VIRBAC CORPORATION
FORM 10-Q
SEPTEMBER 30, 2003
Exhibit 2.2
Stock Purchase Agreement by and between Virbac Corporation and Delmarva
Laboratories, Inc. dated as of August 15, 2003.
[BLANK ROME LLP LOGO]
PHONE: (▇▇▇) ▇▇▇-▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
EMAIL: ▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇.▇▇▇
August 15, 2003
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Chief Financial Officer
Virbac
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇. ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Re: Acquisition of Delmarva Laboratories, Inc. by Virbac Corporation
Dear ▇▇▇:
Please find enclosed Virbac's set of original documents for the above
referenced transaction.
Please call me or Marcus if you have any questions.
Sincerely,
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
TZC/cet
Enclosure
Watergate ▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇., ▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇.▇▇▇▇▇▇▇▇▇.▇▇▇
Delaware - Florida - Maryland - New Jersey - New York
- Ohio - Pennsylvania - Washington, DC
Virbac Corporation
STOCK PURCHASE
by
Virbac Corporation
of
Delmarva Laboratories, Inc.
August 15, 2003
Stock Purchase Agreement........................................................... 1
Unanimous Consent of Stockholders and Directors of Delmarva Laboratories........... 2
Non-Competition Agreement.......................................................... 3
Opinion of Counsel to Delmarva Laboratories and the Stockholders................... 4
Resignation of Officers and Directors of Delmarva Laboratories..................... 5
Escrow Agreement................................................................... 6
Stock Powers....................................................................... 7
Certificate of Good Standing of Delmarva Laboratories.............................. 8
Certificate of the Secretary of Virbac Corporation................................. 9
Certificate of Good Standing of Virbac Corporation................................. 10
Consulting Agreement............................................................... 11
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is entered into as of
August 15, 2003 by and among VIRBAC CORPORATION, a corporation organized under
the laws of Delaware and having its principal office at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ (the "Purchaser"), DELMARVA LABORATORIES, INC., a
Virginia corporation having its principal office at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Company"), and the individuals listed on
Exhibit A hereto (the "Shareholders").
RECITALS
A. The Shareholders own all of the issued and outstanding capital stock of
the Company.
B. The Shareholders wish to sell, and the Purchaser wishes to purchase, all
of the issued and outstanding capital stock of the Company upon the terms
and subject to the conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the respective
representations, warranties, covenants, agreements and conditions hereinafter
set forth, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. DEFINITIONS
Unless otherwise defined herein or the context otherwise requires, the
following terms shall have the meanings herein specified for all purposes of
this Agreement. All accounting terms used in this Agreement not defined in this
Article 1 shall, except as otherwise provided for herein, be construed in
accordance with generally accepted accounting principles, consistently applied.
"Action" shall mean any actual or threatened claim, action, suit,
arbitration, hearing, inquiry, proceeding, complaint, charge or investigation by
or before any Governmental Entity or arbitrator and any appeal from any of the
foregoing.
"Affiliate" of a Person shall mean any Person that directly or indirectly
controls, is controlled by, or is under common control with such Person.
"Balance Sheet" and "Balance Sheet Date" shall have the meaning assigned
to such terms in Section 4.4(a).
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"Base Purchase Price" shall have the meaning assigned to it in Section
2.2(a).
"Amoxicillin Products" shall mean Biomox(R) tablets (FDA registration NADA
065-492) and Biomox(R) oral suspension (NADA 065-495).
"Clindamycin Products" shall mean Clintabs(TM) (FDA Registration NADA
200-316) and Clinsol(TM) (FDA Registration NADA 200-291).
"Closing" and "Closing Date" shall have the respective meanings assigned
to such terms in Section 2.3.
"Common Stock" shall mean the Company's authorized class of common stock,
$1.00 par value per share.
"Dental Equipment Line" shall mean the veterinary dental equipment
business of the Company as more fully described in Appendix 1 hereto.
"Environmental Laws" shall mean all Legal Requirements pertaining to the
protection of the environment, the treatment, emission and discharge of gaseous,
particulate and effluent pollutants and the use, handling storage, treatment,
removal transport, transloading, cleanup decontamination, discharge and disposal
of Hazardous Substances, including those statutes, laws, rules and regulations
set forth below in the definitions of "Hazardous Material."
"Euthanasia Products" shall mean Euthasol(R) (FDA registration NADA
200-071) and Pentasol(R) Powder.
"FDA" shall mean the United States Food and Drug Administration.
"Gross Profit" shall mean gross sales minus all rebates, discounts,
refunds, and returns, minus the cost of goods sold.
"Governmental Entity" shall mean any local, state, federal or foreign (i)
court, (ii) government or (iii) governmental department, commission,
instrumentality, board, agency or authority, including the IRS and other taxing
authorities.
"Hazardous Material" shall mean any flammable, ignitable, corrosive,
reactive, radioactive or explosive substance or material, hazardous waste, toxic
substance or related material and any other substance or material defined or
designated as a hazardous or toxic substance, material or waste by any
Environmental Law currently in effect or as amended or
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promulgated in the future and shall include those substances included within the
definitions of "hazardous substances," "hazardous materials," "toxic
substances," or "solid waste" in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. Sections 9601, et.
seq., the Resource Conservation and Recovery Act, 42 U.S.C. Sections 6901 et.
seq., and the Hazardous Materials Transportation Act, 49 U.S.C. Sections 1801
et. seq., and in the regulations promulgated pursuant thereto.
"IRS" shall mean the United States Internal Revenue Service.
"Indebtedness" shall mean, when used with reference to any Person: (i) any
liability of such Person created or assumed by such Person, or any Subsidiary
thereof, (A) for borrowed money, (B) evidenced by a bond, note, debenture,
mortgage or similar instrument given in connection with the acquisition of, or
exchange for, any property or assets (other than inventory or similar property
acquired and consumed in the Ordinary Course), or (C) for the payment of money
as lessee under leases that should be, in accordance with generally accepted
accounting principles, recorded as capital leases for financial reporting
purposes; (ii) any liability of others described in the preceding clause (i)
guaranteed as to payment of principal and interest by such Person or in effect
guaranteed by such Person through an agreement, contingent or otherwise, to
purchase, repurchase or pay the related Indebtedness or to acquire security
therefor; (iii) all liabilities or obligations secured by a Lien upon property
owned by such Person and upon liabilities or obligations such Person customarily
pays interest or principal, whether or not such Person has not assumed or become
liable for the payment of such liabilities or obligations; (iv) any amendment,
renewal, extension, revision or refunding of any such liability or obligation;
and (v) any trade payables created in the Ordinary Course.
"Leased Real Property" shall mean all real property, including Structures,
leased by the Company.
"Legal Requirements" shall mean any statute, law, ordinance, rule,
regulation, permit, order, writ, judgment, injunction, decree or award issued,
enacted or promulgated by any Governmental Entity or any arbitrator.
"Lien" shall mean all liens (including judgment and mechanics liens,
regardless of whether liquidated), mortgages, assessments, security interests,
easements, claims, pledges, trusts (constructive or other), deeds of trust,
options or other charges, encumbrances or restrictions.
"Material Adverse Effect" shall mean a material adverse effect on the
business, financial condition, properties, profitability, prospects or
operations of the Company.
"Non-Competition Agreement" shall have the meaning assigned to such term
in Section 8.1(f).
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"Ordinary Course" shall mean, when used with reference to the Company, the
ordinary course of the Company's business, consistent with past practices.
"Owned Real Property" shall mean all real property, including Structures,
owned by the Company.
"Permit" shall have the meaning assigned to such term in Section 4.15.
"Person" shall mean all natural persons, corporations, business trusts,
associations, limited liability companies, partnerships, joint ventures,
Governmental Entities and any other entities.
"Real Property" shall mean the Owned Real Property and the Leased Real
Property, collectively.
"Share Percentage" with respect to any Shareholder shall mean the
percentage that the number of Shares held by such Shareholder represents of the
total number of Shares, as set forth on Exhibit A.
"Shares" shall mean the shares of Common Stock of the Company owned by the
Shareholders.
"Structure" shall mean any facility, building, plant, factory, office,
warehouse structure or other improvement owned or leased by the Company.
"Subsidiary" of a Person shall mean any corporation, partnership, limited
liability company, association or other business entity at least 50% of the
outstanding voting power of which is at the time owned or controlled directly or
indirectly by such Person or by one or more of such subsidiary entity, or both.
"Tax" shall mean any Federal, state, local or foreign income, gross
receipts, license, payroll, unemployment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, customs duties, capital stock,
franchise, profits, withholding, social security (or similar), employment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated tax or other
tax, assessment or charge of any kind whatsoever, including, any interest, fine,
penalty or addition thereto, whether disputed or not.
"Tax Return" shall mean any return, declaration, report, claim for refund
or information, or statement relating to Taxes, and any exhibit, schedule,
attachment or amendment thereto.
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2. PURCHASE AND SALE OF SHARES
2.1 Sale and Delivery. Each Shareholder agrees to sell and deliver to
Purchaser at Closing, and Purchaser agrees to purchase and accept from each
Shareholder, free and clear of all Liens, on the terms and conditions set forth
in this Agreement, and for the Purchase Price described in Section 2.2, good and
marketable title to the number of Shares set forth opposite the name of such
Shareholder on Exhibit A.
2.2 Purchase Price. The Purchase Price for 100 percent of the Shares,
which shall be allocated among the Shareholders as set forth on Exhibit A, and
the Non-Competition Agreements, shall consist of the Base Purchase Price and the
Additional Purchase Price, payable as follows:
(a) Base Purchase Price. The Base Purchase Price shall be $2,500,000
payable by Purchaser in cash at Closing. If the Shareholders elect to provide
the security required under Section 10.2(a) below by establishing an escrow
account, then $500,000 of the Base Purchase Price shall be payable into an
escrow account jointly established by the Shareholders and Purchaser prior to
Closing.
(b) Additional Purchase Price. The Additional Purchase Price shall consist
of the following conditional payments by Purchaser:
(i) $500,000 payable upon receipt of all FDA approvals that are
required for the manufacture (for purposes of commercialization) of the
Amoxicillin Products at a manufacturing site designated by Purchaser;
(ii) $500,000 payable 45 days after Purchaser's cumulative revenue
from sales of the Amoxicillin Products reaches $1,000,000;
(iii) $500,000 payable 45 days after the first time Purchaser's
Gross Profit on sales of the Amoxicillin Products during any period of 12
consecutive months during the first three years following Purchaser's
commercialization of the Amoxicillin Products reaches $1,500,000;
provided, however, that if such Gross Profit has not reached $1,500,000
during 12 consecutive months during such three-year period, Purchaser
shall pay a pro rota portion of such $500,000 to the extent that the
highest Gross Profit during any period of 12 consecutive months in such
three-year period exceeds $1,000,000. Appendix 2 sets forth a sample
calculation of the payment due under this Section 2.2(b) (iii) if Gross
Profit in a 12-month period exceeds $1,000,000, but does not reach
$1,500,000.
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(iv) $250,000 payable 45 days after the first time Purchaser's Gross
Profit on sales of Clindamycin Products during any period of 12
consecutive months during the first two years following Purchaser's
commercialization of the Clindamycin Products reaches $700,000; provided,
however, that if such Gross Profit has not reached $700,000 during 12
consecutive months during such two-year period, Purchaser shall pay a pro
rata portion of such $250,000 to the extent that the highest Gross Profit
during any period of 12 consecutive months in such two-year period exceeds
$600,000.
(v) $250,000 payable 45 days after the first time Purchaser's Gross
Profit on sales of Clindamycin Products during any period of 12
consecutive months during the first four years following Purchaser's
commercialization of the Clindamycin Products reaches $1,000,000;
provided, however, that if such Gross Profit has not reached $1,000,000
during 12 consecutive months during such four-year period, Purchaser shall
pay a pro rata portion of such $250,000 to the extent that the highest
Gross Profit during any period of 12 consecutive months in such four-year
period exceeds $900,000.
(vi) $250,000 payable 45 days after the first time Purchaser's Gross
Profit on sales of Euthanasia Products during any period of 12 consecutive
months during the first two years following Purchaser's commercialization
of the Euthanasia Products reaches $900,000; provided, however, that if
such Gross Profit has not reached $900,000 during 12 consecutive months
during such two-year period, Purchaser shall pay a pro rata portion of
such $250,000 to the extent that the highest Gross Profit during any
period of 12 consecutive months in such two-year period exceeds $800,000.
(vii) $250,000 payable 45 days after the first time Purchaser's
Gross Profit on sales of Euthanasia Products during any period of 12
consecutive months during the first four years following Purchaser's
commercialization of the Euthanasia Products reaches $1,200,000; provided,
however, that if such Gross Profit has not reached $1,200,000 during 12
consecutive months during such four-year period, Purchaser shall pay a pro
rata portion of such $250,000 to the extent that the highest Gross Profit
during any period of 12 consecutive months in such four-year period
exceeds $1,000,000.
Purchaser shall provide the Shareholders with regular reports regarding
the development and sale of the products described in this Section 2.2(b). In
addition, the Shareholders (or their representatives) shall have the right to
(i) monitor the development and sale of such products until such time as the
latest of the time periods described in this Section 2.2(b) has expired, and
(ii) audit Purchaser's books and records related to such products and the
Additional Purchase Price, which right may be exercised upon reasonable notice
to Purchaser. In the event any such audit determines that Purchaser has
incorrectly calculated the Additional Purchase Price, Purchaser shall
immediately pay the difference to the Shareholders. Furthermore, in the event
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the amount of the difference is 5% or more, Purchaser shall also reimburse the
Shareholders for the cost of the audit.
2.3 Closing. The purchase and sale of the Shares and the consummation of
the other transactions contemplated by this Agreement, (the "Closing") shall
occur on August 15, 2003, or at such other time or on such other date as shall
be agreed upon among the Shareholders and Purchaser, such hour and date being
herein generally referred to as the "Closing Date." At the Closing, and subject
to the conditions precedent in Article 8 of this Agreement, each Shareholder
shall deliver to Purchaser a certificate or certificates representing the Shares
owned by such Shareholder, duly endorsed for transfer, and Purchaser shall pay
to each Shareholder such Shareholder's allocable portion of the Base Purchase
Price, such payment subject, however, to the provisions of Sections 2.2(a) and
10.2(a) of this Agreement.
3. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS CONCERNING THE SHAREHOLDERS
Each of the Shareholders hereby jointly and severally represents and
warrants to Purchaser that:
3.1 Ownership of Shares. Such Shareholder owns of record and beneficially
the number of Shares set forth opposite the name of such Shareholder on Exhibit
A hereto, and has, and at all times prior to and as of the Closing such
Shareholder will have, good and marketable title to such Shares free and clear
of all Liens.
3.2 Delivery of Good Title. Upon delivery of the Shares to be sold by such
Shareholder hereunder and delivery of the Stock therefor pursuant to this
Agreement, Purchaser will have good and marketable title to such Shares free and
clear of all Liens.
3.3 Execution and Delivery. All consents, approvals, authorizations and
orders necessary for the execution, delivery and performance by such Shareholder
of this Agreement have been duly and lawfully obtained, and such Shareholder
has, and at the Closing will have, full right, power, authority and capacity to
execute, deliver and perform this Agreement. This Agreement has been duly
executed and delivered by such Shareholder and constitutes a legal, valid and
binding agreement of such Shareholder enforceable against such Shareholder in
accordance with its terms.
