1
EXHIBIT 10.2
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
CONTRIBUTION AGREEMENT
between
FREE RADICAL SCIENCES, INC.
and
CLINTEC NUTRITION COMPANY
-----------------------
April 5, 1994
-----------------------
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TABLE OF CONTENTS
Page
SECTION 1 - CONTRIBUTION OF ASSETS 1
1.1 Contribution of Assets 1
1.2 Assumption of Liabilities 2
1.3 Issuance of Common Shares and Non-Convertible
Preferred Shares; Contingent Payments 3
1.4 Transfer of Contributed Assets 6
1.5 Delivery of Records and Contracts 6
1.6 Closing 6
1.7 Section 351 Transaction 6
1.8 Tax Definition 6
1.9 Certain Payments Relating to Contract with
▇▇▇▇▇▇▇ Research Group 6
1.10 Cooperation with FRS in Obtaining Rights under
Contract de Recherche 7
SECTION 2 - REPRESENTATIONS AND WARRANTIES OF CLINTEC 7
2.1 Organization and Qualification 7
2.2 Authority to Execute and Perform Agreements 7
2.3 Compliance with Laws 8
2.4 Consents; No Breach 8
2.5 Actions and Proceedings 9
2.6 Contracts and Other Agreements 9
2.7 Intangible Property 10
2.8 Title to Assets; Liens 11
2.9 Insurance 11
2.10 Brokerage 12
2.11 Full Disclosure 12
2.12 Contract de Collaboration 12
2.13 Investment Representations 12
SECTION 3 - CONDITIONS PRECEDENT TO THE OBLIGATION OF
FRS TO CLOSE 13
3.1 Representations, Warranties and Covenants 13
3.2 Third Party Consents 13
3.3 ▇▇▇▇▇▇ Agreement with Pace 14
3.4 Non-Solicitation Agreement 14
3.5 License Agreement 14
3.6 Services Letter 14
3.7 Letter Agreement 14
3.8 Opinion of Counsel to Clintec 14
3.9 Litigation 14
3.10 Delivery of Instruments of Transfer 14
3.11 Stock Purchase Agreement 14
(i)
3
SECTION 4 - CONDITIONS PRECEDENT TO THE OBLIGATION OF
CLINTEC TO CLOSE 15
4.1 Delivery of Assumption Agreement 15
4.2 Litigation 15
4.3 License 15
4.4 Stock Purchase Agreement 15
SECTION 5 - NON-COMPETITION AND EMPLOYEE NON-SOLICITATION.. 15
5.1 No Competing Business 15
5.2 Certain Acquisitions of Competing Businesses 16
5.3 Non-Solicitation of FRS Employees 16
5.4 No Disclosure of Proprietary Information 17
5.5 Remedies 17
SECTION 6 - INDEMNIFICATION 17
6.1 Survival 17
6.2 Obligation of Clintec to Indemnify 19
6.3 Obligation of FRS to Indemnify 19
6.4 Notice and Opportunity to Defend 19
6.5 Other Benefits 20
6.6 Limitation on Representations and Warranties 20
6.7 Exclusion 20
SECTION 7 - MISCELLANEOUS 21
7.1 Publicity 21
7.2 Notices 21
7.3 Entire Agreement 22
7.4 Australian Insurance 22
7.5 Confidentiality Letter 22
7.6 Waivers and Amendments; Non-Contractual Remedies;
Preservation of Remedies 22
7.7 Governing Law 23
7.8 Binding Effect; No Assignment 23
7.9 Expenses 23
7.10 Taxes 23
7.11 Variations in Pronouns 23
7.12 Counterparts 23
7.13 Exhibits and Schedules 23
7.14 Headings 24
(ii)
4
SCHEDULES
1.1(i) Inventory
1.1(ii) Contributed Contracts
1.1(iv) Intangible Property
1.2 Assumed Liabilities
2.3 Permits
2.4 Consents
2.5 Actions and Other Proceedings
2.6 Contracts and Other Agreements
2.7 Intangible Property
(i)
5
CONTRIBUTION AGREEMENT
CONTRIBUTION AGREEMENT dated as of April 5, 1994, among Free Radical
Sciences, Inc., a Delaware corporation ("FRS") and Clintec Nutrition
Company, an Illinois general partnership ("Clintec").
WITNESSETH
WHEREAS, Clintec is the owner of certain intangible property described
on Schedule 1.1(iv) hereto (collectively, the "Technology").
WHEREAS, Clintec desires to contribute to FRS, and FRS desires to
acquire, all of Clintec's right, title and interest in and to the
Technology in exchange for Common Stock and NonConvertible Preferred Stock
of FRS and for certain rights to receive contingent payments from FRS, as
part of a transaction in which certain other investors will acquire Common
Stock and Series A Preferred Stock of FRS.
NOW THEREFORE, in consideration of the foregoing and of the mutual
covenants set forth below, the parties hereby agree as follows:
SECTION I. - CONTRIBUTION OF ASSETS
A. CONTRIBUTION OF ASSETS. Subject to the provisions of this
Agreement, at the Closing (as defined in Section 1.6 hereof), Clintec
agrees to sell and FRS agrees to purchase, effective as of the Effective
Date (as defined in Section 1.6 hereof), free and clear of any mortgage,
lien, pledge, charge, security, interest or encumbrance of any kind,
including, without limitation, Tax liens (a "Lien"), other than Permitted
Liens (as hereinafter defined), all right, title and interest of Clintec
in, to and under:
(i) the clinical supplies listed on Schedule 1.1(i);
(ii) All rights under all contracts, agreements, licenses and
commitments listed on Schedule 1.1(ii) except for Clintec's rights
under Section 10.14 of the contract (the "▇▇▇▇▇▇▇ Contract") between
Clintec and ▇▇▇▇▇▇▇ Research Group ("▇▇▇▇▇▇▇"), entered into on the
date hereof, (collectively, the "Contributed Contracts");
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(iii) all of Clintec's rights, claims, credits, causes of action or
rights of set-off against third parties relating to any of the
Contributed Contracts, the other items referred to in paragraphs (i)
and (iii) - (vii) of this Section 1.1 or to the Compounds, including,
without limitation, unliquidated rights under manufacturers' and
vendors' warranties;
(iv) the items listed on Schedule 1.1(iv) and all patents, licensed
patents, copyrights, trademarks, tradenames, technology, know-how,
processes, trade secrets, inventions, invention records, proprietary
data, formulae, research and development data, human clinical data,
computer software programs and other intangible property and any
applications for the same owned or licensed by Clintec and relating to
the molecular entities L-2-oxothiazolidine-4-carboxylate
(Procysteine), its isomers, its esters (including diesters) and its
neutral salts, the cysteine derivative N-acetyl-cysteine, and
glutathione esters (including diesters) including the alkyl monoesters
(collectively, the "Compounds");
(v) all books, records, files and papers, whether in hard copy or
computer format, relating to the items described in paragraphs (i) -
(iii) and (vi) - (vii) of this Section 1.1 or to the Compounds,
including, without limitation, manuals and data and correspondence
relating to the Contributed Contracts;
(vi) all transferable licenses, permits or other governmental
authorizations affecting, or relating in any way to, items described
in paragraphs (i) - (iii) and (v) - (vii) of this Section 1.1 or to
the Compounds, if any;
(vii) all rights to commercially exploit any other free-radical
scavengers which have been developed or are being developed, as of the
date hereof, by or on behalf of Clintec for a primary purpose or use
as a pharmaceutical, if any (collectively, the "Other Compounds");
Section 1.1(i) through (vii) shall be referred to collectively as the
"Contributed Assets".
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At the closing, Clintec shall also contribute to the capital of FRS
all of FRS's indebtedness to Clintec for money borrowed or other amounts
advanced to FRS, except that Clintec shall not contribute to the capital of
FRS but FRS shall repay to Clintec by wire transfer of immediately
available funds at the Closing an amount equal to $175,304, determined as
set forth in the Reconciliation Letter between Clintec and FRS of even date
herewith.
