<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 1998
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the transition period from ___________________ to
______________________.
Commission File Number: 0-12395
ALCIDE CORPORATION
Delaware 22-2445061
- ------------------------------ ------------------------------------
State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization
8561 154th Avenue North East, Redmond WA 98052
- ---------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code ............. (425) 882-2555
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
---- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of November 30, 1998: 2,543,458, net of Treasury Stock.
1
<PAGE>
ALCIDE CORPORATION
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
PAGE
----
<S> <C> <C>
Item 1. Financial Statements
Condensed Balance Sheets - November 30, 1998 (Unaudited) and
May 31, 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Unaudited Condensed Statements of Operations - For the three
and six months ended November 30, 1998 and November 30, 1997 . . . . . . .4
Statements of Changes in Shareholders' Equity. . . . . . . . . . . . . . .5
Unaudited Condensed Statements of Cash Flows - For the six
months ended November 30, 1998 and November 30, 1997 . . . . . . . . . . .6
Notes to Unaudited Condensed Financial Statements. . . . . . . . . . . . .7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations. . . . . . . . . . . . . . . . . . . . . . . . . . .9
Item 3. Legal Proceeding . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Item 4. Submission of Matters to a Vote of Security Holders. . . . . . . . . . . 13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8 - K . . . . . . . . . . . . . . . . . . . 14
SIGNATURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
2
<PAGE>
ALCIDE CORPORATION
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
November 30, May 31,
1998 1998
------------ -----------
(Unaudited)
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents $9,188,985 $7,844,217
Short term investments 1,735,868 3,782,752
Accounts receivable - trade 3,921,636 2,268,264
Inventory 2,045,671 1,353,870
Prepaid expenses and other current assets 119,274 213,269
----------- -----------
TOTAL CURRENT ASSETS 17,011,434 15,462,372
----------- -----------
Equipment and leasehold improvements:
Office equipment 132,594 112,280
Laboratory and manufacturing equipment 150,759 145,292
Leasehold improvements 56,152 56,152
Less: Accumulated depreciation and amortization (233,680) (202,318)
----------- -----------
Total equipment and leasehold improvements, net 105,825 111,406
Deferred income tax asset 285,618 285,618
Long term investments and other assets 503,758 509,941
----------- -----------
TOTAL ASSETS $17,906,635 $16,369,337
----------- -----------
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Accounts payable $661,429 $269,801
Accrued expenses 673,950 157,812
Income taxes payable 123,771 125,000
----------- -----------
TOTAL LIABILITIES 1,459,150 552,613
----------- -----------
COMMITMENTS AND CONTINGENCIES:
Redeemable Class B Preferred Stock - noncumulative convertible
$.01 par value: authorized 10,000,000 shares;
issued and outstanding:
May 31, 1998 - 81,119
November 30, 1998 - 72,525 190,377 212,936
----------- -----------
Shareholders' equity:
Class A Preferred Stock - no par value authorized 1,000 shares;
issued and outstanding 594 shares 80,437 135,307
Common Stock $.01 par value; authorized 100,000,000 shares;
issued and outstanding:
May 31, 1998 - 2,872,313
November 30, 1998 2,875,623 28,756 28,723
Treasury stock at cost (6,521,930) (6,125,794)
Additional paid-in capital 19,591,249 19,559,369
Retained earnings 3,078,596 2,006,183
----------- -----------
Total Shareholders' Equity 16,257,108 15,603,788
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $17,906,635 $16,369,337
----------- -----------
----------- -----------
</TABLE>
See notes to Unaudited Condensed Financial Statements.
