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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
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Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
May 15, 2000 0-21537
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Date of Report (Date of earliest event reported) Commission File Number
PACIFIC BIOMETRICS, INC.
(Exact name of registrant as specified in its charter)
Delaware 93-1211114
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(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification Number
23120 Alica Parkway, Suite 200
Mission Viejo, CA 92692
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(Address of Principal Executive Offices) (Zip Code)
(949) 455-9724
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(Registrant's telephone number, including area code)
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Item 5. Other Events.
The Company has not filed its Form 10-KSB for the fiscal year ending June 30,
1999, which was due on extension on October 13, 1999. The Company also has not
filed its Form 10-QSB for the periods ending September 30, 1999, December 31,
1999, and March 31, 2000. The Company, due to lack of funds, was unable to
engage an audit firm to perform the necessary year end audit of the June 30,
1999 financials and has been unable to prepare the Company's interim financial
statements.
As a result of the execution of an Agreement of Purchase and Sale of Assets with
Saigene Corporation dated April 18, 2000, the Company now has funds available to
begin the required audit of the June 30, 1999 fiscal year-end financial
statements. The Company will also prepare and have audited the financial
statement for the fiscal year ending June 30, 2000 and plans to file the Form
10-KSB for June 30, 1999 and June 30, 2000, as well as the Form 10-QSB reports
as soon as possible, but not later than September 30, 2000.
The Purchase Agreement, which is subject to shareholder approval, will transfer
the business and all assets of the Company's Seattle laboratory operation to
Saigene for a total consideration of $4,000,000. Shareholder approval will be
sought after completion of the June 30, 1999 and 2000 audits. The purchase price
is comprised of the following: 1) $200,000 already advanced to support the
operation of the laboratory under a Management Agreement with Saigene dated
September 15, 1999; 2) The assumption of approximately $1,200,000 in debt; 3)
$700,000 in cash; and, 4) A promissory note in connection with the redemption of
$1,900,000 of Series A Convertible Preferred Stock. The Series A Preferred Stock
will be returned to the Company. These amounts are subject to adjustment upon
audit of funds advanced and the May 31, 2000 balance sheet of the laboratory
operation. The cash portion of the purchase is payable as follows: 1) $50,000
upon signing of the agreement, which was paid on May 3, 2000; 2) $350,000
payable on June 15, 2000; 3) $300,000 placed into escrow on June 15, 2000 to be
paid to the Company upon shareholder approval. The assumption of debt in the
amount of $1,200,000 includes: $350,000 to settle the debt with the landlord of
the Company's Lake Forest, California office and laboratory facility; $400,000
of equipment lease financing obligations with Transamerica; $140,000 of
additional equipment leases; and accrued expenses and accounts payable of the
laboratory.
Upon completion of the transaction with Saigene, the Company will still have
various debts and claims that need to be settled. These include amounts owed to
various consultants, vendors and suppliers of the Company not related to the
Seattle laboratory operation (estimated to be between $250,000 and $400,000);
deferred pay to current and former employees (approximately $650,000); accrued
dividends to preferred shareholders (estimated to be $360,000), and a potential
liability, disputed by the Company, of approximately $2.0 million related to the
OsteoPatch technology. The Company will attempt to settle these debts with cash,
stock, and technology assets. There can be no assurance that the Company will be
successful in these negotiations and may have to declare bankruptcy. If the
Company is successful in settling the remaining debts, then the Company plans to
pursue a merger with another company as a means of providing some value to
common shareholders. There can be no assurance that the Company will be
successful in
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finding and negotiating a successful merger or that any such merger would create
value for the shareholders.
As previously reported, the landlord of the Company's office and laboratory
space in Lake Forest, California was proceeding against the Company to cancel
the lease. The landlord has obtained a judgment against the Company from Orange
County Superior Court for approximately $150,000 related to the default on the
lease. In addition, liabilities continue to accrue at about $13,000 per month
until the space is leased. This obligation will be settled with the closing of
the sale of laboratory assets to Saigene Corporation.
As previously disclosed, the Company has continued to negotiate forbearance
agreements with Transamerica Business Credit related to payments due on capital
leases. In exchange for the most recent Forbearance Agreement the Company has
granted Transamerica additional warrants and a lien position on assets of the
Company. This Forbearance Agreement has expired as of September 30, 1999 and was
extended again through December 31, 1999 in exchange for additional warrants.
As previously disclosed, the Minnesota Mining and Manufacturing Company (3M), as
a party in possession of secured property, has not informed the Company of its
plans for the Sudormed assets. This includes the SkinPatch(TM) technology
rights, which are part of the Company's Osteopatch(TM) product. The Company had
sought to reestablish certain rights to this technology in order to create
additional value for the Company's other intellectual property related to the
Osteopatch(TM). Without an agreement with 3M the Company's Osteopatch(TM) assets
may not have any value, and has already been written-off on the Company's
balance sheet.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) not applicable
(b) not applicable
(c) Exhibits - Agreement of Purchase and Sale of Assets between
Pacific Biometrics and Saigene Corporation, dated April 18,
2000
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: May 15, 2000 PACIFIC BIOMETRICS, INC.
By: /s/ Paul G. Kanan
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Name: Paul G. Kanan
Title: President and Chief Executive Officer
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AGREEMENT OF PURCHASE AND SALE OF ASSETS
This Agreement of Purchase and Sale of Assets (the
"Agreement") is made as of April 18, 2000, by and between Saigene Corporation
("Buyer"), a Delaware corporation, having its principal office at 7126 180th
Avenue NE, C104, Redmond, Washington 98052; Pacific Biometrics, Inc., a Delaware
corporation ("Corporation"), having its principal office at 23120 Alicia
Parkway, Suite 200, Mission Viejo, California 92692; and Pacific Biometrics,
Inc., a Washington corporation ("Subsidiary"), having its principal office at
220 West Harrison Street, Seattle, Washington 98119. Corporation and Subsidiary
are collectively referred to in this Agreement as "Selling Parties."
RECITALS:
a. WHEREAS Corporation represents that it owns all of the
outstanding stock of Subsidiary;
B. WHEREAS Buyer desires to purchase from Subsidiary and
Subsidiary desires to sell to Buyer, on the terms and subject to the conditions
of this Agreement, substantially all the business and properties of the
Subsidiary in exchange for the assumption of certain liabilities and the payment
of other consideration, as more specifically stated herein;
C. WHEREAS Corporation desires that this transaction be
consummated; and
D. WHEREAS Buyer, Corporation and Subsidiary have entered into
a written Management Agreement, dated September 15, 1999, whereby Buyer has
assumed control of Subsidiary's day-to-day business (a copy of said Management
Agreement is attached hereto as Exhibit "1" and incorporated herein by this
reference), and has advanced approximately Two Hundred Thousand Dollars
($200,000.00) to Subsidiary's business, as well as re-investing Buyer's share of
profits under the Management Agreement, based on proof to be submitted prior to
the Closing.