B. ASSUMPTION OF LIABILITIES. Upon the sale and purchase of the
Contributed Assets, FRS shall assume and agree to pay or discharge when due
the liabilities and obligations of Clintec which are to be performed after
the Closing Date (as defined in Section 1.6 below) as are described on
Schedule 1.2. Such liabilities to be assumed by FRS under this Agreement
are hereinafter sometimes referred to as the "Assumed Liabilities." Except
as otherwise specifically provided in this Section 1.2, (a) FRS shall not
assume or be liable for any obligation or liability of Clintec, of any kind
or nature, known, unknown, contingent or otherwise, including without
limitation: (i) any liability of Clintec incurred in connection with this
Agreement and the transactions provided for herein, including brokerage,
accounting and counsel fees, transfer and other taxes, and expenses
pertaining to the performance by Clintec of its obligations hereunder, (ii)
any liability or obligation of Clintec arising out of any contract or
agreement, (iii) any liability or obligation arising out of or relating to
the clinical development or testing of the Compounds or the Other Compounds
on or prior to Closing, (iv) any obligations to Clintec's employees,
including without limitation, any pension, retirement, or profit-sharing
plan or trust, (v) any litigation, proceeding, claim by any person or
entity or other obligation of Clintec arising out of the conduct of
Clintec's business or its use of the Compounds or other Contributed Assets
prior to the Closing Date, whether or not such litigation, proceeding,
claim or obligation is pending, threatened, or asserted before, on, or
after the Closing Date, (vi) Taxes (as defined in Section 1.8) whether
relating to periods before or after the Closing Date, and (vii) any
obligations under any law, including but not limited to antitrust, civil
rights, health, safety, labor, discrimination and environmental laws; and
(b) Clintec shall be solely responsible for, and shall discharge, any and
all liabilities and obligations of Clintec not included within the Assumed
Liabilities. The assumption of the Assumed Liabilities by FRS hereunder
shall be treated as independent of its existing business and shall not
enlarge any rights of third parties under contracts or arrangements with
FRS or Clintec. Nothing herein shall prevent FRS from contesting in good
faith any of the Assumed Liabilities.
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CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
C. ISSUANCE OF COMMON SHARES AND NON-CONVERTIBLE PREFERRED SHARES;
CONTINGENT PAYMENTS. (a) In consideration of the contribution of the
Contributed Assets to FRS, at the Closing, FRS shall deliver to Clintec
certificates for an aggregate of 3,400,000 shares (the "Common Shares") of
FRS's Common Stock, $.01 par value per share, and 9,000 shares (the
"Preferred Shares") of FRS's Non-Convertible Preferred Stock, $.01 par
value per share, registered in the name of Clintec.
(b) From and after the Closing, FRS shall pay to Clintec in U.S.
dollars, within 30 days after the end of each calendar quarter after the
Closing, a royalty equal to **** of FRS's Gross Margin (as hereinafter
defined) on Net Sales (as hereinafter defined) of drugs sold by FRS or any
subsidiary, affiliate or sublicensee of FRS during such calendar quarter
for applications for patients with AIDS approved by the FDA (in the case of
sales in the United States) or approved by any foreign regulatory agency,
if applicable (in the case of sales outside the United States) (the "AIDS
Drugs"); provided however, that no such royalty will be payable by FRS
until FRS's cumulative Gross Margin on Net Sales of AIDS Drugs exceeds the
total amount of costs incurred for clinical inventory used in the AIDS
clinical studies (up to a maximum of **** million of such costs), which
royalty shall be payable only on such excess; and provided further, that
the sum of all royalty obligations with respect to technology involved in
the manufacture, use or sale of such AIDS drug will in no case, in the
aggregate, exceed **** of Net Sales, which percentage will include payments
to Cornell Research Foundation and any other third party for technology
involved in the manufacture, use or sale of such AIDS drug (the "Contingent
Payment").
(c) For this purpose, Gross Margin shall mean Net Sales less the
direct cost of goods sold, which will include royalties paid to Cornell and
any other third party for technology involved in the manufacture, use or
sale of the drug. Also for this purpose, Net Sales shall mean the gross
amount of money billed by FRS to its customers on sale or use of drugs for
FDA approved applications for patients with AIDS subsequent to the Closing,
**************************************************************************
**************************************************************************
**************************************************************************
**************************************************************************
************************************************************** FRS will
deliver to Clintec within 30 days after the end of each calendar year
ending after the Closing a report in writing setting forth sales of the
AIDS Drugs and will accompany such
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report with an appropriate payment of royalty due for such period. FRS will
keep accurate records for at least three years, certified by it, showing
the information by which FRS arrived at a royalty determination and will
permit an auditor appointed and paid for by Clintec and acceptable to FRS
to make such inspection of said records as may be necessary to verify
royalty reports made by FRS. However, if such inspection demonstrates that
the royalties paid were less than 90% of the royalties due, and FRS' Net
Sales of the AIDS Drugs for the applicable year was $500,000 or more, then
FRS shall reimburse Clintec the reasonable charges charged by the auditor
for such inspection.
(d) In the event it is ultimately determined, by a court of
competent jurisdiction or pursuant to any agreement between FRS and the
Internal Revenue Service ("IRS") and/or any applicable state tax authority
(collectively "Tax Authority"), that any payment made pursuant to Section
1.3(b) is not currently deductible by FRS for federal or state income tax
purposes (a "Final Determination"), then the amounts payable by FRS under
Section 1.3(b) after such Final Determination becomes final shall be
reduced to the extent necessary so that the present value, as of the first
day of the first year for which any payment is determined not to be
currently deductible, of (i) all payments made by FRS under Section 1.3(b)
(taking into account the reduction under this Section 1.3(d)) minus (ii)
all Tax Reductions attributable to such payments, is equivalent to the
present value, as of the first day of the first year for which any payment
is determined not to be currently deductible, of (iii) all payments that
would be provided for under Section 1.3(b) but for this Section 1.3(d) and
Section 1.3(e) if all such payments had been currently deductible for
federal and state income tax purposes, minus (iv) all Tax Reductions
attributable to such payments, it being the intention of the parties that
FRS be put in the same economic position it would have been in had the
amounts payable pursuant to Section 1.3(b) been currently deductible for
federal and state income tax purposes. For this purpose, (i) present value
of a payment of Tax Reduction shall be determined by using, for each
calendar year of the computation, the federal mid-term rate determined
using an annual compounding convention under Section 1274(d) of the
Internal Revenue Code of 1986, as amended (the "Code"), announced for
January of such calendar year, and (ii) the "Tax Reduction" attributable to
a payment is the amount of the actual reduction in federal and state income
tax liability resulting from the payment.
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(e) In the event the IRS asserts that any payment made pursuant to
Section 1.3(b) is not currently deductible by FRS for federal income tax
purposes and the matter has not been settled or resolved upon the
completion of the audit examination (including an appeal to the IRS appeals
office) (an "Interim Determination") then, notwithstanding the provisions
of Section 1.3(d), the amounts payable by FRS under Section 1.3(b) after
the Interim Determination may be reduced to the extent they could have been
reduced under Section 1.3(d) if such deficiency had been upheld or agreed
to in a Final Determination, provided, however, that if there is a Final
Determination in which such deficiency is not upheld or agreed to in its
entirety, then FRS shall pay to Clintec, within 90 days of such Final
Determination, the amount necessary to put Clintec in the same economic
position it would have been in if this Section 1.3(e) had not applied.
(f) In the event that the amounts payable under Section 1.3(b)
without regard to Sections 1.3(d) and 1.3(e) are insufficient to permit any
reduction in the amounts payable under Section 1.3(b) that is required
pursuant to Section 1.3(d) or 1.3(e) as a result of a Final Determination
or Interim Determination to be effected within the four next succeeding
calendar quarters after such Final Determination or Initial Determination,
then Clintec shall pay to FRS, within 90 days after the end of the last of
such calendar quarters, the amount necessary to put FRS in the economic
position it would have been in if the amounts payable under Section 1.3(b)
had been sufficient to permit the full amount of any such required
reduction to be effected.
(g) FRS shall give Clintec a reasonable period of time (i) to
review any federal or state income tax returns of FRS in which FRS claims a
deduction for payments made pursuant to Section 1.3(b) prior to the filing
of any such returns and (ii) to control the manner in which any such
deductions are claimed on such return.