3
<PAGE>
ALCIDE CORPORATION
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
November 30, November 30,
-------------------------- -------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
NET SALES $2,668,869 $3,231,276 $6,450,148 $6,423,672
Expenditures
Cost of goods sold 1,180,992 1,024,454 2,292,999 2,127,455
Royalty expense 66,732 77,253 150,948 157,065
Research and development expense 820,969 529,007 1,159,050 1,025,814
Depreciation 15,756 14,838 31,362 29,676
Consulting expense to the related parties 21,000 21,000 54,000 54,012
Other selling, general/administrative 651,305 520,645 1,395,818 1,038,487
---------- ---------- ---------- ----------
Total Expenditures 2,756,754 2,187,197 5,084,177 4,432,509
---------- ---------- ---------- ----------
Operating income (87,885) 1,044,079 1,365,971 1,991,163
Interest income 148,696 151,679 320,213 293,384
Other income --- 9,022 --- 15,763
---------- ---------- ---------- ----------
Income before provision for income taxes 60,811 1,204,780 1,686,184 2,300,310
Provision for income taxes 22,136 409,625 613,771 782,105
---------- ---------- ---------- ----------
Net income $ 38,675 $ 795,155 $1,072,413 $1,518,205
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Basic earnings per common share $.02 $.30 $.42 $.59
Diluted earnings per common share and
equivalents $.01 $.28 $.40 $.54
Weighted average common shares
outstanding 2,544,428 2,607,807 2,553,703 2,593,475
Weighted average common shares &
common share equivalents 2,642,412 2,852,066 2,688,061 2,837,734
</TABLE>
See Notes to Unaudited Condensed Financial Statements.
4
<PAGE>
ALCIDE CORPORATION
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Total
Class "A" Additional Paid Common Retained Shareholders'
Preferred Stock Common Stock in Capital Treasury Stock Earnings Equity
- -----------------------------------------------------------------------------------------------------------------------------------
Shares Amount Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance May 31, 1998 1,000 $135,307 2,872,313 $28,723 $19,559,369 (309,165) ($6,125,794) $2,006,183 $15,603,788
Purchase Treasury Stock (5,000) (87,677) (87,677)
Net Income 1,033,738 1,033,738
- -----------------------------------------------------------------------------------------------------------------------------------
Balance August 31, 1998 1,000 $135,307 2,872,313 $28,723 $19,559,369 (314,165) ($6,213,471) $3,039,921 $16,549,849
Redeem Class "A"
Preferred Stock (406) (54,870) 13,913 (40,957)
Exercise of Stock Options 3,310 33 17,967 18,000
Purchase Treasury Stock (18,000) (308,459) (308,459)
Net Income 38,675 38,675
- -----------------------------------------------------------------------------------------------------------------------------------
Balance November 30, 1998 594 $80,437 2,875,623 $28,756 $19,591,249 (332,165) ($6,521,930) $3,078,596 $16,257,108
----- -------- --------- ------- ----------- -------- ----------- ---------- -----------
----- -------- --------- ------- ----------- -------- ----------- ---------- -----------
</TABLE>
5
<PAGE>
ALCIDE CORPORATION
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Six Months
Ended November 30,
-----------------------------
1998 1997
----------- ----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $1,072,413 $1,518,205
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 31,362 29,676
Amortization of premiums and discounts (62,615) (27,655)
Deferred income tax --- 731,498
Decrease (increase) in assets:
Inventory (691,801) (227,752)
Accounts receivable - trade (1,653,372) (733,053)
Prepaid expenses and other current assets 93,995 158,989
Other assets 5,682 25,000
Increase (decrease) in liabilities:
Accounts payable 391,628 (150,985)
Accrued expenses and taxes payable 514,909 (49,569)
----------- ----------
Net cash provided by operating activities (297,799) 1,274,354
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Redemption (acquisition) of U.S. Treasury Instruments 2,110,000 (449,712)
Acquisition of equipment (25,781) (14,353)
----------- ----------
Net cash generated by (used in) investing activities 2,084,219 (464,065)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of Alcide Common Stock (396,136) (55,812)
Redemption of Class A Preferred Stock (40,957) ---
Redemption of Class B Preferred Stock (22,559) (20,169)
Stock Options exercised 18,000 318,795
----------- ----------
Net cash provided by (used in) financing activities (441,652) 242,814
----------- ----------
Net increase in cash and cash equivalents 1,344,768 1,053,103
Cash and cash equivalents at beginning of period 7,844,217 6,723,154
----------- ----------
Cash and cash equivalents at end of period $ 9,188,985 $7,776,257
----------- ----------
----------- ----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest --- ---
Cash paid during the period for income taxes 615,000 41,625
</TABLE>
See notes to Unaudited Condensed Financial Statements.
