (the "Supply Agreement") duly executed by Seller; and
(vi) properly endorsed certificates of title for
each of the motor vehicles included in the Tangible Personal
Property.
(b) Purchaser shall deliver to Seller the following:
(i) the Cash Payment in accordance with Section
1.3.1(a) hereof;
(ii) a duly executed Technology Transfer
Agreement;
(iii) a duly executed Support Agreement;
(iv) a duly executed Supply Agreement; and
(v) a duly executed Assignment and Assumption
Agreement and Lease Assignment and Assumption Agreement.
(c) At or prior to the Closing, the parties hereto
shall also deliver to each other the agreements, opinions,
certificates and other documents and instruments referred to in
Article V hereof.
2.3 Third Party Consents. To the extent that Seller's rights
under any Assumed Contract or other Purchased Asset may not be
assigned without the approval, consent or waiver of another
person, this Agreement shall not constitute an agreement to
assign the same if an attempted assignment would constitute a
breach thereof or be unlawful, and Seller shall use commercially
reasonable efforts to obtain any such required approval(s),
consent(s) and waiver(s) as promptly as possible. SCHEDULE 2.3
of the Disclosure Schedule sets forth and describes all of such
approvals, consents or waivers. If any such approval, consent or
waiver shall not be obtained or if any attempted assignment would
be ineffective or would impair Purchaser's rights under the
Assumed Contract or other Purchased Asset in question so that
Purchaser would not acquire the benefit of all such rights and if
Purchaser shall elect to effect the Closing notwithstanding its
rights under 5.1.7 to the contrary, Seller, to the maximum extent
permitted by law and the Assumed Contract or other Purchased
Asset, shall act after the Closing as Purchaser's agent in order
to obtain for it the benefit of all such rights thereunder and
shall cooperate with Purchaser in any other mutually agreeable
arrangements to provide the benefit of all such rights to
Purchaser.
ARTICLE III - REPRESENTATIONS AND WARRANTIES
--------------------------------------------
3.1 Representations and Warranties of Seller . Seller hereby
represents and warrants to Purchaser that, except as set forth on
a Disclosure Schedule delivered to Purchaser with this Agreement,
each of which exceptions shall specifically identify the relevant
subsection hereof to which it relates and shall be deemed to be
representations and warranties as if made hereunder (the
"Disclosure Schedule"):
3.1.1 Corporate Existence. Seller is a corporation duly
organized, validly existing and in good standing under the laws
of the State of Delaware. Seller is duly qualified to do
business and is in good standing as a foreign corporation in
California, Louisiana and each other jurisdiction where the
failure to so qualify would have a materially adverse effect on
the Transferred Business. SCHEDULE 3.1.1 of the Disclosure
Schedule sets forth the jurisdictions in which Seller is
qualified as a foreign corporation.
3.1.2 Corporate Power; Authorization; Enforceable
Obligations. Seller has the corporate power, authority and legal
right to execute, deliver and perform this Agreement and the
other agreements, documents and instruments required to be
delivered by Seller in connection with this Agreement. All
agreements, documents, and instruments required to be delivered
by Seller pursuant to this Agreement are sometimes collectively
referred to hereinafter as the "Seller's Documents". The
execution, delivery and performance by Seller of this Agreement
and of the Seller's Documents have been duly authorized by all
necessary corporate action on the part of Seller and its
directors and stockholders. The approval or authorization of this
Agreement and the transactions contemplated hereby by the
shareholders of Seller is not required. This Agreement has been,
and the Seller's Documents will be, duly executed and delivered
on behalf of Seller by duly authorized officers of Seller, and
this Agreement constitutes, and the Seller's Documents when
executed and delivered will constitute, the legal, valid and
binding obligations of Seller, enforceable against Seller in
accordance with their respective terms.
3.1.3 Validity of Contemplated Transactions, Etc. The
execution, delivery and performance of this Agreement and each of
Seller's Documents by Seller does not and will not violate,
conflict with or result in the breach (or would result in a
breach but for any requirement of notice or lapse of time or
both) of any term, condition or provision of, or require the
consent of any other person under, (a) assuming compliance with
the requirements of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976, as amended, and the rules and regulations thereunder
(the "HSR Act"), any existing law, ordinance, or governmental
rule or regulation to which Seller or any of the Purchased Assets
is subject, (b) any judgment, order, writ, injunction, decree or
award of any court, arbitrator or governmental or regulatory
official, body or authority which is applicable to Seller or any
of the Purchased Assets, (c) the certificate of incorporation and
bylaws, as amended, of, or any securities issued by, Seller, or
(d) any mortgage, indenture, agreement, contract, commitment,
lease, plan, Authorization, or other instrument, document or
understanding, oral or written, by which any of the Transferred
Business, the Purchased Assets or the Purchaser may be bound or
affected, or give any party with rights thereunder the right to
terminate, modify, accelerate or otherwise change the existing
rights or obligations of Seller thereunder. Except as aforesaid,
no Authorization, approval or consent of, and no registration or
filing with, any governmental or regulatory official, body or
authority is required in connection with the execution, delivery
or performance of this Agreement or any of the Seller's Documents
by Seller.
3.1.4 No Third Party Rights. Except for this Agreement or
agreements disclosed on SCHEDULE 3.1.17, there are no existing
agreements, options, commitments or rights with, of or to any
person to acquire any of Seller's assets, properties or rights
included in the Purchased Assets or any interest therein.
3.1.5 SEC Filings. Each filing by Seller with the
Securities and Exchange Commission, as amended prior to the date
hereof (each, an "SEC Filing") since December 31, 1998 complied
with the requirements of the Securities Act or the Exchange Act,
as the case may be, and the rules and regulations of the
Securities Exchange Commission (the "SEC") thereunder applicable
to such SEC Filings. The financial statements included in the SEC
Filings complied as to form in all material respects with
applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto, have been
prepared in accordance with GAAP applied on a consistent basis
during the periods involved (except as may be indicated in the
notes thereto or, in the case of the unaudited statements, as
permitted by Form 10-Q of the SEC) and fairly present in all
material respects the consolidated financial position of Seller
and its subsidiaries as at the dates thereof and the results of
its operations and cash flows for the periods then ended.
References in this Agreement to the "Balance Sheet" shall mean
the consolidated balance sheet of Seller and its subsidiaries as
of March 31, 2000 included with Seller's Form 10-Q as of that
date; and references in this Agreement to the "Balance Sheet
Date" shall be deemed to refer to March 31, 2000.
3.1.6 Financial Information. All financial information
provided by the Seller to the Purchaser, including without
limitation (i) all general ledger information and reports
relating to the Plant and the Assets for the quarter ended March
31, 2000 and the years ended December 31, 1999 and 1998,
including income statements, balance sheets, expense details by
cost center and period, cost of goods sold analyses, inventory
listings, accounts receivable listings, and sales ledgers; (ii)
the Seller's Budget information for the fiscal year ending
December 31, 2000; (iii) the Seller's fixed asset ledger reports
as of December 31, 1999, identifying original cost, accumulated
depreciation, net book value, depreciation methods, and estimated
useful lives of the Seller's fixed assets included in the
Transferred Business; (iv) cost accounting information; (v) the
unaudited pro forma balance sheet of the Transferred Business as
of the Balance Sheet Date and the related statements of income
for the three-month period then ended, which financial statements
are attached hereto as SCHEDULE 3.1.6(v); (vi) 1999 and 2000
Product Costing Sheets; (vii) 1999 and 2000 Revenue and Gross
Margin Analysis Summary by Quarter by Customer; and (viii) 1999
and 2000 Overhead Base Calculation (collectively, the "Financial
Information"):
(a) is true, complete and correct;
(b) in the case of historical information, is in
accordance with the books and records of Seller;
(c) in the case of historical information, presents
fairly the results of operations for the periods then ending and
other information concerning the condition of the Plant and the
other Purchased Assets as of the respective dates thereof; and
(d) in the case of forecasts, represents the
Seller's best projection of the information for the periods
covered thereby and is based upon reasonable assumptions.
3.1.7 Title to Property; Absence of Encumbrances, etc.
(a) SCHEDULE 1.1.1(a) of the Disclosure Schedule sets
forth a complete and accurate legal description of the Land. Set
forth on SCHEDULE 3.1.7 is a complete and accurate description of
all Encumbrances to which the Plant is subject, none of which
Encumbrances interferes with the present use of the Purchased
Assets or the full use of the Plant as currently configured.
Seller has delivered to Purchaser copies of all documents
relating to the foregoing Encumbrances. Seller has good and
marketable title to the Plant, free and clear of any Encumbrances
other than: (a) the Permitted Exceptions and (b) the other
Encumbrances described on SCHEDULE 3.1.7, all of which
Encumbrances that are marked with an asterisk will be removed at
or prior to Closing. As used herein, "Encumbrances" means all
mortgages, pledges, privileges, liens, servitudes, encroachments,
leases, easements, security interests and other encumbrances of
every nature, liens for taxes, assessments or other governmental
charges not yet due and payable, or presently payable without
penalty or interest, and any restrictions on the operation of the
Plant. True and complete copies of all deeds and, to the extent
they exist, all surveys, abstracts of title, title insurance
policies and other documents relating to the Plant have been
delivered to Purchaser prior to the date hereof.
(b) SCHEDULE 1.1.1(b) of the Disclosure Schedule sets
forth a complete and accurate description of the Leased Real
Property. A true and correct copy of the Real Property Lease has
been delivered to Purchaser. The Real Property Lease is valid,
binding and enforceable in accordance with its terms and is in
full force and effect, and there are no offsets or defenses by
either landlord or tenant thereunder. There are no existing
defaults, and no events or circumstances have occurred which,
with or without notice or lapse of time or both, would constitute
defaults, under the Real Property Lease. The assignment of the
Real Property Lease by Seller to Purchaser will not (i) permit
the landlord to accelerate the rent or cause the lease terms to
be renegotiated; (ii) constitute a default thereunder; (iii)
require the consent of the landlord or any third party; or (iv)
affect the continuation, validity, or effectiveness thereof or
the terms thereof.
(c) No part of any Improvement encroaches on any real
property not included in the Land. All water, sewer, gas,
electric, telephone lines and drainage facilities and all other
utilities (including the water treatment plant) (the "Utilities")
necessary for the operation of the Plant are installed to supply
the Plant, are of adequate size and capacity for the operation of
the Plant as currently conducted by Seller and as intended to be
conducted by Purchaser (assuming Purchaser intends to use the
Plant at up to full capacity and full employment and assuming
substantially the same product mix as conducted by Seller), and
all such Utilities are validly connected and in use in the
operation of the Plant.
(d) The Plant has been constructed and operated in
compliance with all applicable Federal, state and local laws,
regulations, ordinances, standards and orders, including, without
limitation, all zoning laws, building codes, regulations,
ordinances, standards and orders, except where the failure to
comply would not have a materially adverse effect on the
Transferred Business or the Purchased Assets.
(e) There is no pending or contemplated condemnation
action with respect to the Plant, or any part thereof. Seller
has not received written notice of, and, to the best of Seller's
knowledge, there is no pending or contemplated change in any
governmental regulation or private restriction applicable to the
Plant; any pending or threatened judicial or administrative
action or proceedings in any court or before any governmental
authority or arbitration board or tribunal; or any such action or
proceeding pending or threatened by adjacent landowners or other
persons, any of which would result in any material change in the
condition of the Plant, or any part thereof, or to the access to
the Plant. Seller has not received written notice of, nor, to the
best of Seller's knowledge are there, any contemplated
improvements to the Plant by any public authority, the costs of
which are to be assessed, as special taxes or otherwise, against
the Plant or the owner thereof in the future.
(f) Attached hereto as SCHEDULE 3.1.7(f) is a
commitment for a current ALTA Form B Owner's Title Insurance
Policy in the face amount equal to the portion of the Purchase
Price allocated to the Plant pursuant to SCHEDULE 1.3.2 and
issued by First American Title Insurance Company (such company,
the "Title Company" and such commitment, the "Title Commitment").
The Title Commitment shows Seller has good, merchantable and
indefeasible title to the Plant, in fee simple, free and clear of
all Encumbrances, excepting only: (a) zoning and building laws,
ordinances and regulations with which the Plant is in compliance;
(b) legal streets and highways; (c) building set back lines,
servitudes, rights-of-way, covenants, restrictions, conditions,
and easements, in each case of record, which do not (or will not)
interfere with Seller's current use of the Plant or Purchaser's
intended use of the Plant (assuming for purposes of this
provision that Purchaser intends to use the Plant at full
capacity and full employment to manufacture substantially the
same product mix as currently conducted by Seller); (d) the lien
of real estate taxes and assessments which are not then due and
payable; and (e) any Encumbrances to be released at or prior to
Closing (the encumbrances set forth in clauses (a) through (d),
the "Permitted Exceptions"). The Title Commitment sets forth the
state of title to the Plant, together with all exceptions or
conditions to such title which would appear in an owner's title
insurance policy as of the date of the Title Commitment, and
shall contain true, correct and legible copies of all instruments
referred to in the Title Commitment as conditions or exceptions
to title to the Plant. The Title Commitment contains the express
commitment of the Title Company to issue an owner's title
insurance policy to Purchaser in the amount equal to the portion
of the Purchase Price allocated to the Plant pursuant to SCHEDULE
1.3.2, insuring title to the Plant in Purchaser with the legal
description set forth in the Survey, subject only to the
Permitted Exceptions. All expenses, including reasonable legal
fees and expenses, incurred in connection with the Title
Commitment shall be borne by Purchaser.
(g) Attached hereto as SCHEDULE 3.1.7(g) is a survey
of the Plant prepared by Montagnet & ▇▇▇▇▇▇▇▇, Inc. dated May 24,
2000 (the "Survey") showing, among other things, the location of
all Improvements, fences, streams, ponds, lakes, rivers and other
water courses, easements, roads and rights-of-way; identifying
all easements by including the recording information for the
same; showing all encroachments upon the Plant and showing all
encroachments of the Improvements on other property and showing
in feet and inches the magnitude of such encroachments; and
showing thereon a legal description of the boundaries of the
Plant as a single, unified parcel of land by metes and bounds or
other appropriate legal description. The Survey states whether or
not the property appears on any U.S. Department of H.U.D. Flood
Insurance Boundary Map and, if so, shall state the "Flood Hazard"
designation. The Survey satisfies the "Minimum Standard Detail
Requirements for ALTA/ACSM Land Title Surveys," as adopted by
ALTA, ACSM and NSPS in October, 1999, and meets the accuracy
requirements of a Class A Survey as defined therein. The Survey
includes a certification from the surveyor to Purchaser and to
the Title Company that the Survey was made from an actual field
inspection; that it is correct; that there are no visible
discrepancies, conflicts, encroachments, overlapping of
improvements, easements, roads or rights-of-way except as shown
on the Survey; that the Survey is a true, correct, and accurate
representation of the Plant; and that the surveyor has undertaken
all steps required by applicable law or custom to confirm the
boundaries set forth in the legal description of the Plant as a
single, unified parcel of land, including without limitation
providing notices to each owner of land adjacent to the Plant.
All expenses, including reasonable legal fees and expenses,
incurred in connection with the Survey shall be borne by
Purchaser.