NOW, THEREFORE, in consideration of the mutual covenants,
agreements, representations, and warranties contained in this Agreement, the
parties agree as follows:
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AGREEMENT
ARTICLE I
Sale, Sales Price And Terms Of Payment
1.1 Sale and Transfer of Assets. Subject to the terms and
conditions set forth in this Agreement, Subsidiary agrees to sell, convey,
transfer, assign, and deliver to Buyer, and Buyer agrees to purchase from
Subsidiary, all the assets, properties, and business of Subsidiary of every
kind, character, and description, whether tangible, intangible, real, personal,
or mixed, and wherever located, including, without limitation, laboratory
equipment, leasehold improvements, accounts receivable and contracts (including
all warranties which Subsidiary possesses with respect to all of the foregoing),
all of which are collectively referred to as the assets, except the
Corporation's Salivasac device and Sweat Patch device (the "Products") and,
subject to the limitations in Section 2.17, all inventory of Products, equipment
used exclusively to manufacture the Products, and data, procedures and files
relating exclusively to the Products; however, this exclusion shall not prohibit
Buyer from collecting and testing sweat and saliva. The assets being transferred
to Buyer are hereinafter referred to as the "Assets." With respect to the
deposit of Seventy-Five Thousand Dollars ($75,000.00) paid by Subsidiary to its
landlord as a security deposit for the leased premises, Subsidiary shall retain
the right to receive said amount, together with any accrued interest, upon the
expiration of the lease. It is anticipated that Buyer, in order to assume the
lease, will need to pay an additional Twenty-Five Thousand Dollars ($25,000.00)
to the landlord as additional security in order to bring the security deposit
into compliance under the terms of the lease. In the event that Buyer does pay
the landlord any monies to increase the amount of the security deposit, Buyer
shall be entitled to receive such amount, together with any accrued interest,
upon the expiration of the lease. Additionally, Buyer shall use its reasonable
efforts to have the landlord segregate the monies paid by Buyer and Subsidiary
into separate accounts and place Subsidiary's name on the account containing its
portion of the security deposit.
1.2 Grant of License. Subject to the terms and conditions
set forth in this Agreement, as part of the Assets being sold to Buyer, Selling
Parties hereby grant a fully-paid, royalty free, worldwide license for the
exclusive use of the name "Pacific Biometrics" and the initials "PBI" in the
central laboratory and contract research industries.
1.3 Consideration from Buyer. As full payment for the sale
and transfer of the Assets by Subsidiary to Buyer, Buyer shall pay to the
Selling Parties a total purchase price (the "Purchase Price") for the Assets of
Four Million Dollars ($4,000,000.00), which will consist of:
(a) Buyer assuming up to One Million Two Hundred
Thousand Dollars ($1,200,000.00) in Subsidiary debt, calculated as of May 31,
2000. It is expressly understood and agreed that Buyer shall assume only those
debts, liabilities, obligations and contracts listed in Exhibit "2" (the
"Assumed Liabilities"). It is further expressly understood
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and agreed that Buyer shall not be liable for any of the obligations or
liabilities of Subsidiary and/or Corporation of any kind and nature other than
those specifically assumed by Buyer under this Section (the "Unassumed
Liabilities");
(b) Buyer issuing to the Corporation's Preferred
Shareholders a Promissory Note (the terms of which are described hereinbelow) in
the principal amount of One Million Nine Hundred Thousand Dollars
($1,900,000.00) in order to retire One Million Nine Hundred Thousand Dollars
($1,900,000.00) (subject to the offset discussed in paragraph (c) below) of
Corporation's Preferred Stock and returning said retired shares to Corporation.
The Promissory Note will pay interest only at the same rate and on the same
terms as an equivalent amount of Preferred Shares until Buyer completes its
initial public offering, at which time all of the principal and accrued interest
of the Promissory Note will be due and payable;
(c) Taking a credit in the approximate amount of Two
Hundred Thousand Dollars ($200,000.00) (subject to proof to be submitted to
Selling Parties before the Closing) based upon the investment by Buyer into
Subsidiary's business pursuant to the terms of the Management Agreement. In the
event that the amount of Buyer's credit is less than Two Hundred Thousand
Dollars ($200,000.00), the actual amount of the Promissory Note described in
Subparagraph (b) above will be calculated by taking $1,900,000.00 of Preferred
Shares of the Corporation and adding thereto one-half of the lesser amount owed
to Buyer under the Management Agreement as of May 31, 2000. The other one-half
shall be added to the cash payment due to Selling Parties pursuant to
Subparagraph (d)(iii) below. For example, if the actual amount of the credit is
$140,000.00, then the amount of the Promissory Note described in Subparagraph
(b) above would be $1,930,000.00, and the cash payment under Subparagraph
(d)(iii) would be $330,000.00. In the event that the amount of Buyer's credit is
more than Two Hundred Thousand Dollars ($200,000.00), the actual amount of the
Promissory Note described in Subparagraph (b) above will be calculated by taking
$1,900,000.00 of Preferred Shares of the Corporation and subtracting therefrom
one-half of the lesser amount owed to Buyer under the Management Agreement as of
May 31, 2000. The other one-half shall be subtracted from the cash payment due
to Selling Parties pursuant to Subparagraph (d)(iii) below. For example, if the
actual amount of the credit is $240,000.00, then the amount of the Promissory
Note would be $1,880,000.00, and the cash payment under Subparagraph (d)(iii)
would be $280,000.00; and
(d) The remaining Seven Hundred Thousand Dollars
($700,000.00) will be payable in cash, subject to the offset in Subsection (iii)
and also subject to the terms of Section 1.4, below. The cash portion of the
Purchase Price will be payable as follows:
(i) Fifty Thousand Dollars ($50,000.00) upon
execution of this Agreement by the parties (which payment shall be
non-refundable if, and only if, the Closing does not occur due to Buyer's
failure or refusal to perform its obligations under this Agreement; however, in
the event that the Closing does not occur due to Selling Parties' failure or
refusal to perform their obligations under this Agreement, then said amount
shall be refundable);
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(ii) Three Hundred Fifty Thousand Dollars
($350,000.00) payable at the Closing;
(iii) The remaining Three Hundred Thousand Dollars
($300,000.00) payable after Corporation obtains the required approval from
either its shareholders authorizing the sale of the Assets (and Corporation
provides Buyer with an opinion of counsel in reasonably acceptable form
confirming that Corporation has properly obtained the necessary approval of
Corporation's shareholders required to approve this Agreement) or a bankruptcy
court of competent jurisdiction. It is understood and agreed that, pursuant to
Section 3 of the Management Agreement, Selling Parties currently owe Buyer
approximately Two Hundred Thousand Dollars ($200,000.00), subject to proof to be
submitted prior to Closing, which Buyer has infused into the Subsidiary's
laboratory business, which amount is subject to change, and that Buyer will, in
accordance with Subparagraph (c) above, deduct or increase one-half (1/2) of the
amount above or below $200,000.00 due as of May 31, 2000 (the other one-half
(1/2) having been credited or deducted against the retirement of Preferred Stock
in Subsection (b), above). Additionally, Buyer shall place the funds for this
payment into escrow with Cadden, Fuller & Burkhalter, or another mutually
acceptable escrow holder at Closing.
Simultaneous with each payment by Buyer under Subsection (d),
Seller will provide Buyer with a Form UCC-1 (and a signed Security Agreement, if
necessary) granting to Buyer a security interest in all of the assets of
Subsidiary, which shall provide Buyer with collateral for the advances in the
event Corporation's shareholders do not approve the sale of the Assets.
In the event that the aggregate amount of the Assumed
Liabilities on May 31, 2000 are less than One Million Two Hundred Thousand
Dollars ($1,200,000.00), then the cash portion of the Purchase Price payable
under Subsection (d)(iii) above, shall be increased on a dollar-for-dollar basis
so that the total Purchase Price shall equal Four Million Dollars
($4,000,000.00). For example, if the Assumed Liabilities equal One Million One
Hundred Fifty Thousand Dollars ($1,150,000.00), then the amount of the cash
payable under Subsection (d) shall be increased to Seven Hundred Fifty Thousand
Dollars ($750,000.00), and the additional Fifty Thousand Dollars ($50,000.00)
shall be added to the final payment under Subsection (d)(iii).