6
<PAGE>
ALCIDE CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
1. Basis of Presentation
In the opinion of management, the accompanying unaudited financial statements of
Alcide Corporation (the "Company") as of and for the three and six month periods
ended November 30, 1998 and 1997 have been prepared in accordance with the
instructions to Form 10-Q. Certain information and disclosures normally
included in notes to financial statements have been condensed or omitted
according to the rules and regulations of the Securities and Exchange
Commission, although the Company believes that the disclosures are adequate to
make the information presented not misleading. The accompanying unaudited
condensed financial statements should be read in conjunction with the financial
statements contained in the Company's Annual Report on Form 10 - K for the year
ended May 31, 1998. In the opinion of management, the accompanying unaudited
condensed financial statements contain all adjustments (consisting of only
normal recurring accruals) considered necessary for a fair presentation. The
results of operations for the six month periods are not necessarily indicative
of the results to be expected for the full year.
2. Inventory consisted of the following:
<TABLE>
<CAPTION>
NOVEMBER 30, 1998 MAY 31, 1998
----------------- ------------
<S> <C> <C>
Finished products $ 720,457 $ 406,627
Raw materials 1,325,214 947,243
---------- ----------
Total $2,045,671 $1,353,870
---------- ----------
---------- ----------
</TABLE>
3. Accounts Receivable - Trade consisted of the following:
<TABLE>
<CAPTION>
NOVEMBER 30, 1998 MAY 31, 1998
----------------- ------------
<S> <C> <C>
ABS Global, Inc. $ 985,945 $ 337,286
IBA, Inc. 567,103 147,843
UMS, Inc. 514,845 163,548
International Distributors 487,970 948,202
Novus International, Inc. 1,276,703 594,404
Other Receivables 89,070 76,981
---------- ----------
Total Accounts Receivable $3,921,636 $2,268,264
---------- ----------
---------- ----------
</TABLE>
4. Taxes
The income tax provision for the six month period ended November 30, 1998
consists of:
<TABLE>
<S> <C>
Federal Income Taxes $552,456
State Income Taxes 61,315
--------
$613,771
--------
--------
</TABLE>
7
<PAGE>
5. Earnings Per Share
The Company has adopted Statement of Financial Accounting Standards 128 (ASFAS
128@), AEarnings Per Share@ which replaced the calculation of primary and fully
diluted earnings per share with Basic and Diluted earnings per share. Basic
earnings per share is computed by dividing net income by the weighted average
number of common shares outstanding during the period. Diluted earnings per
share is computed by dividing net income by the weighted average number of
common shares and common stock equivalents outstanding during the period.
Common stock equivalents of the Company include the dilutive effect of
outstanding stock options.
Basic and Diluted earnings per share were calculated as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
November 30, November 30,
--------------------- -----------------------
1998 1997 1998 1997
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Net Income $38,675 $795,155 $1,072,413 $1,518,205
Weighted average number of Common Shares
outstanding 2,544,428 2,607,807 2,553,703 2,593,475
Basic EPS $.02 $.30 $.42 $.59
Assuming exercise of options reduced by the number
of shares which could have been purchased with the
proceeds from exercise of such options 97,984 244,259 134,358 244,259
--------- --------- ---------- ----------
Weighted average Common Shares outstanding and
Common Share equivalents 2,642,412 2,852,066 2,688,061 2,837,734
--------- --------- ---------- ----------
--------- --------- ---------- ----------
Diluted EPS $.01 $.28 $.40 $.54
</TABLE>
6. Orders for Future Delivery
At November 30, 1998 and 1997 the Company had orders for future delivery of
$1,582,706 and $2,373,926, respectively. The $1,582,706 orders for future
delivery are scheduled for shipment during the period December, 1998 through
March, 1999. The reduction in orders for future delivery at November 30, 1998,
as compared to November 30, 1997, is due primarily to the timing and receipt of
orders from the Company's largest distributor in Europe. Management believes
that the future order pattern is not indicative of expected second half
activity.