(h) Purchaser has objected to the Encumbrances
identified on SCHEDULE 3.1.7 of the Disclosure Schedule that are
marked with an asterisk. Seller shall, at its sole cost and
expense on or before the Closing satisfy such objections. In
addition, Purchaser shall have 10 days from the date Purchaser
discovers any Encumbrance arising or appearing of record on or
after May 22, 2000 to deliver in writing to Seller such
objections as Purchaser may have to any such Encumbrance. If
Purchaser shall raise any such objections to any such
Encumbrances within the time period set forth herein, Seller
shall, at its sole cost and expense and within 15 days
thereafter, or within such additional time period as Seller and
Purchaser may mutually agree upon, satisfy such objections,
provided that either party may agree or refuse to extend the cure
period in its sole and absolute discretion. All such objections
relating to monetary Encumbrances shall be satisfied by Seller at
or prior to the Closing and Seller shall diligently pursue the
satisfaction of any other objections, either by satisfying the
same or by obtaining title insurance against the same; provided,
however, Seller shall not provide any title indemnities to the
Title Company without Purchaser's prior written consent, which
consent shall not be unreasonably withheld. If Seller is unable
to satisfy all of the objections of Purchaser within the
foregoing identified time periods or such additional time period
as may be agreed upon, then Purchaser shall have the option of
either (a) terminating this Agreement by giving written notice of
termination to Seller within 15 days after the expiration of such
time periods or such additional time period as may be agreed
upon, or (b) knowingly taking title to the Plant subject to any
such additional title exception(s), in which event Purchaser
shall have no right to terminate this Agreement on the basis of
any such title exception(s), but shall retain all other rights
under this Agreement, including without limitation any applicable
rights of set-off hereunder, provided, however, in no event shall
Purchaser be obligated to take title to the Plant subject to any
monetary Encumbrance.
3.1.8 Inventory. The Inventory included on the Balance
Sheet or acquired since the date thereof was acquired and has
been maintained in the ordinary course of business; is of good
and merchantable quality; is not obsolete; is valued at an amount
not in excess of the lower of cost or net realizable value; is
not subject to any writedown or write-off other than reserves and
allowances set forth on the Balance Sheet or, with respect to
Inventory acquired or produced since the date thereof, reserves
and allowances proportionate to the reserves and allowances for
Inventory set forth on the Balance Sheet; and is located at the
Plant, the Leased Real Property or, in the case of Inventory
relating to operation of the purchased equipment located at the
Research Facility, the Research Facility. Seller is not under
any liability or obligation with respect to the return of
Inventory in the possession of suppliers, distributors, reseller
or customers, other than in the ordinary course of business and
in amounts consistent with Seller's past practice. The Inventory
shall be of a type and quality useable or saleable by Purchaser
in the ordinary course of performing its obligations under the
Assumed Contracts. All items included in the Inventory, (x) to
the extent they constitute raw materials or packaging materials,
shall have been inspected and accepted by Seller in accordance
with the applicable specifications in effect as of the Closing
Date, and (y) to the extent they constitute work in process or
finished goods, shall have been manufactured in accordance with
the applicable specifications in effect as of the Closing Date.
3.1.9 Taxes and Tax Returns. All federal, state, local and
foreign tax returns, reports, statements and other similar
filings required to be filed by Seller (the "Tax Returns") with
respect to any federal, state, local or foreign taxes,
assessments, interest, penalties, deficiencies, fees and other
governmental charges or impositions (including without limitation
all income tax, unemployment compensation, social security,
payroll, sales and use, excise, privilege, property, ad valorem,
franchise, license, school and any other tax or similar
governmental charge or imposition under laws of the United States
or any state or political subdivision thereof or any foreign
country or political subdivision thereof) (the "Taxes"), have
been timely filed with the appropriate governmental agencies in
all jurisdictions in which such Tax Returns are required to be
filed and all such Tax Returns properly reflect the liabilities
of Seller for Taxes for the periods, property or events covered
thereby. All Taxes, including without limitation those which are
called for by the Tax Returns or heretofore or hereafter claimed
to be due by any taxing authority from Seller, have been properly
accrued or paid and the amount of accruals for Taxes recorded by
Seller on its books is adequate to cover the Tax liabilities of
Seller. Seller has not received any notice of assessment or
proposed assessment in connection with any Tax Returns and there
are no pending tax examinations of or tax claims asserted against
Seller or any of the Purchased Assets. Seller has not extended,
or waived the application of, any statute of limitations of any
jurisdiction regarding the assessment or collection of any Taxes.
There are no tax liens (other than any lien for current Taxes not
yet due and payable) on any of the Purchased Assets. Seller has
no knowledge of any basis for any additional assessment of any
Taxes. Seller has made all deposits required by law to be made
by it with respect to employees' withholding and other employment
Taxes, including without limitation the portion of such deposits
relating to Taxes imposed upon Seller.
3.1.10 Books and Records. The Books and Records and the
accounts of Seller accurately and fairly reflect, in reasonable
detail, all of the transactions regarding the Plant, the
Transferred Business and the Purchased Assets. Seller has not
engaged in any transaction with respect to the Transferred
Business, maintained any bank account for the Transferred
Business or used any of the funds of Seller in the conduct of the
Transferred Business except for transactions, bank accounts and
funds which have been and are reflected in Financial Information.
3.1.11 Existing Condition. Since the Balance Sheet Date,
Seller has not:
(a) incurred any liabilities in connection with the
Transferred Business, other than liabilities incurred in the
ordinary course of the Transferred Business consistent with past
practice, or discharged or satisfied any lien or encumbrance
liabilities in connection with the Transferred Business, or paid
any liabilities, other than in the ordinary course of the
Transferred Business consistent with past practice, or failed to
pay or discharge when due any liabilities of which the failure to
pay or discharge has caused or will cause any material damage or
risk of material loss to it or the Purchased Assets or the
Transferred Business;
(b) sold, encumbered, assigned or transferred any
assets or properties which would have been included in the
Purchased Assets if the Closing had been held on the Balance
Sheet Date or on any date since then, except for the sale of
Inventory in the ordinary course of business consistent with past
practice and the grant of licenses that are in the ordinary
course of business and are set forth on SCHEDULE 3.1.17(j);
(c) mortgaged, pledged or subjected any of the
Purchased Assets to any mortgage, lien, pledge, security
interest, conditional sales contract or other Encumbrance of any
nature whatsoever, except for Permitted Liens and grants of
licenses that are in the ordinary course of business and are set
forth on SCHEDULE 3.1.17(j);
(d) made or suffered any amendment or termination of
any material agreement, contract, commitment, lease or plan
relating to the Purchased Assets or the Transferred Business to
which Seller is a party or by which Seller is bound, or canceled,
modified or waived any substantial debts or claims relating to
the Purchased Assets or the Transferred Business held by Seller
or waived any rights relating to the Purchased Assets or the
Transferred Business of substantial value, whether or not in the
ordinary course of business, except as set forth on SCHEDULE
3.1.11(d);
(e) suffered any damage, destruction or loss, whether
or not covered by insurance, (i) materially and adversely
affecting the Transferred Business or the prospects or condition
(financial or otherwise) of the Purchased Assets or the
Transferred Business or (ii) of any item or items carried on its
books of account individually or in the aggregate at more than
$[*], or suffered any repeated, recurring or prolonged shortage,
cessation or interruption of supplies or Utilities or other
services required to conduct the Transferred Business or operate
the Purchased Assets;
(f) suffered any material adverse change in the
Transferred Business, the Purchased Assets, or the prospects or
condition (financial or otherwise) of the Transferred Business or
the Purchased Assets;
(g) received notice or had knowledge of any
occurrence, event or condition which is reasonably likely to have
a material adverse effect on the Transferred Business or the
Purchased Assets or the prospects or condition (financial or
otherwise) thereof;
(h) made commitments or agreements for capital
expenditures or capital additions or betterments relating to the
Transferred Business or the Purchased Assets exceeding in the
aggregate $[*];
(i) increased the salaries or other compensation of,
or made any advance (excluding advances for ordinary and
necessary business expenses) or loan to, any of the Plant
Employees or Research Facility Employees or made any increase in,
or any addition to, other benefits to which any such persons may
be entitled, except for annual salary increases or bonus awards
made in the ordinary course of business consistent with past
practice; or
(j) changed any of the accounting principles followed
by it or the methods of applying such principles.
3.1.12 Title to Assets. Except as set forth on SCHEDULE
3.1.12 of the Disclosure Schedule, Seller has good, valid and
marketable title to all of its properties and assets, real,
personal and mixed, which would be included in the Purchased
Assets if the Closing took place on the date hereof, which it
purports to own, and has good leasehold title to those properties
and assets it purports to lease, including without limitation all
Tangible Personal Property, all Inventory, all Books and Records
and all Intellectual Property transferred hereunder or licensed
to Purchaser under the Technology Transfer Agreement, free and
clear of all mortgages, liens, pledges, security interests,
charges, claims, restrictions and other encumbrances and defects
of title of any nature whatsoever, except for liens that are
immaterial in character, amount, and extent, and which do not
detract in any manner from the value or interfere with the
present or proposed use of the Purchased Assets or conduct of the
Transferred Business (collectively, "Permitted Liens").
3.1.13 Condition and Sufficiency of Assets. All equipment
and other items of tangible property and assets which would be
included in the Purchased Assets if the Closing took place on the
date hereof (a) are in good operating condition and repair,
subject to normal wear and maintenance, (b) are usable in the
regular and ordinary course of the Transferred Business, (c) are
not in need of maintenance or repair other than ordinary,
recurring maintenance or repair that is not material in nature or
cost, (d) conform to all applicable Regulations and
Authorizations relating to their use and operation, (e) together
with the Transferred Intellectual Property and the Licensed
Intellectual Property, constitute all of the assets reasonably
needed by Purchaser to perform its obligations under the Assumed
Contracts and for the continued conduct of the Transferred
Business after the Closing Date. No person other than Seller
owns any equipment or other items of tangible property or assets
located at the Plant or necessary to the operation of the
Transferred Business, except for leased items disclosed in
SCHEDULE 3.1.17(e) of the Disclosure Schedule and items of
immaterial value.
3.1.14 Compliance with Regulations; Authorizations. Except
as set forth on SCHEDULE 3.1.14 of the Disclosure Schedule, since
January 1, 1998, Seller has complied with each, and is not in
violation of any, law, ordinance, governmental or regulatory rule
or regulation, judgment, decision or order, whether federal,
state, local or foreign, to which Seller with respect to the
Transferred Business, the Transferred Business, any of the
Purchased Assets or any employees of Seller engaged in the
Transferred Business are subject, including without limitation
the Federal Food, Drug and Cosmetic Act, 21 U.S.C. ss 301 (the
"FDC Act") (collectively, "Regulations"). Notwithstanding the
foregoing, Seller has complied with each, and is not in violation
of any, Regulations except where such failure to comply or
violation would not have a materially adverse effect on the
Transferred Business or any of the Purchased Assets. No notice
has been received by the Seller and, to the best of the Seller's
knowledge, no review or investigation is pending or threatened
for any alleged violation by Seller or any of its Affiliates of
any Regulation. Seller owns, holds, possesses and lawfully uses
in the operation of the Transferred Business all franchises,
licenses, permits, easements, rights, applications, filings,
registrations and other authorizations (collectively,
"Authorizations") which are in any manner necessary for the
conduct of the Transferred Business as now or previously
conducted or for the ownership and use of the Purchased Assets,
all of which are listed and described in SCHEDULE 3.1.14 of the
Disclosure Schedule, except where the failure to do so would not
have a materially adverse effect on the Transferred Business.
Seller is not in default, and Seller has not received any notice
of any claim of default, and to the best knowledge of the Seller,
no event has occurred or circumstance exists that may reasonably
give or serve as a basis for a default or the commencement of any
investigation, with respect to any Authorization. All such
Authorizations are renewable by their terms or in the ordinary
course of business without the need to comply with any special
qualification procedures or to pay any amounts other than routine
filing fees. None of the Authorizations will be adversely
affected by consummation of the transactions contemplated by this
Agreement. No person other than Seller owns or has any
proprietary, financial or other interest (direct or indirect) in
any Authorization which Seller owns, possesses or uses in the
operation of the Transferred Business. No Plant Employee or
Research Facility Employee has been debarred, suspended or denied
approval to participate in activities subject to regulation by
the Federal Food and Drug Administration or any comparable agency
of any foreign jurisdiction.
3.1.15 Litigation. No litigation, arbitration,
investigation or other proceeding of or before any court,
arbitrator or governmental or regulatory official, body or
authority is pending against Seller or, to the knowledge of
Seller, is threatened against Seller which relates to or could
reasonably be expected to have an adverse effect on the
Transferred Business, the Purchased Assets or the transactions
contemplated by this Agreement, nor to the knowledge of Seller is
there any reasonably likely basis for any such litigation,
arbitration, investigation or proceeding, the result of which
could adversely affect Seller with respect to the Transferred
Business, the Transferred Business, the Purchased Assets or the
transactions contemplated by this Agreement. Seller is not a
party to or subject to the provisions of any judgment, order,
writ, injunction, decree or award of any court, arbitrator or
governmental or regulatory official, body or authority which may
adversely affect Seller with respect to the Transferred Business,
the Transferred Business, the Purchased Assets or the
transactions contemplated by this Agreement.
3.1.16 Insurance. The assets, properties and operations of
Seller with respect to the Transferred Business and the Purchased
Assets are insured under various policies of property and
casualty insurance, all of which are described in SCHEDULE 3.1.16
of the Disclosure Schedule, which Schedule discloses (a) any and
all policies covering general liability, excess liability,
product liability, workers' compensation, auto liability, foreign
liability, property damage, directors and officers liability,
fiduciary liability, employment practices liability, professional
liability, errors and omissions liability, or environmental
liability of Seller or its employees, officers, directors,
property, or business, and (b) for each such policy the risks
insured against, insurer name, policy number, policy dates,
occurrence and aggregate coverage limits, retentions and
deductible amounts, premium, broker name, and whether the terms
of such policy provide for retrospective premium adjustments.
All such policies are in full force and effect in accordance with
their terms, no notice of cancellation has been received, and
there is no existing default or event which, with the giving of
notice or lapse of time or both, would constitute a default
thereunder. Such policies are in amounts which are adequate in
relation to the assets and liabilities of the Transferred
Business and all premiums to date have been paid in full. Seller
has not been refused any insurance, nor has its coverage been
limited, by any insurance carrier to which it has applied for
insurance or with which it has carried insurance during the past
five years. SCHEDULE 3.1.16 of the Disclosure Statement also
contains a true and complete list of all outstanding bonds and
other surety arrangements issued or entered into by Seller in
connection with the Transferred Business or the Purchased Assets.
3.1.17 Agreements, Contracts and Commitments. SCHEDULE
3.1.17 of the Disclosure Schedule contains accurate lists of the
following agreements, contracts, leases and other documents and
understandings (whether written or oral) to which Seller is a
party or has rights with respect to the Transferred Business or
by which any of the Purchased Assets may be bound or affected:
(a) any agreement, contract or commitment with any
Plant Employee, Research Facility Employee or consultant or
advisor who provides services relating to the Transferred
Business or the Purchased Assets;
(b) any agreement, contract or commitment for the
future purchase by Seller of products or services relating to the
Transferred Business which involves $100,000 or more;
(c) any agreement, contract or commitment by Seller
to sell or supply products or to perform services relating to the
Transferred Business which involves $100,000 or more or which
relates to any warranty provided by Seller;
(d) any partnership, joint venture, sales agency or
similar agreement, contract or commitment relating to the
Transferred Business;
(e) any lease under which Seller is either a lessor
or lessee or relating to any property at which any of the
Purchased Assets are located;
(f) any deed of trust, mortgage, lien or other
encumbrance affecting any of the Purchased Assets;
(g) any agreement, contract or commitment for any
capital expenditure or leasehold improvement for the Transferred
Business or the Purchased Assets in excess of $100,000;
(h) any agreement, contract or commitment limiting or
restraining any Plant Employee or Research Facility Employee from
engaging or competing in any manner or in any business, from
disclosing any confidential information, from misappropriating
any trade secrets or from employing or soliciting the employment
of any person;
(i) any license, franchise, computer service,
distributorship or other agreement which relates in whole or in
part to any software, patent, trademark, trade name, service ▇▇▇▇
or copyright or to any ideas, technical assistance or other know-
how of third parties used by Seller in the conduct of the
Transferred Business (the rights of Seller under such agreements
are referred to as "Third Party Intellectual Property");
(j) any license or other agreement relating in whole
or in part to any of Seller's patents, trademarks, copyrights,
proprietary software, ideas, or know-how used in the conduct of
the Transferred Business;
(k) any agreement containing covenants that in any
way purport to restrict the operation of the Transferred Business
or limit the freedom of the operator of the Transferred Business
to engage in any line of business or to compete with any person,
including without limitation any agreements containing any
exclusive or semi-exclusive arrangements; and
(l) any other agreement, contract or commitment
relating to the Transferred Business not otherwise listed on
SCHEDULE 3.1.17 of the Disclosure Schedule and which either (w)
continues over a period of more than six months from the date
hereof, (x) exceeds $100,000 in value, (y) is otherwise material
to Seller, the Transferred Business or the Purchased Assets or
(z) contains termination or other provisions triggered by the
transactions contemplated by this Agreement.