(h) FRS shall promptly notify Clintec of any claim by a Tax
Authority that any payment made by FRS under Section 1.3(b) is not
currently deductible, and in such event Clintec shall have the exclusive
right to assume the defense of any such claim and to control any
controversy resulting therefrom, at Clintec's expense. FRS agrees to
cooperate with Clintec in the defense of any such claim and to cooperate
with Clintec and the FRS Firm or the Joint Firm (as hereinafter defined) in
the determination of the amount of any reduction in payments required
hereunder. Such cooperation shall include, but not be limited to, (i) the
execution and delivery of any power of attorney required to allow
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Clintec and its representatives to represent FRS in any controversy which
Clintec has the right to control hereunder, (ii) the prompt and timely
filing of appropriate claims for any refund, and (iii) making available to
Clintec and its representatives all books, records (including working
papers and schedules), information and employees necessary or useful in
connection with any tax inquiry, audit, investigation, dispute or
litigation relating to the matters described in this Section 1.3(h).
(i) The determination of the amount of any reduction pursuant to
Sections 1.3(d) or 1.3(e) hereof shall initially be made by the independent
certified public accountants then serving as auditor for FRS (the "FRS
Firm"), and such determination shall be furnished to Clintec in writing,
which shall include a computation of the amount of any reduction and a
detailed written explanation of the manner in which such computation was
made. If Clintec objects in writing to such determination within 60 days
after it is received by Clintec, then the amount of any reduction shall be
determined by a "Big Six" firm of independent certified public accountants
jointly selected by Clintec and FRS (or, if they are unable to agree, then
such a firm jointly selected by the FRS Firm and a firm of independent
public accountants designated by Clintec) (the "Joint Firm"), and the
decision of the Joint Firm shall be final and binding upon the parties. If
Clintec does not object in writing to the determination of the FRS Firm
within such time period, then the decision of the FRS Firm shall be final
and binding upon the parties. No reduction in the payments provided for in
Section 1.3(b) shall be made until a decision of the FRS Firm or the Joint
Firm has become final. The fees and expenses of the FRS Firm shall be borne
by FRS, and the fees and expenses of the Joint Firm shall be shared equally
by Clintec and FRS, except that if the Joint Firm decides that the amount
of any reduction in payments required hereunder is less than 90% of the
amount of the reduction decided by the FRS Firm, then FRS shall bear all of
the fees and expenses of the Joint Firm.
D. TRANSFER OF CONTRIBUTED ASSETS. At the Closing, Clintec shall
deliver or cause to be delivered to FRS good and sufficient instruments of
transfer transferring to FRS title to all of the Contributed Assets. Such
instruments of transfer (a) shall be in the form and will contain the
warranties, covenants and other provisions (not inconsistent with the
provisions hereof) which are usual and customary for transferring the type
of property involved under the laws of the jurisdictions applicable to such
transfers, (b) shall be in form and substance satisfactory to FRS and its
counsel, and (c) shall effectively vest in FRS good title to all the
Contributed Assets free and clear of all Liens.
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E. DELIVERY OF RECORDS AND CONTRACTS. At the Closing, Clintec, to the
extent FRS does not already have possession of such documents or rights,
shall deliver or cause to be delivered to FRS, at FRS' request, all written
leases, contracts, commitments and rights evidencing Contributed Assets and
Assumed Liabilities, with such assignments thereof and consents to
assignments as are necessary to assure FRS of the full benefit of the same.
From time to time, pursuant to the request of FRS delivered to Clintec
after the Closing, Clintec, at Clintec's expense and without any further
consideration, will execute and deliver to FRS such instruments and
documents of conveyance and transfer, and do and cause to be done such acts
or things, as FRS may reasonably request in order to more effectively
contribute, convey, transfer and assign to FRS, or to perfect or record
FRS's interest in or title to, or to enable FRS to use, any and all of the
Contributed Assets, or otherwise to carry out the purposes and intent of
this Agreement.
F. Closing. The closing of the sale and purchase of the transactions
contemplated hereby (the "Closing"), shall take place at the offices of
▇▇▇▇▇▇ & Dodge, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇ at 10:00 a.m., local time, on
April 5, 1994, or at such other time and place as agreed to by the parties
(the "Closing Date") and the effective date of such sale and purchase shall
be February 1, 1994 (hereinafter referred to as the "Effective Date").
G. Section 351 Transaction. The parties intend that the contribution
of the Contributed Assets be treated as a transfer described in Section 351
of the Internal Revenue Code of 1986, as amended (the "Code"), and the
parties agree that they will prepare and file their federal and any state
or local income tax returns in a manner consistent with such
characterization.
H. Tax Definition. For purposes of this Agreement, the term "Taxes" or
individually, a "Tax" shall mean all federal, state, county, local, foreign
and other taxes, including, without limitation, income taxes, estimated
taxes, alternative minimum taxes, excise taxes, sales taxes, use taxes,
import duties, value-added taxes, gross receipts taxes, franchise taxes,
capital stock taxes, employment and payroll-related taxes, withholding
taxes, stamp taxes, transfer taxes, windfall profit taxes, environmental
taxes and property taxes, whether or not measured in whole or in part by
net income and all deficiencies, or other additions to such taxes and
interest, fines and penalties thereon.
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CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
I. Certain Payments Relating to Contract with ▇▇▇▇▇▇▇ Research Group.
Upon the fulfillment, to FRS's satisfaction, of all of ▇▇▇▇▇▇▇'▇
obligations to FRS with respect to Study 3.0 under the ▇▇▇▇▇▇▇ Contract,
FRS shall pay to Clintec by certified check or wire transfer of immediately
available funds an amount equal to ********* representing the value of
Clintec's prepayment under the ▇▇▇▇▇▇▇ Contract. FRS agrees that after the
Closing it will continue to use ▇▇▇▇▇▇▇ for the completion of Study 3.0
unless it has a valid business reason for terminating ▇▇▇▇▇▇▇.
J. Cooperation with FRS in Obtaining Rights under Contract de
Recherche. Clintec Technologies, S.A. and L'Institut National de la
Recherche Agronomique ("INRA") entered into a Research Contract on December
24, 1992 (the "INRA Contract") under which Clintec may have rights to
commercially exploit any research results, inventions or discoveries. To
the extent that Clintec has such rights (including the right to license
FRS) under the INRA Contract as such rights relate to Pharmaceutical
Applications (as defined in the License Agreement) without the payment by
Clintec of additional consideration therefor, Clintec will execute an
exclusive, fully paid, royalty-free license granting to FRS all such
rights. To the extent Clintec is unable to license such rights, Clintec
will use its best efforts to cause INRA to offer to FRS an exclusive
license, granting FRS all such rights, provided, however, that Clintec
shall not be required to make any payment to INRA or to incur any
out-of-pocket expenses in connection therewith. Clintec will provide FRS
copies of all correspondence between Clintec and INRA which relates to the
INRA Contract and Pharmaceutical Applications (as defined in the License
Agreement), and will give FRS an opportunity to respond to such
correspondence to the extent that such correspondence relates to
Pharmaceutical Applications of the Compounds or the Other Compounds.
SECTION II. - REPRESENTATIONS AND WARRANTIES
OF CLINTEC
Clintec represents and warrants to FRS as follows:
A. Organization and Qualification. Clintec is a general partnership
duly established, validly existing and in good standing under the laws of
Illinois and has full power and lawful authority to own, lease and operate
its assets, properties and business and to carry on its business as now
being and as heretofore conducted. Clintec is not required to be qualified
or otherwise authorized to transact business as a foreign
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partnership in any jurisdiction (in the United States and outside of the
United States) in which such qualification or authorization is required by
law and in which the failure to so qualify or be authorized could have a
material adverse effect on the Contributed Assets. Clintec does not file
and is not required to file any franchise, income or other tax returns in
any jurisdiction (in the United States or outside of the United States)
other than in Illinois, based upon the ownership or use of the Contributed
Assets therein or the derivation of income therefrom.
B. Authority to Execute and Perform Agreements. Clintec has the full
legal right and power and all authority and approvals required to enter
into, execute and deliver this Agreement and the Related Agreements (as
hereinafter defined) and to perform fully its respective obligations
hereunder and thereunder, and each of this Agreement and the Related
Agreements has been or will be duly executed and delivered and is the valid
and binding obligation of Clintec enforceable in accordance with its terms.