8
<PAGE>
PART I.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
Alcide Corporation (the "Company") is a Delaware Corporation organized in 1983
which has its executive offices and research laboratories at 8561 154th Avenue
N.E., Redmond, Washington 98052.
Alcide is engaged in the research, development and commercialization of unique
chemical compounds having intense microbiocidal activity. The Company holds
substantial worldwide rights to its discoveries through various patents, patent
applications, trademarks and other intellectual property, technology, and
know-how.
This report includes forward-looking statements which involve risk and
uncertainty including, without limitation, risk of dependence on patents and
trademarks, third party suppliers, market acceptance of and demand for the
Company's products, distribution capabilities, development of technology and
regulatory approval thereof. Sentences or phrases that use the words such as
"believes," "anticipates," "hopes," "plans," "may," "can," "will," and others,
are often used to flag such forward-looking statements, but their absence does
not mean a statement is not forward-looking. Such statements reflect
management's current opinion and are designed to help readers understand
management's thinking. By their very nature, however, such statements are
subject to certain risks and uncertainties that could cause actual results to
differ materially from those projected. Readers are cautioned not to place
undue reliance on these forward-looking statements which speak only as of the
date hereof. The Company undertakes no obligation to release publicly any
revisions to these forward-looking statements that may be made to reflect events
or circumstances after the date hereof, or to reflect the occurrence of
unanticipated events.
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Net sales for the 3 month period ended November 30, 1998, were $2,668,869,
$562,407 lower than the equivalent 3 month period last year, which included
revenue from Novus International of $530,012 related to a contractual minimum
payment.
Net sales for the half year ended November 30, 1998 were $6,450,148 versus
$6,423,672 for the first 6 months last year. The first half this year included
contractual minimum revenue from Novus totaling $1,136,703 versus $1,265,195 for
the 6 month period last year.
Net income of $1,072,413 for the 6 month period was $445,792 lower than the
equivalent 6 month period last year and reflects the negative impact of
several unusual events which occurred during the second quarter including:
- - Alcide decided not to ship product ordered by its former distributor, ABS
Global, Inc. for the months of October and November, 1998. Sales to ABS
for the six month period ended November 30, 1998 were $2,499,752, compared
to $3,405,228 for the equivalent period last year.
- - Negotiated settlement costs relating to the termination of distribution
agreement with Novus. Costs of $354,000 are being recognized in Alcide's
second quarter, although Alcide's obligation to pay this amount will not
occur until sometime in the future, possibly as late as
9
<PAGE>
November, 1999. Of this amount $317,000 is categorized as research and
development expense and $37,000 as trademark expense which is included in
other selling, general and administrative expense.
- - Operating expenses totaling $308,000 incurred by Alcide for testing and for
support of the Sanova-Registered Trademark- business in anticipation of the
Novus contract termination.
In total, the above adversely affected Alcide's first half net income by
approximately $734,000.
Cost of goods as a percentage of net sales was 36% for the six month period
ended November 30, 1998, an increase of 3 points over the 33% for the same
period last year. Sanova cost of goods during the second quarter with no
corresponding minimum profit as occurred in the prior year account for one-third
of the difference. The balance is due, primarily, to increased warehousing,
freight and handling costs incurred in building inventory to support the
transition to two new distributors for the Company's mastitis prevention
products.
Research and development expenses of $1,159,050 for the six months ended
November 30, 1998 were $133,236, 13% higher than for the first half last year.
This increase is primarily due to recognition of $317,000 as part of the
agreement to reimburse Novus for research and development expenses.
Other selling, general and administrative expenses of $1,395,818 for the six
months ended November 30, 1998 were $357,331 higher than for the first half last
year. The increase reflects the impact of higher salaries, executive bonuses
and employee travel expense.
Interest income of $320,213 for the six months ended November 30, 1998 was
$26,829, 9% higher than interest income for the equivalent period last year.
The increase is attributable to the Company's larger balances in its cash and
marketable securities accounts compared to the equivalent period last year.