Each of the agreements, contracts, commitments,
leases, plans and other instruments, documents and undertakings
listed on SCHEDULE 3.1.17 of the Disclosure Schedule, or not
required to be listed thereon because of the amount thereof,
under which Purchaser is acquiring rights or obligations
hereunder, except for those listed on SCHEDULE 1.1.2 of the
Disclosure Schedule or as otherwise set forth on the Disclosure
Schedule, is referred to herein as an "Assumed Contract." Each
Assumed Contract is valid and enforceable against the parties
thereto in accordance with its terms, subject to, as to
enforcement, (i) to bankruptcy, insolvency, reorganization,
arrangement, moratorium, and other laws of general applicability
relating to or affecting creditor's rights, (ii) to general
principles of equity, whether such enforcement is considered in a
proceeding in equity or at law. With regard to each Assumed
Contract to which Seller is a party, Seller is, and to the
knowledge of Seller, all other parties thereto are, in compliance
with the provisions thereof; Seller is not, and to the knowledge
of Seller, no other party thereto is, in default in the
performance, observance or fulfillment of any obligation,
covenant or condition contained therein; and no event has
occurred which with or without the giving of notice or lapse of
time, or both, would constitute a default thereunder. Except as
set forth and described in SCHEDULE 2.3 of the Disclosure
Schedule, no Assumed Contract requires a consent of any party to
its assignment in connection with the transactions contemplated
by this Agreement.
3.1.18 Additional Information. SCHEDULE 3.1.18 of the
Disclosure Schedule contains accurate lists of the following:
(a) all inventory, equipment, leasehold improvements,
furniture and fixtures of Seller included in the Purchased Assets
as of the Balance Sheet Date, specifying such items as are owned
and such as are leased and, with respect to the owned property,
specifying its aggregate cost or original value and the net book
value as of the Balance Sheet Date and, with respect to the
leased personal property as to which Seller is lessee, specifying
the identity of the lessor, the rental rate and the unexpired
term of the lease; and
(b) the names and titles of and current annual base
salary or hourly rate for each person employed by Seller at the
Plant as of June 2, 2000 (the "Plant Employees"), each of the
individuals listed on SCHEDULE 3.1.18(b) of the Disclosure
Schedule (such listed individuals, the "Research Facility
Employees") and each temporary employee, leased employee,
independent contractor or other person providing services at the
Plant, and together with a statement of the full amount and
nature of any other remuneration, whether in cash or kind, paid
to each such person during the most recent fiscal year or payable
to each such person in the future, including the bonuses accrued
for each such person and the vacation and severance benefits to
which each such person is entitled.
3.1.19 Employee Benefit Plans and Labor Matters.
(a) SCHEDULE 3.1.19 of the Disclosure Schedule
contains a complete list of all employee benefit plans, whether
formal or informal, whether or not set forth in writing, and
whether covering one or more Plant Employee or Research Facility
Employee, sponsored or maintained by Seller. Seller has
delivered to Purchaser accurate and complete copies of each such
plan.
(b) Seller is not a party to any collective
bargaining agreement or any other agreement which determines the
terms and conditions of employment of any employee of Seller. No
collective bargaining agent has been certified as a
representative of any of the employees of Seller and no
representation campaign or election is now in progress with
respect to any of the employees of Seller. Seller has not
suffered any strike, slowdown, picketing or work stoppage by any
union or other group of employees affecting the business of
Seller; and to the knowledge of Seller, there are no efforts
underway or threats to effect any of same.
(c) Seller is in compliance with all federal, state
and local laws and regulations respecting employment and
employment practices, terms and conditions of employment and
wages and hours except where the failure to so comply would not
have a materially adverse effect on the Transferred Business, and
there is no unfair labor practice complaint against Seller
pending or, to the best knowledge of Seller, threatened.
(d) Except as set forth on SCHEDULE 3.1.19(d) of the
Disclosure Schedule, no representations have been made by Seller
or its employees or agents to employees of Seller with respect to
Purchaser's intentions to employ, or not to employ, Seller's
employees or with respect to the conditions of any such
employment.
3.1.20 Trade Relations. There exists no actual or, to the
knowledge of Seller, threatened termination, cancellation or
limitation of, or any adverse modification or change in, the
business or business relationship of Seller with any customer,
reseller or distributor or any group of customers, reseller or
distributors whose purchases are individually or in the aggregate
material to the Transferred Business, or with any supplier
relating to the Transferred Business, and there exists no present
condition or state of facts or circumstances that would adversely
affect the Transferred Business or prevent Purchaser from
conducting such business or business relationships with any such
customer, reseller or distributor, such group of customers,
reseller or distributors or any supplier in the same manner as
heretofore conducted by Seller. Seller has used reasonable
efforts to keep available for Purchaser the services of the
customers, suppliers, employees and contractors of Seller active
in the conduct of the Transferred Business.
3.1.21 Intellectual Property.
(a) The Transferred Intellectual Property, the
intellectual property licensed to Purchaser under the Technology
Transfer Agreement (the "Licensed Intellectual Property") and the
Third Party Intellectual Property constitute all of the
copyrights, patents, trademarks, trade names, fictitious business
names, logos, service marks, mask works, computer software,
customer lists, trade secrets, designs, plans, processes, know-
how, inventions and other intellectual property rights that are
material to the Transferred Business (the Transferred
Intellectual Property and the Licensed Intellectual Property are
collectively referred to as the "Intellectual Property"), and
Seller owns or has the right to use the Intellectual Property
free and clear of all liens, claims, charges or encumbrances.
(b) SCHEDULE 1.1.1(e) of the Disclosure Schedule sets
forth all Transferred Intellectual Property, and all federal,
state, local and foreign registrations, filings and applications
with respect to the Transferred Intellectual Property. Seller
owns and has the exclusive right to make, use, sell and license
the Transferred Intellectual Property. None of the Transferred
Intellectual Property is subject to any outstanding order, and no
action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand is pending or, to the knowledge of
Seller, threatened, which challenges the validity,
enforceability, ownership, use or licensing of the Transferred
Intellectual Property. Seller has not licensed to any third
party the intellectual property rights referenced on SCHEDULE
3.1.21(b).
(c) SCHEDULE 3.1.21(c) of the Disclosure Schedule
sets forth all licenses, sublicenses, assignments and other
agreements under which Seller is a licensor or assignor of any
Intellectual Property. Seller has performed (or will perform)
all obligations imposed upon it thereunder which are required to
be performed by it on or prior to the Closing Date, and neither
Seller nor to Seller's knowledge, any other party thereto, is in
breach of or default thereunder in any respect, nor is there any
event which with notice or lapse of time or both would constitute
a default thereunder. All of the licenses, assignments and other
agreements listed on SCHEDULE 3.1.21(c) of the Disclosure
Schedule are valid and enforceable against the parties thereto in
accordance with their respective terms, and will continue to be
so on identical terms immediately following the Closing, subject
to, as to enforcement, (i) to bankruptcy, insolvency,
reorganization, arrangement, moratorium, and other laws of
general applicability relating to or affecting creditor's rights,
(ii) to general principles of equity, whether such enforcement is
considered in a proceeding in equity or at law.
(d) Seller has not infringed upon or unlawfully or
wrongfully used any copyright, patent, trademark, trade name,
service ▇▇▇▇, mask work, computer software or trade secret owned
or claimed by another person, where such infringement or use
would have a materially adverse effect on the Transferred
Business, and Seller has not received any notice of any claim of
infringement or any other claim or proceeding relating to any
such copyright, patent, trademark, trade name, service ▇▇▇▇, mask
work, computer software or trade secret. No person other than
Seller owns or has any proprietary, financial or other interest,
direct or indirect, in any of the Transferred Intellectual
Property. Except as set forth on SCHEDULE 3.1.21(d) of the
Disclosure Schedule, to the knowledge of Seller, no person is
infringing upon or otherwise violating the intellectual property
rights of Seller. No litigation is pending and no claim has been
made against Seller or, to the knowledge of Seller, is
threatened, which contests the right of Seller to sell or license
to any person or use the Transferred Intellectual Property. To
the knowledge of Seller, no employee or consultant of Seller is
in violation of any requirement of law applicable to such
employee or consultant, or any term of any employment or
consulting agreement, any patent or invention disclosure
agreement, any non-competition or non-disclosure agreement, or
any other contract or agreement relating to the relationship of
such employee or consultant with Seller.
(e) Except as set forth on SCHEDULE 3.1.21(e) of the
Disclosure Schedule, Seller is not a party to or bound by any
license or other agreement requiring the payment by Seller or its
assigns of any material royalty payment, excluding licenses
relating to software licensed by Seller for use solely on the
computers of Seller for Seller's internal business purposes.
(f) None of the designs, plans, trade secrets, source
codes, inventions, processes, procedures, research records, know-
how and formulae of Seller with respect to the Transferred
Business, the value of which is contingent upon maintenance of
confidentiality thereof, has been disclosed, or is required to be
disclosed, to any person other than employees, consultants,
representatives and agents of Seller, all of whom are bound by
confidentiality or non-disclosure agreements.
(g) The computer software of Seller included in the
Intellectual Property (the "Software") performs in accordance
with the documentation and other written materials used in
connection with the Software, is in machine-readable form,
contains all current revisions of the Software, and includes all
object code and source code forms of the Software and all
computer programs, materials, processes, tapes and know-how
related to the Software. All of the Software correctly
recognizes and processes four-digit year-dates, including the
correct recognition and processing of February 29 during leap
years, and will continue to function properly with regard to
dates before, through and after the year 2000. Seller makes no
representation under this Section 3.1.21(g) with respect to the
general ledger software identified on SCHEDULE 1.1.2(b).
(h) Seller is the sole owner of the Software and
Seller has obtained assignments of all rights in and to the
Software from any developers or other parties who held any rights
in the Software. Seller has no obligation to compensate any
person for the development, use, sale or exploitation of the
Software nor has Seller granted to any other person or entity any
license, option or other rights to develop, use, sell or exploit
in any manner the Software, whether requiring the payment of
royalties or not.
3.1.22 Environmental Matters.
(a) Seller has obtained and holds all permits,
licenses and other Authorizations under Regulations relating to
pollution or protection of the environment, including Regulations
relating to emissions, discharges, releases or threatened
releases of pollutants, contaminants, chemicals, or industrial,
toxic or hazardous substances or wastes into the environment
(including without limitation ambient air, surface water,
groundwater, or land), or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, chemicals, or
industrial, toxic or hazardous substances or wastes
(collectively, "Environmental Regulations").
(b) Seller is in full compliance with all
Environmental Regulations and all terms and conditions of the
permits, licenses and other Authorizations issued under
Environmental Regulations, and Seller also is in full compliance
with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables
contained in Environmental Regulations or contained in any order,
decree, judgment, injunction, notice or demand letter issued,
entered, promulgated or approved thereunder. There is no civil,
criminal or administrative claim, action, demand, suit,
proceeding, study or investigation pending or, to the knowledge
of Seller, threatened against Seller relating to Environmental
Regulations (an "Environmental Claim").
(c) Seller has no knowledge of and has not received
notice of any past, present or future events, conditions,
circumstances, activities, practices, incidents, actions or plans
which may interfere with or prevent compliance or continued
compliance by Seller or the Transferred Business with any
Environmental Regulations or any order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated
or approved thereunder or which may give rise to any common law
or legal liability, or otherwise form the basis of any claim,
action, demand, suit, proceeding, hearing, study or
investigation, based on or related to the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport, or handling, or the emission, discharge, release or
threatened release into the environment, of any pollutant,
contaminant, chemical, or industrial, toxic or hazardous
substance or waste.
(d) Seller represents and warrants as of the Closing
Date that:
(i) Seller has not, and has no knowledge of any
other person who has, caused any Release, threatened Release, or
disposal of any Hazardous Material at the Land in any material
quantity; the Land is not adversely affected by any Release,
threatened Release, or disposal of a Hazardous Material
originating or emanating from any other property;
(ii) The Land does not contain and has not
contained any: (a) underground storage tank, (b) material
amounts of asbestos-containing building material, (c) landfills
or dumps, (d) hazardous waste management facility as defined
pursuant to RCRA or any comparable state law, or (e) site on or
nominated for the National Priority List promulgated pursuant to
CERCLA or any state remedial priority list promulgated or
published pursuant to any comparable state law;
(iii) Seller has no material liability for
response or corrective action, natural resource damage, or other
harm pursuant to CERCLA, RCRA, or any comparable state law;
Seller is not subject to, has no notice or knowledge of, and is
not required to give any notice of any Environmental Claim
involving Seller or the Land; there are no conditions or
occurrences at the Land which could form the basis for an
Environmental Claim against Seller or the Land;
(iv) The Land is not subject to any, and Seller
has no knowledge of any imminent, restriction on the ownership,
occupancy, use or transferability of the Land in connection with
any (a) Environmental Regulation or (b) Release, threatened
Release, or disposal of a Hazardous Material;
(v) There are no conditions or circumstances at
the Land which pose a risk to the environment or the health or
safety of persons; and
(vi) Seller has provided or otherwise made
available to Buyer any Environmental Record concerning Seller and
Land which Seller possesses or could reasonably have attained.
For purposes of this Section, the following terms shall have the
following meanings:
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended by the
Superfund Amendments and Reauthorization Act of 1986, 42 USC 9601
et seq., and any future amendments.
"Environmental Record" shall mean any document, correspondence,
pleading, report, assessment, analytical result, Authorization,
or other record concerning a Hazardous Material, compliance with
an Environmental Regulation, or other environmental subject.
"Hazardous Material" shall mean any substance, chemical,
compound, product, solid, gas, liquid, waste, byproduct,
pollutant, contaminant or material which is hazardous or toxic
and includes, without limitation, (a) asbestos, polychlorinated
biphenyls, and petroleum (including crude oil or any fraction
thereof) and (b) any such material classified or regulated as
"hazardous" or "toxic" pursuant to any environmental law.
"RCRA" shall mean the Solid Waste Disposal Act, as amended by the
Resource Conversation and Recovery Act of 1976 and Hazardous and
Solid Waste Amendments of 1984, 42 USC 6901 et seq., and any
future amendments.
"Release" shall mean any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching,
dumping, or disposing into the indoor or outdoor environment,
including, without limitation, the abandonment or discarding of
barrels, drums, containers, tanks, and other receptacles
containing or previously containing any Hazardous Material.
3.1.23 Restrictions. Seller is not a party to any Assumed
Contract, Authorization, judgment, order, writ, injunction,
decree or award which materially and adversely affects or, so far
as Seller can now reasonably foresee, may in the future
materially and adversely affect, the business operations, assets,
properties, prospects or condition (financial or otherwise) of
the Transferred Business or the Purchased Assets after
consummation of the transactions contemplated by this Agreement.