Clintec has obtained the necessary approval of its partners, (collectively,
the "Partners"), and third parties to the transactions contemplated by this
Agreement and the Related Agreements.
C. Compliance with Laws.
(a) Clintec is not in violation of any order, judgment,
injunction, award or decree binding upon it relating to the Contributed
Assets, or which would affect the transactions contemplated hereunder.
Subject to the exception that Clintec makes no representation or warranty
in respect of the activities of FRS at its offices located at ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇, neither Clintec nor FRS, nor their
respective officers, directors, employees or agents, is in violation of any
Environmental or Clinical Testing Law (as hereinafter defined). For
purposes of this Agreement, Environmental or Clinical Testing Law shall
mean the regulations and requirements of the Occupational Safety and Health
Administration ("OSHA"), and laws, ordinances, regulations and other
requirements respecting the clinical testing of health care products,
pollution or protection of the environment, including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes into the environment (including, without limitation,
ambient air, surface water, ground water or land), or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants, human bodily
fluids,
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chemicals or industrial, toxic or hazardous substances or wastes. Clintec
and, to the best of Clintec's knowledge, FRS have never received notice of,
and there has never been, any citation, fine or penalty imposed or asserted
against Clintec, or, to the best knowledge of Clintec, FRS for any such
violation or alleged violation.
(b) Set forth on Schedule 2.3 are all of the licenses issued by
OSHA and all other licenses, permits, franchises, orders or approvals of
any federal, state, local or foreign governmental or regulatory body,
relating to the clinical testing of health care products and environmental
matters, including, without limitation, the treatment, storage, disposal,
transport or handling of human bodily fluids (collectively, "Permits") that
are material to the use of the Contributed Assets. Clintec holds all
Permits necessary to the operation and use of the Contributed Assets as
presently used. Such Permits are in full force and effect and, except as
set forth on Schedule 2.3, such Permits will be transferred to FRS as part
of the Contributed Assets. No violations are or have been recorded with any
governmental or regulatory body in respect of any Permit; and no proceeding
is pending or, to the best knowledge of Clintec, threatened to revoke or
limit any Permit.
D. Consents; No Breach. All consents, permits, authorizations and
approvals from any person pursuant to applicable law or contracts or other
agreements with Clintec, that are required in connection with the
performance of Clintec's obligations under this Agreement, or the
assignment of the Contributed Assets or the assumption of the Assumed
Liabilities are set forth on Schedule 2.4 hereto. The execution, delivery
and performance of this Agreement and the Related Agreements and the
consummation of the transactions contemplated hereby and thereby will not
(i) violate any provision of the Partnership Agreement of Clintec; (ii)
except as set forth on Schedule 2.4, violate, conflict with or result in
the breach of any of the terms or conditions of, result in modification of
the effect of, or otherwise give any other contracting party the right to
terminate, or constitute (or with notice or lapse of time or both
constitute) a default under, any material instrument, contract or other
agreement to which Clintec is a party or to which any of its assets or
properties may be bound or subject; (iii) violate any order, judgment,
injunction, award or decree of any court, arbitrator or governmental or
regulatory body against, or binding upon, Clintec or the securities,
properties, assets or business of Clintec; (iv) violate any statute, law or
regulation of any jurisdiction as such statute, law or regulation relates
to Clintec or to the securities, properties, assets or business of
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Clintec; (v) violate any Permit; (vi) except as set forth in Schedule 2.4,
require the approval or consent of any foreign, federal, state, local or
other governmental or regulatory body or the approval or consent of any
other person; or (vii) result in the creation of any Lien on the
Contributed Assets.
E. ACTIONS AND PROCEEDINGS. There are no outstanding orders,
judgments, injunctions, awards or decrees of any court, governmental or
regulatory body or arbitration tribunal against or involving Clintec which
are reasonably likely to affect or relate to any of the Contributed Assets
or the transactions contemplated hereunder. Except as set forth on Schedule
2.5, there are no actions, suits or claims or legal, administrative (other
than patent office proceedings not involving third parties) or arbitral
proceedings or, to the best knowledge of Clintec, governmental
investigations (whether or not the defense thereof or liabilities in
respect thereof are covered by insurance) pending or, to the best knowledge
of Clintec, threatened against or involving Clintec which are reasonably
likely to affect or relate to any of the Contributed Assets or the
transactions contemplated hereunder. To the best of Clintec's knowledge,
there is no fact, event or circumstance that may give rise to any suit,
action, claim, governmental investigation or proceeding based upon a
material violation of any law governing environmental matters, including,
without limitation, the treatment, storage, disposal, transport or handling
of human bodily fluids, or regulating the clinical testing of health care
products that individually or in the aggregate would have a material
adverse effect on the Contributed Assets or the transactions contemplated
hereunder.
F. CONTRACTS AND OTHER AGREEMENTS. Schedule 2.6 contains a complete
and correct list of all agreements, contracts and commitments of the
following types, written or oral, (1) to which Clintec is a party and which
relate to the Compounds or the Other Compounds, (2) to which the
Contributed Assets are bound, subject to or affected by (except to the
extent any such agreements, contracts or commitments relate solely to
Clinical Nutrition (as defined in the License Agreement), or (3) to the
best of Clintec's knowledge, to which FRS is a party:
(i) contracts and other agreements for the purchase or sale
of materials, supplies, equipment, merchandise or services;
(ii) partnership or joint venture agreements;
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(iii) contracts, options and other agreements for the
purchase of any asset, tangible or intangible calling for an aggregate
purchase price or payments in any one year of more than $25,000 in any
one case (or in the aggregate, in the case of any related series of
contracts and other agreements);
(iv) contracts and other agreements that cannot by their
terms be canceled by Clintec and any successor or assignee of Clintec
without liability, premium or penalty on no less than thirty days
notice;
(v) contracts and other agreements with customers or
suppliers for the sharing of fees, the rebating of charges or other
similar arrangements;
(vi) contracts and other agreements containing covenants of
Clintec not to compete in any line of business or with any person or
covenants of any other person not to compete with Clintec in any line
of business;
(vii) contracts, indentures, mortgages, promissory notes,
loan agreements, guaranties, security agreements, pledge agreements,
and other agreements relating to the borrowing of money or securing
any such liability;
(viii) distributorship or licensing agreements;
(ix) contracts under which Clintec will acquire or has
acquired ownership of, or license to, intangible property, including
software (other than software licensed by Clintec as an end user for
less than $25,000 and not distributed by it); or
(x) any other material contract or other agreement whether
or not made in the ordinary course of business.
There have been delivered or made available to FRS true and complete
copies of all of the written contracts and other agreements (and all
amendments, waivers or other modifications thereto) and accurate
descriptions of all oral contracts and other agreements set forth on
Schedule 2.6. Except as set forth in Schedule 2.6, all of such contracts
and other agreements are valid, subsisting, in full force and effect,
binding upon Clintec or FRS, as applicable, and to the best knowledge of
Clintec, binding upon the other parties thereto in accordance with their
terms, and Clintec or FRS, as applicable, has paid in full or
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accrued all amounts now due thereunder and has satisfied in full or
provided for all of its liabilities and obligations thereunder which are
presently required to be satisfied or provided for, and is not in default
under any of them, nor, to the best knowledge of Clintec, is any other
party to any such contract or other agreement in default thereunder, nor
does any condition exist that with notice or lapse of time or both would
constitute a default thereunder.
G. INTANGIBLE PROPERTY. (a) Except as set forth on Schedule 2.7,
Clintec has exclusive ownership of all patents, trademarks and trade names;
all applications to register any of the foregoing; all trade secrets,
inventions, customer lists, manufacturing or other processes, designs, data
compilations, research results and other confidential information and
legally protected proprietary rights (collectively, "Proprietary Rights")
that constitute Contributed Assets and Clintec has the right to use, free
and clear of claims or rights of others, all such Proprietary Rights.
(b) Clintec has not received any notices claiming infringement by
Clintec of any Proprietary Rights of others, and, to the best knowledge of
Clintec none of the present activities of Clintec or its products or assets
infringe on any Proprietary Rights of others, including unauthorized use of
any confidential information or trade secrets of any person, including
without limitation any former employer of any past or present employees of
Clintec.