1.4 Control of Cash. It is understood and agreed that the
cash portion of the Purchase Price paid by Buyer to the Selling Parties shall
only be used by the Selling Parties to pay (a) approved third-party creditors of
Corporation and its subsidiaries (i.e., not to pay accrued salaries of past or
present Directors or the accrued interest on the Preferred Shares), (b) expenses
required to get Corporation in compliance with the Securities and Exchange
Commission, including repaying any advances made by the Corporation's Directors
in furtherance of same, and (c) expenses incurred in the ordinary course of
business. Only after all of these creditors and expenses have been paid may the
Selling Parties pay other debts. It is further understood and agreed that the
Fifty Thousand Dollars ($50,000.00) paid to Selling Parties under Section
1.3(d)(i) shall be used exclusively to pay expenses required to get Corporation
in compliance with the Securities and Exchange Commission.
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1.5 Excise And Property Taxes. Subsidiary shall pay all
sales and use taxes arising out of the transfer of the Assets and shall pay its
portion, prorated as of the effective date of the Management Agreement, of state
and local real and personal property taxes of the business. Buyer shall not be
responsible for any business, occupation, withholding, or similar tax, or any
taxes of any kind related to any period before the effective date of the
Management Agreement.
ARTICLE II
Selling Parties' Representations And Warranties
The parties acknowledge that Buyer has had operational control
of Subsidiary's laboratory business since September 15, 1999, pursuant to the
Management Agreement and, as a consequence, Buyer will be preparing all of the
schedules and exhibits relating to Subsidiary, and will use appropriate due
diligence in preparing same. All schedules prepared by Buyer are presumed
accurate by Seller and may not be verified by Seller. Buyer will not hold Seller
responsible for any error made by Buyer on any Schedule to the extent Buyer
either had actual knowledge of the correct facts or, in its capacity as Manager
under the Management Agreement, reasonably should have known of the correct
facts; provided, however, that Buyer is not responsible for knowing facts or the
contents of documents which have been withheld from Buyer.
2.1 Organization, Standing, and Qualification of Subsidiary.
Subsidiary is a corporation duly organized, validly existing, and in good
standing under the laws of Washington, has all necessary corporate powers to own
its properties and to carry on its business as now owned and operated by it, and
is duly qualified to do intrastate business and is in good standing in each
jurisdiction in which its ownership or leasing of its properties or the conduct
of its business requires such qualification.
2.2 Financial Statements. Exhibit "3" to this Agreement sets
forth the unaudited Financial Statements of Subsidiary as of May 31, 2000 (the
"Financial Statements"). The Financial Statements fairly present the assets and
liabilities of Subsidiary as of the date thereof and for the period covered
thereby, and are prepared on a consistent basis throughout the period covered
thereby and in accordance with generally accepted accounting principles.
2.3 Absence of Specified Changes. Since the date of the
Financial Statements referred to in Section 2.2, (excluding any acts done by,
transactions entered into by, or other events known to Buyer) to the knowledge
of Selling Parties, there has not been any of the following changes which would
affect the assets or liabilities of Subsidiary:
(a) Transaction by Subsidiary except in the ordinary
course of business as conducted on that date;
(b) Material adverse change in the financial condition,
liabilities,
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assets, business, or prospects of Subsidiary;
(c) Destruction, damage to, or loss of any asset of
Subsidiary (whether or not covered by insurance) that materially and adversely
affects the financial condition, business, or prospects of Subsidiary;
(d) Other event or condition of any character materially
and adversely affecting the financial condition, business, assets or prospects
of Subsidiary;
(e) Change in accounting methods or practices
(including, without limitation, any change in depreciation or amortization
policies or rates) by Corporation or Subsidiary;
(f) Declaration, setting aside, or payment of a dividend
or other distribution in respect to the capital stock of Subsidiary, or any
direct or indirect redemption, purchase, or other acquisition by Subsidiary of
any of its shares of capital stock;
(g) Increase in the salary or other compensation payable
or to become payable by Subsidiary to any of its officers, directors, or
employees, or the declaration, payment, or commitment or obligation of any kind
for the payment, by Subsidiary, of a bonus or other additional salary or
compensation to any such person;
(h) Sale or transfer of any asset of Subsidiary except
in the ordinary course of business;
(i) Amendment or termination of any contract, agreement,
or license to which the Subsidiary is a party, except in the ordinary course of
business;
(j) Loan by Subsidiary to any person or entity, or
guaranty by Corporation or Subsidiary of any loan;
(k) Mortgage, pledge, or other encumbrance of any asset
of Subsidiary;
(l) Waiver or release of any right or claim of
Subsidiary, except in the ordinary course of business;
(m) Issuance or sale by Subsidiary of any shares of its
capital stock of any class, or of any other of its securities; or
(n) Agreement by Corporation or Subsidiary to do any of
the things described in the preceding clauses (a) through (m).
2.4 Debts, Obligations, and Liabilities. Exhibit "4" to this
Agreement contains a true and complete schedule of all monetary liabilities and
obligations of Subsidiary. Subsidiary does not have any monetary debts,
liabilities, or obligations of any
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nature, whether accrued, absolute, contingent, or otherwise, and whether due or
to become due, that are not set forth in Exhibit "4." Nothing in this Section is
intended to refer to written contracts for laboratory services to be performed
by Subsidiary.
2.5 Tax Returns and Audits. Except for taxes and tax returns
for the last Two (2) fiscal years, within the times and in the manner prescribed
by law, Subsidiary has filed all federal, state, and local tax returns required
by law and has paid all taxes, assessments, and penalties due and payable. There
are no present disputes as to taxes of any nature payable by Subsidiary.
Subsidiary has never filed, and will not file on or before the Closing Date, any
consent under ss. 341(f) of the Internal Revenue Code. Furthermore, Subsidiary
agrees that it will use proceeds from the cash portion of the Purchase Price to
file all of its outstanding tax returns and pay all of its outstanding taxes.
2.6 Real Property. Exhibit "5" contains the lease for the
Subsidiary's laboratory in Seattle, Washington. Seller defers to Buyer to
determine the willingness of the landlord to assign the lease to Buyer and, if
so, on what terms.
2.7 Hazardous Materials. Prior to the date on which Buyer
took control of Subsidiary's laboratory, except as set forth in Exhibit "6" to
this Agreement, the Selling Parties have no knowledge of any hazardous waste
liabilities of the business as encompassed in 42 U.S.C. ss.ss. 9601, et seq. or
any other relevant statute, nor do the premises of the business contain any
underground storage tanks, asbestos building materials, or any other hazardous
substances that require or may require removal or other remedial attention.
2.8 Inventory. Selling Parties own the inventories of raw
materials, work in progress, and finished goods (collectively called
"Inventories") of the business. No items included in the Inventories have been
pledged as collateral (except as reflected in UCC-1 Financing Statements
recorded on or before the date of this Agreement) or are held by Subsidiary on
consignment from others.
2.9 Other Tangible Personal Property. Exhibit "7" to this
Agreement (which has been prepared by Buyer) is a complete and accurate schedule
(prepared by Buyer) describing all machinery, equipment, furniture, tools,
laboratory equipment, drawings, and all other tangible personal property owned
by, in the possession of, or used by Subsidiary in connection with its business,
except inventories of raw materials, work in progress, and finished goods.