3.1.24 Year 2000 Compliance. All computer applications
(including all hardware and software and including those of its
suppliers and customers) that are material to the Transferred
Business and the Purchased Assets are able to perform properly
date-sensitive functions for all dates after January 1, 2000, and
Seller has experienced no interruption in the functionality of
such hardware and software, including those of its suppliers and
customers, attributable to improper performance of date-sensitive
functions for periods after January 1, 2000.
3.1.25 Availability of Documents. Seller has made available
to Purchaser copies of all documents, including without
limitation all agreements, contracts, commitments, leases, plans,
instruments, undertakings, Authorizations, permits, licenses,
patents, trademarks, trade names, service marks, copyrights and
applications therefor, listed in the Disclosure Schedule or
referred to herein. Such copies are true and complete and
include all amendments, supplements and modifications thereto or
waivers currently in effect thereunder.
3.1.26 Completeness of Disclosure. No representation or
warranty by Seller in this Agreement nor in any Disclosure
Schedule, certificate, statement, document or instrument
furnished or to be furnished to Purchaser pursuant hereto, or in
connection with the negotiation, execution or performance of this
Agreement, contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact
required to be stated herein or therein or necessary to make any
statement herein or therein not misleading.
3.2 Representations and Warranties of Purchaser. Purchaser
represents and warrants to Seller as follows:
3.2.1 Corporate Existence. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws
of the state of Delaware.
3.2.2 Corporate Power and Authorization. Purchaser has the
corporate power, authority and legal right to execute, deliver
and perform this Agreement, the Assignment and Assumption
Agreement and the other agreements, documents and instruments
required to be executed and delivered by Purchaser in accordance
with the provisions hereof (collectively, the "Purchaser's
Documents"). The execution, delivery and performance of this
Agreement and Purchaser's Documents by Purchaser have been duly
authorized by all necessary corporate action. This Agreement has
been duly executed and delivered by Purchaser and constitutes,
and Purchaser's Documents when executed and delivered will
constitute, the legal, valid and binding obligations of Purchaser
enforceable against Purchaser in accordance with their respective
terms.
3.2.3 Validity of Contemplated Transactions, Etc. The
execution, delivery and performance of this Agreement and
Purchaser's Documents by Purchaser does not and will not violate,
conflict with or result in the breach of any term, condition or
provision of, or require the consent of any other party to, (a)
assuming compliance with the HSR Act, any existing law,
ordinance, or governmental rule or regulation to which Purchaser
is subject, (b) any judgment, order, writ, injunction, decree or
award of any court, arbitrator of governmental or regulatory
official, body or authority which is applicable to Purchaser, (c)
the Certificate of Incorporation or bylaws of, or any securities
issued by, Purchaser, or (d) any mortgage, indenture, agreement,
contract, commitment, lease, plan or other instrument, document
or understanding, oral or written, to which Purchaser is a party
or by which Purchaser is otherwise bound or affected. Except as
aforesaid, no authorization, approval or consent of, and no
registration or filing with, any governmental or regulatory
official, body or authority is required in connection with the
execution, delivery and performance of this Agreement and
Purchaser's Documents by Purchaser.
3.2.4 Completeness of Disclosure. No representation or
warranty by Purchaser in this Agreement nor in any Disclosure
Schedule, certificate, statement, document or instrument
furnished or to be furnished to Seller pursuant hereto, or in
connection with the negotiation, execution or performance of this
Agreement, contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact
required to be stated herein or therein or necessary to make any
statement herein or therein not misleading.
3.3 Survival of Representations and Warranties. All
representations and warranties made by the parties in this
Agreement or in any Disclosure Schedule, certificate, statement,
document or instrument furnished hereunder or in connection with
the negotiation, execution or performance of this Agreement shall
survive the Closing for a period of three years except for (i)
the representations and warranties set forth in Section 3.1.9 and
Section 3.1.22 hereof and the Disclosure Schedules thereto, which
shall survive the Closing for a period which terminates upon the
lapse of the last statute of limitations that is applicable to
the matters covered by such representations and warranties, (ii)
the representations and warranties set forth in Section 3.1.21
and the Disclosure Schedules thereto relating to patents and
patent applications included within the Transferred Intellectual
Property shall survive the Closing for a period of five years,
and (iii) the representations and warranties set forth in
Sections 3.1.1 through 3.1.4, inclusive, Section 3.1.7 and
Section 3.1.12 hereof and the Disclosure Schedules thereto, which
shall survive the Closing and shall have no expiration.
Notwithstanding any investigation or audit conducted before or
after the Closing Date or the decision of any party to complete
the Closing, each party shall be entitled to rely upon the
representations and warranties set forth herein and therein.
ARTICLE IV - AGREEMENTS PENDING CLOSING
---------------------------------------
4.1 Agreements of Seller Pending the Closing. Seller covenants
and agrees with Purchaser that, pending the Closing and except as
otherwise agreed to in writing by Purchaser:
4.1.1 Business in the Ordinary Course. Seller shall cause
the Transferred Business to be conducted solely in the ordinary
course consistent with past practice.
4.1.2 Existing Condition. Seller shall not cause nor
permit to occur any of the events or occurrences described in
Section 3.1.11 hereof.
4.1.3 Maintenance of Physical Assets and Business
Relations. Seller shall continue to maintain and service the
physical and intangible assets included in the Purchased Assets
in the same manner as has been their past practice. Seller shall
use its reasonable commercial efforts to maintain the relations
and goodwill with suppliers, customers, the workforce and any
others having business relations relating to the Transferred
Business.
4.1.4 Legal Compliance. Seller shall comply with all
Regulations and Authorizations and all other laws, regulations
and ordinances applicable to the Transferred Business, the
Purchased Assets or Seller.
4.1.5 Updated Disclosure Schedules. Seller shall promptly
disclose to Purchaser in writing any information contained in the
representations and warranties or the Disclosure Schedules which,
because of an event occurring after the date hereof, is
incomplete or is no longer correct as of all times after the date
hereof until the Closing Date and shall, three days before the
Closing Date, document all such disclosures in an updated
Disclosure Schedule. Such updated Disclosure Schedule shall not
be deemed to amend or supplement the representations and
warranties of Seller or the Disclosure Schedules thereto for the
purposes of Article V of this Agreement unless Purchaser shall
have consented thereto in writing.
4.1.6 Conduct of Business. Seller shall use reasonable
efforts to conduct the Transferred Business and operate the
Purchased Assets in such a manner that on the Closing Date the
representations and warranties of Seller contained in this
Agreement shall be true as though such representations and
warranties were made on and as of such date. Furthermore, Seller
shall cooperate with Purchaser and use reasonable efforts to
cause all of the conditions to the obligations of Purchaser and
Seller under this Agreement to be satisfied on or prior to the
Closing Date. In the event that Seller determines that a
condition is not reasonably likely to be so satisfied, Seller
shall promptly notify Purchaser of such determination.
4.1.7 Exclusive Rights. From and after the date hereof
until the Closing or earlier termination of this Agreement
pursuant to Section 8.1 hereof, neither Seller nor any of its
representatives will directly or indirectly solicit or engage in
negotiations or discussions with, disclose any of the terms of
this Agreement to, accept any offer from, furnish any information
to, or otherwise cooperate, assist, or participate with, any
person (other than Purchaser and its representatives) regarding
any offer or proposal with respect to the acquisition by
purchase, merger, lease or otherwise of all or any part of the
Transferred Business, any of the Purchased Assets, or the
Licensed Intellectual Property or a material percentage of the
capital stock of Seller, and Seller shall promptly notify
Purchaser of any such discussion, offer or proposal.
4.1.8 Access. At all reasonable times prior to Closing,
Purchaser and its representatives shall have the right, upon
reasonable advance notice to ▇▇▇▇▇▇▇ ▇'▇▇▇▇▇▇▇ (or any other
representative of Seller designated by him), to: (a) examine,
inspect, and review the Transferred Business and the Purchased
Assets and all books, contracts, agreements, commitments, records
and documents of every kind relating to the Transferred Business
or the Purchased Assets, other than such information relating
solely to Excluded Assets; and (b) interview Plant Employees,
Research Facility Employees, suppliers and customers (including
prospective customers) of Seller relating to the Transferred
Business, accompanied by a representative assigned by ▇▇▇▇▇▇▇
▇'▇▇▇▇▇▇▇ to be present during such interviews, if such
accompaniment (in each instance) is deemed necessary or
appropriate by ▇▇▇▇▇▇▇ ▇'▇▇▇▇▇▇▇. Seller shall exercise
reasonable efforts to cooperate with Purchaser and its
representatives in conducting the reviews and other activities
described in this Section 4.1.8.
4.1.9 Press Releases. Except as required by applicable
law, Seller shall not make any public statement or release
concerning this Agreement or the transactions contemplated hereby
except in accordance with Section 4.3.1. If Seller determines
that it shall be required by law to make disclosure of any such
information, Seller shall advise Purchaser as soon as reasonably
practicable and in any event prior to the making of such
disclosure.
4.1.10 Pre-Closing Financial Statements. Seller shall cause
to be prepared and submitted to Purchaser at least ten business
days prior to the Closing Date (i) unaudited balance sheets of
both the Seller and the Transferred Business as of the last day
of the month which immediately precedes the Closing Date and (ii)
detailed, unaudited income statements for both the Seller and the
Transferred Business for the period from the Balance Sheet Date
through the last day of the month which immediately precedes the
Closing Date. Such statements shall be prepared in accordance
with the requirements for the Financial Information described in
Section 3.1.6 hereto and, to the extent reasonably practicable,
in accordance with GAAP (excluding footnotes) consistently
applied by Seller. Such financial information shall be subject
to the provisions of Section 8.9.2.
4.1.11 Specific Performance. The parties hereto recognize
and agree that in the event of a breach by either party of this
Article IV, money damages would not be an adequate remedy to the
nonbreaching party and, even if money damages were adequate, it
would be impossible to ascertain or measure with any degree of
accuracy the damages sustained by the nonbreaching party
therefrom. Accordingly, if there should be a breach or
threatened breach by either party of provisions of this Article
IV, the non-breaching party shall be entitled to an injunction
restraining a breaching party from any breach without showing or
proving actual damage sustained by the non-breaching party.
Nothing in the preceding sentence shall limit or otherwise affect
any remedies that the parties may otherwise have under applicable
law.
4.1.12 Actions of Seller. Seller shall cooperate with
Purchaser and use reasonable commercial efforts to cause all of
the conditions to the obligations of Purchaser and Seller under
this Agreement to be satisfied on or prior to the Closing Date.
In the event that Seller determines that a condition is not
reasonably likely to be so satisfied, Seller shall promptly
notify Purchaser of such determination.
4.2 Agreements of Purchaser Pending the Closing. Purchaser
covenants and agrees with Seller that, pending the Closing and
except as otherwise agreed to in writing by Seller:
4.2.1 Actions of Purchaser. Purchaser shall cooperate with
Seller and use reasonable commercial efforts to cause all of the
conditions to the obligations of Purchaser and Seller under this
Agreement to be satisfied on or prior to the Closing Date. In
the event that Purchaser determines that a condition is not
reasonably likely to be so satisfied, Purchaser shall promptly
notify Seller of such determination.
4.2.2 Press Releases. Except as required by applicable
law, Purchaser shall not make any public statement or release
concerning this Agreement or the transactions contemplated hereby
except in accordance with Section 4.3.1. If Purchaser determines
that it shall be required by law to make disclosure of any such
information, Purchaser shall advise Seller as soon as reasonably
practicable and in any event prior to the making of such
disclosure.
4.3 Mutual Agreements of Purchaser and Seller Pending the
Closing. Purchaser covenants and agrees with Seller that,
pending the Closing and except as otherwise agreed to in writing
by Seller:
4.3.1 Publicity. Promptly upon execution of this Agreement,
Purchaser and Seller shall issue a joint or coordinated public
announcement(s), substantially in the form of EXHIBIT F and shall
jointly conduct employee briefings regarding the transactions
contemplated by this Agreement. From time to time thereafter,
Purchaser and Seller may issue mutually acceptable joint or
coordinated press releases and shall reasonably cooperate with
each other to coordinate and approve the press release(s) and
additional employee briefings.
4.3.2 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Notification. Seller and
Purchaser will each prepare and file a notification with the
United States Justice Department (the "Justice Department") and
the Federal Trade Commission (the "FTC") as required by the HSR
Act, within three business days after the date of this Agreement.
Seller and Purchaser will cooperate with each other in connection
with the preparation of such notification, including sharing such
information as may be needed to complete such notification, and
providing a copy of such notification to the other prior to
filing. Each of Seller and Purchaser will keep confidential all
information about the other obtained in connection with the
preparation of such notification. Purchaser and Seller will
cooperate to respond to all inquiries and requests for further
information associated with the HSR filing. Purchaser and Seller
shall respond to as soon as reasonably possible any Request for
Additional Information and Documentary Material ("Second
Request") from the Justice Department or the FTC. Seller and
Purchaser shall each be responsible for one half of the filing
fee required under the applicable regulations.
ARTICLE V - CONDITIONS PRECEDENT TO THE CLOSING
-----------------------------------------------
5.1 Conditions Precedent to Purchaser's Obligations. The
obligation of Purchaser under this Agreement to effect the
Closing is subject to the fulfillment or satisfaction, prior to
or at the Closing, of each of the following conditions precedent
(unless waived in writing by Purchaser):
5.1.1 Representations and Warranties True as of the Closing
Date. The representations and warranties of Seller contained in
this Agreement or in any Disclosure Schedule, certificate,
statement, document or instrument furnished to Purchaser
hereunder or in connection with the negotiation, execution or
performance of this Agreement shall have been true on the date of
this Agreement without regard to any updated Disclosure Schedule
furnished to Purchaser after the date of this Agreement and prior
to the Closing, and shall be true on the Closing Date with the
same effect as though such representations and warranties were
made as of such date.
5.1.2 Compliance with this Agreement. Seller shall have
performed and complied with all agreements and conditions
required by this Agreement to be performed or complied with by
them prior to or at the Closing.
5.1.3 Closing Certificate. Purchaser shall have received a
certificate from Seller dated the Closing Date, certifying in
such detail as Purchaser may reasonably request that the
conditions specified in Sections 5.1.1 and 5.1.2 hereof have been
fulfilled and certifying that Seller has obtained all approvals,
consents and waivers required with respect to Seller or the
Transferred Business by Section 5.1.7 hereof.
5.1.4 Opinion of Counsel for Seller . Counsel for Seller
shall have delivered to Purchaser a written opinion, dated the
Closing Date, in the form of EXHIBIT E attached hereto with only
such changes as shall be in form and substance reasonably
satisfactory to Purchaser and its counsel.
5.1.5 Intentionally Omitted
5.1.6 No Threatened or Pending Litigation. On the Closing
Date, no suit, action or other proceeding, or injunction or final
judgment relating thereto, shall be known by Seller or Purchaser,
to be threatened or to be pending before any court or
governmental or regulatory official, body or authority in which
it is sought to restrain or prohibit or to obtain damages or
other relief in connection with this Agreement or the
consummation of the transactions contemplated hereby, and no
investigation shall be known by Seller or Purchaser to be ongoing
that might result in any such suit, action or proceeding.
5.1.7 Approvals, Consents and Waivers. Seller shall have
delivered to Purchaser, or there shall otherwise have been
obtained, all approvals, consents and waivers (including the
expiration of any applicable waiting period under applicable
Regulations, including under the HSR Act) from governmental and
other regulatory agencies, customers, suppliers, lessors and
other third parties which, in the reasonable judgment of
Purchaser, are necessary or required to consummate this Agreement
and the transactions contemplated hereby, including without
limitation those set forth on SCHEDULE 2.3 of the Disclosure
Schedule. Seller shall also have obtained all necessary
corporate approvals and authorizations.