LIQUIDITY
The Company's cash, cash equivalents, short term investments and U.S. Treasury
instruments totaled $11,428,611 on November 30, 1998, an amount $702,618 lower
than at the end of the previous fiscal year due to increases in the amounts
receivable from Novus and ABS. Management anticipates that these receivable
balances will be collected. The Company plans to continue to operate profitably
in fiscal 1999 and believes resources are sufficient to meet its anticipated
operating needs.
YEAR 2000 ISSUES
The Company has developed and is implementing a comprehensive plan to address
issues related to Year 2000. The organizational simplicity of Alcide's business
structure, which relies heavily on third party manufacturers and a network of
third party distributors, greatly limits the direct financial impact on the
Company to become fully Year 2000 compliant.
It has been necessary to upgrade the Company's accounting software which
controls internal and external reporting, sales order and billing records, cost
accounting inventory records, accounts payable and cash management processes.
The costs incurred to accomplish the upgrade were approximately $10,000 and were
recorded as an expense during fiscal 1998.
10
<PAGE>
Further, the Company has identified a need to upgrade computer software which
controls certain laboratory analytical instruments. The laboratory instrument
software upgrade is estimated to cost approximately $20,000 and is targeted for
completion during the Company's fiscal third quarter.
Lastly, the Company is in the process of surveying each of its raw material
suppliers, manufacturing resources and distributors to assure their Year 2000
readiness.
Alcide management believes that the risks facing the Company relating to Year
2000 issues are minimal, however, there can be no assurance of this. All
business related computer systems are fully Year 2000 compatible. Critical raw
materials and manufacturing requirements are available from multiple sources and
the Company can serve its distributors without reliance on computers.
OUTLOOK
- - Sanova Food Quality System Distribution
On October 8, 1998, the Company and Novus International, Inc. announced the
termination of their May 21, 1997 agreement to market the Sanova Food
Quality System. As a result of this decision Alcide will now sell and
distribute Sanova directly to the poultry processing industry. The Company
expects to invest capital of $300,000 to $400,000 to equip each new plant.
On November 11, 1998, Alcide and Novus signed a contract which delineates
the terms under which Alcide will purchase equipment already installed in
five operating poultry plants and related spare parts inventory from Novus.
The asset purchase agreement is being filed as an exhibit to this Form
10-Q. Purchase of the assets is contingent on certain USDA approvals.
- - Udder Care Product Distribution
The Company's distribution agreements with ABS Global, Inc. expired on
October 31, 1998, and will not be renewed. On November 1, 1998, Alcide
entered into a new four year contract with IBA, Inc. to expand IBA
territory to cover the entire United States. The contract is being filed
as an exhibit to this Form 10-Q. The present Universal Marketing Services,
Inc. contract has been amended to include the additional territories of
Canada, Italy, Portugal and the Czech Republic as exclusive UMS
territories, and the United States as a nonexclusive UMS territory.
Management believes that the combined distribution coverage provided by IBA
and UMS has the potential to equal or surpass that previously provided by
ABS for the territories of the United States, Canada, Italy, Portugal and
the Czech Republic. Alcide is seeking new distributors to cover
territories in Mexico and South America previously served by ABS.
In November, 1998, ABS Global, Inc. began distributing an udder care
product which competes with Alcide's udder care products. Alcide
management believes that the product infringes an Alcide patent and,
consequently, on December 18, 1998, Alcide filed a patent infringement suit
against ABS in U.S. District Court for the Western District of Wisconsin,
seeking a preliminary injunction and treble damages for their willful
infringement.
At this point it is difficult to predict the impact that the change in
distributors, the introduction of a competing product by ABS and Alcide's
patent infringement suit against ABS will have on the Company's sales of
its udder care products.
11
<PAGE>
ITEM 3. LEGAL PROCEEDING
On October 20, 1998, the Company filed a suit in U.S. District Court for the
Western District of Wisconsin against its former distributor, ABS Global, Inc.,
to collect past due balances owed to the Company by ABS. At the time the suit
was filed, ABS owed Alcide approximately $1.4 million. At November 30, 1998,
the amount owed was reduced by ABS to approximately $986,000. A trial date is
expected in early spring, 1999.