(c) All patents, patent applications, trademarks, trademark
applications and registrations and registered copyrights (or applications
therefor) which constitute Contributed Assets are listed in Schedule 2.7
("Registered Rights"). All of the Registered Rights have been duly
registered in, filed in or issued by the United States Patent and Trademark
Office, the United States Register of Copyrights, or the corresponding
offices of other jurisdictions as identified on said Schedule, and have
been properly maintained and renewed in accordance with all applicable
provisions of law and administrative regulations in the United States and,
to the best of Clintec's knowledge, in each such other jurisdiction,
provided, however, that Clintec makes no representation or warranty as to
the validity or enforceability of any issued patent or trademark.
(d) Clintec has disclosed or made available confidential
information and trade secrets included in the Proprietary Rights only to
(i) employees of Clintec who required
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such disclosure or access for Clintec's business purposes and who, to the
best of Clintec's knowledge, have exercised the same degree of care to
preserve the confidentiality of such information and trade secrets as they
have to preserve the confidentiality of other confidential information and
trade secrets of Clintec, and (ii) consultants or other third parties
(other than employees of FRS) who have executed written confidentiality
agreements governing their use of such confidential information and trade
secrets. Clintec is not aware of any unauthorized disclosure of any such
confidential information or trade secrets by any of its employees or of any
breach of any obligation of any such consultants or other third parties
under the confidentiality agreements referred to above.
(e) To the best of Clintec's knowledge, none of the activities of
Clintec's employees relating to the Proprietary Rights violate any
agreements which any such employees have with former employers.
H. TITLE TO ASSETS; LIENS. Clintec owns outright and has good title to
all the Contributed Assets, free and clear of any Liens, except for liens
or other encumbrances securing the claims of materialmen, carriers,
landlords and like persons or attorneys' liens, all of which are not yet
due and payable ("Permitted Liens"). Upon delivery of and payment for the
Contributed Assets as herein provided, FRS will acquire all of Clintec's
right, title and interest thereto, free and clear of any Liens. The
Contributed Assets constitute all assets of Clintec which relate to the
Compounds or the Other Compounds.
I. INSURANCE. Clintec is covered by all policies or binders of
liability, product liability, clinical trial and other insurance that are
customary and reasonable in relation to the Contributed Assets. Such
policies and binders are in full force and effect, all premiums with
respect thereto are currently paid and are in conformity with the
requirements of all contracts to which Clintec is a party and are valid and
enforceable in accordance with their terms. Neither Clintec nor the
Partners is in default with respect to any provision contained in any such
policy or binder nor has Clintec or the Partners failed to give any notice
or present any claim under any such policy or binder in due and timely
fashion. There are no outstanding unpaid claims under any such policy or
binder. Neither Clintec nor the Partners has received notice of
cancellation or non-renewal of any such policy or binder.
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J. BROKERAGE. No broker, finder, agent or similar intermediary has
acted on behalf of Clintec, the Partners or their respective affiliates in
connection with this Agreement or the transactions contemplated hereby, and
there are no brokerage commissions, finders fees or similar fees or
commissions payable in connection therewith based on any agreement,
arrangement or understanding with Clintec, the Partners or their respective
affiliates, or any action taken by them.
K. FULL DISCLOSURE. No representation or warranty of Clintec contained
in this Agreement, including the schedules attached hereto, contains an
untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements made, in
the context in which made, not false or misleading.
L. CONTRACT DE COLLABORATION. Clintec has the authority to transfer
and assign to FRS, without the consent (written or otherwise) by the other
parties thereto, and will transfer and assign to FRS at the Closing, all of
Clintec's rights and interests in the following research contracts which
are described on Schedule 1.1(ii), section 3:
(i) Contract de Collaboration between Clintec Technologies S.A.
and L'Universite, ▇▇▇▇▇▇ Fourier, and
(ii) Contract de Collaboration between Clintec Technologies S.A.
and L'Institut National de la Recherche Agronomique dated October 25, 1993.
M. INVESTMENT REPRESENTATIONS.
(a) Clintec has not relied upon the advice of a "purchaser
representative," as defined in Regulation D under the Securities Act of
1933, as amended (the "Securities Act") in evaluating the risks and merits
of the Common Shares and Preferred Shares (collectively, the "Shares").
(b) Clintec has had an opportunity to ask questions of and receive
answers from FRS, or a person or persons acting on FRS's behalf, concerning
the terms and conditions of the Shares.
(c) Clintec understands that the Shares have not been registered
under the Securities Act or under the securities laws of any state or other
jurisdiction in reliance upon exemptions for private offerings, and that,
while FRS may in the future register the Shares, except as set forth in the
Registration Rights Agreement of even date herewith between FRS, Clintec
and
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the other parties named therein ("Registration Rights Agreement") it is
under no obligation to do so, and Clintec further understands that Clintec
is acquiring the Shares without being furnished any offering literature or
prospectus.
(d) Clintec represents that the Shares are being acquired solely
for its own account, for investment and not with a view to or for the
resale, distribution, subdivision, or fractionalization thereof; Clintec
has no present plans to enter into any contract, undertaking, agreement, or
arrangement relating thereto.
(e) Clintec acknowledges and is aware that there are substantial
restrictions on the transferability of the Shares; the Shares cannot be
resold unless the Shares are registered under the Securities Act and any
applicable securities law of any state or other jurisdiction, or an
exemption from registration is available; except as set forth in the
Registration Rights Agreement, Clintec has no rights to require that the
Shares be registered under the Securities Act; and there currently is no
and there may never be, a public market for the Shares.
(f) Clintec has such knowledge and experience in financial and
business matters that it is capable of evaluating the relative risks and
merits of the Shares.
(g) Clintec is a general partnership organized and with its
principal place of business in the state of Illinois.
SECTION III. - CONDITIONS PRECEDENT TO
THE OBLIGATION OF FRS TO CLOSE
The obligation of FRS to enter into and complete the Closing is
subject, at the option of FRS acting in accordance with the provisions of
this Agreement with respect to termination hereof, to the fulfillment of
the following conditions, any one or more of which may be waived by it:
A. REPRESENTATIONS, WARRANTIES AND COVENANTS. The representations and
warranties of Clintec contained in this Agreement shall be true on and as
of the Closing Date with the same force and effect as though made on and as
of the Closing Date. Clintec shall have performed and complied with all
covenants and agreements required by this Agreement to be performed or
complied with by Clintec on or prior to the Closing Date. Clintec shall
have delivered to FRS a certificate, dated
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the Closing Date and signed by an officer of Clintec to the foregoing
effect and stating that all conditions to FRS's obligations hereunder have
been satisfied.
B. THIRD PARTY CONSENTS. FRS shall have received evidence of the
receipt of all authorizations, consents and permits of others required to
permit the consummation by FRS and Clintec of the transactions contemplated
by this Agreement, including but not limited to, all consents set forth on
Schedule 2.4, except to the extent waived by FRS in writing.
▇. ▇▇▇▇▇▇ AGREEMENT WITH PACE. ▇▇▇▇▇▇ shall have executed and
delivered a waiver of certain rights of ▇▇▇▇▇▇ under its contract with ▇▇▇▇
▇▇▇▇, dated August 22, 1989, (the "Waiver") in the form agreed by the
parties.
D. NON-SOLICITATION AGREEMENT. ▇▇▇▇▇▇ shall have executed and
delivered the Employee Non-Solicitation Agreement between ▇▇▇▇▇▇ and FRS,
dated of even date herewith.
E. LICENSE AGREEMENT. Clintec shall have executed and delivered the
License Agreement between Clintec and FRS, dated of even date herewith (the
"License Agreement").
F. SERVICES LETTER. ▇▇▇▇▇▇ shall have executed and delivered the
letter relating to the provision by ▇▇▇▇▇▇ of certain services, dated of
even date herewith, together with the Non-Solicitation Agreement and the
Waiver (together with the License Agreement and the Letter Agreement
described in Section 3.7 the "Related Agreements").