5.1.8 Material Adverse Changes. Between the Closing Date
and the Balance Sheet Date, there shall have been no change in
the Transferred Business or the Purchased Assets or the business,
operations, prospects or condition (financial or otherwise)
thereof, that either alone or in the aggregate would have a
materially adverse effect on the Transferred Business.
5.1.9. Purchaser shall have obtained a title Title
Insurance; Survey insurance policy in an amount no less than the
amount allocated to the Plant on SCHEDULE 1.3.2 of the Disclosure
Schedule insuring good and marketable title in fee simple
absolute to the Plant, free and clear of all title defects or
objections, liens, claims, charges, security interests and other
Encumbrances of any nature whatsoever other than the Permitted
Exceptions. The Survey shall have been certified to Purchaser
showing the boundaries of and the location of the Land and the
locations of all Improvements, showing no encroachment by the
Improvements on the property of others.
5.1.10 Removal of Liens. All Encumbrances indicated to exist
on or with respect to any of the Purchased Assets by record
searches made by Purchaser prior to the Closing Date
(specifically including, but not limited to, those liens
described on SCHEDULE 3.1.12 of the Disclosure Schedule) shall
have been removed, and Seller shall have provided evidence
satisfactory to Purchaser of such removal.
5.1.11 Financial Information. The financial information
furnished to Purchaser pursuant to Section 4.1.10 shall not
reflect any material adverse change in the business, operations,
prospects or financial condition of the Transferred Business or
the Purchased Assets since the Balance Sheet Date.
5.1.12 Insurance. Seller shall have purchased extended
reporting period policies (tail coverage) for a period not less
than five years effective on the Closing Date for the
Products/Completed Operations and Clinical Trials "claims made"
coverage in the current Commercial General Liability and Umbrella
Liability policies. The limit of these policies shall be
$2,000,000 for each claim and in the aggregate for the general
liability tail policy and $10,000,000 for each claim and in the
aggregate for the umbrella tail policy. These policies shall
cover occurrences prior to the Closing which are made or reported
following the Closing. These policies shall name Purchaser,
Cardinal Health, Inc., and ▇▇ ▇▇▇▇▇▇▇ Corporation as additional
insureds or additional named insureds. Within 10 days following
the Closing, Seller shall provide to Purchaser a certificate of
insurance evidencing the foregoing insurance policies and within
30 days of Closing, Seller shall provide to Purchaser a copy of
the foregoing insurance policies.
5.2 Conditions Precedent to the Obligations of Seller. The
obligation of Seller under this Agreement to effect the Closing
are subject to the fulfillment or satisfaction, prior to or at
the Closing, of each of the following conditions precedent
(unless waived in writing by Seller):
5.2.1 Representations and Warranties True as of the Closing
Date. The representations and warranties of Purchaser contained
in this Agreement or in any schedule, certificate, statement,
document or instrument furnished to Seller hereunder or in
connection with the negotiation, execution or performance of this
Agreement shall be true on the Closing Date with the same effect
as though such representations and warranties were made as of
such date.
5.2.2 Compliance with this Agreement. Purchaser shall have
performed and complied with all agreements and conditions
required by this Agreement to be performed or complied with by
them prior to or at the Closing.
5.2.3 Closing Certificate. Seller shall have received a
certificate from Purchaser dated the Closing Date certifying in
such detail as Seller may reasonably request that the conditions
specified in Sections 5.2.1 and 5.2.2 hereof have been fulfilled.
5.2.4 No Pending Litigation. On the Closing Date, no suit,
action or other proceeding, or injunction or final judgment
relating thereto, shall be pending before any court or
governmental or regulatory official, body or authority in which
it is sought to restrain or prohibit or invalidate the
transactions contemplated by this Agreement or the consummation
of the transactions contemplated hereby.
5.2.5 Approvals, Consents and Waivers. All material
consents, approvals, authorizations, registrations and filings
required by any governmental authority shall have been obtained
prior to or at the Closing.
ARTICLE VI - INDEMNIFICATION
----------------------------
6.1 General Indemnification Obligations of Seller . From and
after the Closing, subject to the limitations of Section 6.3
hereof, Seller shall reimburse, indemnify and hold harmless
Purchaser, all other Affiliates of Cardinal ("Cardinal
Affiliates") and their respective successors and assigns and each
of their respective officers, agents, directors, shareholders,
insurers and attorneys (each an "Indemnified Purchaser Party")
against and in respect of any and all damages, losses,
deficiencies, liabilities, costs and expenses (including
reasonable legal fees and expenses) incurred or suffered by any
Indemnified Purchaser Party that result from, relate to or arise
out of:
(a) any and all liabilities and obligations of Seller of
any nature whatsoever, except for those liabilities and
obligations of Seller which Purchaser specifically assumes
pursuant to Section 1.4.1 of this Agreement, the Assignment and
Assumption Agreement, the Lease Assignment and Assumption
Agreement and the Technology Transfer Agreement;
(b) any and all actions, suits, claims, or legal,
administrative, arbitration, governmental or other proceedings
or investigations against any Indemnified Purchaser Party that
relate to the Seller, the Transferred Business or the Purchased
Assets in which the principal event giving rise thereto occurred
prior to the Closing Date or which result from or arise out of
any action or inaction prior to the Closing Date of Seller or any
director, officer, employee, agent, representative, consultant or
subcontractor of Seller, except for those liabilities and
obligations of Seller which Purchaser specifically assumes
pursuant to Section 1.4.1 of this Agreement, the Assignment and
Assumption Agreement, the Lease Assignment and Assumption
Agreement or the Technology Transfer Agreement;
(c) any misrepresentation, breach of warranty or
nonfulfillment of any agreement, obligation or covenant on the
part of Seller under this Agreement, the Technology Transfer
Agreement, the Support Agreement or from any misrepresentation in
or omission from any Disclosure Schedule (including the update
thereto delivered pursuant to Section 4.1.5), certificate,
statement, other document or instrument furnished to Purchaser
pursuant hereto or in connection with the negotiation, execution
or performance of this Agreement, the Technology Transfer
Agreement or the Support Agreement, in each case determined
without regard to any materiality or material adverse effect
qualification contained in any such representation or warranty;
and any and all actions, suits, claims, proceedings,
investigations, demands, assessments, audits, fines, judgments,
costs and other expenses, (including, without limitation,
reasonable legal fees and expenses) incident to any of the
foregoing or to the enforcement of this Section 6.1; or
(d) any claim by any person employed by Seller with respect
to any matter occurring prior to the Closing, including without
limitation, the termination of such person's employment by
Seller, and any severance payments or obligations alleged to be
imposed by contract or by law.
6.2 General Indemnification Obligation of Purchaser. From and
after the Closing, subject to the limitations of Section 6.3
hereof, Purchaser shall reimburse, indemnify and hold harmless
Seller and its successors or assigns and their respective
officers, agents, directors, shareholders, insurers and attorneys
(each an "Indemnified Seller Party") against and in respect of
any and all damages, losses, deficiencies, liabilities, costs and
expenses (including reasonable legal fees and expenses) incurred
or suffered by any Indemnified Seller Party that result from,
relate to or arise out of:
(a) any and all liabilities and obligations of Seller which
have been specifically assumed by Purchaser pursuant to Section
1.4.1 of this Agreement, the Assignment and Assumption
Agreement, the Lease Assignment and Assumption Agreement and the
Technology Transfer Agreement;
(b) any and all actions, suits, claims, or legal,
administrative, arbitration, governmental or other proceedings
or investigations against any Indemnified Seller Party that
relate to the Transferred Business in which the principal event
giving rise thereto occurred after the Closing Date or which
result from or arise out of any action or inaction after the
Closing Date of Purchaser or any shareholder, director, officer,
employee, agent, representative, consultant or subcontractor of
Purchaser, except for those liabilities or obligations which
Seller is obligated to indemnify the Indemnified Purchaser
Parties pursuant to Section 6.1 hereof; or
(c) any misrepresentation, breach of warranty or non-
fulfillment of any agreement, obligation or covenant on the part
of Purchaser under this Agreement, the Technology Transfer
Agreement or the Support Agreement or from any misrepresentation
in or omission from any schedule, certificate, statement,
document or instrument furnished to Seller pursuant hereto or in
connection with the negotiation, execution or performance of this
Agreement; the Technology Transfer Agreement or the Support
Agreement, in each case determined without regard to any
materiality or material adverse effect qualification contained in
any such representation or warranty; and any and all actions,
suits, claims, proceedings, investigations, demands, assessments,
audits, fines, judgments, costs and other expenses, (including,
without limitation, reasonable legal fees and expenses) incident
to any of the foregoing or to the enforcement of this Section
6.2.
6.3 Method of Asserting Claims, Etc. In the event that any
claim or demand for which Seller would be liable to an
Indemnified Purchaser Party hereunder is asserted against or
sought to be collected from an Indemnified Purchaser Party by a
third party, the Indemnified Purchaser Party shall promptly
notify Seller of such claim or demand, specifying the nature of
such claim or demand and the amount or the estimated amount
thereof to the extent then feasible (which estimate shall not be
conclusive of the final amount of such claim and demand) (the
"Claim Notice"). Seller shall have 30 days from the giving of
the Claim Notice in accordance with Section 8.8 hereof (the
"Notice Period") to notify the Indemnified Purchaser Party, (A)
whether or not it disputes its liability to the Indemnified
Purchaser Party hereunder with respect to such claim or demand
and (B) notwithstanding any such dispute, whether or not it
desires, at its sole cost and expense (subject to the limitation
in Section 6.3(b) regarding an Agreed Upon Settlement), to defend
the Indemnified Purchaser Party against such claim or demand.
(a) If Seller disputes its liability with respect to such
claim or demand or the amount thereof (whether or not Seller
desires to defend the Indemnified Purchaser Party against such
claim or demand as provided in paragraphs (b) and (c) below),
such dispute shall be resolved in accordance with Section 6.5
hereof. Pending the resolution of any dispute by Seller of its
liability with respect to any claim or demand, such claim or
demand shall not be settled (x) without the prior written consent
of the Indemnified Purchaser Party, which consent shall not be
unreasonably withheld and (y) by Purchaser or any Cardinal
Affiliate without having first provided Seller with written
notice of the terms of such settlement at least five days prior
to the effective date of such settlement.
(b) In the event that Seller notifies the Indemnified
Purchaser Party within the Notice Period that they desire to
defend the Indemnified Purchaser Party against such claim or
demand then, except as hereinafter provided, Seller shall have
the right to defend the Indemnified Purchaser Party by
appropriate proceedings, which proceedings shall be promptly
settled or prosecuted by them to a final conclusion in such a
manner as to avoid any liability to Indemnified Purchaser Party
for such claim; provided, however, Seller shall not, without the
prior written consent of the Indemnified Purchaser Party, consent
to the entry of any judgment against the Indemnified Purchaser
Party or enter into any settlement or compromise which does not
include, as an unconditional term thereof, the giving by the
claimant or plaintiff to the Indemnified Purchaser Party of a
release, in form and substance reasonably satisfactory to the
Indemnified Purchaser Party, from all liability in respect of
such claim or litigation. If any Indemnified Purchaser Party
desires to participate in any such defense or settlement, it may
do so at its sole cost and expense provided that such
participation shall be under the control of, and exclusively
through, Seller. If, in the reasonable opinion of the
Indemnified Purchaser Party, any such claim or demand or the
litigation or resolution of any such claim or demand involves an
issue or matter which could have a materially adverse effect on
the business, operations, assets, properties or prospects of the
Indemnified Purchaser Party, including without limitation the
administration of the tax returns and responsibilities under the
tax laws of any Indemnified Purchaser Party, then the Indemnified
Purchaser Party shall have the right to control the defense or
settlement of any such claim or demand after giving notice to
Seller of its intention to take control of the defense or
settlement of such claim or demand. If the Indemnified Purchaser
Party should elect to exercise such right, Seller shall have the
right to participate in the defense or settlement of such claim
or demand at its sole cost and expense provided that such
participation shall be under the control of, and exclusively
through, such Indemnified Purchaser Party; PROVIDED, that such
claim or demand shall not be settled without the prior written
consent of the Seller, which consent shall not be unreasonably
withheld; PROVIDED FURTHER that if the third party making any
such claim or demand has agreed or stated its willingness in
writing, to (x) settle such claim or demand in exchange solely
for the payment of money in an agreed upon amount ("Agreed Upon
Settlement") which Seller is willing to accept and agrees in
writing to reimburse and indemnify Indemnified Purchaser Party
for and (y) unconditionally release the Purchaser Indemnified
Parties with respect to the applicable claim or demand, but the
Indemnified Purchaser Parties do not accept such settlement, then
in no event shall Seller be liable to reimburse or indemnify
Indemnified Purchaser Parties with respect to such claim or
demand in excess of the amount of such Agreed Upon Settlement
plus the amount of the Indemnified Purchaser Parties' costs and
expenses incurred in connection with such claim or demand through
the date the Indemnified Purchaser Parties refused to accept the
Agreed Upon Settlement.
(c) (i) If Seller does not defend the Indemnified
Purchaser Party against such claim or demand, whether by not
giving the Indemnified Purchaser Party timely notice within the
Notice Period as provided above or the Indemnified Purchaser
Party has taken over control of such defense in accordance with
the provisions of subparagraph (b) above, then the amount of any
such claim or demand, or that portion thereof as to which such
defense is unsuccessful, in each case shall be conclusively
deemed to be a liability of Seller hereunder, unless Seller shall
have disputed its liability to the Indemnified Purchaser Party
hereunder, as provided in paragraph (a) above, in which event
such dispute shall be resolved as provided in Section 6.5 hereof.
(ii) In the event an Indemnified Purchaser Party should
have a claim against Seller hereunder that does not involve a
claim or demand being asserted against or sought to be collected
from it by a third party, the Indemnified Purchaser Party shall
promptly send a Claim Notice with respect to such claim to
Seller. If Seller notifies the Indemnified Purchaser Party
within the Notice Period that it disputes its liability with
respect to such claim or demand, such dispute shall be resolved
in accordance with Section 6.5 hereof. If Seller does not notify
the Indemnified Purchaser Party within the Notice Period that
they dispute such claim, the amount of such claim shall be
conclusively deemed a liability of Seller hereunder.
(d) All claims for indemnification by an Indemnified Seller
Party under this Agreement shall be asserted and resolved under
the procedures set forth above substituting in the appropriate
places "Indemnified Seller Party" for "Indemnified Purchaser
Party" and variations thereof and "Purchaser" for "Seller" and
variations thereof.
(e) All claims for indemnification for an alleged
misrepresentation or breach of warranty contained in Section 3.1
or Section 3.2 hereof or in any Disclosure Schedule, certificate,
statement, document or instrument furnished under this Agreement
or in connection with the negotiation, execution or performance
of this Agreement shall be asserted during the period in which
any such representation or warranty survives pursuant to Section
3.3 hereof.
(f) No party shall bring a claim for indemnification under
this Section 6.3 unless the aggregate amount of all claims
(excluding claims described in the next sentence) for such
indemnification exceeds $[*], in which event the party may bring
any and all claims for such indemnification without regard to
such dollar threshold, including the first dollar of any and all
claims for such indemnification, provided, however, that Seller
shall indemnify the Purchaser Indemnified Parties for any losses
or claims arising from the matters set forth on SCHEDULE 6.3(f)
from the first dollar and any such losses shall not be taken into
account in determining whether the foregoing $[*] threshold has
been met. Purchaser shall not bring a claim for indemnification
on the basis that Inventory included within the Purchased Assets
is not saleable unless the aggregate standard cost of nonsaleable
inventory exceeds $[*], in which event the amount indemnifiable
by Seller shall be the damages, losses, deficiencies,
liabilities, costs and expenses incurred by Purchaser in excess
of $[*] with respect to the nonsaleable inventory.