2.10 Accounts Receivable. Pursuant to the Management
Agreement, Buyer is entitled to receive all monies on all accounts receivable of
Subsidiary until the Management Agreement is terminated, and Buyer is purchasing
the accounts receivable as part of the Assets. Exhibit "8" to this Agreement
(which has been prepared by Buyer) is a complete and accurate schedule of the
accounts receivable of Subsidiary as of May 31, 2000. Notwithstanding the
foregoing, Buyer is not acquiring, and Selling Parties shall retain, any
accounts receivable or portion thereof which are directly attributable to the
sale of the Products. For contracts which require both the performance of
services and the sale or use of the Products, Subsidiary shall be entitled to
Three Dollars ($3.00) for each Sweat Patch
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used or sold under the contract, and Four Dollars ($4.00) for each Salivasac
used or sold under the contract, and Buyer shall retain the remainder of the
funds.
2.11 Trade Names, Trademarks, Service Marks and Copyrights.
Exhibit "9" to this Agreement (which has been prepared by Buyer) is a schedule
of all trade names, trademarks, service marks, and copyrights (including,
without limitation, the name "Pacific Biometrics," the initials "PBI" and its
logo) owned by Subsidiary or in which it has any rights or licenses, together
with a brief description of each. Subsidiary has not infringed, and is not now
infringing, on any trade name, trademark, service mark, or copyright belonging
to any other person, firm, or corporation. Except as set forth in Exhibit "9,"
Subsidiary is not a party to any license, agreement, or arrangement, whether as
licensor, licensee, or otherwise, with respect to any trademarks, service marks,
trade names, or applications for them, or any copyrights. Subsidiary owns or
holds adequate licenses or other rights to use, all trademarks, service marks,
trade names, and copyrights necessary for its business as now conducted by it
(including, without limitation, those listed in Exhibit "9"), and that use does
not, and will not, conflict with, infringe on, or otherwise violate any rights
of others. Following the Closing, Buyer will continue to use the name "Pacific
Biometrics" and the abbreviation "PBI" without further compensation to
Corporation or Subsidiary.
2.12 Trade Secrets. Exhibit "10" to this Agreement (which has
been prepared by Buyer) is a true and complete list, without extensive or
revealing descriptions, of Subsidiary's trade secrets, including all customer
lists, processes, know-how, computer programs and routines and other technical
data. The specific location of each trade secret's documentation, including its
complete description, specifications, charts, procedures, and other material
relating to it, is also set forth with it in that Exhibit. Each trade secret's
documentation is current, accurate, and sufficient in detail and without
reliance on the special knowledge or memory of others.
Subsidiary is the sole owner of each of these trade secrets,
free and clear of any liens, encumbrances, restrictions, or legal or equitable
claims of others, except as specifically stated in Exhibit "10." Subsidiary has
taken all reasonable security measures to protect the secrecy, confidentiality,
and value of these trade secrets; any of their employees and any other persons
who, either alone or in concert with others, developed, invented, discovered,
derived, programmed, or designed these secrets, or who have knowledge of or
access to information relating to them, have been put on notice and, if
appropriate, have entered into agreements that these secrets are proprietary to
Subsidiary and not to be divulged or misused.
All these trade secrets are presently valid and protectable,
and are not part of the public knowledge or literature, nor to Selling Parties'
knowledge have they been used, divulged, or appropriated for the benefit of any
past or present employees or other persons, or to the detriment of Subsidiary.
However, Buyer shall be responsible for all confidentiality agreements executed
by Subsidiary's employee's after the effective date of the Management Agreement,
as well as the effect of Buyer's failure to have Subsidiary's employees execute
Confidentiality Agreements.
2.13 Other Intangible Property. A true and complete list of
all
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intangible assets, other than those specifically referred to elsewhere in
this Agreement, and the locations of certificates or other evidences of title to
these assets is set forth in Exhibit "11" to this Agreement (which has been
prepared by Buyer).
2.14 Title to Assets. Except as set forth in Exhibit "12,"
(which has been prepared by Buyer), Subsidiary has good and indefeasible title
to all its assets and interests in assets, whether real, personal, mixed,
tangible, and intangible, that constitute all the assets and interests in assets
that are used in the business of Subsidiary. Except as set forth in Exhibit
"12," all these assets are free and clear of restrictions on, or conditions to,
transfer or assignment, and free and clear of mortgages, liens, pledges,
charges, security interests, encumbrances, equities, claims, easements, rights
of way, covenants, conditions or restrictions. Subsidiary is in possession of
all premises leased to it from others. No shareholder, officer, director, or
employee of Corporation or Subsidiary, nor any spouse, child, or other relative
of any of these persons, owns, or has any interest, directly or indirectly, in
any of the real or personal property owned by, or leased to, Subsidiary or any
copyrights, patents, trademarks, trade names, or trade secrets licensed by
Subsidiary. Subsidiary does not occupy any real property in violation of any
law, regulation, or decree.
2.15 Employment Contracts. Exhibit "13" to this Agreement
(which has been prepared by Buyer) is a list of all employment contracts and
collective bargaining agreements, and all pension, bonus, profit-sharing, stock
option, or other agreements or arrangements providing for employee remuneration
or benefits to which Subsidiary is a party or by which Subsidiary is bound; all
these contracts and arrangements are in full force and effect, and neither
Corporation, Subsidiary, nor any other party is in default under them. Except as
set forth in Exhibit "13," there have been no claims of defaults and, to the
best knowledge of Selling Parties, there are no facts or conditions that, if
continued, or on notice, will result in a default under these contracts or
arrangements. Except as set forth in Exhibit "13"(and except for compensation
due for the most recent pay period), all employees are paid in full.
2.16 Insurance Policies. Exhibit "14" to this Agreement
(which has been prepared by Buyer) is a description of all insurance policies
held by Corporation or Subsidiary concerning Subsidiary's businesses and
properties. All these policies are in the respective principal amounts set forth
in Exhibit "14."
2.17 Other Contracts. Except as set forth in Exhibit "15"
(which has been prepared by Buyer), Subsidiary is not a party to, nor is its
property bound by, any distributor's or manufacturer's representative or agency
agreement, any output or requirements agreement, or any agreement not entered
into in the ordinary course of business. There is no default or event that with
notice or lapse of time, or both, would constitute a default by any party to any
of these agreements. Neither Corporation nor Subsidiary has received notice that
any party to any of these agreements intends to cancel or terminate any of these
agreements or to exercise or not exercise any options under any of these
agreements. Neither Corporation nor Subsidiary is a party to, nor is either or
the property of either bound by any agreement that is materially adverse to the
businesses, properties, or financial condition of Subsidiary. Corporation and/or
Subsidiary is the
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recipient of an SBIR research grant from the National Institute of Health
("NIH") to conduct research involving the Products, which research is ongoing
(and is currently being performed by Buyer as Manager of Subsidiary) and Buyer
will continue to perform the remainder of the research through completion,
including the submission of any required reports (a copy of which shall also be
provided to Corporation). If possible, Buyer shall attempt to complete said
report by the Closing.
2.18 Compliance With Laws. Except as set forth in Exhibit
"16" (which has been prepared by Buyer), at all times prior to the date that
Buyer took over control of Subsidiary's laboratory under the Management
Agreement, Subsidiary has complied with, and was not in violation of, applicable
federal, state, or local statutes, laws and regulations affecting the operation
of its business.
2.19 Pending Litigation. Except as set forth in Exhibit "17"
(which has been prepared by Buyer) there is no suit, action, arbitration, or
legal, administrative, or other proceeding, or governmental investigation
pending, or, to the best knowledge of Corporation or Subsidiary, threatened
against or affecting Subsidiary, or its business, assets or financial condition.
Selling Parties have furnished or made available to Buyer copies of all relevant
court papers and other documents relating to the matters set forth in Exhibit
"17." Except as set forth in Exhibit "17," neither Corporation nor Subsidiary is
in default with respect to any order, writ, injunction, or decree of any
federal, state, local, or foreign court, department, agency, or instrumentality.