3.4 No Conflicts. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby will not
conflict with or result in a breach or violation of any term or provision of, or
(with or without notice or passage of time, or both) constitute a default under,
any indenture, mortgage, deed of trust, trust (constructive and other), loan
agreement or other agreement or instrument to which such Shareholder is a party
or by
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which such Shareholder or such Shareholder's Shares are bound, or violate any
Legal Requirement applicable to or binding upon such Shareholder.
3.5 No Brokers. No broker, finder or similar agent has been employed by or
on behalf of such Shareholder in connection with this Agreement or the
transactions contemplated hereby, and such Shareholder has not entered into any
agreement or understanding of any kind with any person or entity for the payment
of any brokerage commission, finder's fee or any similar compensation in
connection with this Agreement or the transactions contemplated hereby.
4. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS CONCERNING THE COMPANY.
The Shareholders hereby jointly and severally represent and warrant to
Purchaser that:
4.1 Organization and Good Standing.
(a) The Company has been duly organized and is existing as a
corporation in good standing under the laws of the Commonwealth of Virginia with
full power and authority (corporate and other) to own and lease its properties
and to conduct its business as currently conducted.
(b) The Company does not own or control, or have any other equity
investment or other interest in, directly or indirectly, any corporation, joint
venture, partnership, association or other entity.
4.2 No Conflicts. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby will not
(a) conflict with or result in a breach or violation of any term or provision
of, or constitute a default under (with or without notice or passage of time, or
both), or otherwise give any Person a basis for accelerated or increased rights
or termination or nonperformance under, any indenture, mortgage, deed of trust,
loan or credit agreement, lease, license or other agreement or instrument of
which the Company is a party or by which the Company is bound or affected or to
which any of the property or assets of the Company is bound or affected, (b)
result in the violation of the provisions of the Articles of Incorporation or
Bylaws of the Company or any Legal Requirement applicable to or binding upon it,
(c) result in the creation or imposition of any Lien upon any property or asset
of the Company or (d) otherwise adversely affect the contractual or other legal
rights or privileges of the Company.
4.3 Capitalization. The authorized capital stock of the Company consists
of 5,000 shares of Common Stock having a par value of $1.00 per share, of which
the number of Shares listed on Exhibit A are, and as of the Closing will be,
issued and outstanding. All of the Shares
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have been duly authorized and validly issued and are fully paid and
non-assessable. There are no options, warrants, right, calls or commitments of
any character relating to the shares of Common Stock or any other capital stock
or securities of the Company, (ii) there are no outstanding securities or other
instruments convertible into or exchangeable for shares of Common Stock or any
other capital stock or securities of the Company and no commitments to issue
such securities or instruments and no Person has any right of first refusal,
preemptive right, subscription right or similar right with respect to any shares
of Common Stock or any other capital stock or securities of the Company,
4.4 Financial Statements.
(a) Schedule 4.4 hereto contains the compiled balance sheet (the
"Balance Sheet") of the Company at June 30, 2003 (the "Balance Sheet Date"), and
the related compiled statement of income for the six months then ended, the
compiled balance sheet of the Company at December 31, 2002 and the related
compiled statements of income, for the fiscal year then ended (collectively, the
"Financial Statements").
(b) The Financial Statements present fairly the financial condition
of the Company as of the dates indicated therein and the results of operations
of the Company for the periods specified therein, have been prepared in
conformity with generally accepted accounting principles applied on a consistent
basis during the periods covered thereby and prior periods, have been derived
from the accounting records of the Company and represent only actual, bona fide
transactions. The Company's Financial Statements are true and correct in all
material respects and do not contain any untrue statement of a material fact or
omit to state a material fact.
4.5 Title to Property; Encumbrances.
(a) The Company has no Owned Real Property, and has, and immediately
prior to the Closing will have, good, valid and marketable title to all personal
property reflected on the Balance Sheet as owned by the Company and all personal
property acquired by the Company since the Balance Sheet Date, in each case free
and clear of all Liens, and except for sales and other dispositions of inventory
in the Ordinary Course since the Balance Sheet Date which, in the aggregate,
have not been materially different from prior periods.
(b) The Company at Closing will own no personal property, except for
inventory as described in Section 4.7 below.
4.6 Accounts Receivable. All accounts receivable of the Company reflected
in the Balance Sheet and all accounts receivable of the Company that have arisen
since the Balance Sheet Date (except such accounts receivable as have been
collected since such dates) are valid and enforceable claims, and the goods and
services sold and delivered that gave rise to such
9
accounts were sold and delivered in conformity with all applicable express and
implied warranties, purchase orders, agreements and specifications. Such
accounts receivable of the Company are subject to no valid defense, offset or
counterclaim and are fully collectible, except to the extent of the allowance
for doubtful accounts reflected on the Balance Sheet.
4.7 Inventories. All inventory, work-in-process and finished goods set
forth or reflected in the Balance Sheet or acquired by the Company since the
Balance Sheet Date, consist of a quality and quantity usable and salable in the
Ordinary Course, except for slow-moving, damaged or obsolete items and materials
of below standard quality, all of which have been written down to net realizable
market value or in respect of which adequate reserves have been provided, in
each case as reflected in the Balance Sheet. The value at which inventories are
carried on the Balance Sheet reflect the normal inventory valuation policy of
the Company, as applicable, in accordance with generally accepted accounting
principles and on a basis consistent with that of preceding periods, of stating
inventory at the lower of cost or market value. To the best of the Shareholders'
knowledge, the Company will not experience in the foreseeable future any
difficulty in obtaining, in the desired quantity and quality, inventory of the
Euthanasia Products necessary to conduct its business in the manner proposed to
be conducted, including, inventory that historically has been imported.
4.8 Trademarks, Patents, Etc.
(a) Schedule 4.8(a) contains a true and complete list of all letters
patent, patent applications, trade names, trademarks, service marks, trademark
and service ▇▇▇▇ registrations and applications, copyrights, copyright
registrations and applications, grants of a license or right to the Company with
respect to the foregoing, both domestic and foreign, claimed by either Company
or used or proposed to be used by the Company in the conduct of its business,
whether registered or not, (collectively herein, "Registered Rights").
(b) The Company owns and has the unrestricted right to use the
Registered Rights and owns or has the unrestricted right to use every trade
secret, know-how, process, discovery, development, design, technique, customer
and supplier list, promotional idea, marketing and purchasing strategy,
invention, process, confidential data and or other information (collectively
herein, "Proprietary Information") required for or incident to the design,
development, manufacture, operation, sale and use of all products and services
sold or rendered or proposed to be sold or rendered by the Company, free and
clear of any right, equity or claim of others. The Company has taken reasonable
security measures to protect the secrecy, confidentiality and value of all
Proprietary Information. The Company has not sold, transferred, assigned,
licensed or subjected to any Lien, any Registered Right or Proprietary
Information or any interest therein, and the Company is not obligated or under
any liability whatever to make any payments by way of royalties, fees or
otherwise to any owner or licensor of, or other claimant to, any Registered
Right or Proprietary Information.
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(c) Except for the settlement agreement between the Company and
Vortech Pharmaceuticals, Ltd., dated April 15, 2002, the obligations of which
have been satisfied by the Company (the "Vortech Matter"), there is no claim or
demand of any Person pertaining to, or any Action that is pending or, to the
best of the Shareholders' knowledge, threatened, which challenges the rights of
the Company in respect of any Registered Right or any Proprietary Information.
4.9 Insurance. Schedule 4.9 contains a true and complete list of all
insurance policies and bonds and self-insurance arrangements currently in force
that cover or purport to cover risks or losses to or associated with the
Company's business, operations, premises, properties, assets, employees, agents
and directors. The insurance policies, bonds and arrangements described on
Schedule 4.9 (the "Policies") provide such coverage against such risk of loss
and in such amounts as are customary for corporations of established reputation
engaged in the same or similar business and similarly situated. The Company has
no obligation, liability or other commitment relating to any contract of
insurance containing a provision for retrospective rating or adjustment of the
Company's premium obligation.
4.10 Liabilities. At the Closing, the Company shall be free of liabilities
or shall have cash on hand, collectable accounts receivable, other receivables
approved by the Purchaser and salable inventory at cost in an amount at least
equal to its liabilities. Any shortfall in the value of such assets shall be
subject to final adjustment 60 days following the Closing. The limitations under
Section 10.6(a) on the Shareholders' obligation to indemnify the Purchaser shall
not apply to any indemnification obligation that may arise as a result of any
inaccuracy or breach of the representation and warranty made by the Shareholders
under this Section 4.10.
4.11 Judgments; Litigation.
(a) There is no (i) outstanding judgment, order, decree, award
stipulation or injunction of any Governmental Entity or arbitrator against or
affecting the Company or its properties, assets or business or (ii) Action
pending against or affecting the Company or its properties, assets or business.
(b) Except for the Vortech Matter, there is (i) no outstanding
judgment, order, decree, award, stipulation, injunction of any Governmental
Entity or arbitrator against or affecting any officer, director or employee of
the Company relating to the Company or its business, (ii) to the best of the
Shareholders' knowledge, no Action threatened against or affecting the Company
or its properties, assets or business, (iii) to the best of the Shareholders'
knowledge, no Action pending or threatened against the Company's officers,
directors or employees relating to the Company or its business or (iv) to the
best of the Shareholders' knowledge, no basis for the institution of any Action
against the Company or any of its officers,
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directors, employees, properties or assets which, if decided adversely, would
have a Material Adverse Effect.
4.12 Income and Other Taxes.
(a) All Tax Returns required to be filed through and including the
date hereof in connection with the operations of the Company are true, complete
and correct in all material respects and have been properly and timely filed.
The Company has not requested any extension of time within which to file any Tax
Return, which Tax Return has not since been filed. Purchaser has heretofore been
furnished by the Company with true, correct and complete copies of each Tax
Return of the Company with respect to the past three (3) taxable years, and of
all reports of, and communications from, any Governmental Entities relating to
such period. The Company has disclosed on its Federal Income Tax Returns all
positions taken therein that could give rise to a substantial understatement of
income Taxes for federal income tax purposes.
(b) All Taxes required to be paid or withheld and deposited through
and including the date hereof in connection with the operations of the Company
have been duly and timely paid or deposited by the Company. The Company has
properly withheld or collected all amounts required by law for income Taxes and
employment Taxes relating to its employees, creditors, independent contractors
and other third parties, and for sales Taxes on sales, and has properly and
timely remitted such withheld or collected amounts to the appropriate
Governmental Entity. The Company has no liabilities for any Taxes for any
taxable period ending prior to or coincident with the Closing Date.
(c) The Company has made adequate provision on its book of account
for all Taxes with respect to its business, properties and operations through
the Balance Sheet Date, and the accruals for Taxes in the Balance Sheet are
adequate to cover all liabilities for Taxes of the Company for all periods
ending on or before the Closing Date.
(d) The Company has never (i) had a tax deficiency proposed,
asserted or assessed against it (ii) executed any waiver of any statute of
limitations on the assessment or collection of any Taxes, or (iii) been
delinquent in the payment of any Taxes.
(e) No Tax Return of the Company has been audited or the subject of
other Action by any Governmental Entity. The Company has not received any notice
from any Governmental Entity of any pending examination or any proposed
deficiency, addition, assessment, demand for payment or adjustment relating to
or affecting the Company or its assets or properties and, to the best of the
Shareholders' knowledge, no Governmental Entity may assess (or threaten to
assess) any Taxes for any periods ending on or prior to the Closing Date.
4.13 Questionable Payments. Neither the Company nor, to best of the
Shareholders'
12
knowledge, any of its directors, officers, agents, employees or other Person
associated with or acting on behalf of the Company has (a) used any corporate
funds for unlawful contributions, gifts, entertainment or other unlawful
expenses relating to political activity, (b) made any direct or indirect
unlawful payments to government officials or employees, or foreign government
officials or employees, from corporate funds, (c) established or maintained any
unlawful or unrecorded fund of corporate monies or other assets, (d) made any
false or fictitious entries on the books of account of the Company, (e) made or
received any bribe, rebate, payoff, influence payment, kickback or other
unlawful payment, or (f) made any other payment, favor or gift not fully
deductible for federal income tax purposes.
4.14 No Undisclosed Liabilities. Except to the extent set forth or
provided for in the Balance Sheet or the notes thereto, or for non-material
current liabilities incurred since the Balance Sheet Date in the Ordinary
Course, as of the date hereof, to the best of the Shareholders' knowledge, the
Company has no liabilities, whether accrued, absolute, contingent or otherwise,
whether due or to become due and whether the amounts thereof are readily
ascertainable or not, or any unrealized or anticipated losses from any
commitments of a contractual nature, including Taxes with respect to or based
upon the transactions or events occurring at or prior to the Closing.
4.15 Permits, Licenses, Etc. Except as described on Schedule 4.15, the
Company possesses, and is operating in compliance with, all franchises,
licenses, permits, certificates, authorizations, rights and other approvals of
Governmental Entities necessary to (i) manufacture, assemble, package,
distribute or sell any and all of the Company's products, (ii) occupy, maintain,
operate and use the Leased Real Property as it is currently used and proposed to
be used, and (iii) conduct its business as currently conducted (collectively,
the "Permits"). Schedule 4.15 contains a true and complete list of all Permits,
including all FDA product registrations. Each Permit has been lawfully and
validly issued, and no proceeding is pending or, to the best of the
Shareholders' knowledge, threatened looking toward the revocation, suspension or
limitation of any Permit. The consummation of the transactions contemplated by
this Agreement will not result in the revocation, suspension or limitation of
any Permit and no Permit requires the consent of its issuing authority to, or as
a result of, the consummation of the transaction contemplated hereby.
4.16 Regulatory Filings. Except as described on Schedule 4.15, the Company
has made all required registrations and filings with and submissions to all
applicable Governmental Entities relating to the operations of the Company as
currently conducted and as proposed to be conducted, including, all such
applicable Governmental Entities having jurisdiction over any matters pertaining
to conservation or protection of the environment, and the treatment, discharge,
use, handling, storage or production, or disposal of Hazardous Materials. All
such registrations, filings and submissions were in compliance with all Legal
Requirements (including all Environmental Laws) and other requirements when
filed, no material deficiencies have been
13
asserted by any such applicable Governmental Entities with respect to such
registrations, filings or submissions and, to the best of the Shareholders'
knowledge, no facts or circumstances exist which would indicate that a material
deficiency may be asserted by any such authority with respect to any such
registration, filing or submission.
4.17 Consents. All consents, authorizations and approvals of any Person to
or as a result of the consummation of the transactions contemplated hereby, that
are necessary or advisable in connection with the operations and business of the
Company as currently conducted and as proposed to be conducted, or for which the
failure to obtain the same might have, individually or in the aggregate, a
Material Adverse Effect, have been lawfully and validly obtained by the Company.
4.18 Material Contracts; No Defaults.
(a) Schedule 4.18(a) contains a true and complete list and
description of the outstanding material sales orders and sales contracts of the
Company. All outstanding sales orders and sales contracts of the Company have
been entered into in the Ordinary Course. The Company has not received any
advance, progress payment or deposit in respect of any sales order or sales
contract, and the Company has no sales order or sales contract that will result,
upon completion or performance thereof, in gross margins materially lower than
those normally experienced by the Company for the services or products covered
by such sales order or sales contract.