6.4 Payment. Upon the determination of liability under Section
6.3 or 6.5 hereof, the appropriate party shall pay to the other,
as the case may be, within ten days after such determination, the
amount of any claim for indemnification made hereunder. In the
event that the indemnified party is not paid in full for any such
claim pursuant to the foregoing provisions promptly after the
other party's obligation to indemnify has been determined in
accordance herewith, it shall have the right, notwithstanding any
other rights that it may have against any other person, to setoff
the unpaid amount of any such claim against any amounts owed by
it or its Affiliates under this Agreement, under the Technology
Transfer Agreement or any other agreements entered into pursuant
to this Agreement, Seller's Documents or Purchaser's Documents.
6.5 Dispute Resolution. If there is a dispute relating to a
claim under this Article VI, Purchaser and Seller shall use good
faith efforts to attempt to resolve such claim in accordance with
this Section 6.5. The parties will promptly seek to resolve any
such claim by negotiations between executives of the parties and
an authorized representative of each party shall meet at least
once to attempt to resolve any such dispute. Either party may
initiate this procedure by requesting the other to meet within
fifteen days after the date of such request, with such meeting to
be held in Basking Ridge, New Jersey if the procedure is
initiated by Seller and in Redwood City, California if the
procedure is initiated by Purchaser, or such other location as
may be mutually agreed. If the dispute is not resolved within
twenty days after the initial meeting, the parties agree first to
try in good faith to settle the dispute by mediation administered
by the American Arbitration Association under its Commercial
Mediation Rules before resorting to arbitration, litigation, or
some other dispute resolution procedure. If the dispute has not
been resolved pursuant to such mediation within sixty days after
the commencement of mediation, or if either party will not
participate in mediation, then either party may initiate
litigation. Nothing herein shall restrict the right of a party
to seek a preliminary injunction or other judicial relief if in
that party's judgment such judicial proceedings are necessary or
appropriate to avoid irreparable damage. All applicable statutes
of limitation shall be tolled while the procedures specified in
this Section 6.5 are pending. The parties will take all such
actions, if any, which may be necessary or appropriate to
effectuate such tolling.
6.6 Compliance with Bulk Sales Laws. Purchaser and Seller
hereby waive compliance by Purchaser and Seller with the bulk
sales law and any other similar laws in any applicable
jurisdiction in respect of the transactions contemplated by this
Agreement. Seller shall indemnify Purchaser from, and hold it
harmless against, any liabilities, damages, costs and expenses
resulting from or arising out of (a) the parties' failure to
comply with any of such laws in respect of the transactions
contemplated by this Agreement, (b) any action brought or levy
made as a result thereof, other than those liabilities which have
been expressly assumed, on such terms as expressly assumed, by
Purchaser pursuant to Section 1.4.1 of this Agreement, the
Assignment and Assumption Agreement, the Lease Assignment and
Assumption Agreement and the Technology Transfer Agreement, or
(c) sales or similar taxes resulting from the transfer to
Purchaser of the Purchased Assets.
6.7. Other Rights and Remedies. The indemnification rights
of the parties under this Article VI are independent of and in
addition to such other rights and remedies as the parties may
have at law or in equity or otherwise for any misrepresentation,
breach of warranty or failure to fulfill any agreement or
covenant hereunder on the part of any party hereto, including
without limitation the right to seek specific performance, an
injunction, rescission or restitution, none of which rights or
remedies shall be affected or diminished hereby.
ARTICLE VII - POST CLOSING MATTERS
----------------------------------
7.1 Employee Benefits.
7.1.1 General. After the Closing Date, Purchaser shall make
available to (i) each of the Plant Employees who accepts
employment with Purchaser and (ii) each of the Research Facility
Employees who accepts employment with Purchaser that portion of
all sick pay and accrued vacation time (or pay in lieu thereof)
which have been accrued on behalf of that employee as of the
Closing Date, in each case in accordance with such policies as
Purchaser may adopt from time to time. Seller shall be
responsible for and shall promptly discharge any liability or
obligation for any other benefits (including the arrangements,
plans and programs set forth in SCHEDULE 3.1.19 of the Disclosure
Schedule), wages, salaries and other amounts which have been
accrued on behalf of that employee (or is attributable to
expenses properly incurred by that employee) as of the Closing
Date, and Purchaser shall assume no liability therefor. No
portion of the assets of any plan, fund, program or arrangement,
written or unwritten, heretofore sponsored or maintained by
Seller (and no amount attributable to any such plan, fund,
program or arrangement) shall be transferred to Purchaser, and
Purchaser shall not be required to continue any such plan, fund,
program or arrangement after the Closing Date; PROVIDED that any
such Plant Employees or Research Facility Employees who wishes to
transfer any amounts held for the benefit of such person in
Seller's 401(k) plan to a 401(k) plan maintained by Purchaser
shall be allowed to make such transfer in accordance with the
terms of the applicable plan maintained by Purchaser or its
applicable Affiliate. The amounts payable on account of all
benefit arrangements shall be determined with reference to the
date of the event by reason of which such amounts become payable,
without regard to conditions subsequent, and Purchaser shall not
be liable for any claim for insurance, reimbursement or other
benefits payable by reason of any event which occurs prior to the
Closing Date. All amounts payable by Seller directly to Plant
Employees or Research Facility Employees who accept employment
with Purchaser, or to any fund, shall be paid by Seller within 30
days after the Closing Date to the extent that such payment is
not inconsistent with the terms of such fund, program,
arrangement or plan. For purposes of Purchaser's 401(k) plan and
vacation policies, all employees of Seller who are employed by
Purchaser on or after the Closing Date shall be granted credit
for years of service with Seller.
7.1.2 Stay Bonus Plan. Seller has adopted the Stay Bonus
Plan (the "Stay Bonus Plan"), an accurate and complete copy of
which is attached as EXHIBIT G hereto. As and when amounts are
payable under the Stay Bonus Plan to Transferring Employees who
commence employment with Purchaser, Purchaser shall pay the
amounts due, less applicable deductions and withholdings, to such
Transferring Employees. Purchaser shall also remit to any
governmental authorities the applicable withholdings and
deductions from such bonus amounts and shall pay the applicable
employer contributions relating to such bonus payments. From
time to time after the Closing, Purchaser shall notify Seller in
writing of the amount paid by Purchaser with respect to the Stay
Bonus Plan and Seller shall promptly reimburse Purchaser for all
such amounts. In the event Seller shall fail promptly to
reimburse Purchaser for any amounts paid by Purchaser in
connection with the Stay Bonus Plan, Purchaser may offset such
amounts against any amounts payable by Purchaser to Seller under
this Agreement or the Technology Transfer Agreement. The parties
acknowledge and agree that solely for purposes of determining
amounts payable under the Stay Bonus Plan, employment by a
Transferring Employee with Purchaser shall be treated as
continued employment by such person with Seller following a
Change of Control (as such term is used in the Stay Bonus Plan)
and the Closing Date shall be deemed to be the Effective Date (as
such term is used in the Stay Bonus Plan). The parties further
acknowledge and agree that all Transferring Employees other than
the persons identified on SCHEDULE 7.1.2 are eligible for
payments under the Stay Bonus Plan.
7.2 Transferring Employees; Non-Solicitation. As of the Closing
Date, Purchaser shall offer employment to, and Seller shall use
its best efforts to assist Purchaser in employing as new
employees of Purchaser, the Plant Employees, the Research
Facility Employees and the contractors who performed services at
or for the benefit of the Plant immediately prior to the Closing
and who Purchaser desires to employ (the "Transferring
Employees"). As a condition to such employment by Purchaser,
Purchaser may require each Transferring Employee to execute and
deliver to Purchaser the "Certificate of Compliance with
Cardinal's Business Ethics Program," the form of which
Certificate has previously been provided to Seller. Purchaser
shall notify Seller of the identity of the Transferring Employees
prior to the Closing. Seller shall terminate, effective as of
the Closing Date, all employment or contracting arrangements it
has with any of the Transferring Employees. Until the fifth
anniversary of the Closing Date, Seller shall not directly or
indirectly (except on behalf of and for the benefit of Purchaser
and Purchaser's Affiliates) solicit employment of or offer
employment to any (a) Transferring Employee, (b) individual who
is then an employee of Purchaser or any Affiliate of Purchaser,
or (c) Transferring Employee who has terminated employment with
Purchaser or any Affiliate of Purchaser without the consent of
Purchaser or such other Affiliate within 180 days of such
solicitation or offer.
7.3 Covenant Not to Compete. In order to assure Purchaser the
full benefits of the Purchased Assets and the Transferred
Business, Seller agrees that until the [*] anniversary of the
Closing Date (or until the [*] anniversary of the Closing Date as
to the matters identified in clause (b) below), neither it nor
any of its Affiliates shall, directly or indirectly, own, manage,
operate, join, control or participate in the ownership,
management, operation or control of, any business whether in
corporate, proprietorship or partnership form or otherwise
(except that the mere ownership of less than one percent of a
publicly traded company shall not be prohibited) competitive with
the Transferred Business conducted anywhere in the world, other
than by ownership of the Licensed Intellectual Property and the
fulfillment of its existing obligations and rights under the
Ortho License Agreement and the RPR License Agreement. Without
limiting the generality of the foregoing, Seller expressly
covenants that (a) neither it nor any of its Affiliates shall,
until the [*] anniversary of the Closing Date, license, have
licensed, sublicense, have sublicensed, manufacture, have
manufactured, sell or have sold any prescription, over-the-
counter, cosmetic or other product for any use which is
competitive to the Transferred Business other than for the
Retained Applications, and (b) neither it nor any of its
Affiliates shall, until the [*] anniversary of the Closing Date,
develop or have developed any prescription, over-the-counter,
cosmetic or other product for any use which is competitive to the
Transferred Business other than for the Retained Applications.
The parties hereto specifically acknowledge and agree that the
remedy at law for any breach of the foregoing will be inadequate
and that Purchaser, in addition to any other relief available to
it, shall be entitled to temporary and permanent injunctive
relief without the necessity of proving actual damages. In the
event that the provisions of this Section 7.3 should ever be
determined to exceed the limitation provided by applicable law,
then the parties hereto agree that such provisions shall be
reformed to provide, as nearly as permissible, the limitations
intended to be provided hereby. In the event that the provisions
of this Section 7.3 should ever be determined to be wholly or
partially unenforceable in any jurisdiction, then the parties
hereto agree that such determination shall not be a bar to or in
any way diminish Purchaser's right to enforce such provisions in
any other jurisdictions. Notwithstanding anything herein to the
contrary, the restrictions set forth in this Section 7.3 shall
not prohibit any person that becomes an Affiliate of Seller after
the Closing in connection with a merger or similar transaction in
which the stockholders of Seller prior to such transaction own
less than a majority of the voting power of the surviving entity
from continuing to engage in activities conducted by such person
prior to the transaction or transactions pursuant to which that
person becomes an Affiliate of Seller.
7.4 Discharge of Obligations. From and after the Closing Date,
Seller shall pay and discharge, in accordance with past practice
but not less than on a timely basis, all obligations and
liabilities of Seller that have not been expressly assumed by
Purchaser under Section 1.4.1 of this Agreement, the Assignment
and Assumption Agreement, the Lease Assignment and Assumption
Agreement and the Technology Transfer Agreement.
7.5 Payments Received. Seller and Purchaser agree that after
the Closing they will hold and will promptly transfer and deliver
to the other, from time to time as and when received by them, any
cash, checks with appropriate endorsements (using their best
efforts not to convert such checks into cash), or other property
that they may receive on or after the Closing which properly
belongs to the other party, including without limitation any
insurance proceeds, and will account to the other for all such
receipts.
7.6 Ortho and RPR Contracts.
7.6.1 Contracts. Seller is party to (i) that certain
Development and License Agreement dated April 14, 1992 with Ortho
Pharmaceutical Corporation ("Ortho") (the "Ortho License
Agreement"), (ii) that certain Supply Agreement dated January 1,
1996 with Ortho (the "Ortho Supply Agreement"), and (iii) that
certain Development and License Agreement dated March 19, 1992
with ▇▇▇▇▇-▇▇▇▇▇▇▇ ▇▇▇▇▇ Inc. ("RPR"), as amended as of March 16,
1998 and December 22, 1999 (as amended, the "RPR License
Agreement"). The parties have agreed that the Ortho Supply
Agreement shall be included within the Purchased Assets, and at
the Closing, Purchaser shall assume all rights and obligations
thereunder in accordance with Section 1.4.1(a). The Ortho License
Agreement and the RPR License Agreement shall be Excluded Assets.
Seller and Purchaser shall reasonably cooperate with each other
and execute and deliver to the other party such other instruments
and documents and take such other actions as may be reasonably
requested from time to time by the other party as necessary or
appropriate to perform their respective obligations, and to enjoy
their respective rights, under the foregoing agreements with
Ortho and RPR.
7.6.2 Limitation Regarding Agreements with Ortho and RPR.
After the date hereof, Seller shall not engage in any activity
with respect to the Ortho License Agreement, the Ortho Supply
Agreement or the RPR License Agreement other than the
continuation of the activities conducted under such agreements as
of the date hereof or the development of new applications for
chemical compounds expressly identified in such agreements and
set forth on SCHEDULE 7.6.2. Without limiting the generality of
the foregoing, Seller shall not, directly or indirectly, license
any intellectual property relating to the Transferred Business to
Ortho or RPR or their respective Affiliates and shall not commit
to develop, license, manufacture or have manufactured any
products for Ortho or RPR or their respective Affiliates under
such agreements other than products which have as the primary
active ingredient the chemical compounds expressly identified in
such agreements.
7.6.3 Gross Profit Guaranty. Seller hereby guaranties to
Purchaser that, for each consecutive twelve-month period
beginning on the commencement of the Guaranty Term and on each
anniversary of such date during the Guaranty Term and any shorter
period beginning on the last such anniversary and ending at the
end of the Guaranty Term (each a "Guaranty Period"), the Gross
Profit derived by Purchaser (i) from products supplied under the
Ortho Supply Agreement and (ii) from any products supplied by
Purchaser in connection with or arising under the RPR License
Agreement (collectively, such products, the "Guaranteed
Products"), using standard costs for such products then in effect
(the "Ortho and RPR Gross Profit"), shall be no less than [*]% of
Net Sales of such Guaranteed Products on a combined basis.
"Guaranty Term" shall mean the period commencing on the first day
of the first Earnout Year and ending on the earlier to occur of
(i) the end of any Guaranty Period if the Ortho and RPR Gross
Profit equals or exceeds [*]% of the Net Sales of the Guaranteed
Products during that Guaranty Period and the immediately
preceding Guaranty Period, (ii) the [*] of the Ortho Supply
Agreement or any supply agreement arising in connection with the
RPR License Agreement, or (iii) the [*] anniversary of the
commencement of the Guaranty Term. Following the end of each
Guaranty Period in which the Ortho and RPR Gross Profit is less
than [*]% of Net Sales of the Guaranteed Products, Seller shall,
in accordance with the procedures set forth in Section 7.6.4, pay
to Purchaser the amount that, when added to the Gross Profit
derived by Purchaser from the Guaranteed Products during such
Guaranty Period, would be required to yield an Ortho and RPR
Gross Profit of [*]% of Net Sales of the Guaranteed Products for
such period (each such payment, an "Ortho and RPR Profit
Payment"). Amounts earned by or otherwise paid to any Affiliate
of Purchaser for performing any additional services with respect
to the products manufactured for Ortho under the Ortho Supply
Agreement, including without limitation any packaging services,
shall be expressly excluded from the calculation of Ortho and RPR
Gross Profit. Any amounts paid by Seller under this Section
7.6.3 shall be included in Net Sales for purposes of determining
the Earnout Payments under Section 1.3.1(c). For purposes of
this Section 7.6.3, revenues derived by Purchaser from the sale
of products to Ortho or RPR shall be deemed to constitute Net
Sales, not as revenues taken into account in calculating
Applicable Affiliate Profits.