Except as set forth in Exhibit "17" Subsidiary is not presently engaged in any
legal action to recover money due it or damages sustained by it.
2.20 Agreement Will Not Cause Breach or Violation of
Preexisting Arrangements. The consummation of the transactions contemplated by
this Agreement will not result in or constitute any of the following: (1) a
default or an event that, with notice or lapse of time or both, would be a
default, breach, or violation of the Articles of Incorporation or Bylaws of
Corporation or Subsidiary, or any judgment, order, decree, statute, law, or
regulation applicable to Subsidiary, or any lease, license, promissory note,
conditional sales contract, commitment, indenture, mortgage, deed of trust, or
other agreement, instrument, or arrangement to which Corporation or Subsidiary
is a party or by which any of them or the property of any of them is bound; (2)
an event that would permit any party to terminate any agreement or to accelerate
the maturity of any indebtedness or other obligation of Corporation or
Subsidiary; or (3) the creation or imposition of any lien, charge, or
encumbrance on any of the properties of Subsidiary.
2.21 Authority and Consent to Transfer Assets. The execution
and delivery of this Agreement by Corporation and Subsidiary have been duly
authorized by their respective boards of directors. Selling Parties have the
right, power, legal capacity, and authority to enter into and perform their
respective obligations under this Agreement, and no approvals or consents of any
persons other than Selling Parties are necessary in connection with it.
2.22 No Liability for Compensation of Officers and Directors.
Buyer shall not assume nor be liable for any compensation owed by Selling
Parties to their respective Officers and Directors except such officers, if any,
that are employed on a full time basis and work
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on a full time basis at the Subsidiary's laboratory in Seattle, Washington.
2.23 Statement of Full Disclosure. None of the
representations and warranties made by Corporation or Subsidiary, or made in any
certificate or memorandum furnished or to be furnished by any of them, or on
their behalf, contains or will contain any untrue statement of a material fact,
or omit any material fact the omission of which would be misleading. Selling
Parties represent and warrant that they have made available to Buyer all
documents, agreements and other instruments that materially affect Subsidiary,
regardless of where such documents are located.
ARTICLE III
Buyer's Representations And Warranties
3.1 Organization, Standing, and Qualification of Buyer. Buyer
represents and warrants that Buyer is a corporation duly organized, existing,
and in good standing under the laws of Delaware, and that Buyer is authorized to
do business in the State of Washington and the State of California.
3.2 Authority and Consent to Enter Agreement. The execution
and delivery of this Agreement and the consummation of this transaction by Buyer
has been duly authorized, and no further corporate authorization is necessary on
the part of Buyer.
3.3 Obligations Created by Buyer. Upon the Closing, any and
all obligations of the Subsidiary which were created or entered into by Buyer on
behalf of Subsidiary after the effective date of the Management Agreement shall
be the sole obligation of Buyer.
3.4 Cooperation. Buyer will cooperate with Selling Parties
and provide any reasonable assistance required by Selling Parties to get in
compliance with the Securities and Exchange Commission, file Subsidiary's taxes,
perform any necessary audits, or other similar acts required to be performed by
Selling Parties under this Agreement. However, in cooperating with and providing
assistance to Selling Parties, Buyer shall not be required to incur any
out-of-pocket expenses, nor shall Buyer to be required to provide its personnel
(or the personnel of Subsidiary, to the extent that Buyer is paying their wages)
for use by Selling Parties for any unreasonable amount of time or for any task
that is not specifically related to the performance of Selling Parties' acts
required under this Agreement.
3.5 Silicon Valley Bank Lien. Buyer is aware of a first lien
and a second lien on all of the assets of Corporation and Subsidiary held by
Silicon Valley Bank (under its receivable financing) and TransAmerica,
respectively, and Buyer takes the Assets subject to these liens and assumes
responsibility for said liens. As soon as practicable after the Closing, Buyer
will use its commercially best efforts to negotiate with Silicon Valley Bank and
TransAmerica to release their respective liens on the tangible and intangible
assets not being purchased by Buyer (e.g., the intellectual property related to
the Products and the equipment used exclusively to manufacture the Products).
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ARTICLE IV
Selling Parties' Obligations Before Closing
4.1 Extension of Management Agreement. The Term of the
Management Agreement is extended through the earlier of: (i) June 15, 2000; or
(b) the Closing; and during the extended term of the Management Agreement, Buyer
shall continue to have complete control of the operations of Subsidiary's
business through said date. Selling Parties and their officers and directors
will not take any action to interfere with Buyer's sole and exclusive rights to
operate the Subsidiary's business pursuant to the terms of the Management
Agreement. Selling Parties and their officers and directors will not do anything
to affect Subsidiary's business or the Assets without the prior written consent
of Buyer.
4.2 Representations And Warranties True At Closing. All
representations and warranties of Selling Parties set forth in this Agreement
and in any written statements delivered to Buyer by Selling Parties under this
Agreement will also be true and correct as of the Closing Date as if made on
that date.
4.3 Corporate And Shareholder Approvals. As soon as
reasonably practical following the execution of this Agreement by the
Corporation and the Subsidiary, Corporation will cause a meeting of its
shareholders to be called for the purpose of authorizing and approving this
Agreement with Buyer, and the Corporation's Board of Directors will recommend
approval of this Agreement. Any and all costs associated with said meeting shall
be borne by Corporation.
4.4 Sales And Use Tax On Prior Sales. Subsidiary agrees to
cooperate with Buyer and provide any necessary data that Buyer may need to
obtain a Clearance Certificate from the Washington tax authorities and any
related certificates that Buyer may reasonably request as evidence that all
sales and use tax liabilities of Subsidiary accruing before the effective date
of the Management Agreement have been fully satisfied or provided for,
including, if required, paying any taxes, interest or penalties due and any fees
incurred by Buyer in obtaining said certificates.
ARTICLE V
Conditions Precedent To Buyer's Performance
5.1 Conditions Precedent. The obligations of Buyer to
purchase the Assets under this Agreement are subject to the satisfaction, at or
before the Closing, of all the conditions set out in Sections 5.2 through 5.7.
Buyer may waive any or all of these conditions in whole or in part without prior
notice; provided, however, that no such waiver of a condition shall constitute a
waiver by Buyer of any of its other rights or remedies, at law or in equity, if
Corporation or Subsidiary shall be in default of any of their representations,
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warranties, or covenants under this Agreement.
5.2 Accuracy Of Selling Parties' Representations And
Warranties. Except as otherwise permitted by this Agreement, all representations
and warranties by each of the Selling Parties in this Agreement or in any
written statement that shall be delivered to Buyer by any of them under this
Agreement shall be true on and as of the Closing Date as though made at that
time.
5.3 Selling Parties' Performance. Selling Parties shall have
performed, satisfied, and complied with all covenants, agreements, and
conditions required by this Agreement to be performed or complied with by them,
or any of them, on or before the Closing Date.