(b) Schedule 4.18(b) contains a true and complete list and
description of all outstanding material purchase orders and purchase commitments
of the Company. All outstanding purchase orders and purchase commitments of the
Company have been incurred in the Ordinary Course, and no purchase order or
purchase commitment of the Company is in excess of the normal, ordinary and
usual requirements of the business of the Company or at an excessive price. To
the best of the Shareholders' knowledge, the principal raw materials used and
inventory sold by the Company will continue to be available from their current
sources at competitive prices and upon competitive terms.
(c) Schedule 4.18(c) contains a true and complete list of all sales
agency, sales representative, distributor, wholesaler, dealer and similar
contracts or agreements of the Company, and true and complete copies of the same
have been delivered to Purchaser heretofore. All of such contracts and
agreements are terminable at any time by the Company without penalty (including,
any obligation to repurchase inventories on hand) upon not more than thirty
days' notice.
(d) There exist no non-competition agreements and covenants under
which the Company is obligated. The Company is not restricted by any agreement
from carrying on its
14
business or engaging in any other activity anywhere in the world (including
relocating, closing, or terminating any of its operations or facilities). True
and complete copies of all noncompetition agreements or covenants in favor of
the Company have been delivered to Purchaser.
(e) There exist no contracts, agreements, understandings,
arrangements and commitments, written or oral, of the Company with any officer,
director, consultant, employee or Affiliate of the Company or with any
associate, Affiliate or employee of any Affiliate of the Company.
(f) There exist no material contracts, agreements, understandings,
arrangements and commitments, written or oral, of the Company by which it or its
properties, rights or assets are bound, except as otherwise disclosed in this
Agreement or the Schedules hereto. For the purposes of this section 4.18,
"material" means any contract, agreement, understanding, arrangement or
commitment that (i) involves performance by any party more than ninety days from
the date hereof, (ii) contemplates payments or receipts by the Company in excess
of five percent of the Company's annual expenses or revenues, respectively,
(iii) involves any capital expenditures, or (iv) otherwise materially affects
the Company.
(g) each agreement, contract, arrangement or commitment described
above in this Section 4.18 is, and after the Closing will be, legal, valid,
binding, enforceable and in full force and effect;
(h) no event or condition has occurred or become known to the
Company or any Shareholder or is alleged to have occurred that constitutes or,
with notice or the passage of time, or both, would constitute a default or a
basis of force majeure or other claim of excusable delay, termination,
nonperformance or accelerated or increased rights by the Company or any other
Person under any contract, agreement, arrangement, commitment or other
understanding, written or oral, described above in this Section 4.18, or
described or otherwise disclosed pursuant to this Agreement; and
(i) no person with whom the Company has such a contract, agreement,
arrangement, commitment or other understanding is in default thereunder or has
failed to perform fully thereunder by reason of force majeure or other claim of
excusable delay, termination or nonperformance thereunder, the delay,
termination or nonperformance of which, or a default under which, has had or may
have a Material Adverse Effect.
4.19 Absence of Certain Changes. Since the Balance Sheet Date, the Company
has not: (i) incurred any debts, obligations or liabilities (absolute, accrued,
contingent or otherwise), other than current liabilities incurred in the
Ordinary Course which, individually or in the aggregate, are not material; (ii)
subjected to or permitted a Lien upon or otherwise encumbered any of its assets,
tangible or intangible; (iii) sold, transferred, licensed or leased any of its
assets
15
or properties except in the Ordinary Course; (iv) discharged or satisfied any
Lien other than a Lien securing, or paid any obligation or liability other than,
current liabilities shown on the Balance Sheet and current liabilities incurred
since the Balance Sheet Date, in each case in the Ordinary Course; (v) canceled
or compromised any debt owed to or by the Company or any claim of or against the
Company, or waived or released any right of material value other than in the
Ordinary Course; (vi) suffered any physical damage, destruction or loss (whether
or not covered by insurance) causing a Material Adverse Effect; (vii) entered
into any material transaction or otherwise committed or obligated itself to any
capital expenditure other than in the Ordinary Course; (viii) made or suffered
any change in, or condition affecting, its condition (financial or otherwise),
properties, profitability, prospects or operations other than changes, events or
conditions in the Ordinary Course, none of which (individually or in the
aggregate) has had or may have a Material Adverse Effect; (ix) made any change
in the accounting principles, methods, records or practices followed by it or
depreciation or amortization policies or rates theretofore adopted; (x) other
than in the Ordinary Course, made or suffered any amendment or termination of
any material contract, agreement, lease or license to which it is a party; (xi)
made or agreed to make any charitable contributions or incurred any non-business
expenses; (xii) changed or suffered change in any benefit plan or labor
agreement affecting any employee of the Company otherwise than to conform to
Legal Requirements; or (xiii) entered into any agreement or otherwise obligated
itself to do any of the foregoing.
4.20 No Employees.
(a) As of the Closing, the Company will have no employees, and there
will not be in effect any contracts, agreements, plans, arrangements,
commitments or understandings (formal or informal) pertaining to terms of
employment, compensation, bonuses, profit sharing, stock purchases, stock
repurchases, stock options, commissions, incentives, loans or loan guarantees,
severance pay or benefits, use of the Company's property, or related matters of
the Company with any current or former officer, director, employee or
consultant.
(b) There are in effect no labor, collective bargaining, union or
similar agreements under or by which the Company is obligated.
(c) Except for a consulting agreement to be entered into by the
Purchaser and ▇▇▇▇▇▇▇ ▇▇▇▇▇, neither Purchaser nor the Company will have any
responsibility for continuing any person in the employ of the Company from and
after the Closing, nor will Purchaser or the Company have any liability for any
severance payments to or similar arrangements with any such Person, all of whom
shall cease to be employees of the Company at or prior to the Closing.
(d) The Company has complied with all Legal Requirements relating to
employment and labor, and, to the best of the Shareholders' knowledge, no facts
or circumstances exist that could provide a reasonable basis for a claim of
wrongful termination by
16
any current or former employee of the Company against the Company.
4.21 Affiliation. None of the Shareholders, officers, directors or key
employees of the Company or any associate or Affiliate of the Company or any of
such Persons has, directly or indirectly, (i) an interest in any Person that (A)
furnishes or sells, or proposes to furnish or sell, services or products that
are furnished or sold by the Company or (B) purchases from or sells or furnishes
to, or proposes to purchase from or sell or furnish to, the Company any goods or
services or (ii) a beneficial interest in any contract or agreement to which the
Company is a party or by which the Company or any of the assets of the Company
are bound or affected.
4.22 Principal Customers and Suppliers.
(a) No customer accounting for five percent or more of the Company's
revenue during the twelve months ended on the Balance Sheet Date has terminated
its relationship with or adversely curtailed its purchases from the Company or
indicated (for any reason) its intention so to terminate its relationship or
curtail its purchases.
(b) Except for the Termination of the Exclusive Distribution
Agreement between the Company and TEVA Pharmaceuticals USA, Inc. dated May 20,
2003, no supplier accounting for five percent or more of the Company's purchases
of goods or services during the twelve months ended on the Balance Sheet Date
has terminated its relationship with or adversely curtailed its accommodations,
sales or services to the Company or indicated (for any reason) its intention to
terminate such relationship or curtail its accommodations, sales or services.
4.23 Compliance with Law. Through and including the date hereof, the
Company (i) has not violated or conducted its business or operations in material
violation of, and has not used or occupied its properties or assets in material
violation of, any Legal Requirement, (ii) to the best of the Shareholders'
knowledge, has not been alleged to be in violation of any Legal Requirement, and
(iii) has not received any notice of any alleged violation of, or any citation
for noncompliance with, any Legal Requirement.
4.24 Product Liability and Product Warranty. Schedule 4.24 hereto contains
a true and complete description of (i) all warranties granted or made with
respect to products sold, or services rendered, by the Company and (ii) the
Company's product liability and product warranty experience for the last three
years. The Company has not suffered any product liability or product warranty
claims that have had or may have a Material Adverse Effect.
4.25 Corporate Records. True and correct copies or originals of the
Articles of Incorporation, Bylaws, minute books and stock records of the Company
have been delivered to, or made available for inspection by, Purchaser.
17
4.26 Hazardous Materials.
(a) No Hazardous Material (i) has been released, placed, stored,
generated, used, manufactured, treated, deposited, spilled, discharged, released
or disposed or on or under any real property currently or previously owned or
leased by the Company or is presently located on or under any Real Property (or,
to the best of the Shareholders' knowledge, any property adjoining any Real
Property), (ii) is presently maintained, used, generated, or permitted to remain
in place by the Company in violation of any Environmental Law, (iii) is required
by any Environmental Law to be eliminated, removed, treated or mitigated by the
company, given the nature of its present condition, location, nature, material
or maintenance, or (iv) is of a type, location, material, nature or condition
which requires special notification to third parties by the Company under
Environmental Law or common law.
(b) No notice, citation, summons or order has been received by the
Company or any Shareholder, no notice has been given by the Company and no
complaint has been filed, no penalty has been assessed and no investigation or
review is pending or, to the best of the Shareholders' knowledge, threatened by
any Governmental Entity, with respect to (i) any alleged violation by the
Company of any Environmental Law, (ii) any alleged failure by the Company to
have any environmental permit, certificate, license, approval, registration or
authorization required in connection with its business or properties, or (iii)
any use, possession, generation, treatment, storage, recycling, transportation,
release or disposal by or on behalf of the Company of any Hazardous Material.
(c) The Company has not received any request for information, notice
of claim, demand or notification that it is or that indicates that it may be a
"potentially responsible party" with respect to any investigation or remediation
of any threatened or actual release of any Hazardous Material.
(d) To the best of the Shareholders' knowledge, no above-ground or
underground storage tanks, whether or not in use, are or have ever been located
at any property currently owned or leased by the Company.
(e) No notice has been received by the Company with respect to the
listing or proposed listing of any property currently or previously owned,
operated or leased by the Company on the National Priorities List promulgated
pursuant to CERCLA, CERCLIS or any similar state list of sites requiring
investigation or cleanup.
(f) There have been no environmental inspections, investigations,
studies, tests, review or other analyses conducted in relation to any Real
Property.
(g) The Company has not released, transported, or arranged for the
transportation
18
of any Hazardous Material from any property currently or previously owned,
operated or leased by the Company.
4.27 Disclosure.
(a) No representation or warranty of any Shareholder in this
Agreement and no information contained in any Schedule or other writing
delivered pursuant to this Agreement or at the Closing contains or will contain
any untrue statement of a material fact or omits or will omit to state a
material fact required to make the statements herein or therein not misleading.
There is no fact that the Shareholders have not disclosed to Purchaser in
writing that has had or, insofar as any Shareholder can now foresee, may have a
Material Adverse Effect on the ability of any Shareholder to perform fully this
Agreement.
(b) To the extent that any representation or warranty in this
Article 4 is qualified to the Shareholders' "knowledge," the Shareholders
represent and warrant that they have made a reasonable investigation sufficient
to express an informed view concerning the matters to which such representation
or warranty relates, and that their knowledge about such matters is commensurate
with that which they may reasonably be expected to have, given their positions
as officers and directors of the Company and their active participation in the
daily operations of the Company.
5. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to each of the Shareholders that:
5.1 Organization and Good Standing. Purchaser has been duly organized and
is existing as a corporation in good standing under the laws of the State of
Delaware with full corporate power and authority to (i) enter into this
Agreement and to consummate the transactions contemplated hereby, and (ii) own
and lease its properties and to conduct its business as currently conducted.
Purchaser has been duly qualified as a foreign corporation for the transaction
of business and is in good standing under the laws of each jurisdiction in which
Purchaser owns or leases property, or conducts any business, so as to require
such qualifications.
5.2 Execution and Delivery. This Agreement has been duly authorized by all
necessary corporate action on the part of Purchaser, has been duly executed and
delivered by Purchaser and constitutes the legal, valid and binding agreement of
Purchaser enforceable against Purchaser in accordance with its terms.
5.3 No Conflicts. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby will not
(a) conflict with or result in a breach or violation of any term or provision
of, or constitute a default under (with or without
19
notice or passage of time, or both), or otherwise give any Person a basis for
accelerated or increased rights or termination or nonperformance under, any
indenture, mortgage, deed of trust, loan or credit agreement, lease, license or
other agreement or instrument of which Purchaser is a party or by which
Purchaser is bound or affected or to which any of the property or assets of
Purchaser is bound or affected, (b) result in the violation of the provisions of
the Articles of Incorporation or Bylaws of Purchaser or any Legal Requirement
applicable to or binding upon it, (c) result in the creation or imposition of
any Lien upon any property or asset of Purchaser or (d) otherwise adversely
affect the contractual or other legal rights or privileges of Purchaser.
5.4 Consents. All consents, authorizations and approvals of any Person to
or as a result of the consummation of the transactions contemplated hereby, that
are necessary or advisable in connection with the operations and business of
Purchaser as currently conducted and as proposed to be conducted, or for which
the failure to obtain the same might have, individually or in the aggregate, a
Material Adverse Effect, have been lawfully and validly obtained by Purchaser.
5.5 Financial Ability to Perform. Purchaser has available to it funds
sufficient to enable Purchaser to deliver the Base Purchase Price and the
Additional Purchase Price as and when contemplated by this Agreement and to
perform its obligations hereunder.
5.6 Absence of Changes. Since March 31, 2003, the business of Purchaser
has been operated in the ordinary course consistent with past practice and there
has not been (a) any material adverse change in the operations, properties or
condition (financial or otherwise) of Purchaser or (b) any other change in the
nature of, or the manner of conducting, Purchaser's business, other than changes
which neither have had, nor reasonably may be expected to have, a Material
Adverse Effect on Purchaser.
5.7 Disclosure. No representation or warranty of Purchaser in this
Agreement and no information contained in any Schedule or other writing
delivered pursuant to this Agreement or at the Closing contains or will contain
any untrue statement of a material fact or omits or will omit to state a
material fact required to make the statements herein or therein not misleading.
There is no fact that Purchaser has not disclosed to the Shareholders in writing
that has had or, insofar Purchaser can now foresee, may have a Material Adverse
Effect on the ability of Purchaser to perform fully this Agreement.
6. CONDUCT OF BUSINESS PENDING CLOSING
During the period commencing on the date hereof and continuing through the
Closing Date, the Shareholders jointly and severally covenant and agree (except
as expressly contemplated by this Agreement or to the extent that Purchaser
shall otherwise expressly consent in writing) that:
20
6.1 Qualification. The Company shall maintain all qualifications to
transact business and remain in good standing in its jurisdiction of
incorporation and in the foreign jurisdictions in which such qualification is
required.
6.2 Ordinary Course. The Company shall conduct its business in, and only
in, the Ordinary Course and, to the extent consistent with such business, shall
preserve intact its current business organizations, keep available the services
of its current officers and employees and preserve its relationships with
customers, suppliers and others having business dealings with it to the end that
its goodwill and going business value shall be unimpaired at the Closing Date.
The Company shall maintain its properties and assets in good condition and
repair. Notwithstanding the foregoing, the Company shall have the right prior to
the Closing Date to sell, assign or transfer, upon commercially reasonable
terms, to any third party or parties (i) all of its right, title and interest in
the Dental Equipment Line, including the right to use the name "Delmarva" in
connection therewith, provided, however, that the Company shall require of the
acquiring party that it covenant not to use the words "laboratory" or
"veterinary" or any similar words or any abbreviations thereof in conjunction
with the name "Delmarva"; and (ii) all office furniture and equipment owned by
the Company.