7.6.4 Procedures Regarding Payment of Gross Profit Guaranty.
(a) Within 60 days following the end of each Guaranty
Period, Purchaser shall deliver to Seller a reasonably detailed
statement setting forth the calculation of the Ortho and RPR
Gross Profit and the amount of the Ortho and RPR Profit Payment
owed by Seller with respect to that period, if any (such notice,
an "Ortho and RPR Profit Notice"). During the 21-day period
following delivery of an Ortho and RPR Profit Notice, Seller and
its representatives shall be permitted to discuss the preparation
of the Ortho and RPR Profit Notice with Purchaser and its
representatives.
(b) If, within 21 days after Purchaser delivers an
Ortho and RPR Profit Notice to Seller, Seller does not notify
Purchaser that Seller objects to the calculation of the Ortho and
RPR Profit Payment, Seller shall be deemed to have accepted the
calculation of the Ortho and RPR Profit Payment for that period
and it shall be deemed to be final and binding upon the parties.
In such event, Seller shall pay the Ortho and RPR Profit Payment
to Purchaser within 5 days after the expiration of such 21-day
period.
(c) If, within 21 days after Purchaser delivers an
Ortho and RPR Profit Notice to Seller, Seller notifies Purchaser
that Seller believes modifications are required to be made to the
amount of the Ortho and RPR Profit Payment or that Seller
requires additional information regarding the calculation of the
Ortho and RPR Profit Payment, then Seller and Purchaser shall,
for a period of 30 days after Seller's notice, negotiate in good
faith toward a resolution of the disagreement. If such
disagreement is resolved during such 30-day period, Seller shall
pay the agreed upon Ortho and RPR Profit Payment to Purchaser
within 5 days after such resolution. If such disagreement is not
resolved by the end of such 30-day period, the calculation of the
proper Ortho and RPR Profit Payment shall be determined by the
Independent Accountant. In such event, the determination by the
Independent Accountant shall be made in accordance with the terms
of this Agreement and on the basis of such procedures as the
Independent Accountant, in its reasonable judgment, deems
applicable and appropriate, taking into account the nature of the
issues, the amount(s) in dispute, the terms of this Agreement and
the respective positions asserted by the parties. The Independent
Accountant shall review only the calculation of the Ortho and RPR
Profit Payment and the basis on which it is made, including if
the calculations were made in accordance with the terms of this
Agreement and as promptly as practicable deliver to Seller and
Purchaser a statement in writing setting forth its determination
as to the proper calculation of the Ortho and RPR Profit Payment
for the applicable period, and such determination shall be final
and binding upon the parties without any further right of appeal.
Seller shall pay the Ortho and RPR Profit Payment determined by
the Independent Accountant to Purchaser within 5 days after such
determination. If the Independent Accountant determines that
Purchaser's calculations were correct or would have resulted in
any underpayment or in an overpayment of less than 5% of the
Ortho and RPR Profit Payment determined by the Independent
Accountant, Seller shall be responsible for all charges of the
Independent Accountant, and if the Independent Accountant
determines that Purchaser's calculations would have resulted in
an overpayment of 5% or more of the Ortho and RPR Profit Payment
determined by the Independent Accountant, then Purchaser shall be
responsible for all charges of the Independent Accountant.
(d) Purchaser may, at its election, offset against any
amount payable under this Agreement or under the Technology
Transfer Agreement the amount of any Ortho and RPR Profit
Payment.
7.7 Further Assurances. Seller from time to time after the
Closing, at Purchaser's request, shall execute, acknowledge and
deliver to Purchaser such other instruments of conveyance and
transfer and shall take such other actions and execute and
deliver such other documents, certifications and further
assurances as Purchaser may reasonably require in order to vest
more effectively in Purchaser, or to put Purchaser more fully in
possession of, any of the Purchased Assets, or to better enable
Purchaser to complete, perform or discharge any of the
liabilities or obligations assumed by Purchaser at the Closing
pursuant to Section 1.4.1 of this Agreement, the Assignment and
Assumption Agreement, the Lease Assignment and Assumption
Agreement and the Technology Transfer Agreement. Each party
hereto will cooperate with the other party and execute and
deliver to the other party such other instruments and documents
and take such other actions as may be reasonably requested from
time to time by the other party as necessary to carry out,
evidence and confirm the intended purposes of this Agreement.
7.8 Specific Performance. The parties hereto recognize and
agree that in the event of a breach by Seller of this Article
VII, money damages would not be an adequate remedy to Purchaser
and, even if money damages were adequate, it would be impossible
to ascertain or measure with any degree of accuracy the damages
sustained by Purchaser therefrom. Accordingly, if there should
be a breach or threatened breach by Seller of provisions of this
Article VII, Purchaser shall be entitled to an injunction
restraining Seller from any breach without showing or proving
actual damage sustained by Purchaser. Nothing in the preceding
sentence shall limit or otherwise affect any remedies that
Purchaser may otherwise have under applicable law.
7.9 Insurance. In the event that Purchaser or its Affiliates
desire after the Closing to pursue coverage under any insurance
policy referenced in Section 5.1.12, Seller shall use reasonable
commercial efforts and shall take all steps reasonably necessary
to assist in securing coverage under such policies. Seller shall
not after the Closing unfairly, improperly or necessarily
exhaust, commute, release, novate or otherwise interfere with or
prejudice any right Purchaser or its Affiliates may have to
coverage under any policy of insurance.
7.10 Intentionally Omitted.
7.11 Future Manufacturing Rights
7.11.1 Right of First Refusal. Effective as of the
Closing, for a period of five years after the Closing Date,
Seller hereby irrevocably grants Purchaser a right of first
refusal to manufacture any Proprietary Products. For purposes of
this Section 7.1, "manufacture" shall include the production of
final dosage forms and the production of inserts and the
packaging of products for sale or distribution. "Proprietary
Product" means any pharmaceutical product in oral dosage form for
which Seller for its own account commences any human testing.
Prior to manufacturing or engaging any Affiliate of Seller or any
third party to manufacture a Proprietary Product for use in human
clinical trials or for commercial sale, Seller shall first offer,
in writing, to Purchaser the right to manufacture the Proprietary
Product on the same terms as Seller proposes to any other party
or parties (the "Written Offer"). The Written Offer shall set
forth all material terms and conditions of any such proposed
manufacturing arrangement and shall be accompanied by a statement
in which Seller identifies any third party intellectual property
rights required to manufacture the Proprietary Product without
infringing any third party's intellectual property rights.
Purchaser shall have 45 days after its receipt of the Written
Offer to give Seller written notice of its intent to manufacture
the Proprietary Product on the terms and conditions set forth in
the Written Offer. If Purchaser accepts such offer, the parties
shall use all good faith and reasonable efforts to enter into a
manufacturing agreement on the terms set forth in the Written
Offer. If Purchaser either declines the Written Offer or fails
to respond to Seller in writing within such 45 day period, Seller
may enter into an agreement with a third party whereby such third
party agrees to manufacture the Proprietary Product within 180
days after the Written Offer was given to Purchaser, provided
that such manufacturing agreement is on terms and conditions no
more favorable, individually or in the aggregate, to the third
party than those that were offered to Purchaser in the Written
Offer. If (a) the manufacture of a Proprietary Product requires
rights to use intellectual property of a person other than
Purchaser, Seller and their respective Affiliates, (b) none of
Seller or its Affiliates has the right to sublicense the
applicable intellectual property rights to Purchaser, and (c)
Purchaser does not have and cannot obtain such rights within the
45 day period set forth above, then Seller shall use reasonable
commercial efforts to cause the third party to grant a license to
Purchaser on commercially reasonable terms sufficient to enable
Purchaser to manufacture the applicable Proprietary Product. If
the third party is unwilling to grant such license to Purchaser
within 30 days after Purchaser has notified Seller that Purchaser
is unable to obtain a license to the applicable intellectual
property, Purchaser shall be deemed to have declined the Written
Offer to the extent that the manufacture of the Proprietary
Product requires rights to use such third party intellectual
property. Nothing herein shall be deemed to limit Purchaser's
exclusive rights to produce and load bulk Microsponge
microparticles and Polytrap microagglomerates.
7.11.2 Right of First Negotiation. Effective as of the
Closing, for a period of five years after the Closing Date,
Seller hereby irrevocably grants Purchaser a right of first
negotiation with respect to the development and manufacture of
Third Party Proprietary Products. "Third Party Proprietary
Product" means any pharmaceutical product in oral dosage form
incorporating or utilizing softgel capsules or fast dissolve
technologies for which a third party commences any human testing
utilizing any intellectual property rights granted by Seller (or
any of the Seller's Affiliates) before or after the Closing
(other than any rights exclusively granted to Purchaser hereunder
or under the Technology Transfer Agreement). Prior to granting
any rights to any third party to use any intellectual property
rights of Seller (or of any of its Affiliates) and prior to
participating in any detailed negotiations relating to the
development and manufacture of any Third Party Proprietary
Product, Seller shall inform the third party of Seller's
obligations under this Section 7.11.2 and shall notify Purchaser
in writing of the existence of the third party (and, if not
contractually prohibited, the identity of the third party) and
the therapeutic class of the Third Party Proprietary Product
(and, if not contractually prohibited, the active ingredient) and
proposed dosage form. Purchaser shall keep such information
confidential. Seller shall use commercially reasonable efforts to
include Purchaser in any negotiations relating to the development
and manufacture of the Third Party Proprietary Product. For
purposes of this Section 7.11.2, "development" shall mean
developing the formulation for delivery of the applicable active
compound utilizing softgel capsules or fast dissolve
technologies.
7.11.3 Intent to Collaborate. The parties intend to
collaborate after the Closing in connection with the development,
manufacture and sale of products incorporating intellectual
property of Seller existing as of the date hereof or developed
hereafter. Without limiting the generality of the foregoing
statement of intent, if, at any time after the Closing, Purchaser
or any of its Affiliates shall make Seller aware of any
opportunity for Seller to license or sublicense any intellectual
property rights of Seller (or any of its Affiliates) relating to,
or for use with respect to, oral delivery of any pharmaceutical
products to any third party, Seller shall use good faith efforts
to include Purchaser or appropriate Affiliates of Purchaser in
negotiations relating to such arrangement. For purposes of
clarity, Seller shall have no express obligation under this
Section 7.11.3 to enable Purchaser or any of its Affiliates to
participate economically in such opportunity or to cause any
third party to enter into an agreement with Purchaser or any of
its Affiliates.
ARTICLE VIII - MISCELLANEOUS
----------------------------
8.1 Termination.
(a) Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated by written
notice of termination at any time before the Closing Date only as
follows:
(i) by mutual consent of Seller and Purchaser;
(ii) by Purchaser (A) at any time if the
representations and warranties of Seller made in connection with
this Agreement were incorrect in any material respect when made
or at any time thereafter, (B) upon written notice to Seller
given at any time on or after the day that is 120 days after the
date of this Agreement (or such later date as shall have been
specified in a writing authorized on behalf of Seller and
Purchaser) if any of the conditions precedent set forth in
Section 5.1 (other than Section 5.1.2) hereof have not been met,
or (C) at any time if Seller shall have failed to perform or
comply in all material respects with all covenants, agreements
and obligations under this Agreement and Seller shall have failed
to cure such nonperformance or noncompliance within ten (10) days
of the receipt from Purchaser of written notice of such
nonperformance or noncompliance.
(iii) by Seller, (A) at any time if the representations
and warranties of Purchaser made in connection with this
Agreement were incorrect in any material respect when made or at
any time thereafter, (B) upon written notice to Purchaser given
at any time on or after the day that is 120 days after the date
of this Agreement (or such later date as shall have been
specified in a writing authorized on behalf of Seller and
Purchaser) if any of the conditions precedent set forth in
Section 5.2 (other than Section 5.2.2) hereof have not been met,
or (C) at any time if Purchaser shall have failed to perform or
comply in all material respects with all covenants, agreements
and obligations under this Agreement and Purchaser shall have
failed to cure such nonperformance or noncompliance within ten
(10) days of the receipt from Seller of written notice of such
nonperformance or noncompliance. Notwithstanding the foregoing,
Seller shall have no right to terminate this Agreement on the
basis of any matter set forth on SCHEDULE 8.1.
(b) In the event of the termination of this Agreement
pursuant to the provisions of this Section 8.1, this Agreement
(except for this Section 8.1 and Sections 8.4 and 8.9 hereof
which shall survive) shall become void and have no effect,
without any liability on the part of any of the parties or their
directors or officers or shareholders in respect of this
Agreement except as otherwise set forth in this Section 8.1.
(c) If this Agreement is terminated (i) by Purchaser
pursuant to Section 8.1(a)(ii) for any reason other than Seller's
failure (notwithstanding Seller's full compliance with Section
4.1.12) to obtain all governmental approvals or (ii) by Seller
(A) pursuant to Section 8.1(a)(iii)(B) due to the failure of the
condition set forth in Section 5.2.4 to have been satisfied or
(B) other than as expressly provided for in Section 8.1(a)(iii),
then Seller shall immediately pay to Purchaser a termination fee
(the "Initial Termination Fee") in an amount equal to $[*]. In
addition, if, at any time between the date of this Agreement and
the date that is nine months after the occurrence of an event
giving rise to an obligation of Seller to pay the Initial
Termination Fee, Seller shall enter into any agreement providing,
directly or indirectly, for (A) the sale or other disposition of
the Transferred Business, all or substantially all of the
Purchased Assets or at least 50% of the assets of Seller and its
subsidiaries taken as a whole in a single transaction or series
of related transactions, (B) any acquisition or purchase by a
person (other than Purchaser or an Affiliate of Purchaser) or
group (as such term is defined under Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and the rules and regulations thereunder) of beneficial ownership
(as defined in Rule 13d-3 under the Exchange Act) of more than
20% of the common stock of Seller whether by tender or exchange
offer or otherwise, or (C) a merger, consolidation or business
combination involving Seller other than a merger or similar
transaction in which the stockholders of Seller prior to such
transaction own at least 60% of the voting power of the surviving
entity, then Seller shall immediately pay to Purchaser an
additional termination fee (the "Additional Termination Fee") in
an amount equal to $[*]. The parties agree (1) the agreements
contained in this Section 8.1(c) are an integral part of the
transactions contemplated by this Agreement, (2) each of the
foregoing termination fees constitutes liquidated damages, not a
penalty, and (3) the termination fees are necessary because the
termination of this Agreement in a manner giving rise to the
Initial Termination Fee would result in substantial damages to
Purchaser which may be difficult to calculate accurately and the
consummation of an event giving rise to the Additional
Termination Fee would result in substantial additional damages to
Purchaser which may also be difficult to calculate accurately.
Notwithstanding the foregoing, nothing herein shall restrict or
otherwise limit Purchaser's right to pursue its other rights and
remedies upon a breach of this Agreement by Seller, including
without limitation seeking specific performance or other
equitable relief.
8.2 Brokers' and Finders' Fees.
(a) Seller shall pay all brokerage fees, finder's fees and
other commissions payable to any person in respect of this
Agreement or the consummation of the transactions contemplated
hereby as a result of the dealings, arrangements or agreements
with any such person by Seller and Seller agrees to indemnify and
hold harmless Purchaser against any and all claims, losses,
liabilities and expenses which may be asserted against or
incurred by it as a result of the dealings, arrangements or
agreements with any such person by Seller.
(b) Purchaser represents and warrants that no brokerage
fee, finder's fee or other commission in respect of this
Agreement or the consummation of the transactions contemplated
hereby is due by it to any third party, and Purchaser agrees to
indemnify and hold harmless Seller against any and all claims,
losses, liabilities and expenses which may be asserted against or
incurred by it as a result of Purchaser's dealings, arrangements
or agreements with or any such person.