5.4 Opinion of Selling Parties' Counsel. Buyer shall have
received from counsel for Selling Parties, an opinion dated the Closing Date, in
form and substance satisfactory to Buyer and its counsel and similar to that in
Exhibit "18" hereto, that:
(a) Corporation and Subsidiary are corporations duly
organized and validly existing and in good standing under the laws of Delaware
and Washington, respectively, and each has all necessary corporate power to own
its properties as now owned and operate their respective businesses as now
operated;
(b) This Agreement has been duly and validly authorized
(except by Corporation's shareholders) and, when executed and delivered by all
Parties, will be legal, valid and binding on each of the Selling Parties and
enforceable in accordance with its terms, except as limited by bankruptcy and
insolvency laws and by other laws affecting the rights of creditors generally;
(c) Except as set forth in Exhibit "17" to this
Agreement, such counsel does not know of any suit, action, arbitration, or
legal, administrative, or other proceeding or governmental investigation pending
or threatened against or affecting the Assets or business of Subsidiary;
(d) Neither the execution nor delivery of this Agreement
nor the consummation of the transaction contemplated in this Agreement, will
constitute
(i) A default or an event that would with notice or
lapse of time or both constitute a default under or violation or breach of
Corporation's or Subsidiary's Articles of Incorporation, Bylaws, or any
indenture, license, lease, franchise, mortgage, instrument, or other agreement
to which any of Selling Parties is a party, or by which they or the properties
of Corporation or Subsidiary may be bound, or
(ii) A violation or contravention of (1) any
governmental statute, rule or regulation applicable to any of the Selling
Parties or (2) any order, writ, judgment, injunction, decree, determination or
award which has been entered against any of the Selling Parties; or
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(iii) An event that would permit any party to any
agreement or instrument to terminate it or to accelerate the maturity of any
indebtedness or other obligation of Corporation or Subsidiary, or
(iv) An event that would result in the creation or
imposition of any lien, charge, or encumbrance on any asset of Corporation or
Subsidiary;
(e) Subsidiary has good and marketable title to all its assets
and properties, including those described in the Exhibits to this Agreement,
free and clear of all liens, encumbrances, equities, conditional sales
contracts, security interests, charges, and restrictions, except as set forth in
this Agreement or its Exhibits, and any other exceptions, defects, and
qualifications that do not, in such counsel's opinion, materially affect the
title of Subsidiary to its assets and properties or its right to use these
assets and properties in the conduct of its business. In rendering their
opinion, counsel for Selling Parties may rely on certificates of officers and
directors of Corporation, Subsidiary, and Buyer as to factual matters, and
opinions of associate counsel approved by Buyer.
5.5 Absence of litigation. No action, suit, or proceeding
before any court or any governmental body or authority pertaining to the
transaction contemplated by this Agreement or to its consummation shall have
been instituted or threatened on or before the Closing Date.
5.6 Department Of Employment Release. Buyer shall have
received a certificate or release from the Washington Employment Development
Department stating that, as of a date not more than Twenty (20) days before the
Closing Date, no contributions, interest, or penalties are due that department
from Subsidiary. Buyer shall be responsible for attempting to obtain such
certificate or release, and Selling Parties agree to cooperate with Buyer and
provide any necessary data that Buyer may need to obtain same including, if
required, paying any taxes, interest or penalties due and any fees incurred by
Buyer in obtaining said certificates.
5.7 Sales and Use Tax Release. Subject to the conditions
stated in Section 4.4, Buyer shall have received a Clearance Certificate from
the Washington tax authorities and any related certificates that Buyer may
reasonably request as evidence that all sales and use tax liabilities of
Subsidiary accruing before the effective date of the Management Agreement have
been fully satisfied or provided for.
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ARTICLE VI
Conditions Precedent To Selling Parties' Performance
6.1 Conditions Precedent. The obligations of Subsidiary to
sell and transfer the assets under this Agreement are subject to the
satisfaction, at or before the Closing, of all the following conditions:
(a) Accuracy Of Buyer's Representations And Warranties.
All representations and warranties by Buyer contained in this Agreement or in
any written statement delivered by Buyer under this Agreement shall be true on
and as of the Closing as though such representations and warranties were made on
and as of that date.
(b) Buyer's Performance. Buyer shall have performed and
complied with all covenants and agreements, and satisfied all conditions that it
is required by this Agreement to perform, comply with, or satisfy, before or at
the Closing.
(c) Buyer's Corporate Approval. The board of directors
of Buyer shall have duly authorized and approved the execution and delivery of
this Agreement and all corporate action necessary or proper to fulfill the
obligations of Buyer to be performed under this Agreement on or before the
Closing Date.
ARTICLE VII
The Closing
7.1 Time And Place Of Closing. The transfer of the assets by
Subsidiary to Buyer (the "Closing") shall take place at 16902 Via Cuesta Verde,
Rancho Santa Fe, California 92067 at 3:00 o'clock local time, on June 15, 2000
(the "Closing Date"), or at such sooner time as the Parties may agree to in
writing.
7.2 Parties' Obligations At Closing. At the Closing, the
parties will exchange the following documents and other things:
(a) Selling Parties will provide Buyer with a Bill of
Sale (in a form provided by Buyer) signed by Subsidiary and, if necessary, the
Corporation, for all tangible assets being transferred to Buyer pursuant to this
Agreement;
(b) Selling Parties will provide Buyer with Assignments
(in a form provided by Buyer) signed by Subsidiary and, if necessary, the
Corporation to assign all of Subsidiary's leaseholds pursuant to this Agreement;
(c) Selling Parties will provide Buyer with any other
required Instruments (in a form provided by Buyer) signed by Subsidiary and, if
necessary, the Corporation necessary to assign or transfer all other property
subject to this Agreement to
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Buyer;
(d) Selling Parties will provide Buyer with
$1,900,000.00 (subject to adjustment pursuant to Section 1.3(b)) of
Corporation's outstanding Preferred Shares together with duly executed stock
powers (in a form provided by Buyer), which shall immediately thereafter be
delivered by Buyer to Corporation;
(e) Buyer shall pay to Corporation $350,000.00 of the
Purchase Price pursuant to Section 1.3(d)(ii), and concurrently therewith
Selling Parties will deliver to Buyer a UCC-1 and a Security Agreement (in a
form provided by Buyer) signed by Subsidiary and, if necessary, the Corporation
in accordance with Section 1.3(d);
(f) Selling Parties will deliver to Buyer any Assets and
all books and records that are the subject of this Agreement from any location
outside of the laboratory in Seattle, Washington.
(g) Buyer will deliver to Selling Parties executed
instruments of assumption of only those liabilities of Subsidiary and
Corporation listed in Exhibit "2."
7.3 Exchange of Documents. In order to expedite the Closing,
at least Five (5) business days prior to the Closing Date, the parties will
exchange copies of all of the documents and other things (except for cash) that
are to be exchanged at the Closing.
ARTICLE VIII
Obligations After Closing
8.1 Selling Parties' Indemnity. The following provisions of
this Section 8.1 shall apply to the following situations: (1) in any action,
suit, proceeding, demand or other assertion of liability or wrongdoing
instituted or maintained by a creditor or purported creditor of Selling Parties
against any Buyer Indemnities (as defined below), Subsection (a) shall apply;
(2) in any action, suit, proceeding, demand or other assertion of liability or
wrongdoing instituted or maintained by a shareholder of Corporation or any other
non-creditor third party against Buyer Indemnity (as defined below), Subsection
(b) shall apply.
(a) Creditor Claims. Subsidiary, Corporation and
Corporation's Preferred Shareholders shall each indemnify, defend, and hold
harmless Buyer and its Officers, Directors, financial advisors (including
investment bankers, underwriters and certified public accountants, attorneys,
employees and agents) (all of whom are collectively referred to as "Buyer
Indemnities") against and in respect of any and all claims, demands, losses,
costs, expenses, obligations, liabilities, damages, recoveries, and
deficiencies, including interest, penalties, fines and reasonable attorneys'
fees (collectively referred to as "Claims"), that Buyer shall incur or suffer,
which arise, result from, or relate to any breach of, or failure by Selling
Parties to perform any of their representations, warranties, covenants, or
agreements in this Agreement or in any schedule, certificate, exhibit, or other
instrument
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furnished or to be furnished by Selling Parties under this Agreement
or arise, result from, or relate to any bankruptcy proceeding instituted by or
against any of the Selling Parties including, without limitation, any recovery
of the Assets, or any of them, as a preference under the Bankruptcy Code. In the
event that Subsidiary, Corporation and/or Corporation's Preferred Shareholders
defend the Buyer Indemnities under this Subsection (a), then they shall have the
right to direct and control the defense, and Buyer Indemnities shall not be
entitled to any attorneys' fees related to such defense.