G. LETTER AGREEMENT. The Letter Agreements, dated June 15, 1993 and
December 22, 1993, respectively, between FRS and Clintec shall be
terminated and of no further force and effect.
H. OPINION OF COUNSEL TO CLINTEC. FRS shall have received the opinion
of ▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇, counsel to Clintec, dated the Closing Date,
addressed to FRS, and in the form agreed by the parties.
I. LITIGATION. No action, suit or proceeding shall have been
instituted before any court or governmental or regulatory body, or
instituted or threatened by any governmental or regulatory body, to
restrain, modify or prevent the carrying out of the transactions
contemplated hereby, or to seek damages or a discovery order in connection
with such transactions, or that has or may have, in the reasonable opinion
of FRS, a materially adverse effect on the Contributed Assets.
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J. DELIVERY OF INSTRUMENTS OF TRANSFER. Clintec shall have delivered
or caused to be delivered to FRS instruments of transfer in conformity with
Section 1.4 above.
K. STOCK PURCHASE AGREEMENT. The transactions contemplated by the
Series A Convertible Preferred Stock Purchase Agreement of even date
herewith among The Venture Capital Fund of New England III, L.P., Advent
International Investors II Limited Partnership, Rovent II Limited
Partnership, Global Private Equity II Limited Partnership, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇, Sprout Capital VI, L.P., DLJ Capital Corporation ▇▇▇▇▇▇,
Clinical Nutrition Holdings, Inc. ("CNHI") and FRS (the "Stock Purchase
Agreement") shall have been consummated, and the other Financing Documents
(as defined in the Stock Purchase Agreement) shall have been executed and
delivered by the parties thereto other than FRS (except to the extent
waived in writing by the parties thereto).
SECTION IV. - CONDITIONS PRECEDENT
TO THE OBLIGATION OF CLINTEC TO CLOSE
The obligation of Clintec to enter into and complete the Closing is
subject, at the option of Clintec acting in accordance with the provisions
of this Agreement with respect to termination hereof, to the fulfillment of
the following conditions, any one or more of which may be waived:
A. DELIVERY OF ASSUMPTION AGREEMENT. FRS shall have delivered or
caused to be delivered to Clintec an agreement for assumption of the
Assumed Liabilities by FRS containing provisions (not inconsistent with the
provisions hereof) which are usual and customary for assuming the
liabilities involved.
B. LITIGATION. No action, suit or proceeding shall have been
instituted before any court or governmental or regulatory body, or
instituted or threatened by any governmental or regulatory body, to
restrain, modify or prevent the carrying out of the transactions
contemplated hereby, and such action, suit or proceeding shall not have
been stayed.
C. LICENSE. FRS shall have executed and delivered the License
Agreement.
D. STOCK PURCHASE AGREEMENT. The transactions contemplated by the
Stock Purchase Agreement shall have been consummated, and the other
Financing Documents shall have been executed and delivered by the parties
thereto other than Clintec, ▇▇▇▇▇▇ and CNHI (except to the extent waived in
writing by the parties thereto).
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SECTION V. - NON-COMPETITION AND EMPLOYEE NON-SOLICITATION
A. NO COMPETING BUSINESS. Clintec hereby agrees that during the period
commencing on the Closing Date and ending on the fifth anniversary of the
Closing Date (the "Restricted Period"), Clintec will not directly or
indirectly own, manage, operate, control, invest or acquire an interest in,
or otherwise engage or participate in (whether as a proprietor, partner,
stockholder, joint venturer, investor or other participant) in the
development or sale of (i) the Compounds or the Other Compounds, except for
Clinical Nutrition Products (as defined in the License Agreement), in the
field of Nutrition (as defined in the License Agreement), or as otherwise
expressly permitted by the License Agreement, or (ii) products or compounds
that have as their principal purpose Pharmaceutical Applications (as
defined in the License Agreement) for the purpose of manipulating
glutathione levels for human therapeutic, prophylactic or other medical
purposes anywhere in the world, or grant any license to any third party to
do any of the foregoing, except as expressly permitted by the License
Agreement (any such development or sale being herein referred to as a
"Restricted Business"). It is anticipated that a number of products and
compounds may be both a Clinical Nutrition Product and have Pharmaceutical
Applications and this Section 5.1 shall not apply to the development or
sale of such products or compounds. This section only applies to Clintec
and in no way places any restrictions on any of Clintec's general partners
or their affiliates, subsidiaries, and related companies.
B. CERTAIN ACQUISITIONS OF COMPETING BUSINESSES. Notwithstanding the
definition of Restricted Business contained in Section 5.1, the term
Restricted Business shall not include the following business activities:
(a) The acquisition and ownership of not more than 5% of the
outstanding shares of any class of stock or other securities of any
entity which engages in a Restricted Business (a "Competing Business")
if such shares or securities are traded on a national securities
exchange or in the over-the-counter market.
(b) The acquisition and ownership of the outstanding shares of
any class of stock or other securities or assets and properties of a
Competing Business provided that the total fair market value of all
assets and properties of the Competing Business (i) which are
acquired, in the case of an asset purchase, or which are among the
assets and properties
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of such Competing Business, in the case of a stock purchase, and (ii)
which are used by the Competing Business in the Restricted Business,
does not exceed the greater of (A) 5% of the total fair market value
of all stock or other ownership interests or assets or properties of
such Competing Business acquired in such transaction, or (B)
$1,000,000; and provided further that upon acquiring control of such
Competing Business or upon acquiring the assets and properties of such
Competing Business which are used in the Restricted Business, as the
case may be, Clintec shall offer to sell the assets and properties of
the Competing Business which are used in the Restricted Business (the
"Assets") to FRS on the following terms and conditions: Clintec shall
offer the Assets to FRS by giving to FRS prompt written notice of such
offer which offer shall identify, in reasonable detail, the Assets,
the nature and type of transaction which Clintec desires to effect
with respect thereto and, if applicable, any indications of interest
in or offers for the Assets which Clintec has received (the "Notice").
During the 60-day period after receipt of the Notice (the "Negotiation
Period"), FRS shall have the right to negotiate with Clintec, and if
FRS elects to do so based upon such negotiations, to make a written
offer or offers to acquire all of the Assets. During the Negotiation
Period, Clintec agrees to negotiate with FRS in good faith, to make
available such information as FRS may reasonably request with respect
to the Assets (subject to receipt of a customary confidentiality
agreement from FRS) and to respond promptly to any offer made by FRS.
In the event Clintec accepts FRS' offer for the Assets, Clintec and
FRS agree to enter into a mutually acceptable definitive agreement
with respect thereto and to complete the acquisition of the Assets
within 60 days of Clintec's acceptance of FRS' offer (or such longer
period as may be required by regulatory constraints). In the event
that during the Negotiation Period FRS does not make an offer, or
makes an offer or offers which Clintec rejects, Clintec is free to (1)
retain the Assets and operate the business associated therewith or (2)
sell, assign or otherwise transfer the Assets after the expiration of
the Negotiation Period to an unrelated third party on terms which are
no less favorable, considered as a whole, to Clintec than the terms of
FRS' final bona fide offer.
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C. NON-SOLICITATION OF FRS EMPLOYEES. Clintec hereby agrees that
during the Restricted Period it will not (i) directly or indirectly
recruit, solicit or otherwise induce or influence any technical,
professional or managerial employee of FRS to discontinue such employment
with FRS, or (ii) willfully induce any person or firm that performs
consulting services for both Clintec and FRS at the time of the Closing to
discontinue the provision of such services to FRS. Clintec also agrees that
for a period of five (5) years from the Closing Date, it will not hire any
employee of FRS. Nothing herein shall prevent either party from (a) hiring
any employee of the other who was discharged by the other, or (b) hiring
any employee of the other who quit that employment without inducement by
the hiring party.
D. No Disclosure of Proprietary Information.
(a) Clintec hereby agrees that, except as expressly permitted by
the Clinical Nutrition License Agreement, it will not directly or
indirectly disclose to anyone, or use or otherwise exploit for its own
benefit or for the benefit of anyone else, any trade secrets which are
being contributed hereunder as Contributed Assets for as long as they
remain trade secrets.