6.3 Corporate Changes. The Company shall not (a) amend its Articles of
Incorporation or Bylaws (or equivalent documents), (b) acquire by merging or
consolidating with, or agreeing to merge or consolidate with, or purchase
substantially all of the stock or assets of, or otherwise acquire, any business
or any corporation, partnership, association or other business organization or
division thereof, (c) enter into any partnership or joint venture, (d) declare,
set aside, make or pay any dividend or other distribution in respect of its
capital stock or purchase or redeem, directly or indirectly, any shares of its
capital stock, (e) issue or sell any shares of its capital stock of any class or
any options, warrants, conversion or other rights to purchase any such shares or
any securities convertible into or exchangeable for such shares, or (f)
liquidate or dissolve or obligate itself to do.
6.4 Indebtedness. Except in the Ordinary course, the Company shall not
incur any Indebtedness. Additionally, the Company not sell any debt securities
or lend money to or guarantee the Indebtedness of any Person. The Company shall
not restructure or refinance its existing Indebtedness. The Company shall not
pay any principal payments on any Indebtedness to Affiliates or Shareholders
between the date of signing of this Agreement and the Closing Date.
6.5 Accounting. The Company shall not make any change in the accounting
principles, methods, records or practices followed by it or depreciation or
amortization policies or rates heretofore adopted by it. The Company shall
maintain its books, records and accounts in accordance with generally accepted
accounting principles applied on a basis consistent with that of prior periods.
21
6.6 Compliance with Legal Requirements. The Company shall comply promptly
with all requirements that applicable law may impose upon it and its operations
and with respect to the transactions contemplated by this Agreement, and shall
cooperate promptly with, and furnish information to, Purchaser in connection
with any such requirements imposed upon Purchaser, or upon any of its
affiliates, in connection therewith or herewith.
6.7 Disposition of Assets. Except for sales of goods or services in the
Ordinary Course, and except for the Company's rights to sell, transfer, or
assign (i) the Dental Equipment Line and (ii) its office furniture, the Company
shall not sell, transfer, license, lease or otherwise dispose of, or suffer or
cause the encumbrance by any Lien upon, any of its properties or assets,
tangible or intangible, or any interest therein, and the Company may not enter
into or terminate any lease, agreement, contract or other commitments in
connection with the business of the Company, except as may be in the Ordinary
Course.
6.8 Modification or Breach of Agreement; New Agreements. The Company shall
not terminate or modify, or commit or cause or suffer to be committed any act
that will result in breach or violation of any term of, or (with or without
notice or passage of time, or both) constitute a default under, or otherwise
give any person a basis for non-performance under, any indenture, mortgage, deed
of trust, loan or credit agreement, lease, license or other agreement,
instrument, arrangement or understanding, written or oral, disclosed in this
Agreement or the Schedules hereto. Except as expressly permitted under this
Agreement, the Company shall refrain from becoming a party to any contract or
commitment other than in the Ordinary Course. The Company shall meet all of its
contractual obligations in accordance with their respective terms. The Company
shall not make any commitment relating to the business of the Company, except in
the Ordinary Course.
6.9 Capital Expenditures. The Company shall not purchase or enter into any
contract to purchase any capital assets.
6.10 Consents. The Company shall use its best efforts to obtain any
consent, authorization or approval of, or exemption by, any Person required to
be obtained or made by any party hereto in connection with the transactions
contemplated hereby or the taking of any action in connection with the
consummation thereof.
6.11 Maintain Insurance. Until the Closing, the Company shall maintain its
Policies in full force and effect and shall not do, permit or willingly allow to
be done any act by which any of the Policies may be suspended, impaired or
canceled.
6.12 Discharge. The Company shall not cancel, compromise, release or
discharge any claim of the Company upon or against any person or waive any right
of the Company of material
22
value, and not discharge any Lien upon any asset of the Company or compromise
any debt or other obligation of the Company to any person other than Liens,
debts or obligations with respect to current liabilities of the Company.
6.13 Actions. The Company shall not institute, settle or agree to settle
any Action before any Governmental Entity.
6.14 Permits. The Company shall maintain in full force and effect, and
comply with, all Permits.
6.15 Tax Assessments and Audits. The Company shall furnish promptly to
Purchaser a copy of all notices of proposed assessment or similar notices or
reports that are received from any taxing authority and which relate to the
Company's operations for periods ending on or prior to the Closing Date. The
Shareholders shall cause the Company to promptly inform Purchaser, and permit
the participation in and control by Purchaser, of any investigation, audit or
other proceeding by a Governmental Entity in connection with any Taxes,
assessment, governmental charge or duty and shall not consent to any settlement
or final determination in any proceeding without the prior written consent of
Purchaser.
6.16 Obligation of Notice to Purchaser. The Company and Shareholders shall
provide advance written notice to Purchaser, prior to taking any of the
following actions: (i) entering into any new contracts, agreements, commitments,
or bids; (ii) the hiring and firing of employees; (iii) commencing or settling
litigation and/or arbitration matters, and (iv) such other general matters
relevant to the operations and financial condition of the Company. The Purchaser
will be provided with a reasonable opportunity, not to exceed 48 hours, to
provide input, advice and recommendations to the company on any of the aforesaid
actions, which the Shareholders, in their sole discretion, may accept, reject or
modify. If the Shareholders do not accept the advice of the Purchaser, the
Purchaser shall be permitted to terminate the Agreement without any further
liability
7. ADDITIONAL COVENANTS
7.1 Covenants of the Company and the Shareholders. During the period from
the date hereof through the Closing Date, the Company agrees, and each
Shareholder agrees to cause the Company, to:
(a) comply promptly with all requirements that applicable Legal
Requirements may impose upon the Company with respect to the transactions
contemplated by the Agreement, and shall cooperate promptly with, and furnish
information to, Purchase in connection with any requirements imposed upon
Purchaser or upon any of its affiliates in connection therewith or herewith;
23
(b) use the Company's reasonable best efforts to obtain (and to
cooperate with Purchaser in obtaining) any consent, authorization or approval
of, or exemption by, any Person required to be obtained or made by such
Shareholder in connection with the transactions contemplated by this Agreement;
(c) use the Company's reasonable best efforts to bring about the
satisfaction of the conditions precedent to Closing set forth in Section 8.1 of
this Agreement;
(d) promptly advise Purchaser orally and, within three (3) business
days thereafter, in writing of any change in such Company's business or
condition that has had or may have a Material Adverse Effect; and
(e) deliver to Purchaser prior to the Closing a written statement
disclosing any untrue statement in this Agreement or any Schedule hereto (or
supplement thereto) or document furnished pursuant hereto, or any omission to
state any material fact required to make the statements herein or therein
contained complete and not misleading, promptly upon the discovery of such
untrue statement or omission, accompanied by a written supplement to any
Schedule to this Agreement that may be affected thereby; provided, however, that
the disclosure of such untrue statement or omission shall not prevent Purchaser
from terminating this Agreement pursuant to Section 9.1(c) hereof at any time at
or prior to the Closing in respect of any original untrue or misleading
statement.
7.2 Covenants of Purchaser. During the period from the date hereof to the
Closing Date, Purchaser shall:
(a) comply promptly with all requirements that applicable Legal
Requirements may impose upon it with respect to the transactions contemplated by
this Agreement, and shall cooperate promptly with, and furnish information to,
the Shareholders in connection with any such requirements imposed upon the
Shareholders or the Company or upon any of the Company's affiliates in
connection therewith or herewith;
(b) use its reasonable best efforts to obtain any consent,
authorization or approval of, or exemption by, any Person required to be
obtained or made by Purchaser in connection with the transactions contemplated
by this Agreement; and
(c) use its reasonable best efforts to bring about the satisfaction
of the conditions precedent to Closing set forth in Section 8.2 of this
Agreement.
7.3 Access and Information
24
(a) During the period commencing on the date hereof and continuing
through the Closing Date, the Shareholders shall continue to cause the Company
to afford to Purchaser and to Purchaser's accountants, counsel, bankers,
investment bankers and other representatives, reasonable access to all of its
properties, books, contracts, commitments, records and personnel and, during
such period, to continue to cause the Company to furnish promptly to Purchaser
all information concerning its business, properties and personnel as Purchaser
may reasonably request.
(b) Except to the extent permitted by the provisions of Section 7.6
hereof, Purchaser shall hold in confidence and shall not use (except for
purposes consistent with the transaction contemplated by this Agreement), and
shall use reasonable efforts to ensure that its employees and representatives
hold in confidence and do not use (except for purposes consistent with the
transaction contemplated by this Agreement), all such information supplied to it
by the Shareholders or the Company concerning the Company and shall not disclose
such information to any third party except as may be required by any Legal
Requirement and except for information that (i) is or becomes generally
available to the public other than as a result of disclosure by Purchaser or its
representatives, (ii) becomes available to Purchaser or its representatives from
a third party other than the Shareholders or the Company, and Purchaser or its
representatives have no reason to believe that such third party is not entitled
to disclose such information, (iii) is known to Purchaser or its representatives
on a non-confidential basis prior to is disclosure by any Shareholder or the
Company or (iv) is made available by any Shareholder or the Company to any other
Person on a non-restricted basis. Purchaser's obligations under the foregoing
sentence shall expire on the Closing Date.
7.4 Expenses. All costs and expenses (including, all legal fees and
expenses and fees and expenses of any brokers, finders or similar agents)
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring the same. Notwithstanding anything
to the contrary, the expenses of the Company relative to this transaction shall
be paid by the Company, provided the Company is not in breach of Section 4.10
hereof on the Closing Date.
7.5 Certain Notifications. At all times from the date hereof to the
Closing Date, each party shall promptly notify the others in writing of the
occurrence of any event that will or may result in the failure to satisfy any of
the conditions specified in Article 8 hereof.
7.6 Publicity; Employee Communications. At all times prior to the Closing
Date, each party shall obtain the consent of all other parties hereto prior to
issuing, or permitting any of its directors, officers, employees or agents to
issue, any press release or other information to the press, employees of the
Company or any third party with respect to this Agreement or the transactions
contemplated hereby; provided, however, that no party shall be prohibited from
25
supplying any information to any of its representatives, agents, attorneys,
advisors, financing sources and others to the extent necessary to complete the
transactions contemplated hereby so long as such representatives, agents,
attorneys, advisors, financing sources and others are made aware of the terms of
this Section 7.6. Nothing contained in this Agreement shall prevent any party to
this Agreement at any time from furnishing any required information to any
Governmental Entity or authority pursuant to a Legal Requirement or from
complying with its legal or contractual obligations.
7.7 Further Assurances.
(a) Subject to the terms and conditions of this Agreement, each of
the parties hereto agrees to use all reasonable efforts to take, or cause to be
taken, all action, and to do, or cause to be done, all things necessary, proper
or advisable under applicable Legal Requirements, to consummate and make
effective the transactions contemplated by this Agreement.
(b) If at any time after the Closing any further action is necessary
or desirable to carry out the purposes of this Agreement, the Shareholders and
the property officers or directors of Purchaser, as the case may be, shall take
or cause to be taken all such necessary or convenient action and execute, and
deliver and file, or cause to be executed, delivered and filed, all necessary or
convenient documentation.
7.8 Competing Offers; Merger or Liquidation. The Shareholders agree that
they will not, and will cause the Company not to, directly or indirectly,
through any officer, director, agent, or otherwise, solicit, initiate or
encourage the submissions of bids, offers or proposals by, any Person with
respect to an acquisition of the Company or its assets, except as permitted by
Section 6.2 hereof, or capital stock or a merger or similar transaction, and the
Shareholders will not, and will not permit the Company to, engage any broker,
financial adviser or consultant with an incentive to initiate or encourage
proposals or offers from other parties. Furthermore, the Shareholders shall not,
and shall not permit the Company to, directly or indirectly, through any
officer, director, agent or otherwise, engage in discussions of any type
concerning any such transaction with, or provide information to, any Person
other than Purchaser and its representatives with a view to engaging, or
preparing to engage, that Person with respect to any matters in this Section.
The Shareholders shall ensure that the Company shall not commence any proceeding
to merge, consolidate or liquidate or dissolve or obligate itself to do so. In
the event Shareholders breach this provision, they agree that Purchaser, among
other remedies that may be available to it, shall be entitled to an injunctive
relief.
7.9 Inconsistent Action. The Shareholders shall not take or suffer to be
taken, and shall not permit the Company to take or cause or suffer to be taken,
any action that would cause any of the representations or warranties of any of
the Shareholders in this Agreement to be untrue, incorrect, incomplete or
misleading.
26
7.10 Post-Closing Covenants.
(a) Each Shareholder acknowledges and agrees that after the Closing (i)
neither Purchaser nor the Company shall be required to employ or retain any
employee of the Company or any other Person, and (ii) Purchaser, in its sole and
absolute discretion, may retain all, some, or none of the former employees of
the Company;
(b) Purchaser shall use reasonable commercial efforts at all times to
market and commercialize the Amoxicillin Products, the Clindamycin Products and
the Euthanasia Products. In the event there is at any time a decline in sales or
Gross Profit in any period of three consecutive months such that the milestones
for payments set forth in Section 2.2(b) are not met, but would have been met if
sales and Gross Profits had continued at the same average pace as during the
preceding nine consecutive months, then the Shareholders shall have the right to
review the Purchaser's marketing and commercialization activities with respect
to the affected product. In conjunction with such review, the parties shall
engage in good faith negotiations to determine whether the Shareholders should
receive the consideration that they would have received if sales or Gross
Profits had not so declined.
8. CONDITIONS PRECEDENT TO CLOSING
8.1 Conditions of Purchaser. Notwithstanding any other provision of this
Agreement, the obligations of Purchaser to consummate the transaction
contemplated hereby shall be subject to the satisfaction, at or prior to the
Closing Date, of the following conditions:
(a) there shall not be instituted and pending or threatened any
Action before any Governmental Entity (i) challenging the acquisition of the
Shares by Purchaser or otherwise seeking to restrain or prohibit the
consummation of the transaction contemplated hereby or (ii) seeking to prohibit
the direct or indirect ownership or operation by Purchaser of all or a material
portion of the business or assets of the Company, or to compel Purchaser or the
Company to dispose of or hold separate all or a material portion of the business
or assets of the Company or Purchaser;
(b) the representations and warranties of each of the Shareholders
in this Agreement shall be true and correct in all respects on and as of the
Closing Date with the same effect as if made on the Closing Date and each of the
Shareholders shall have complied with all covenants and agreements and satisfied
all conditions on such Shareholder's part to be performed or satisfied on or
prior to the Closing Date;
(c) Purchaser shall have received from Cantor Arkema, P.C., counsel
for the Shareholders and the Company, a written opinion dated the Closing date
and addressed to
27
Purchaser, in substantially the form attached as Exhibit B hereto;
(d) the Company shall have no Indebtedness;
(e) the Company shall be free of liabilities or have cash on hand,
collectable accounts receivable, other receivables approved by the Purchaser,
and salable inventory at cost in an amount at least equal to its liabilities;
(f) each Shareholder shall have entered into a Non-Competition
Agreement in the form attached hereto as Exhibit C, (collectively, the
"Non-Competition Agreements"):
(g) all corporate and other proceedings and actions taken in
connection with the transactions contemplated hereby and all certificates,
opinions, agreements, instruments and documents referenced herein or incident to
the transactions contemplated hereby shall be in form and substance satisfactory
to Purchaser and its counsel;
(h) all consents, if any, from third parties, including from any
Governmental Entity, landlord, Bank or other Person, necessary for the
consummation of the transactions contemplated hereby shall have been obtained;
(i) all officers and directors of the Company shall have resigned as
such, effective as of the Closing;
(j) no act, event or condition shall have occurred after the date
hereof which Purchaser determines has had or could have had a Material Adverse
Effect; and
(k) the Shareholders shall have made the election under Section
10.2(a) to have $500,000 of the Base Purchase Price deposited in escrow or to
provide the letter of credit described in Section 10.2(a).