(b) Shareholder Claims and Third Party Claims.
Subsidiary and Corporation shall each indemnify, defend, and hold harmless Buyer
Indemnities, and Corporation's Preferred Shareholders shall hold Buyer
Indemnities harmless against and in respect of any and all Claims that Buyer
shall incur or suffer, which arise, result from, or relate to any breach of, or
failure by Selling Parties to perform any of their representations, warranties,
covenants, or agreements in this Agreement or in any schedule, certificate,
exhibit, or other instrument furnished or to be furnished by Selling Parties
under this Agreement or arise, result from, or relate to any bankruptcy
proceeding instituted by or against any of the Selling Parties including,
without limitation, any recovery of the Assets, or any of them, as a preference
under the Bankruptcy Code.
8.2 Buyer's Indemnity. Buyer shall indemnify, defend, and
hold harmless Subsidiary, Corporation and Corporation's Preferred Shareholders
and its Officers, Directors, financial advisors (including investment bankers,
underwriters and certified public accountants), attorneys, employees and agents
(hereinafter collectively referred to as the "Sellers") against and in respect
of any and all claims, demands, losses, costs, expenses, obligations,
liabilities, damages, recoveries, and deficiencies, including interest,
penalties, fines and reasonable attorneys' fees, that Sellers shall incur or
suffer, which arise, result from, or relate to any breach of, or failure by
Buyer to perform any of its representations, warranties, covenants, or
agreements in this Agreement or in any schedule, certificate, exhibit, or other
instrument furnished or to be furnished by Buyer under this Agreement or arise,
result from, or relate to any bankruptcy proceeding instituted by or against
Buyer.
8.3 Mutual General Release. Except for the obligations and
liabilities set forth herein, the parties, for themselves and for their
respective agents, employees, Officers, Directors, shareholders, attorneys,
representatives, affiliated entities, successors and assigns, hereby release and
discharge all of the other parties to this Agreement, and their respective
agents, employees, Officers, Directors, shareholders, attorneys,
representatives, affiliated entities, successors and assigns, from any and all
claims that they have or believe they may have against any of the parties to
this Agreement that is related to or arises from any transactions, dealings or
occurrences between any of the parties prior to the date of execution of this
Agreement. The Parties specifically waive all rights under Section 1542 of the
California Civil Code, which provides as follows:
[Certain claims not affected by general release]. A general
release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing
the release, which if known by him must have materially
affected his
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settlement with the debtor.
8.4 Noncompetition Provision
(a) Subsidiary, Corporation, any subsidiaries and/or
affiliated entities of Subsidiary and Corporation, and any shareholder thereof
owing more than Ten percent (10%) of the outstanding shares of any or all of the
foregoing (collectively referred to as "PBI Affiliates") each agree that they
will not at any time within the 5-year period immediately following the Closing
Date, directly or indirectly, engage in, or have any interest in any person,
firm, corporation, or business (whether as an employee, officer, director,
agent, security holder, creditor, consultant, or otherwise) that engages in any
activity which activity is the same as, similar to, or competitive with any
activity now engaged in by Subsidiary in any market or geographic location where
Buyer or Subsidiary was doing business within the Five (5) years prior to the
Closing Date, nor shall the PBI Affiliates, or any of them, solicit, or attempt
to solicit, any employees or customers of Buyer or the PBI Affiliates for Five
(5) years following the Closing Date.
(b) The Parties intend that the covenants contained in
the preceding portion of this Section shall be construed as a series of separate
covenants, one for each county and city specified. Except for geographic
coverage, each such separate covenant shall be deemed identical in terms to the
covenant contained in the preceding Section. If, in any judicial proceeding, a
court shall refuse to enforce any of the separate covenants deemed included in
this Section, such unenforceable covenant shall be deemed limited or, at the
option of Buyer, eliminated from these provisions for the purpose of those
proceedings, to the extent necessary to permit the limited or remaining
covenants to be enforced.
(c) PBI Affiliates, and each of them, further agree not
to divulge, communicate, use to the detriment of Buyer or for the benefit of any
other person or persons, or misuse in any way, any confidential information or
trade secrets of Subsidiary, including personnel information, secret processes,
know-how, customer lists, recipes, formulas, or other technical data. PBI
Affiliates, and each of them, acknowledge and agree that any information or data
it has acquired on any of these matters or items was received in confidence and
as a fiduciary of Subsidiary.
(d) Nothing in this Section 8.4 shall act to prohibit
Selling Parties from performing clinical trials or laboratory work for Selling
Parties' Products, nor prohibit the sale of such Products to companies which may
compete with Buyer or Subsidiary or which may be customers or potential
customers of Buyer or Subsidiary.
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ARTICLE IX
Publicizing The Transaction
9.1 Publicity. All notices to third parties and all other
publicity concerning the transactions contemplated by this Agreement shall be
jointly planned and coordinated by and between Buyer and Selling Parties. None
of the parties shall act unilaterally in this regard without the prior written
approval of the others; however, this approval shall not be unreasonably
withheld. Notwithstanding the foregoing, either party shall be entitled to
submit any information, without the prior approval of the other party,
reasonably required by any governmental agency (e.g., the Securities and
Exchange Commission, Internal Revenue Service, etc.), and Buyer shall have the
right to provide notice to its customers, investors, and financial advisors
regarding the terms of this Agreement without the prior approval of Selling
Parties.
ARTICLE X
Costs Of The Transaction
10.1 Finder's Or Broker's Fees. Each of the Parties
represents and warrants that it has dealt with no broker
or finder in connection with any of the transactions contemplated by this
Agreement, and, insofar as it knows, no broker or other person is entitled to
any commission or finder's fee in connection with any of these transactions.
Selling Parties and Buyer each agree to indemnify and hold harmless one another
against any loss, liability, damage, cost, claim, or expense (including, without
limitation, attorneys' fees and costs) incurred by reason of any brokerage,
commission, or finder's fee alleged to be payable because of any act, omission,
or statement of the indemnifying party.
10.2 Expenses And Escrow Costs. Each of the parties shall pay
their own costs and expenses incurred or to be incurred by it in negotiating and
preparing this Agreement and in closing and carrying out the transactions
contemplated by this Agreement.
ARTICLE XI
Miscellaneous
11.1 Headings. The subject headings of the sections and
subsections of this Agreement are included for purposes of convenience only, and
shall not affect the construction or interpretation of any of its provisions.
11.2 Integration; Modification; Waiver. This Agreement,
including all exhibits (all of which are incorporated into the Agreement),
constitutes and contains the entire agreement and understanding concerning the
subject matter between the parties, sets forth all inducements made by any party
to any other party with respect to any of the subject
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matter, and supersedes and replaces all prior and contemporaneous negotiations,
proposed agreements or agreements, whether written or oral. Each of the parties
acknowledges to each of the other parties that no other party nor any agent or
attorney of any other party has made any promise, representation or warranty
whatsoever, express or implied, written or oral, not contained herein concerning
the subject matter hereof to induce it to execute this Agreement, and each of
the parties acknowledges that it has not executed this Agreement in reliance on
any promise, representation or warranty not contained herein. No supplement,
modification, or amendment of this Agreement shall be binding unless executed in
writing by all the parties. No waiver of any of the provisions of this Agreement
shall be deemed, or shall constitute, a waiver of any other provision, whether
or not similar, nor shall any waiver constitute a continuing waiver. No waiver
shall be binding unless executed in writing by the party making the waiver.