(b) Clintec hereby agrees that, except as expressly permitted by
the Clinical Nutrition License Agreement, during the Restricted Period it
will not directly or indirectly disclose to anyone, or use or otherwise
exploit for its own benefit or for the benefit of anyone else, any
confidential information which is being contributed hereunder as
Contributed Assets.
(c) Clintec shall use reasonable efforts to require its employees
to abide by the obligations of Sections 5.1, 5.2, 5.3 and 5.4.
E. Remedies. Clintec agrees that (i) if it breaches any provision of
this Section 5, the damage to FRS will be substantial, although difficult
to ascertain, and money damages will not afford FRS an adequate remedy, and
(ii) if it is in breach of this Section 5, or threatens a breach of this
Section 5, FRS shall be entitled, in addition to all other rights and
remedies as may be provided by law and this Agreement, to specific
performance, injunctive and other equitable relief to prevent or restrain a
breach of this Section 5.
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SECTION VI. - INDEMNIFICATION
A. Survival. Notwithstanding any right of any party to fully
investigate the affairs of the other party, each party has the right to
rely fully upon the representations, warranties, covenants and agreements
of each other party in this Agreement or in any Schedule, certificate
(except for certificates delivered by officers of FRS) or financial
statement delivered by any party pursuant hereto. All such representations,
warranties, covenants and agreements shall survive the execution and
delivery hereof and the Closing hereunder and be indemnified in accordance
with this Section 6, and, except as otherwise specifically provided in this
Agreement, shall thereafter:
(a) survive forever, with respect to (i) any claim based
upon, arising out of or otherwise in respect of any inaccuracy in, or
any breach of, any representation or warranty of Clintec contained in
Sections 2.2, 2.4, 2.8 and 2.13 hereof or covenant of Clintec
contained in Sections 1.2, 1.5, and 1.10 (a "Clause (i) Claim") (ii)
any Tax Claim or (iii) any Clinical Testing Claim; and
(b) terminate and expire on the second anniversary of the
Closing Date with respect to any General Claim or Clintec Claim (as
such Terms are hereinafter defined) or on the fifth anniversary of the
Closing Date with respect to a Non-Competition/Non-Solicitation Claim
based upon, arising out of or otherwise in respect of any fact,
circumstance, action or proceeding of which the party asserting such
claim shall have given no notice on or prior to the second anniversary
or, in the case of a Non-Competition/Non-Solicitation Claim, the fifth
anniversary of the Closing Date to the party against which such
General Claim, Clintec Claim or Non-Competition/Non-Solicitation Claim
is asserted; provided, however, once notice of any such claim has been
given hereunder, additional claims based upon, arising out of or
otherwise in respect of such fact, circumstance, action or proceeding
upon which the original claim arose may be made at any time prior to
the final resolution of such claim (by means of a final,
non-appealable judgment of a court of competent jurisdiction, a
binding arbitration decision or a settlement approved by the parties
involved) even if such resolution occurs after the second anniversary
or, in the case of a Non-Competition/Non-Solicitation Claim, the fifth
anniversary of the Closing Date, such date being deemed to have been
extended to the date of such final resolution.
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As used in this Section 6, the following terms have the following meanings:
(i) "General Claim" means any claim (other than a Clause (i)
Claim, a Tax Claim, Clinical Testing Claim or
Non-Competition/Non-Solicitation Claim) based upon, arising out of or
otherwise in respect of any inaccuracy in or any breach of any
representation, warranty, covenant or agreement of Clintec contained
in this Agreement.
(ii) "Tax Claim" means any claim based upon, arising out of
or otherwise in respect of (A) issues raised on audit by Tax
authorities with respect to Clintec's business, (B) any inaccuracy in
or any breach of any representation, warranty, covenant or agreement
of Clintec contained in this Agreement related to Taxes or (C) any
other Tax liabilities of Clintec.
(iii) "Clintec Claim" means any claim based upon, arising
out of or otherwise in respect of any breach of any covenant or
agreement of FRS contained in this Agreement.
(iv) "Non-Competition/Non-Solicitation Claim" means any claim
based upon, arising out of or otherwise in respect of any breach of
any covenant of Clintec contained in Section 5.
(v) "FRS Claim" means any clause (i) Claim, Tax Claim,
Non-Competition/Non-Solicitation Claim, Clinical Testing Claim or
General Claim.
(vi) "Clinical Testing Claim" any claim based upon, arising
out of or otherwise in respect of any liability or obligation of FRS
arising out of, relating to, based upon or otherwise in respect of (i)
violations of any Environmental or Clinical Testing Law prior to the
Closing Date, (ii) products liability for occurrences prior to the
Closing Date or (iii) clinical testing of the Compounds or Other
Compounds prior to the Closing, except for liabilities arising out of
violations of laws other than Environmental or Clinical Testing Laws
or liabilities arising out of labor or employment matters.
B. Obligation of Clintec to Indemnify. Subject to the limitations set
forth below and in Sections 6.5 and 6.6 hereof and to the termination
provisions set forth in Section 6.1, Clintec agrees to indemnify, defend
and hold harmless FRS (and its directors, officers, employees, affiliates
and assigns) from and against all losses, liabilities, damages,
deficiencies, costs
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CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
or expenses (including interest and penalties imposed or assessed by any
judicial or administrative body and reasonable attorneys fees) ("Losses")
based upon, arising out of or otherwise in respect of any FRS Claim.
Clintec shall have no obligation to indemnify FRS unless the total of all
FRS Claims for indemnification under this Section 6.2 exceeds $******* in
the aggregate (the "FRS Threshold"), whereupon the full amount of such
claims shall be recoverable in accordance with the terms hereof. In no
event shall the aggregate amount payable by Clintec pursuant to this
Section 6.2 exceed ********** (the "FRS Cap"). Notwithstanding the
foregoing, the FRS Threshold and the FRS Cap shall not apply to
Non-Competition/Non-Solicitation Claims, and claims based on the failure to
perform the covenants contained in Sections 1.2, 1.4, 1.5, 1.10, 7.9 and
7.10.
C. Obligation of FRS to Indemnify. Subject to the limitations set
forth below and in Sections 6.5 and 6.6 hereof and to the termination
provisions set forth in Section 6.1, FRS agrees to indemnify, defend and
hold harmless Clintec from and against any Losses based upon, arising out
of or otherwise in respect of any Clintec Claim. FRS shall have no
obligation to indemnify Clintec unless the total of all Clintec Claims for
indemnification under this Section 6.3 exceeds $******* (the "Clintec
Threshold") in the aggregate, whereupon the full amount of such claims
shall be recoverable in accordance with the terms hereof. In no event shall
the aggregate amount payable by FRS pursuant to this Section 6.3 exceed
$*********(the "Clintec Cap"). Notwithstanding the foregoing, the Clintec
Threshold and the Clintec Cap shall not apply to claims based on the
failure to perform the covenants in Sections 1.2, 1.9 and 7.9.
D. NOTICE AND OPPORTUNITY TO DEFEND.
1. Notice of Asserted Liability. Promptly after receipt by any
party hereto (the "Indemnitee") of notice of any demand, claim or
circumstances which, with the lapse of time, would give rise to a claim or
the commencement (or threatened commencement) of any action, proceeding or
investigation (an "Asserted Liability") that may result in a Loss, the
Indemnitee shall give notice thereof (the "Claims Notice") to any other
party or parties) obligated to provide indemnification pursuant to Sections
6.2 or 6.3 hereof (the "Indemnifying Party"). The Claims Notice shall
describe the Asserted Liability in reasonable detail, and shall indicate
the amount (estimated, if necessary) of the Loss that has been or may be
suffered by the Indemnitee.
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2. Opportunity to Defend. The Indemnifying Party may elect to
compromise or defend, and control the defense of, at its own expense and by
counsel reasonably satisfactory to the Indemnitee, any Asserted Liability,
provided that the Indemnitee shall have no liability under any compromise
or settlement agreed to by the Indemnifying Party which it has not approved
in writing. If the Indemnifying Party elects to compromise or defend such
Asserted Liability, it shall within 30 days (or sooner, if the nature of
the Asserted Liability so requires) notify the Indemnitee of its intent to
do so, and the Indemnitee shall cooperate upon the request and at the
expense of the Indemnifying Party, in the compromise of, or defense
against, such Asserted Liability. If the Indemnifying Party elects not to
compromise or defend the Asserted Liability, or fails to notify the
Indemnitee of its election as herein provided, the Indemnitee may pay,
compromise or defend such Asserted Liability and receive full
indemnification for its Losses as provided in Sections 6.2 and 6.3 hereof.