8.2 Conditions of the Shareholders. Notwithstanding any other provision of
this Agreement, and except as set forth below, the obligations of the
Shareholders to consummate the transactions contemplated hereby shall be subject
to the satisfaction, at or prior to the Closing, of the following conditions:
(a) all conditions set forth in subsection (a) of Section 8.1 have
been met; and
(b) all representations and warranties of Purchaser in this
Agreement shall be true and correct in all material respects on and as of the
Closing Date with the same effect as if made on the Closing Date and Purchaser
shall have complied with all covenants and agreements and satisfied all
conditions on its part to be performed or satisfied on or prior to the Closing
Date.
28
(c) the Purchaser and ▇▇▇▇▇▇▇ ▇▇▇▇▇ shall have entered into a
consulting agreement.
9. TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. This Agreement may be terminated at any time prior to
the Cl sing:
(a) by mutual consent of the Purchaser and the Shareholders;
(b) by Purchaser if (i) there has been a material misrepresentation,
breach of warranty or breach of covenant by any Shareholder under this Agreement
or (ii) any of the conditions precedent to Closing set forth in Section 8.1 have
not been met on the Closing Date, and, in each case, Purchaser is not then in
material default of its obligations hereunder; or
(c) by the Shareholders acting together if (i) there has been a
material misrepresentation, breach of warranty or breach of covenant by
Purchaser under this Agreement or (ii) any of the conditions precedent to
Closing set forth in Section 8.2 have not been met on the Closing Date, and, in
each case, no Shareholder is then in material default of his obligations
hereunder.
9.2 Effect of Termination.
(a) In the case of any termination of this Agreement, the provisions
of Sections 7.3 and 7.4 shall remain in full force and effect.
(b) Upon termination of this Agreement as provided in Section
9.1(a), except as stated in subsection (a) above, this Agreement shall forthwith
become void and there shall be no liability or obligation on the part of any
party hereto or their respective directors, officers, employees, agents or other
representatives.
(c) In the event of termination of this Agreement as provided in
Section 9.1(b) or (c) hereof, such termination shall be without prejudice to
any rights that the terminating party or parties may have against the breaching
party or parties or any other person under the terms of this Agreement or
otherwise.
9.3 Amendment. This Agreement may be amended at any time by a written
instrument executed by Purchaser and the Shareholders. Any amendment effected
pursuant to this Section 9.3 shall be binding upon all parties hereto.
9.4 Waiver. Any term or provision of this Agreement may be waived in
writing at
29
any time by the party or parties entitled to the benefits thereof. Any waiver
effected pursuant to this Section 9.4 shall be binding upon all parties hereto.
No failure to exercise and no delay in exercising any right, power or privilege
shall operate as a waiver thereof, nor shall any single or partial exercise of
any other right, power or privilege. No waiver of any breach of any covenant or
agreement hereunder shall be deemed a waiver of any preceding or subsequent
breach of the same or any other covenant or agreement. The rights and remedies
of each party under this Agreement are in addition to all other rights and
remedies, at law or in equity, that such party may have against the other
parties.
10. INDEMNIFICATION
10.1 Survival of Representations and Warranties. The representations and
warranties of the parties hereto contained in this Agreement or in any writing
delivered pursuant hereto or at the Closing shall survive the Closing and the
consummation of the transactions contemplated hereby (and any examination or
investigation by or on behalf of any party hereto) until the second anniversary
of the Closing Date; provided, however, that the representations and warranties
contained in Section 4.12 shall not terminate until the expiration of any
applicable statute of limitations; and provided, further, that representations
and warranties contained in Article 3 shall not terminate but shall continue
indefinitely.
10.2 Indemnification.
(a) The Shareholders, jointly and severally, covenant and agree to
defend, indemnify and hold harmless Purchaser and the Company and each Person
who controls Purchaser or the Company from and against any losses, liabilities,
obligations, costs, expenses, damages or judgments of any kind or nature
(including reasonable attorney and other professional fees) ("Damages") arising
out of or resulting from: (i) any inaccuracy in or breach of any representation
or warranty made by any Shareholder in this Agreement or in any writing
delivered pursuant to this Agreement or at the Closing; or (ii) the failure of
any Shareholder to perform or observe fully any covenant, agreement or provision
to be performed or observed by such Shareholder pursuant to this Agreement or
any other Agreements executed as part of this Agreement. To secure the full and
punctual performance of the indemnification obligations of the Shareholders
under this Section 10.2(a), the Shareholders shall either (i) provide an
irrevocable standby letter of credit in the amount of $500,000 in form and
substance reasonably satisfactory to Purchaser and issued by a first class U.S.
bank reasonably acceptable to Purchaser or (ii) shall direct Purchaser to
deposit $500,000 of the Base Purchase Price into an escrow account to be jointly
established by the Shareholder and Purchaser. Except as expressly provided in
Section 10.1, the obligation to indemnify shall terminate on the second
anniversary of the Closing Date. Any such letter of credit or escrow arrangement
shall terminate upon the second anniversary of the Closing Date.
30
(b) Purchaser covenants and agrees to defend, indemnify and hold
harmless the Shareholders from and against any Damages arising out of or
resulting from: (i) any inaccuracy in or breach of any representation or
warranty made by Purchaser in this Agreement or in any writing delivered
pursuant to this Agreement or at the Closing; or (ii) the failure by Purchaser
to perform or observe any covenant, agreement or condition to be performed or
observed by it pursuant to this Agreement; or (iii) the operation of the
business of the Company after the Closing.
10.3 Indemnification Non-Exclusive. The foregoing indemnification
provisions are in addition to, and not in derogation of, any statutory,
equitable or common-law remedy any party may have for breach of representation,
warranty, covenant or agreement; provided, however, the time and dollar
limitations as set forth in Section 10.1, 10.2 and 10.6 shall apply to any such
remedies.
10.4 Set-off. Notwithstanding any provision of this Agreement or of any
other agreement, instrument or undertaking, it is understood and agreed that
Purchaser shall have the right to set-off the amount of any indemnity under
Section 10.2 hereof to the extent any of the Shareholders shall be liable
therefor against any sums of money at any time payable or deliverable to the
Shareholders. The remedies provided in this Article shall be cumulative and
shall not preclude the assertion by any party of any other rights or the seeking
of any other remedies by it against any other party.
10.5 Prompt Payment. In the event that any party is required to make any
payment under this Section 10, such party shall promptly pay the Indemnified
Party the amount so determined. If there should be any dispute as to the amount
or manner of determination of any indemnity obligation owed under this Section
10, the Indemnitor shall, nevertheless, pay when due such portion, if any, of
the obligation as shall not be subject to dispute. The portion in dispute shall
be paid upon a full and non-appealable resolution of such dispute. Upon the
payment in full of any claim, the Indemnitor shall be subrogated to the rights
of the Indemnified Party against any person with respect to the subject matter
of such claim. Notwithstanding any claims or disputed claims arising pursuant to
this Agreement, Purchaser shall be obligated to continue to make any and all
payments to the Shareholders pursuant to Section 2.2(b) hereof.
10.6 Limitations on the Shareholders' Obligation to Indemnify.
Notwithstanding anything set forth in this Section 10 to the contrary,
(a) Except as provided in Section 4.10 above, neither Purchaser, the
Company nor any other Person entitled to indemnification under Section 10.1 (a)
shall have any right to indemnification thereunder unless and until the
aggregate Damages indemnifiable by the Shareholders thereunder exceeds $25,000,
following which such parties shall be entitled to recover their full amount of
Damages.
31
(b) The maximum aggregate amount of Damages that Purchaser, the
Company or any Person entitled to indemnification under Section 10.2(a) shall be
entitled to receive from the Shareholders shall not exceed the aggregate amount
of the Base Purchase Price plus any Additional Purchase Price paid by Purchaser.
To the extent that that Damages or any portion thereof are paid directly to an
indemnitee or are reimbursable to the Shareholders under an insurance policy,
the premiums of which were paid by the Company, such amounts of Damages shall
not be counted against the limits on indemnification set forth in this Section
10.6(b).
11. GENERAL PROVISIONS
11.1 Notices. All notices and other communications under or in connection
with this Agreement shall be in writing and shall be deemed given (a) if
delivered personally (including by overnight express or messenger), upon
delivery, (b) if delivered by registered or certified mail (return receipt
requested), upon the earlier of actual delivery or three (3) days after being
mailed, or (c) if given by telecopy, upon confirmation of transmission by
telecopy, in each case to the parties at the following addresses:
(a) If to the Purchaser, addressed to:
Virbac Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
With a Copy to:
Blank Rome, LLP
▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇., ▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
32
(b) If to any Shareholder, to the address set forth
below such Shareholder's name on Schedule "A"
hereto:
With a Copy to:
Cantor Arkema, P.C.
The First National Bank Building
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
11.2 Severability. If any term or provision of this Agreement or the
application thereof to any circumstance shall, in any jurisdiction and to any
extent, be invalid or unenforceable, such term or provision shall be ineffective
as to such jurisdiction to the extent of such invalidity or unenforceability
without invalidating or rendering unenforceable such term or provision in any
other jurisdiction, the remaining terms and provisions of this Agreement or the
application of such terms and provisions to circumstances other than those as to
which it is held invalid or enforceable.
11.3 Entire Agreement. This Agreement, including the annexes and schedules
attached hereto and other documents referred to herein, contains the entire
understanding of the parties hereto in respect of its subject matter and
supersedes all prior and contemporaneous agreements and understandings, oral and
written, between the parties with respect to such subject matter.
11.4 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of Purchaser and the Shareholders and their respective
successors, heirs and assigns; provided, however, that no Shareholder shall
directly or indirectly transfer or assign any of such Shareholder's respective
rights hereunder in whole or in part without the prior written consent of
Purchaser, and any such transfer or assignment without said consent shall be
void, ab initio. Subject to the immediately preceding sentence, and except as
set forth in Article 10, this Agreement is not intended to benefit, and shall
not run to the benefit of or be enforceable by, any other person or entity other
than the parties hereto and their permitted successors and assigns.
11.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute but one and the same Agreement.
11.6 Recitals, Schedules and Annexes. The recitals, schedules and annexes
to this
33
Agreement are incorporated herein and, by this reference, made a part hereof as
if fully set forth at length herein.
11.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws (and not the law of conflicts) of the State of
Delaware.
11.8 Attorneys Fees. If any legal action or any other proceeding is
brought for the enforcement of this Agreement or by reason of an alleged
dispute, breach, default or misrepresentation in connection with any of the
provisions of this Agreement, the successful or prevailing party shall be
entitled to recover reasonable attorney's fees and other costs incurred in that
action or proceeding, in addition to any other relief to which it may be
entitled.
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or has caused this Agreement to be executed on its behalf by a
representative duly authorized, all as of the date first above set forth.
VIRBAC CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇
President
SHAREHOLDERS:
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
DELMARVA LABORATORIES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President
34
LIST OF APPENDICES, EXHIBITS AND SCHEDULES
APPENDICES
Appendix 1 Description of Dental Equipment Line
Appendix 2 Sample Calculation of Possible Payment Under Section 2.2(b)(iii)
EXHIBITS
Exhibit A List of Shareholders
Exhibit B Opinion of Seller's Counsel
Exhibit C Non-Competition Agreements
SCHEDULES
4.4 Financial Statements
4.8(a) List of Patents and Trademarks
4.9 Insurance Policies
4.15 Permits
4.18(a) Sales Orders
4.18(b) Purchase Orders
4.18(c) Sales Representatives
4.24 Warranties
35
APPENDIX 1
I. DESCRIPTION OF DENTAL EQUIPMENT LINE
Delmarva's Dental Equipment line is intended for small animal use. It consists
of three (3) pieces of equipment:
1. ULTRASONIC SCALER: Used for scaling teeth. It has automatic tuning and is
25K power for all scaling needs. This unit accepts feline urethral
catheters and other specialty inserts.
2. MOTOR PACK: Used for polishing, drilling, cutting and rounding of teeth.
Variable speeds of 3,000 to 22,000 RPMs allow a wide range of speed.
Available with a foot switch and a sealed precision motor pack..
3. COMBO UNIT: This is the only Scaler/Motor Pack Combination Unit in the
Veterinary field. It has all of the benefits of the individual Scalers and
Motor Packs.
Approximately 21 accessory units are also available. They range from portable
water supplies, prophy pastes, TFI inserts, periodontal inserts, feline urethral
catheters to supplemental motor hand pieces.
The Exclusive Distribution Agreement between Delmarva Laboratories and South
East Instruments Corp. has been terminated and it is transferred to Delmarva
2000 LTD, a Delaware Corp. operated by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇.
All U.S. Distributor customers will be notified August 4th or 5th about the
change to Delmarva 2000 and the full Dental Line will be transferred to them on
August 8, 2003.
APPENDIX 2
SAMPLE CALCULATION OF PAYMENT UNDER SECTION 2.1(b)(iii)
If Gross Profit does not exceed $1,000,000, no amount is payable. The maximum
Gross Profit entitling the Shareholders to a payment is $1,500,000. The "maximum
payment target" therefore is Gross Profit of $500,000 in excess of $1,000,000.
Assume the highest Gross Profit during any 12 consecutive months in the three
years following commercialization is $1,250,000.
Extent to which Gross Profit exceeds $1,000,000...................................... $250,000
Percentage of maximum payment target ($500,000) represented by $250,000.............. 50%
50% of $500,000 maximum payment...................................................... $250,000
SAMPLE CALCULATION OF PAYMENT UNDER SECTION 2.1(b)(iv)
If Gross Profit does not exceed $600,000, no amount is payable. The maximum
Gross Profit entitling the Shareholders to a payment is $700,000. The "maximum
payment target" therefore is Gross Profit of $100,000 in excess of $600,000.
Assume the highest Gross Profit during any 12 consecutive months in the two
years following commercialization is $610,000.
Extent to which Gross Profit exceeds $600,000........................................ $10,000
Percentage of maximum payment target ($100,000) represented by $10,000............... 10%
10% of $250,000 maximum payment...................................................... $25,000
36
Exhibit A
List of Shareholders
Shareholder Address Shares
------------------ ------------------------- ------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
37
Exhibit B
Opinion of Seller's Counsel
[CANTORARKEMA, P.C. LOGO]
The First National Bank Building Telephone (▇▇▇) ▇▇▇-▇▇▇▇
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▇▇▇.▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ August 15,2003
Virbac Corporation
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Gentlemen:
We have acted as counsel for Delmarva Laboratories, Inc., a Virginia
corporation (the "Company"), and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ (individually, a "Shareholder" and collectively, the
"Shareholders"), in connection with a Stock Purchase Agreement dated
August 15,2003 (the "Purchase Agreement"), by and among Virbac
Corporation, a Delaware corporation, the Shareholders and the Company.