(c) The limitations set forth in Section 6.3(f) shall not
apply to any breach of a representation, warranty, covenant or
other agreement set forth in this Section
8.3 Sales, Transfer and Documentary Taxes, Etc. Seller shall
pay all federal, state and local sales, documentary and other
transfer taxes, if any, due as a result of the purchase, sale or
transfer of the Purchased Assets in accordance herewith and shall
indemnify, reimburse and hold harmless Purchaser in respect of
the liability for payment of or failure to pay any such taxes or
the filing of or failure to file any reports required in
connection therewith.
8.4 Expenses. Except as provided for in Sections 1.3.1(c),
7.6.4(c), 8.1(c) and Section 8.3, each party shall bear its
respective legal, accounting, and other costs and expenses
associated with the transactions contemplated by this Agreement
(including without limitation the costs of any accountants,
attorneys, brokers and financial advisors). Without limiting the
generality of the foregoing, Seller shall bear all costs,
expenses and obligations arising out of (a) the Letter Agreement
dated April 14, 1999 between Seller and Warburg ▇▇▇▇▇▇ ▇▇▇▇ and
(b) the Letter Agreement dated June 15, 1999 between Seller and
Bank of America Securities, LLC.
8.5 Contents of Agreement; Parties in Interest; Etc. This
Agreement sets forth the entire understanding of the parties
hereto with respect to the transactions contemplated hereby. It
shall not be amended or modified except by written instrument
duly executed by each of the parties hereto. Except as provided
in Article VI and except for Affiliates of Purchaser which are
intended third party beneficiaries of this Agreement, this
Agreement is not intended to confer upon any other person not a
party hereto any rights or remedies hereunder. Any and all
previous agreements and understandings between or among the
parties hereto regarding the subject matter hereof, whether
written or oral, are superseded by this Agreement. For the
avoidance of doubt, the rights and obligations of Seller and ▇.▇.
▇▇▇▇▇▇▇ North America, a division of ▇.▇. ▇▇▇▇▇▇▇ Corporation, an
Affiliate of Purchaser, under that certain Joint Agreement dated
June 17, 1997 (the "Joint Agreement") shall continue in full
force and effect on the terms set forth therein until the
Closing, at which time such agreement shall be an Assumed
Contract.
8.6 Assignment and Binding Effect. This Agreement may not be
assigned by Seller without the prior written consent of
Purchaser. Purchaser may assign its rights and obligations (a)
to any Cardinal Affiliate, in which case the assignment shall not
effect a release of the obligations of ▇.▇. ▇▇▇▇▇▇▇ Corporation
to guaranty certain obligations of Purchaser under this Agreement
or (b) in connection with any merger, stock exchange or sale of
any part of its business to an assignee that provides reasonably
satisfactory business and financial assurances to Seller and that
expressly assumes the obligations of Purchaser hereunder and the
guaranty obligations of ▇.▇. ▇▇▇▇▇▇▇ Corporation with respect to
this Agreement, in which case such assignment shall constitute a
release of Purchaser and ▇.▇. ▇▇▇▇▇▇▇ Corporation of their
obligations with respect to this Agreement. Subject to the
foregoing, all of the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of and be
enforceable by the successors and assigns of each party hereto.
8.7 Waiver. Any term or provision of this Agreement may be
waived at any time by the party entitled to the benefit thereof
by a written instrument duly executed by such party.
8.8 Notices. Any notice, request, demand, waiver, consent,
approval or other communication which is required or permitted
hereunder shall be in writing and shall be deemed given only if
delivered personally or sent by telecopier or by registered or
certified mail, postage prepaid, as follows:
If to Purchaser, to:
▇.▇. ▇▇▇▇▇▇▇ South, Inc.
c/o ▇.▇. ▇▇▇▇▇▇▇ Corporation
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
With required copies to:
Cardinal Health, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
and to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇, PLLC
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
If to Seller, to:
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇'▇▇▇▇▇▇▇
With a required copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇ White & ▇▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
or to such other address or telecopier number as the addressee may
have specified in a notice duly given to the sender as provided
herein. Such notice, request, demand, waiver, consent, approval or
other communication will be deemed to have been given as of the date
so delivered, telecopied or mailed.
8.9 Confidential Information.
8.9.1 Cardinal Information. From and after the date hereof,
Seller shall not disclose to any person (other than Purchaser or
any Cardinal Affiliate) in any manner, directly or indirectly,
any confidential or proprietary information or data of Purchaser
or any Cardinal Affiliate whether of a technical or commercial
nature ("Confidential Information"), or use or assist any person
(other than any Cardinal Affiliates) to use, in any manner,
directly or indirectly, any Confidential Information, excepting
only use of such data or information as is at the time generally
known to the public and which did not become generally known
through the breach of any provisions of this Agreement. As used
in this Agreement, Confidential Information includes but is not
limited to any and all (i) computer software proprietary to any
Cardinal Affiliate, together with all documentation for any such
software; (ii) confidential, proprietary or trade secret
information submitted to any Cardinal Affiliate in confidence by
its suppliers, employees, consultants, customers or others; (iii)
information of any Cardinal Affiliate concerning operations,
customers or prospects, terms and conditions of sale and prices,
technical knowledge relating to customer requirements, and
knowledge of markets for its products and services; and (iv)
subject to the successful consummation of the Closing, all
confidential, proprietary, and similar information of the
Transferred Business, other than information relating solely to
the Excluded Assets. Seller acknowledges that all information,
whether falling within the above definition or otherwise, shall
be presumed to be Confidential Information if any Cardinal
Affiliate takes measures designed to prevent it, in the ordinary
course of business, from being available to persons other than
those selected by Cardinal Affiliates to have access thereto for
limited purposes. All information disclosed to Seller or its
Affiliates or to which Seller or its Affiliates obtains access,
which such person has reasonable basis to believe to be
Confidential Information, or which such person has reasonable
basis to believe that any Cardinal Affiliate treats as being
Confidential Information, shall be presumed to be Confidential
Information.
8.9.2 Seller Information. From and after the date hereof,
the Cardinal Affiliates shall not disclose to any person in any
manner, directly or indirectly, any confidential or proprietary
information or data of Seller whether of a technical or
commercial nature ("Seller Confidential Information"), or use or
assist any person (other than Seller or any of Seller's
Affiliates) to use, in any manner, directly or indirectly, any
Seller Confidential Information, excepting only use of such data
or information as is at the time generally known to the public
and which did not become generally known through the breach of
any provisions of this Agreement. As used in this Agreement,
Seller Confidential Information includes but is not limited to
any and all (i) computer software proprietary to Seller, together
with all documentation for any such software; (ii) confidential,
proprietary or trade secret information submitted to Seller in
confidence by its suppliers, employees, consultants, customers or
others; (iii) information of Seller or any of its Affiliates
concerning operations, customers or prospects, terms and
conditions of sale and prices, technical knowledge relating to
customer requirements, and knowledge of markets for its products
and services; and (iv) all confidential, proprietary, and similar
information of the Transferred Business. Purchaser acknowledges
that all information, whether falling within the above definition
or otherwise, shall be presumed to be Seller Confidential
Information if Seller or any of its Affiliates takes measures
designed to prevent it, in the ordinary course of business, from
being available to persons other than those selected by Seller or
its Affiliates to have access thereto for limited purposes. All
information disclosed to Cardinal Affiliates or to which Cardinal
Affiliates obtain access, which such person has reasonable basis
to believe to be Seller Confidential Information, or which such
person has reasonable basis to believe Seller or its Affiliates
treats as being Seller Confidential Information, shall be
presumed to be Seller Confidential Information. Effective upon
the Closing, Seller Confidential Information which relates solely
to the Transferred Business shall become Confidential Information
of Purchaser and the provisions of Section 8.9.1 shall apply
thereto and the provisions of this Section 8.9.2 shall cease to
apply thereto.
8.9.3 Shared Information. Purchaser and Seller agree that
the information contained in the Books and Records and which
Seller has a right to use pursuant to Section 1.1.1(f)
constitutes confidential information of both parties and the
provisions of Sections 8.9.1 and 8.9.2 shall not apply thereto.
The standard of care required of each party in protecting the
confidentiality of such confidential information shall be at
least the same standard of care that such party uses in
protecting its own confidential and trade secret information, but
in no event shall either party use less than a reasonable
standard of care.
8.10 Counterparts. This Agreement may be executed in two or
more counterparts which together shall constitute a single
agreement.
8.11 Pronouns. All pronouns used in this Agreement shall be
deemed to refer to the masculine, feminine, neuter, singular or
plural, as the identity of the person(s) may require.
8.12 Governing Law. This Agreement shall be governed in all
respects, including validity, interpretation and effect, by the
internal laws of the State of Delaware without regard to the
principles of conflict of laws thereof.
8.13 No Strict Construction. The language used in this
Agreement shall be deemed to be the language chosen by the
parties hereto to express their mutual intent, and no rule of
strict construction will be applied against any party.
8.14 Knowledge. For purposes of this Agreement, an individual
shall be deemed to have "knowledge" of a particular fact or other
matter if such individual is actually aware of such fact or other
matter or if such person, in the conduct of their duties, should
have become aware of such fact or other matter. Seller shall be
deemed to have "knowledge" of a particular fact or other matter
any individual who is serving, or who has at any time served, as
a director or officer of such entity (or in any similar capacity)
or any other person set forth on SCHEDULE 8.14 has, or at any
time had, knowledge of such fact or other matter.
8.15 Severability. If any provision of this Agreement, or the
application thereof to any person, place or circumstance, shall
be held by a court of competent jurisdiction to be invalid,
unenforceable or void, the remainder or this Agreement and such
provisions as applied to other persons, places and circumstances
shall not be effected thereby and remain in full force and effect
only if, after excluding the portion deemed to be unenforceable,
the remaining terms shall provide for the consummation of the
transactions contemplated hereby in substantially the same manner
as originally set forth at the later of the date of this
Agreement was executed or last amended.
8.16 Definitions. The following terms are defined in the
sections indicated below:
Term Where Defined
---- -------------
Additional Termination Fee 8.1(c)
Affiliate 1.1.1(j)
Agreed Upon Settlement 6.3 (b)
Agreement Introduction
Applicable Affiliate Profits 1.3.1(b)
Assumed Contract 3.1.17
Assumed Liabilities 1.4.1
Authorizations 3.1.14
Balance Sheet 3.1.5
Balance Sheet Date 3.1.5
Books and Records 1.1.1 (f)
Cardinal Recital A
Cardinal Affiliate 6.1
Cash Payment 1.3.1 (a)
CERCLA 3.1.22
Claim Notice 6.3
Closing 2.1
Closing Date 2.1
COBRA 1.4.2 (d)
Confidential Information 8.9.1
Disclosure Schedule 3.1
Earnout Maximum 1.3.1 (b)
Earnout Notice 1.3.1 (b) (ii)
Earnout Payment 1.3.1 (b)
Earnout Payments 1.3.1 (b)
Earnout Year 1.3.1 (b)
Earnout Years 1.3.1 (b)
Encumbrances 3.1.7 (a)
Environmental Claim 3.1.22 (b)
Environmental Record 3.1.22
Environmental Regulations 3.1.22 (a)
Exchange Act 8.1 (c)
Excluded Assets 1.1.2
FDC Act 3.1.14
Financial Information 3.1.6
FTC 4.3.2
Fully Burdened Manufacturing Costs 1.3.1 (b)
GAAP 1.3.1 (b)
Gross Profit 1.3.1 (b)
Guaranteed Products 7.6.3
Guaranty Period 7.6.3
Guaranty Term 7.6.3
Hazardous Material 3.1.22
HSR Act 3.1.3
Improvements 1.1.1 (a)
Indemnified Purchaser Party 6.1
Indemnified Seller Party 6.2
Independent Accountant 1.3.1 (b) (iv)
Industrial Applications Recital A
Initial Termination Fee 8.1 (c)
Intellectual Property 3.1.21 (a)
Inventory 1.1.1 (d)
Joint Agreement 8.5
Justice Department 4.3.2
Land 1.1.1 (a)
Leased Real Property 1.1.1 (b)
Licensed Intellectual Property 3.1.21 (a)
Net Sales 1.3.1 (b)
Notice Period 6.3
Ortho 7.6.1
Ortho and RPR Gross Profit 7.6.3
Ortho License Agreement 7.6.1
Ortho and RPR Profit Notice 7.6.4 (a)
Ortho and RPR Profit Payment 7.6.3
Ortho Supply Agreement 7.6.1
Permitted Exceptions 3.1.7 (f)
Permitted Liens 3.1.12
Plant Recital A and 1.1.1(a)
Plant Employees 3.1.18 (b)
Pouch Technology Recital A
Proprietary Product 7.11.1
Purchase Price 1.3.1
Purchased Assets 1.1.1
Purchaser Introduction
Purchaser's Documents 3.2.2
RCRA 3.1.22
Real Property Lease 1.1.1 (b)
Regulations 3.1.14
Release 3.1.22
Research Facility Recital A
Research Facility Employees 3.1.18 (b)
Retained Applications Recital A
RPR 7.6.1
RPR License Agreement 7.6.1
RPR Profit Payment 7.6.3
SEC 3.1.5
SEC Filing 3.1.5
Second Request 4.3.2
Seller Introduction
Seller Confidential Information 8.9.2
Seller's Documents 3.1.2
Software 3.1.21 (g)
Stay Bonus Plan 7.1.2
Support Agreement 2.2 (a) (iv)
Supply Agreement 2.2 (a) (v)
Survey 3.1.7 (g)
Tangible Personal Property 1.1.1 (c)
Tax Returns 3.1.9
Taxes 3.1.9
Technology Transfer Agreement 2.2 (a) (iii)
Third Party Intellectual Property 3.1.17 (i)
Third Party Proprietary Product 7.11.2
Title Commitment 3.1.7 (f)
Title Company 3.1.7 (f)
Transferred Business Recital A
Transferred Intellectual Property 1.1.1 (e)
Transferring Employees 7.2
Utilities 3.1.7 (c)
Written Offer 7.11.1
IN WITNESS WHEREOF, the undersigned have executed this Agreement,
or have caused this Agreement to be executed by their duly
authorized officer, as of the date first written above.
SELLER: PURCHASER:
ADVANCED POLYMER SYSTEMS, INC. ▇.▇. ▇▇▇▇▇▇▇ SOUTH, INC.
By: /S/ ▇▇▇▇▇▇▇ ▇'▇▇▇▇▇▇▇ By: /S/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------- ---------------------
Title: Chief Financial Officer Title: Executive Vice President;
President-Americas
------------------------ --------------------------
▇.▇. ▇▇▇▇▇▇▇ Corporation, a Delaware corporation
("▇▇▇▇▇▇▇"), hereby guaranties to Advanced Polymer Systems, Inc.,
a Delaware corporation ("Seller"), the full payment of all sums
owed by ▇.▇. ▇▇▇▇▇▇▇ South, Inc., a Delaware corporation and
wholly-owned subsidiary of ▇▇▇▇▇▇▇ ("Purchaser"), to Seller under
the foregoing Asset Purchase Agreement between Seller and
Purchaser (the "Agreement"), subject to (a) ▇▇▇▇▇▇▇ receiving
written notification of any payment default by Purchaser under
the Agreement (which notice shall specify in detail the nature
and amount of such payment default and shall be sent to the
General Counsel of ▇▇▇▇▇▇▇ at the address specified in Section
8.8 of the Agreement) and (b) such amount remaining unpaid to
Seller 30 days after ▇▇▇▇▇▇▇'▇ receipt of such notice.
▇.▇. ▇▇▇▇▇▇▇ CORPORATION
By: /S/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------
Its: Executive Vice President
-------------------------
Date: July 25, 2000
--------------