In any event, the Indemnitee and the Indemnifying Party may participate, at
their own expense, in the defense of such Asserted Liability by the
Indemnifying Party or the Indemnitee, respectively. If the Indemnifying
Party chooses to defend any claim, the Indemnitee shall make available to
the Indemnifying Party any books, records or other documents within its
control that are reasonably requested for such defense and shall otherwise
cooperate with the Indemnifying Party, in which event the Indemnitee shall
be reimbursed for its out-of-pocket expense.
E. OTHER BENEFITS. In determining the amount of any Loss, there shall
be taken into account any tax benefit, insurance proceeds or other similar
recovery or offset realized, directly or indirectly, by the Indemnitee.
F. LIMITATION ON REPRESENTATIONS AND WARRANTIES. In the event that, as
of the Closing Date, an Indemnitee (or, in the case of FRS, if all of the
purchasers other than Clintec or its affiliates, under the Stock Purchase
Agreement (the "Purchasers")) has(ve) obtained actual knowledge of a breach
of any representation, warranty or covenant made in this Agreement and
has(ve) had a reasonably sufficient time in the circumstances to recognize
and investigate the same, (A) such Indemnitee shall give the Claims Notice
before the Closing (in the event FRS is the Indemnitee, the Purchasers
shall give such Claims Notice on its behalf), (B) the parties shall
thereupon negotiate in good faith to resolve such breach and/or to make
appropriate adjustment to the terms of this Agreement and any related
agreement, and (C) no indemnification shall be available under this Section
6 with respect to any breach as to which the Indemnitee has not complied
with clause (A) of this subsection.
G. EXCLUSION. The provisions of this Section 6 shall not apply to
Sections 1.3(b)-(i), Section 1.7 or Section 7.4.
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SECTION VII. - MISCELLANEOUS
A. PUBLICITY. No publicity release or announcement concerning this
Agreement or the transactions contemplated hereby shall be made without
advance approval thereof by Clintec and FRS.
B. NOTICES. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally,
telegraphed, telexed, sent by facsimile transmission or sent by certified,
registered or express mail, postage prepaid. Any such notice shall be
deemed given when so delivered personally, telegraphed, telexed or sent by
facsimile transmission or, if mailed, two days after the date of deposit in
the United States mails, as follows:
(i) if to FRS, to:
Free Radical Sciences, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ & Dodge
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(ii) if to Clintec:
Clintec Nutrition Company
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇
Three First National Plaza, ▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇, Esq.,
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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Any party may by notice given in accordance with this Section to the other
parties designate another address or person for receipt of notices
hereunder.
C. ENTIRE AGREEMENT. This Agreement (including the Schedules), the
Related Agreements and all other documents executed in connection with the
consummation of the transactions contemplated herein contain the entire
agreement among the parties with respect to the purchase of the Shares and
the Contributed Assets and related transactions, and supersedes all prior
agreements, written or oral, with respect thereto. Other than the
purchasers named in the Stock Purchase Agreement, this Agreement is for the
sole benefit of the parties hereto and nothing herein expressed shall give
or be construed to give any person or entity, other than the parties hereto
and the purchasers named in the Stock Purchase Agreement, any legal or
equitable rights hereunder.
D. AUSTRALIAN INSURANCE. Clintec hereby covenants and agrees to
maintain, at its sole expense, in full force and effect the clinical trial
insurance in effect on the Effective Date for the Australian Co-trimoxazole
study (the "Study") through June 30, 1994 (the "Roll-Over Date"). At the
election of FRS, by written notice to Clintec ten days prior to the
Roll-Over Date, Clintec shall renew and maintain such policy in full force
and effect until December 31, 1994. Notwithstanding any provision hereof to
the contrary, FRS's only responsibilities and liabilities with respect to
the Study shall be (i) payment to Clintec of the renewal premium, up to a
maximum of $1,000, on the Roll-Over Date and (ii) payment of any insurance
deductible for third-party claims made after the Closing Date, up to a
maximum of $250,000.
E. CONFIDENTIALITY LETTER. The Letter Agreement, effective as of
January 27, 1994, between Advent International Corporation, Clintec and FRS
shall automatically terminate and be of no further force and effect upon
the Closing.
F. WAIVERS AND AMENDMENTS; NON-CONTRACTUAL REMEDIES; PRESERVATION OF
REMEDIES. This Agreement may be amended, superseded, canceled, renewed or
extended, and the terms hereof may be waived, only by a written instrument
signed by the parties or, in the case of a waiver, by the party waiving
compliance. No delay on the part of any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall
any waiver on the part of any party of any such right, power or privilege,
nor any single or partial exercise of any such right, power or privilege,
preclude any further exercise thereof or the
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exercise of any other such right, power or privilege. The rights and
remedies herein provided are cumulative and are not exclusive of any rights
or remedies that any party may otherwise have at law or in equity. The
rights and remedies of any party based upon, arising out of or otherwise in
respect of any inaccuracy in or breach of any representation, warranty,
covenant or agreement contained in this Agreement shall in no way be
limited by the fact that the act, omission, occurrence or other state of
facts upon which any claim of any such inaccuracy or breach is based may
also be the subject matter of any other representation, warranty, covenant
or agreement contained in this Agreement (or in any other agreement between
the parties) as to which there is not inaccuracy or breach.
G. GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of The Commonwealth of Massachusetts, without
regard to the conflicts of law rules of The Commonwealth of Massachusetts.
H. BINDING EFFECT; NO ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
legal representatives. This Agreement is not assignable except by operation
of law or by FRS to any of its affiliates, except that (i) Clintec and FRS
may assign their respective rights under Sections 1.3(b)-(i) and (ii)
Clintec may assign any of its rights hereunder to its partners or their
affiliates (but such assignment shall not release Clintec from its
obligations hereunder). In the event of a sale (which shall be deemed not
to include a license) of a substantial portion of the Technology related to
the AIDS Drugs, FRS shall obtain the agreement of the Transferee of such
Technology to be bound by the provisions of Section 1.3(b)-(i) hereof, as
such provisions would be modified by substituting the name of the
Transferee for FRS therein, and upon obtaining such agreement FRS shall be
released from its obligations under Section 1.3(b)-(i) to the extent such
obligations relate to the sales of AIDS Drugs by the Transferee.
I. EXPENSES. Except as otherwise provided in this Agreement, all costs
and expenses incurred in connection with this Agreement shall be paid by
the party incurring such cost or expense; provided, that, Clintec shall pay
the legal fees and expenses of ▇▇▇▇▇▇ & Dodge incurred in connection with
negotiating, drafting and consummation of the transactions contemplated by
this Agreement, up to a maximum amount of $25,000.
J. TAXES. Clintec shall be responsible for the payment of any sales,
transfer, documentary or similar tax due as a result of the transactions
contemplated by this Agreement.
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K. VARIATIONS IN PRONOUNS. All pronouns and any variations thereof
refer to the masculine, feminine or neuter, singular or plural, as the
context may require.
L. COUNTERPARTS. This Agreement may be executed by the parties hereto
in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute
one and the same instrument. Each counterpart may consist of a number of
copies hereof each signed by less than all, but together signed by all of
the parties hereto.
M. EXHIBITS AND SCHEDULES. The Exhibits and Schedules are a part of
this Agreement as if fully set forth herein. All references herein to
Sections, subsections, clauses, Exhibits and Schedules shall be deemed
references to such parts of this Agreement, unless the context shall
otherwise require.
N. HEADINGS. The headings in this Agreement are for reference only,
and shall not affect the interpretation of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement under
seal as of the date first above written.
Attest: FREE RADICAL SCIENCES, INC.
_________________________ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇
Title: -----------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇
Title: President
Attest: CLINTEC NUTRITION COMPANY
_________________________ By: /s/ ▇.▇. ▇▇▇▇▇▇
Title: -----------------------------
Name: ▇.▇. ▇▇▇▇▇▇
Title: Vice President
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