11.3 Counterparts; Fax Signatures. This Agreement may be
executed in one or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument. This
Agreement may be executed using facsimile signatures, each of which shall be
deemed an original.
11.4 Parties in Interest. Nothing in this Agreement, whether
express or implied, is intended to confer any rights or remedies under or by
reason of this Agreement on any persons other than the parties to it and their
respective successors and assigns, nor is anything in this Agreement intended to
relieve or discharge the obligation or liability of any third persons to any
party to this Agreement, nor shall any provision give any third persons any
right of subrogation or action over or against any party to this Agreement.
11.5 Assignment. This Agreement shall be binding on, and
shall inure to the benefit of, the parties to it and their respective heirs,
legal representatives, successors, and assigns.
11.6 Arbitration. All controversies arising out of or
relating to this Agreement or any related instruments shall be resolved
exclusively by submission to final and binding arbitration at the offices of
JAMS/Endispute in Orange County, California. The final decision of the
arbitrator shall be binding on the parties and shall not be subject to appellate
review. In any arbitration proceedings, the parties shall be entitled to employ
all methods of discovery permitted to litigants in a civil lawsuit under the
1986 Discovery Act. Notwithstanding the foregoing, the parties shall be entitled
to obtain equitable relief, such as by temporary restraining order or
injunction, in State or Federal Court to prevent any violation of any of the
covenants, conditions or provisions contained in this Agreement. Such remedies
shall be in addition to all other remedies available to the parties including,
but not limited to, the right to recover any and all monetary damages that may
be sustained as a result of another party's breach.
11.7 Specific Performance and Waiver of Rescission Rights.
Each party's obligation under this Agreement is unique. If any party should
default in its obligations under this Agreement, the parties each acknowledge
that it would be extremely impracticable to measure the resulting damages;
accordingly, the nondefaulting party, in addition to any
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other available rights or remedies, may sue in equity for specific performance,
and the parties each expressly waive the defense that a remedy in damages will
be adequate. Notwithstanding any breach or default by any of the parties of any
of their respective representations, warranties, covenants, or agreements under
this Agreement, if the purchase and sale contemplated by it shall be consummated
at the Closing, each of the parties waives any rights that it, he or she, may
have to rescind this Agreement or the transaction consummated by it; provided,
however, this waiver shall not affect any other rights or remedies available to
the parties under this Agreement or under the law.
11.8 Recovery of Litigation Costs. If any legal action or any
arbitration or other proceeding is brought for the enforcement of this
Agreement, or because of an alleged dispute, breach, default, or
misrepresentation in connection with any of the provisions of this Agreement,
the successful or prevailing party or parties shall be entitled to recover
reasonable attorneys' and accountants' fees and other costs incurred in that
action or proceeding, in addition to any other relief to which it or they may be
entitled.
11.9 Defaults Permitting Termination. If either Buyers or
Selling Parties materially default in the due and timely performance of any of
its or their warranties, covenants, or agreements under this Agreement, the
nondefaulting party or parties may on the Closing Date give notice of
termination of this Agreement, in the manner provided in Section 11.11. The
notice shall specify with particularity the default or defaults on which the
notice is based. The termination shall be effective Two (2) calendar days after
the Closing Date, unless the specified default or defaults have been cured on or
before this effective date for termination.
11.10 Survival of Representations and Obligations. All
statements contained in any instrument, certificate, Financial Statement,
opinion or other writings shall be deemed to be representations and warranties
under this Agreement. The representations, warranties and indemnities made by
the parties under this Agreement, or in the instruments, certificates, Financial
Statements, opinions or other writings provided for in the covenants and
agreements to be performed or complied with by the respective parties under it
before or after the Closing Date, shall be deemed to be continuing and shall
survive the Closing.
11.11 Notices. All notices, requests, demands, and other
communications required or permitted under this Agreement shall be in writing
and shall be deemed to have been duly given (i) on the date of service, if
served personally on the party to whom notice is to be given; (ii) on the fifth
day after mailing, if mailed to the party to whom notice is to be given, by
first class mail, registered or certified, postage prepaid; or (iii) One (1)
business day after (a) deposit with a nationally recognized overnight courier,
or (b) transmission by telecopy or similar means, if a copy of the notice is
also sent via first class mail, registered or certified, postage prepaid or by
overnight courier, provided that a transmission report is generated reflecting
the accurate transmission of the notice. All notices, requests, demands, and
other communications must be addressed as follows:
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To Selling Parties at: Mr. Paul Kanan
Pacific Biometrics, Inc.
23120 Alicia Parkway
Suite 200
Mission Viejo, California 92692
With Copy To: Terry M. Giles, Esq.
16902 Via Cuesta Verde
Rancho Santa Fe, California 92067
To Buyers at: Mr. Ronald R. Helm
Saigene Corporation
7126 180th Avenue NE, Suite C104
Redmond, Washington 98052
With Copy To: Cadden, Fuller & Burkhalter LLP
ATTN: Alton G. Burkhalter, Esq.
2030 Main Street, Suite 1500
Irvine, California 92614
Any party may change its address for purposes of this Section by giving the
other parties written notice of the new address in the manner set forth above.
11.12 Interpretation. The parties have participated jointly in
the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent arises, this Agreement shall be construed as if drafted
jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement.
11.13 Severability. In the event that any provision of this
Agreement is deemed invalid, illegal, or unenforceable, all other provisions of
the Agreement which are not affected by such invalidity, illegality or
unenforceability, shall remain in full force and effect. Further, the parties
hereby agree that if any such provision is deemed invalid, illegal or
unenforceable, that provision shall be limited or eliminated in scope, power or
effect to the minimum extent necessary so that this Agreement shall otherwise
remain in full force and effect and enforceable.
11.14 Cumulative Rights and Remedies. The rights and remedies
in this Agreement shall be cumulative, and in addition to, any duties,
obligations, rights and remedies otherwise provided by law.
11.15 Authority. The undersigned individuals execute this
Agreement on behalf of the respective parties, and represent that they are
authorized to enter into and execute this Agreement on behalf of such parties.
11.16 Further Assurances. The parties agree to execute all
instruments and
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documents of further assurance and will do any and all such acts as may be
reasonably required to carry out their obligations and to consummate the
transactions contemplated herein.
11.17 Time of the Essence. All times stated in this Agreement
are of the essence.
11.18 Advice of Counsel. Each party acknowledges and agrees
that it has given mature and careful thought to this Agreement and that it has
been given the opportunity to independently review this Agreement with its own
independent legal counsel.
IN WITNESS WHEREOF, the parties have executed this Agreement
on the day and year first above written.
SELLING PARTIES
Pacific Biometrics, Inc., a Delaware
corporation
By:
---------------------------------------
Paul Kanan
Its: President
By:
---------------------------------------
Its: Director
By:
---------------------------------------
Terry M. Giles, on behalf of all Preferred
Shareholders and as a 10% Common
Shareholder
[ADDITIONAL SIGNATURES ON FOLLOWING PAGE]
27
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Pacific Biometrics, Inc., a Washington
corporation
By:
---------------------------------------
By:
---------------------------------------
Paul Kanan
Its: Chief Executive Officer
By:
---------------------------------------
Terry M. Giles
Its: Director
BUYER
Saigene Corporation, a Delaware
corporation
By:
---------------------------------------
Ronald R. Helm
Its: Chief Executive Officer
28