In giving the opinions set forth below, we have examined originals
or copies of all such ; agreements, certificates and other documents and
records as we have deemed relevant and necessary under the circumstances
as the basis for the opinions expressed herein. We have relied as to
factual matters upon certificates or advice from appropriate officers of
the Company.
Capitalized terms used and not defined shall have the same meanings
ascribed to such terms in the Purchase Agreement. As used herein, the term
"Agreements" shall mean the Purchase Agreement, the Non-Competition
Agreements and the Consulting Agreement.
For purposes of rendering this opinion, we have assumed that the
Agreements have been duly authorized, executed and delivered by you, and
we have further assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals and the
conformity to the originals of all documents submitted to us as certified,
photostatic or conformed copies. As used herein, the phrase "to the best
of our knowledge" shall be deemed to be the actual knowledge of the
attorneys in this firm who have worked on matters for the Company and the
Shareholders.
Based upon the foregoing, we are of the opinion that:
1. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the Commonwealth of Virginia.
2. The Company has the requisite corporate power and all other
necessary authority to enter into, execute and deliver the Purchase
Agreement and to perform its obligations thereunder.
Virbac Corporation
August 15, 2003
Page 2
3. The execution and delivery of the Purchase Agreement by the Company
has been duly authorized, and the Company and each Shareholder has
duly and validly executed and delivered each of the Agreements to
which it or he is a party.
4. The Purchase Agreement and the other Agreements to which the
Shareholders are party, assuming due execution and delivery by the
other parties thereto, constitute valid and binding agreements
enforceable in accordance with their respective terms against the
Company and each Shareholder, in the case of the Purchase Agreement,
and against each Shareholder party to the Agreement, in the case of
the other Agreements, except as limited by bankruptcy, insolvency or
other similar laws (regardless of whether enforcement is sought in a
court of law or equity), and except that the remedy of specific
performance may be limited by the equitable discretion of the court
before which any proceeding may be brought; and except that we
express no opinion regarding the enforceability on any
non-competition, non-solicitation or similar provisions included in
any of the Agreements.
5. The execution and delivery by the Company and each Shareholder of
the Purchase Agreement, the execution and delivery by the
Shareholders of the other Agreements to which they are party, and
the consummation of the transactions contemplated thereby will not
(i) violate any provision of the articles of incorporation or
by-laws of the Company, (ii) to the best of our knowledge, violate
any statute, rule, regulation, order or decree of any public body or
authority by which the Company or any Shareholder or any of their
respective properties or assets are bound, or (iii) to the best of
our knowledge, result in a violation or breach of, or constitute a
default under, any license, franchise, permit, indenture, agreement
or other instrument to which the Company or any Shareholder is a
party, or by which the Company or any Shareholder or any of their
respective assets or properties are bound.
6. To the best of our knowledge, all consents, authorizations and
approvals required with respect to the consummation of the
transactions contemplated by the Purchase Agreement have been
lawfully and validly obtained.
7. The Company's authorized capital stock consists of 5,000 shares of
common stock, par value $1.00 per share. To the best of our
knowledge, (i) 1,500 of such shares are issued and outstanding, (ii)
the Shares have been validly issued and are fully paid and
non-assessable, and (iii) there are outstanding no securities
convertible into or exchangeable for capital stock of the Company
and no subscriptions, rights, warrants, calls, commitments, options,
or agreements to which the Company or any Shareholder is a party or
by which any of them is bound that relate to the issuance or sale by
any of them of any shares of the capital stock of the Company.
8. To the best of our knowledge, (i) each Shareholder owns good and
valid title to 500 shares of the common stock of the Company, free
and clear of any liens, pledges, encumbrances, charges, agreements
or claims, and (ii) the certificates evidencing each respective
Virbac Corporation
August 15, 2003
Page 3
Shareholder's ownership of his portion of the Shares are in proper
form for the enforcement of rights and limitation of rights
pertaining to such Shares that are set forth in the articles of
incorporation and bylaws of the Company. Any restrictions on
transfer of the Shares contained in the articles of incorporation or
bylaws of the Company have been either waived or complied with.
9. Upon payment for, and delivery of, the Shares in accordance with the
terms of the Agreement, Virbac will be the owner of the Shares. To
the best of our knowledge, such ownership shall be free and clear of
any adverse claim.
10. Except as otherwise disclosed in the Purchase Agreement, there are
no actions, suits, claims, investigations or proceedings, whether
pending or, to the best of our knowledge, threatened, whether at law
or in equity, or whether administrative or in mediation or
arbitration, before any court or government agency that, if decided
adversely to the Company or any Shareholder, would have a Material
Adverse Effect on the financial condition, properties, existence, or
business of the Company.
We are licensed to practice law in the Commonwealth of Virginia and
in connection therewith, with your permission, are expressing our opinion
only with respect to the laws of the Commonwealth of Virginia. We have
assumed, with your permission, however, that insofar as the substantive
laws of any other state may be applicable to any matters opined on herein,
such laws are the same as the substantive laws of the Commonwealth of
Virginia opined on herein. This opinion is furnished solely for the use
and benefit of Virbac Corporation. It is not to be relied upon by any
other person or entity, used for any other purpose, or referred to in
whole or in part in any statements or documents submitted to or filed with
any public or private agency or entity.
Sincerely,
CANTOR ARKEMA, P.C.
3
Exhibit C
Non-Competition Agreements
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT (the "Agreement") is made this 15th day of
August, 2003 by and among ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, an individual residing at ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("▇▇▇▇▇"), ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, an
individual residing at ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
("▇▇▇▇▇▇▇"), ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, an individual residing at ▇▇ ▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Betyeman") (Tracy, Parrish and Betyeman, each a
"Stockholder" and each reference in this Agreement to "Stockholder" shall be a
reference to each of Tracy, Parrish and Betyeman individually and severally, and
each obligation of "Stockholder" hereunder shall be an obligation of each of
them), and VIRBAC CORPORATION, a Delaware corporation ("Virbac").
WITNESSETH
WHEREAS, Virbac is acquiring all of the outstanding capital stock of
Delmarva Laboratories, Inc., a Virginia Corporation ("Delmarva"), pursuant to
that certain Stock Purchase Agreement dated the date hereof among Virbac,
Delmarva, Tracy, Parrish and Betyeman (the "Stock Purchase Agreement"); and
WHEREAS, Stockholder owns and is selling 33.33% of the outstanding capital
stock of Delmarva to Virbac pursuant to the Stock Purchase Agreement; and
WHEREAS, the Stock Purchase Agreement contemplates that Stockholder will
enter into a non-competition agreement as a condition to Virbac's purchase of
Stockholder's stock;
NOW, THEREFORE, in consideration of the premises and of the mutual
promises, covenants, representations, warranties and agreements herein
contained, Tracy, Parrish and Betyeman each hereby agrees with Virbac as
follows:
1. Covenants Not to Compete and Solicit. In partial consideration of the
payments that Virbac will make to Stockholder under the Stock Purchase
Agreement, and as an inducement to Virbac to consummate the transaction
contemplated by the Stock Purchase Agreement, Stockholder hereby covenants and
agrees that for a period of five years from the date of this Agreement (the
"Covenant Term"), he will not:
a. engage in or offer to engage in, directly or indirectly (as
defined below), anywhere in the United States or Canada, any activity that
is competitive with the business and operations of Delmarva or Virbac as
they have been conducted in the past and as they shall be conducted during
the Covenant Term; or
b. interfere, influence, hinder, hamper or impede, or seek to
interfere, influence, hinder, hamper or impede any existing or potential
business relationship between Virbac and any person, entity, customer or
client having a relationship with Delmarva or Virbac preceding or during
the Covenant Term.
For purposes of this Agreement, to act "directly or indirectly" means to act
personally or through an associate, affiliate, family member or otherwise, as
proprietor, partner, shareholder, director, officer, employee, agent, consultant
or in any other capacity or manner whatsoever.
Notwithstanding anything set forth herein to the contrary, the parties
hereby agree that it shall not be a violation of this Agreement for Betyeman, or
an entity owned or controlled by Betyeman, to conduct a business using the
dental equipment assets formerly owned by Delmarva.
2. Confidentiality.
a. Subject to Section 2(c) hereof, Stockholder hereby covenants and
agrees that during the Covenant Term and thereafter he will not
communicate or disclose, directly or indirectly, to any person or entity,
or use for his own account or for the account of any other person or
entity, any business operation plans or manuals, customer lists, marketing
plans or proposals, financial data, technical information, proprietary
rights, or any other knowledge or information whatsoever used in or
concerning the business of Delmarva or Virbac, heretofore or hereafter
acquired by Stockholder, whether or not developed, devised or otherwise
created in whole or in part through his own efforts.
b. Subject to Section 2(c) hereof, and subject to his respective
obligations under applicable law, Stockholder shall keep all documents and
information relating to the business or operations of Delmarva and Virbac
confidential, and will not during the Covenant Term or thereafter disclose
such documents or information to any third party.
c. The confidentiality provisions set forth in this Section 2 will
not apply to (i) information that is in the public domain other than as a
result of a breach by Stockholder of this Agreement and (ii) information,
the disclosure of which is mandated by any judicial, administrative or
regulatory proceeding, or otherwise required by law or regulatory
authority.
3. Remedies. The parties recognize that, in the event of a breach by
Stockholder of any of the provisions hereof, Virbac may suffer continuing and
irreparable harm for which Virbac will have no adequate remedy at law.
Accordingly, Stockholder hereby waives any and all right to assert any claim or
defense that Virbac has an adequate remedy at law for any such breach. In
recognition thereof, Stockholder hereby agrees that, in the event of any such
breach, Virbac will be entitled to seek a decree of specific performance or any
other appropriate remedy to enforce provisions of this Agreement without any
requirement that a bond be posted. The parties further agree that this Section 3
shall not in any way limit remedies at law or in equity otherwise available to
Virbac.
4. Scope of Covenants; Judicial Modification. Stockholder acknowledges and
agrees that the restrictive covenants contained in this Agreement are reasonable
in terms of their geographic scope and temporal limitations. If, however, a
court of competent jurisdiction
2
determines that the geographic scope or temporal limitations of any of the
restrictive covenants contained herein is not reasonably necessary to protect
the legitimate business interests of Virbac, then such geographic scope, time
duration or both will be deemed to become and thereafter will be the maximum
time period or geographic area which such court deems reasonable and
enforceable.
5. Severability. If any provision of this Agreement is found to be
illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability will not affect any other provision of this Agreement.
6. Successors and Assigns. This Agreement will inure to the benefit of and
be binding upon Stockholder and Virbac, and their respective successors and
permitted assigns.
7. Notices. All notices, consents, approvals, requests, instructions and
other communications required by or related to this Agreement shall be in
writing and shall be delivered personally or shall be sent by registered or
certified mail, return receipt requested, or by facsimile transmission, to the
receiving party at the following address and communication numbers:
If to Virbac:
Virbac Corporation
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▇▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax No.: ▇▇▇-▇▇▇-▇▇▇▇
If to ▇▇▇▇▇:
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▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax No.: [Pending Closing]
If to ▇▇▇▇▇▇▇:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇▇,▇▇ ▇▇▇▇▇
Fax No.:
3
If to Betyeman:
▇▇▇▇▇▇▇ F, ▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax No.:
Either party may change his or its address or communications numbers listed
above by notifying the other party of such change in the manner prescribed by
this Section 7.
8. Entire Agreement. This Agreement contains the entire agreement and
understanding of the parties relating to me matters contemplated herein, and
merges and supersedes all prior discussions, agreements and understandings of
any nature among them with respect thereto. This Agreement may not be changed or
modified, except by an agreement in writing signed by all the parties.
9. Waiver. The waiver of the breach of any term or condition of this
Agreement will not operate as or be construed to be a waiver of any other or
subsequent breach of this Agreement.
10. Governing Law. This Agreement will be governed and construed in
accordance with the laws of the State of Delaware. Any action in connection with
any dispute arising under this Agreement shall be brought exclusively in state
or federal courts situated in the State of Texas that have personal and subject
matter jurisdiction over the parties and the matters in dispute.
11. Counterparts. This Agreement may be executed in any number of
counterparts and any party may execute any such counterpart, each of which when
executed and delivered will be deemed to be an original and all of which
counterparts taken together will constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
VIRBAC CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇
President
4
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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5
SCHEDULE 4.4
FINANCIAL STATEMENTS
SEE ATTACHED.
SCHUTRUMPF & KOREN, P.C.
CERTIFIED PUBLIC ACCOUNTANT'S
▇▇▇▇▇▇ J, SCHUTRUMPF, JR. AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ VIRGINIA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
A. ▇▇▇ ▇▇▇▇▇▇▇, ▇▇.
DEC: , 2002
DELMARVA LABORATORIES, INC.
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We have compiled the accompanying Balance Sheet of Delmarva Laboratories,
Inc. as of December 31,2002, and the related Statement of Income for the
period then ended, in accordance with Statements on Standards for
Accounting and Review Services issued by the American Institute of
Certified Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited
or reviewed the accompanying financial statements and, accordingly, do not
express an opinion or any other form of assurance on them.
Management has elected to omit all the disclosures and the Statement of
Cash Flows required by generally accepted accounting principles. If the
omitted disclosures and Statement of Cash Flows were included in the
financial statements, they might influence the user's conclusions about
the Company's financial position, results of operations, and cash flows.
Accordingly, these financial statements are not designed for those who are
not informed about such matters.
Prior years' financial statements have been compiled by us and are
presented for comparative purposes.
/s/ Schutrumpf & Koren, P.C
---------------------------------
Schutrumpf & Koren, P.C,
Certified Public Accountants
June 2, 2003
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PH. ▇▇▇.▇▇▇.▇▇▇▇ FAX ▇▇▇.▇▇▇.▇▇▇▇ E-MAIL INFO [ILLEGIBLE].COM
DELMARVA LABORATORIES, INC.
BALANCE SHEET
AS OF DECEMBER 31, 2002 AND 2001
ASSETS
DEC. 31, 2002 DEC. 31, 2001
------------- -------------
CURRENT ASSETS
▇▇▇▇▇ CASH $ 300 $ 300
CASH IN BANK - CHECKING 74,157 78,498
CASH - MMA - SUNTRUST 281,306 78,129
ACCOUNTS RECEIVABLE 208,713 204,416
INVENTORY - DENTAL EQUIP 48,179 41,704
INVENTORY - EUTHASOL 150,295 124,003
INVENTORY - PENTASOL POWDER 72,987 374,896
PREPAID EXPENSE 19,867 63,708
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TOTAL CURRENT ASSETS $ 855,804 $ 965,654
------------ -------------
PROPERTY AND EQUIPMENT
FURNITURE AND EQUIPMENT $ 81,350 $ 75,505
FIXTURES 45,585 44,121
ACCUMULATED DEPRECIATION (113,602) (99,598)
------------ -------------
NET PROPERTY AND EQUIPMENT $ 23,333 $ 20,030
------------ -------------
OTHER ASSETS
DEPOSIT $ 1,450 $ 1,450
------------ -------------
TOTAL OTHER ASSETS $ 1,450 $ 1,450
------------ -------------
TOTAL ASSETS $ 870,587 $ 987,134
============ =============
See Accountants' Compilation Report
DELMARVA LABORATORIES, INC.
BALANCE SHEET
AS OF DECEMBER 31, 2002 AND 2001
LIABILITIES AND STOCKHOLDERS' EQUITY
DEC. 31, 2002 DEC. 31, 2001
------------- -------------
CURRENT LIABILITIES
ACCOUNTS PAYABLE $ 11,298 $ 102,645
ACCOUNTS PAYABLE - OTHER 146,904 134,004
INCOME TAXES PAYABLE 10,705 0
ACCRUED EXPENSES 47,473 50,000
LINE OF CREDIT - WACHOVIA 50,000 150,000
DEFERRED INCOME TAXES 0 234
------------ -----------
TOTAL CURRENT LIABILITIES $ 266,380 $ 436,883
------------ -----------
TOTAL LIABILITIES $ 266,380 $ 436,883
------------ -----------
STOCKHOLDERS' EQUITY
COMMON STOCK $ 2,000 $ 2,000
RETAINED EARNINGS 548,251 511,097
CURRENT EARNINGS (LOSS) 53,956 37,154
------------ -----------
TOTAL STOCKHOLDERS' EQUITY $ 604,207 $ 550,251
------------ -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 870,587 $ 987,134
============ ===========
See Accountants' Compilation Report
DELMARVA LABORATORIES, INC.
INCOME STATEMENT
3 MONTHS 3 MONTHS 12 MONTHS 12 MONTHS
ENDED ENDED ENDED ENDED
DEC. 31, 2002 PCT DEC. 31, 2001 PCT DEC. 31, 2002 PCT DEC. 31, 2001 PCT
------------- ------ ------------- ------ ------------- ------ ------------- ------
INCOME
SALES-TEVA $ 65,563 11.83 $ 327,966 12.28 $ 1,485,354 39.36 $ 898,003 34.21
SALES-EUTHASOL 351,136 63.34 193,333 10.82 1,775,423 47.05 1,255,902 47.84
SALES-PENTASOL POWDER 23,400 4.22 12,437 1.98 56,949 1.51 24,519 0.93
SALES-DENTAL EQUIPMENT 106,948 19.29 87,457 3.94 427,985 11.34 407,725 15.53
SALES-EQUIP REPAIR 7,048 1.27 8,202 1.31 33,758 0.89 41,893 1.60
RETURNS AND ALLOWANCES 240 0.04 0 0.00 (6,032) (0.16) 0 0.00
REFUNDS AND ADJUSTMENTS 0 0.00 (2,101) (0.33) 0 0.00 (2,781) (0.11)
--------- ------ --------- ------ ----------- ------ ------------ ------
TOTAL INCOME $ 554,335 100.00 $ 627,294 100.00 $ 3,773,435 100.00 $ 2,625,291 100.00
--------- ------ --------- ------ ----------- ------ ------------ ------
COST OF GOODS SOLD
PURCHASES-DENTAL EQUIP $ 101,739 18.35 $ 61,078 9.74 $ 288,784 7.65 $ 260,030 9.90
EQUIP REPAIRS COST 3,524 0.64 4,102 0.65 16,878 0.45 20,947 0.80
PURCHASES-PENTASOL POWDER 20,183 3.64 10,794 1.72 45,376 1.20 19,335 0.74
PURCHASES-TEVA 44,182 7.97 234,858 17.44 1,057,717 28.03 609,628 23.22
EXCLUSIVE DISTRIBUTION FEE (59,540) (10.74) (8,500) (1.36) 0 0.00 50,000 1.90
INVENTORY WRITE OFF 264,397 47.70 0 0.00 264,397 7.01 0 0.00
PURCHASES-EUTHASOL 233,887 42.19 160,442 25.58 1,131,437 29.98 807,400 30.75
2% DISCOUNT (2,280) (0.41) (3,465) (0.55) (22,860) (0.61) (10,140) (0.39)
FREIGHT 5,555 1.00 6,046 0.96 27,257 0.72 20,462 0.78
--------- ------ --------- ------ ----------- ------ ------------ ------
TOTAL COST OF GOODS SOLD $ 611,647 110.34 $ 465,355 74.18 $ 2,808,986 74.44 $ 1,777,662 67.71
--------- ------ --------- ------ ----------- ------ ------------ ------
GROSS PROFIT $ (57,312) (10.34) $ 161,938 25.82 $ 964,449 25.56 $ 847,629 32.29
--------- ------ --------- ------ ----------- ------ ------------ ------
See Accountants' Compilation Report
DELMARVA LABORATORIES, INC.
INCOME STATEMENT
3 MONTHS 3 MONTHS 12 MONTHS 12 MONTHS
ENDED ENDED ENDED ENDED
DEC. 31, 2002 PCT DEC. 31, 2001 PCT DEC. 31, 2002 PCT DEC. 31, 2001 PCT
------------- ------ ------------- ------ ------------- ------- ------------- ------
OPERATING EXPENSES
ACCOUNTING $ 4,180 0.75 $ 2,690 0.43 $ 21,920 0.58 $ 12,890 0.49
ADVERTISING 3,480 0.63 85 0.01 7,673 0.20 85 0.00
PROMOTIONAL MATERIALS 70 0.01 0 0.00 9,308 0.25 12,336 0.47
AUTO ALLOWANCE 6,900 1.24 9,179 1.46 29,100 0.77 34,379 1.31
AUTO EXPENSE 786 0.14 0 0.00 786 0.02 0 0.00
BAD DEBT EXPENSE 0 0.00 7,458 1.19 0 0.00 7,458 0.28
BANK CHARGES 450 0.08 537 0.09 1,567 0.04 2,405 0.09
BOOKS AND PUBLICATIONS 354 0.06 820 0.13 803 0.02 1,778 0.07
COMPUTER EXPENSES 1,983 0.36 10,557 1.68 7,982 0.21 15,687 0.60
CONSULTANTS 2,730 0.49 750 0.12 4,700 0.12 3,930 0.15
CONTRIBUTIONS 0 0.00 0 0.00 1,050 0.03 170 0.01
CONVENTIONS AND SEMINARS 1,942 0.35 1,879 0.30 14,511 0.38 16,231 0.62
DEPRECIATION 2,533 0.46 11,946 1.90 14,006 0.37 27,947 1.06
DUES AND MEMBERSHIPS 11,600 2.09 1,250 0.20 25,750 0.68 5,125 0.20
ENTERTAINMENT 802 0.14 584 0.09 4,693 0.13 6,958 0.27
EXHIBIT FEES 0 0.00 0 0.00 0 0.00 55 0.00
GIFTS 217 0.04 218 0.03 781 0.02 924 0.04
INSURANCE - BUSINESS 6,013 1.08 6,769 1.08 25,639 0.68 26,172 1.00
INSURANCE - DISABILITY 9,501 1.71 4,613 0.74 9,501 0.25 4,613 0.18
INSURANCE - HOSPITALIZATION 14,079 2.54 16,127 2.57 49,983 1.32 57,028 2.17
INSURANCE - LIFE (6,813) (1.23) (5,723) (0.91) 1,099 0.03 2,862 0.11
INSURANCE - KEY MAN 2,199 0.40 5,723 0.91 2,199 0.06 5,723 0.22
INTEREST 697 0.13 2,360 0.38 5,816 0.15 6,622 0.25
LEGAL 8,223 1.48 13,961 2.23 20,146 0.53 14,111 0.54
MEALS 611 0.11 744 0.12 2,240 0.06 758 0.03
OFFICE EXPENSE 1,639 0.30 913 0.15 8,110 0.21 9,396 0.36
PATENT AND TRADEMARK EXP. 0 0.00 150 0.02 1,025 0.03 700 0.03
PENALTIES 0 0.00 0 0.00 11 0.00 0 0.00
RETIREMENT PLAN EXPENSE 107,468 19.39 (46,803) (7.46) 107,468 2.85 0 0.00
PROFESSIONAL FEES 50 0.01 0 0.00 210 0.01 0 0.00
RENT 4,104 0.74 4,000 0.64 16,416 0.44 15,907 0.61
REPAIRS AND MAINTENANCE 0 0.00 690 0.11 0 0.00 1,930 0.07
TRAVEL & LODGING 8,003 1.44 6,929 1.10 30,416 0.81 31,574 1.20
RESEARCH AND DEVELOPMENT 136 0.02 136 0.02 5,243 0.14 19,068 0.73
SALARIES 136,075 24.55 125,010 19.93 438,626 11.62 437,062 16.65
TAXES - BUSINESS 3 0.00 377 0.06 3,059 0.08 4,343 0.17
TAXES - PAYROLL 8,532 1.54 7,844 1.25 32,527 0.86 32,550 1.24
TELEPHONE 1,578 0.28 3,253 0.52 8,514 0.23 12,904 0.49
UTILITIES 489 0.09 491 0.08 1,894 0.04 1,905 0.07
---------- ------ ---------- ----- ----------- ----- ---------- -----
TOTAL OPERATING EXPENSES $ 340,614 61.45 $ 195,517 31.17 $ 914,772 24.24 $ 833,586 31.75
---------- ------ ---------- ----- ----------- ----- ---------- -----
OPERATING INCOME (LOSS) $ (397,926) (71.78) $ (33,578) (5.35) $ 49,677 1.32 $ 14,043 0.53
---------- ------ ---------- ----- ----------- ----- ---------- -----
OTHER INCOME (LOSS)
INTEREST INCOME $ 1,374 0.25 $ 728 0.12 $ 4,215 0.11 $ 10,299 0.39
MISCELLANEOUS INCOME 0 0.00 0 0.00 18,825 0.50 0 0.00
---------- ------ ---------- ----- ----------- ----- ---------- -----
TOTAL OTHER INCOME (LOSS) $ 1,374 0.25 $ 728 0.12 $ 23,040 0.61 $ 10,299 0.39
---------- ------ ---------- ----- ----------- ----- ---------- -----
INCOME BEFORE INCOME TAX $ (396,552) (71.54) $ (32,850) (5.24) $ 72,717 1.93 $ 24,342 0.93
---------- ------ ---------- ----- ----------- ----- ---------- -----
INCOME TAXES
INCOME TAX - FEDERAL $ (138,817) (25.04) $ (23,128) (3.69) $ 13,395 0.35 $ (9,491) (0.36)
INCOME TAX - STATE (23,486) (4.24) (7,413) (1.18) 5,600 0.15 (2,749) (0.10)
DEFERRED TAXES (234) (0.04) (572) (0.09) (234) (0.01) (572) (0.02)
---------- ------ ---------- ----- ----------- ----- ---------- -----
TOTAL INCOME TAXES $ (162,537) 29.32 $ (31,113) 4.96 $ 18,761 (0.50) $ (12,812) 0.49
---------- ------ ---------- ----- ----------- ----- ---------- -----
NET INCOME (LOSS) $ (234,015) (42.22) $ (1,737) 0.28 $ 53,956 1.43 $ 37,154 1.42
========== ====== ========== ===== =========== ===== ========== =====
See Accountants' Compilation Report
SCHUTRUMPF & KOREN, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇. JR. AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
▇▇▇▇▇▇ ▇ ▇▇▇▇▇ VIRGINIA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
A ▇▇▇ [ILLEGIBLE] ▇▇.
▇▇▇▇ ▇▇, ▇▇▇▇
▇▇▇▇▇▇▇▇ LABORATORIES, INC.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
We have compiled the accompanying Balance Sheet of Delmarva Laboratories,
Inc. as of June 30, 2003, and the related Statement of Income for the
period then ended, in accordance with Statements on Standards or
Accounting and Review Services issued by the American Institute of
Certified Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited
or reviewed the accompanying financial statements and, accordingly, do not
express an opinion or any other form of assurance on them.
Management has elected to omit all the disclosures and the Statement of
Cash Flows required by generally accepted accounting principles. If the
omitted disclosures and Statement of Cash Flows were included in the
financial statements, they might influence the user's conclusions is about
the Company's financial position, results of operations, and cash flows.
Accordingly, these financial statements are not designed for those who are
not informed about such matters.
Prior years' financial statements have been compiled by us and are
presented for comparative purposes.
/s/ Schutrumpf & Koren, P.C.
Schutrumpf & Koren, P.C.
Certified Public Accountants
July 25, 2003
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
PH. ▇▇▇.▇▇▇.▇▇▇▇ FAX ▇▇▇.▇▇▇.▇▇▇▇ E-MAIL [ILLEGIBLE]
DELMARVA LABORATORIES, INC.
BALANCE SHEET
AS OF JUNE 30, 2003 AND 2002
ASSETS
JUN. 30, 2003 JUN. 30, 2002
------------- -------------
CURRENT ASSETS
▇▇▇▇▇ CASH $ 300 $ 300
CASH IN BANK - CHECKING 18,710 31
CASH - MMA - SUNTRUST 207,092 229,471
ACCOUNTS RECEIVABLE 427,669 814,262
INVENTORY - DENTAL EQUIP 63,334 54,553
INVENTORY - EUTHASOL 166,327 107,594
INVENTORY - PENTASOL POWDER 347,603 362,976
PREPAID EXPENSE 59,784 20,105
----------- -----------
TOTAL CURRENT ASSETS $ 1,290,819 $ 1,589,292
----------- -----------
PROPERTY AND EQUIPMENT
FURNITURE AND EQUIPMENT $ 83,537 $ 80,926
FIXTURES 45,585 45,585
ACCUMULATED DEPRECIATION (118,663) (107,417)
----------- -----------
NET PROPERTY AND EQUIPMENT $ 10,459 $ 19,094
----------- -----------
OTHER ASSETS
DEPOSIT $ 1,450 $ 1,450
----------- -----------
TOTAL OTHER ASSETS $ 1,450 $ 1,450
----------- -----------
TOTAL ASSETS $ 1,302,728 $ 1,609,836
=========== ===========
See Accountants' Compilation Report
DELMARVA LABORATORIES, INC.
BALANCE SHEET
AS OF JUNE 30, 2003 AND 2002
LIABILITIES AND STOCKHOLDERS' EQUITY
JUN. 30, 2003 JUN. 30, 2002
------------- -------------
CURRENT LIABILITIES
ACCOUNTS PAYABLE $ 309,850 $ 95,110
ACCOUNTS PAYABLE - OTHER 0 418,638
INCOME TAXES PAYABLE 147,559 174,850
ACCRUED EXPENSES 0 39,000
LINE OF CREDIT - WACHOVIA 0 50,000
DEFERRED INCOME TAXES 0 234
----------- -----------
TOTAL CURRENT LIABILITIES $ 457,409 $ 777,632
----------- -----------
TOTAL LIABILITIES $ 457,409 $ 777,832
----------- -----------
STOCKHOLDERS EQUITY
COMMON STOCK $ 2,000 $ 2,000
RETAINED EARNINGS 602,207 548,251
CURRENT EARNINGS (LOSS) (241,112) 281,953
----------- -----------
TOTAL STOCKHOLDERS' EQUITY $ 845,319 832,204
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 1,302,728 $ 1,609,836
=========== ===========
See Accountants' Compilation Report
DELMARVA LABORATORIES, INC.
INCOME STATEMENT
3 MONTHS 3 MONTHS 6 MONTHS 6 MONTHS
ENDED ENDED ENDED ENDED
JUN. 30, JUN. 30, JUN. 30, JUN. 30,
2003 PCT 2002 PCT 2003 PCT 2002 PCT
--------- ------ ----------- ------ ---------- ------ ----------- ------
INCOME
SALES-TEVA $ 0 0.00 $ 814,967 48.16 $ 18,258 1.39 $ 1,239,721 48.48
SALES-EUTHASOL 584,694 82.45 756,377 44.70 1,062,662 80.80 1,067,114 41.73
SALES - PENTASOL POWDER 20,765 2.93 10,560 0.62 32,049 2.44 18,350 0.72
SALES-DENTAL EQUIPMENT 99,793 14.07 102,049 6.03 196,096 14,91 217,248 8.50
SALES-EQUIP REPAIR 4,143 O.58 11,922 0.70 7,824 0.59 20,560 0.80
RETURNS AND ALLOWANCES 0 0.00 (3,807) (0.22) 0 0.00 (6,017) (0.24)
REFUNDS AND ADJUSTMENTS (260) (0.04) 0 0.00 (1,689) (0.13) 0 0.00
--------- ------ ----------- ------ ---------- ------ ----------- ------
TOTAL INCOME $ 709,135 100.00 $ 1,692,068 100.00 $1,315,196 100.00 $ 2,556,976 100.00
--------- ------ ----------- ------ ---------- ------ ----------- ------
COST OF GOODS SOLD
PURCHASES-DENTAL EQUIP $ 58,221 8.21 $ 59,026 3.49 $ 114,505 8.71 $ 126,972 4.97
EQUIP REPAIRS COST 2,072 0.29 5,981 0.35 3,827 0.29 10,280 0.40
PURCHASES - PENTASOL POWDER 17,433 2.46 7,535 0.45 25,953 1.97 12,824 0.50
PURCHASES-TEVA 0 0.00 578,262 34.17 12,976 0.99 889,020 34.77
EXCLUSIVE DISTRIBUTION FEE 0 0.00 19,500 1.15 0 0.00 39,000 1.53
PURCHASES-EUTHASOL 309,919 43.70 472,323 27.91 620,040 47.14 667,767 26.12
2% DISCOUNT 0 0.00 (10,264) (0.61) (418) (0.03) (17,927) (0.70)
FREIGHT 4,708 0.66 8,127 0.48 12,726 0.97 15,958 0.62
--------- ------ ----------- ------ ---------- ------ ----------- ------
TOTAL COST OF GOODS SOLD $ 392,353 55.33 $ 1,140,470 67.40 $ 789,609 60.04 $ 1,743,884 68.20
--------- ------ ----------- ------ ---------- ------ ----------- ------
GROSS PROFIT $ 316,782 44.87 $ 551,598 32.60 $ 525,589 39.96 $ 813,082 31.80
--------- ------ ----------- ------ ---------- ------ ----------- ------
See Accountants, Compilation Report
DELMARVA LABORATORIES, INC.
INCOME STATEMENT
3 MONTHS 3 MONTHS 6 MONTHS 6 MONTHS
ENDED ENDED ENDED ENDED
JUN. 30, 2003 PCT JUN. 30, 2002 PCT JUN. 30, 2003 PCT JUN. 30, 2002 PCT
------------- ------ ------------- ----- ------------- ------ ------------- -----
OPERATING EXPENSES
ACCOUNTING $ 4,775 0.67 $ 3,425 0.20 $ 10,905 0.63 $ 9,505 0.37
ADVERTISING 17,267 2.43 2,250 0.13 30,688 2.33 4,193 0.16
PROMOTIONAL MATERIALS 1,846 0.26 3,455 0.20 1,846 0.14 4,096 0.16
AUTO ALLOWANCE 6,000 0.85 6,900 0.41 12,000 0.91 15,300 0.60
BAD DEBT EXPENSE 94 0.01 0 0.00 94 0.01 0 0.00
BANK CHARGES 472 0.07 493 0.03 941 0.07 823 0.03
BOOKS AND PUBLICATIONS 186 0.03 0 0.00 1,509 0.11 449 0.02
COMPUTER EXPENSES 1,051 0.15 (639) (0.04) 1,504 0.11 3,480 0.14
CONSULTANTS 0 0.00 520 0.03 1,200 0.09 1,870 0.07
CONTRIBUTIONS 100 0.01 1,050 0.06 100 0.01 1,050 0.04
CONVENTIONS AND SEMINARS 3,125 0.44 4,206 0.25 5,639 0.43 9,009 0.35
DEPRECIATION 3,165 0.45 4,758 0.28 5,061 0.38 7,821 0.31
DUES AND MEMBERSHIPS 2,670 0.38 1,375 0.08 5,220 0.40 2,900 0.11
ENTERTAINMENT 416 0.06 927 0.05 2,621 0.20 2,433 0.10
GIFTS 121 0.02 100 0.01 467 0.04 565 0.02
INSURANCE - BUSINESS 9,895 1.40 8,013 0.36 18,345 1.39 13,666 0.53
INSURANCE - DISABILITY 4,887 0.69 0 0.00 4,887 0.37 0 0.00
INSURANCE - HOSPITALIZATION 0 0.00 11,954 0.71 14,413 1.10 24,010 0.94
INSURANCE - LIFE 18,359 2.59 7,463 0.44 18,359 1.40 7,463 0.29
INTEREST 430 0.06 2,276 0.13 1,086 0.08 4,432 0.17
LEGAL 60,620 8.55 3,642 0.22 87,722 5.15 7,375 0.29
MEALS 463 0.07 474 0.03 822 0.06 1,130 0.04
OFFICE EXPENSE 2,044 0.29 1,904 0.11 4,711 0.36 4,504 0.18
PATENT AND TRADEMARK EXP. 0 0.00 0 0.00 150 0.01 525 0.02
PENALTIES 0 0.00 11 0.00 0 0.00 11 0.00
RETIREMENT PLAN EXPENSE (15,308) (2.16) 0 0.00 0 0.00 0 0.00
RENT 4,266 0.60 4,104 0.24 8,586 0.65 8,208 0.32
TRAVEL & LODGING 4,541 0.64 6,582 0.39 9,387 0.71 13,469 0.53
RESEARCH AND DEVELOPMENT 0 0.00 5,000 0.30 1,100 0.08 5,000 0.20
SALARIES 105,032 14.81 96,485 5.70 208,132 15.83 200,495 7.84
TAXES - BUSINESS 1,424 0.20 1,395 0.08 2,365 0.18 1,699 0.07
TAXES - PAYROLL 8,731 1.23 8,075 0.48 16,841 1.28 16,176 0.63
TELEPHONE 2,041 0.29 1,800 0.11 4,514 0.34 4,344 0.17
UTILITIES 1,508 0.21 362 0.02 2,100 0.16 771 0.03
------------ ------ ----------- ----- ----------- ------ ----------- -----
TOTAL OPERATING EXPENSES $ 250,218 35.28 $ 186,360 11.01 $ 463,315 35.23 $ 376,722 14.73
------------ ------ ----------- ----- ----------- ------ ----------- -----
OPERATING INCOME (LOSS) $ 66,584 9.38 $ 385,238 21.59 $ 62,274 4.73 $ 438,380 17.07
------------ ------ ----------- ----- ----------- ------ ----------- -----
OTHER INCOME (LOSS)
INTEREST INCOME $ 1,323 0.19 $ 851 0.05 $ 2,397 0.18 $ 1,418 0.08
MISCELLANEOUS INCOME 324,000 45.69 18,825 1.11 324,000 24.64 18,825 0.74
------------ ------ ----------- ----- ----------- ------ ----------- -----
TOTAL OTHER INCOME (LOSS) $ 325,323 45.88 $ 19,676 1.16 326,397 24.82 $ 20,243 0.78
------------ ------ ----------- ----- ----------- ------ ----------- -----
INCOME BEFORE INCOME TAX $ 391,887 55.28 $ 384,914 22.75 388,671 28.55 $ 456,603 17.86
------------ ------ ----------- ----- ----------- ------ ----------- -----
INCOME TAXES
INCOME TAX - FEDERAL $ 124,236 17.52 $ 125,727 7.43 $ 124,236 9.45 $ 147,825 5.78
INCOME TAX - STATE 23,323 3.29 22,523 1.33 23,323 1.77 26,825 1.05
------------ ------ ----------- ----- ----------- ------ ----------- -----
TOTAL INCOME TAXES $ 147,559 (20.81) $ 148,250 (8.78) 147,559 (11.22) $ 174,650 (8.83)
------------ ------ ----------- ----- ----------- ------ ----------- -----
NET INCOME (LOSS) $ 244,328 34.45 $ 236,664 13.99 241,112 18.33 $ 281,853 11.03
============ ====== =========== ===== =========== ====== =========== =====
See Accountants' Compilation Report
SCHEDULE 4.8(a)
LIST OF PATENTS AND TRADEMARKS
Euthasol(R)
Clinsol(R)
Pentasol(R)
Biomox(R)
SCHEDULE 4.9
LIST OF INSURANCE POLICIES
1. Guardian: Group Insurance Plan for Employees which includes Medical & Dental
This plan will be discontinued August 15,2003.
# 603510-Delmarva Laboratories
2. Massachusetts Mutual: Disability Insurance for Delmarva Corporate Officers
Policy expires 10/1/03 # ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇,
# ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇, #8029609-▇▇▇▇▇
3. Great West Life: "Key Man" Life Insurance on Corporate Officers
Owner=Delmarva Labs... # 04991899-▇▇▇▇▇▇▇
#04992264-Betyeman...........# 04992263-▇▇▇▇▇
Will be terminated August 15, 2003.
4. Fireman's Insurance Co.: Business personal property and General
Liability-Midlothian location. # CPA0105106-10.
5. Fireman's Insurance Co.: Workers Compensation for staff at Huguenot location
# WCA0104952
6. General Starr Insurance Co.: General Product Liability coverage, # IYG355096E
7. Scottsdale Indemnity Ins. Co.: Commercial package policy for products at
Delaware location. # CPI0000797
***** All business policies # 4 thru # 7 above, will be terminated 8/15/03
SCHEDULE 4.15
PERMITS
- Lease Agreement (office)
- Chesterfield County Business License
- Pharmacy Wholesale License - Delmarva, Delaware
- Controlled Substance Registration Certificate - Federal *
- Uniform Controlled Substances Registration Certificate - Delaware
- Florida Out-of-State Prescription Drug Wholesaler Permit
- Missouri Out of State Wholesale License
- Texas Wholesale Distributor of Drugs License
- Virginia Sales and Use Tax
- State of Washington Business and Occupation Tax
FDA PRODUCT REGISTRATIONS
ANADA #200-071, Euthasol
ANADA #200-291, Clinsol
ANADA #200-316, Clintabs (Note: "Clintabs" may not be used as registered ▇▇▇▇)
NADA #65-492, Biomox Tablets (50 mg, 100 mg, 200 mg, 400 mg)
NADA #65-495, Biomox Veterinary for Oral Suspension
EXCEPTIONS TO "THE COMPANY -- IN COMPLIANCE -- WITH -- OTHER APPROVALS OF
GOVERNMENTAL ENTITIES NECESSARY TO (I) MANUFACTURE -- ETC. -- ALL OF THE
COMPANY'S PRODUCTS, -- ETC."
1. Those conditions stated in the FDA/CVM approval letter for Clintabs(R),
ANADA #200-316, dated June 6, 2002 (i.e. Final printed labeling to be
submitted, validation of the manufacturing process and FDA inspection and
verification of same).
2. Those conditions stated in the FDA/CVM approval letter for Clinsol(R),
ANADA #200-291, dated August 26, 2002 (i.e. Final printed labeling to be
submitted, validation of the manufacturing process and FDA inspection and
verification of same).
3. FDA/CVM approval of supplemental NADAs providing for a new manufacturing
facility and approval of the required validation of the manufacturing
process for the amoxicillin tablets (NADA #65-492) and powder for oral
suspension (NADA #65-495).
* Renewal pending, extension granted through August 17, 2003
SCHEDULE 4.18 (a)
SALES ORDERS
(1). The only outstanding sales order is with the City of San Bernardino, CA. It
is for a remaining 204 Euthasol 100ml vials @ $24.38 per vial. This was a total
bid for 216 vials.12 vials were ordered 6/11/2003 @ $27.39 per vial) This price
difference is due to an order quantity of ONLY 12. We sold them at the 36 vial
Distributor Price instead of the bid price, to which they agreed. We informed
them the quantity of 12 was too small for the bid price.
(2). PENTASOL(R) Back orders as of 8/1/03 are shown on the attached sheet:
--------------------------------------------------------------------------------
PENTASOL PURCHASE ORDER# 86997432
DATE DEA# EXP. DIST CUST#
7/23/2003 ▇▇▇▇▇▇▇▇▇ 1/31/04 167-01-2
OFFICE USE ONLY: 1
SHIP TO:
Manatee County Animal Hospital
▇▇▇ - ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
QUANTITY
ORDERED PID PRODUCTNAME
16 ▇▇▇▇▇-▇▇▇-▇▇ Pentasol Powder 98g
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PENTASOL PURCHASE ORDER# 87010792
DATE DEA# EXP. DIST CUST#
7/17/2003 7086368586
OFFICE USE ONLY: 2
SHIP TO:
Animal Welfare League
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ DVM
▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
QUANTITY
ORDERED PID PRODUCTNAME
100 ▇▇▇▇▇-▇▇▇-▇▇ Pentasol Powder 98g
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PENTASOL PURCHASE ORDER# 87883448
DATE DEA# EXP. DIST CUST#
6/23/2003 ▇▇▇▇▇▇▇▇▇ 183-01-4
OFFICE USE ONLY: 3
SHIP TO:
Siloam Springs Animal Services
▇▇▇▇▇▇ ▇. Forest
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇ / ▇.▇. ▇▇▇ ▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
QUANTITY
ORDERED PID PRODUCTNAME
6 ▇▇▇▇▇-▇▇▇-▇▇ Pentasol Powder 98g
--------------------------------------------------------------------------------
SCHEDULE 4.18(b)
OUTSTANDING MATERIAL PURCHASE ORDERS AND PURCHASE COMMITMENTS
Purchase Order # Description
---------------- -----------------------------------------
▇▇-▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ mL -- 10,000 vials @ $14.17
(ship date = July 31, 2003)
▇▇-▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ mL -- 10,000 vials @ $14.17
(ship date = September 10, 2003)
▇▇-▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ mL -- 10,000 vials @ $14.17
(ship date = October 17, 2003)
▇▇-▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ mL -- 10,000 vials @ $14.17
(ship date = November 24, 2003)
▇▇-▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ mL -- 10,000 vials @ $14.17
(ship date = December 31, 2003)
▇▇-▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ mL -- 10,000 vials @ $14.17
(ship date = February 6, 2004)
PURCHASE COMMITMENT
One lot (4,200 vials) or one reduced lot (1,500 vials) Pentasol Powder; ship
date not determined.
SCHEDULE 4.18 (C)
SALES REPRESENTATIVES
The only sales representative currently employed by Delmarva Labs, ▇▇. ▇▇▇▇▇
▇▇▇▇▇▇▇▇, resigned her sales position effective July 31, 2003.
SCHEDULE 4.24
WARRANTIES
The only warranties given by Delmarva are either:
(a) those given to Delmarva by the manufacturer and passed on to
the customer; or
(b) a representation that Delmarva's products are not adulterated
or misbranded.
The only warranty claim received by the Company in the last three years
has been a single claim relating to the dental combination unit, which is being
handled by the Company's insurance carrier and will not represent a Material
Adverse Effect.