ABS has responded to Alcide's claim with several counter claims, including
claims that the Company has interfered with contracts between ABS and its
distributors and that the Company has made false and disparaging statements
about ABS and its business.
Alcide management believes that the debt collection suit will be resolved in
Alcide's favor or that the remaining balance will be paid before trial. The
Company's management believes that the ABS counter claims have no merit and that
these issues will be resolved in Alcide's favor.
12
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Shareholders voted on two proposals at the Annual Meeting of stockholders on
October 13, 1998, as described in the Company's proxy statement.
1. Votes for election of Directors of the Corporation for the ensuing
year were as follows:
<TABLE>
<CAPTION>
FOR WITHHELD
--- AUTHORITY
---------
<S> <C> <C>
Thomas L. Kempner 2,346,619 31,931
Kenneth N. May, Ph.D. 2,370,903 7,647
Joseph A. Sasenick 2,370,947 7,603
William G. Spears 2,348,163 30,387
</TABLE>
2. Votes for the ratification of the Board's selection of Arthur Andersen
LLP as independent auditors of the Company for the fiscal year ending
May 31, 1999.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--- ------- -------
<S> <C> <C>
2,365,122 3,090 10,338
</TABLE>
13
<PAGE>
PART II.
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBIT 10.29
Nonexclusive Distributor Agreement by and between the Company and IBA, Inc.,
dated November 1, 1998, covering the United States.
EXHIBIT 10.30*
Transfer of Assets and Assignment of Contracts Agreement and Addendum by and
between the Company and Novus International, Inc., dated November 11, 1998.
Reports on Form 8-K
- -------------------
None.
* Confidential treatment has been requested for this Exhibit.
14
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
ALCIDE CORPORATION
The Registrant
Date: January 13, 1999 By /s/ John P. Richards
--------------------------------------
John P. Richards
Executive Vice President
Chief Financial Officer
15
<PAGE>
EXHIBIT 10.29
DISTRIBUTOR AGREEMENT
This agreement is entered into this 1st day of November, 1998 by and between
Alcide Corporation, a Delaware corporation whose offices are located at 8561
154th Ave. N.E., Redmond, Washington (hereinafter "Supplier") and IBA,
Incorporated, 27 Providence Road, Millbury, MA 01527 (hereinafter
"Distributor").
This Agreement shall be binding on successors, affiliated companies and
assigns of Alcide Corporation and IBA, Incorporated.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties agree as follows:
1. DEFINITIONS
As used herein, the term
1.1 "Contract Term" shall be a four year period starting on the
date that this Agreement is signed by both parties.
1.2 "Product" shall refer to Alcide external udder care products
including UDDERgold Plus Germicidal Barrier Teat Dip, 4XLA Pre- and
Post-Milking Teat Dip, Pre-Gold Pre-Dip, 4XLA Sprayable Concentrate and
Continue Concentrate. Product shall include any refinements or improvements
to the existing udder care product line, any new teat dips, and any other
topical OTC antimicrobials intended for bovine treatment and introduced into
the U.S. market by Alcide Corporation during the term of this Agreement.
Product shall also include UDDERgold if that product is reintroduced in the
U.S.
1.3 "Territory" shall be defined as the 48 contiguous states of the
United States of America.
2. APPOINTMENT AND AUTHORITY OF DISTRIBUTOR
2.1 Subject to the terms and conditions of this Agreement, Supplier
hereby appoints Distributor as non-exclusive distributor of the Product for
the Territory. Distributor hereby accepts said appointment and agrees to
actively promote and sell the Product.
2.2 Distributor may appoint agents, dealers or sales
representatives to act on Distributor's behalf for sales of the Product in
the Territory, provided that any compensation to such agents, dealers or
representatives shall be solely Distributor's responsibility.
<PAGE>
2.3 Distributor covenants that it will maintain this Agreement for
the four year Contract Term and will not market an acidified sodium chlorite
teat dip product other than purchased directly from Supplier during the term
of the Agreement and any extensions thereto. Distributor also covenants that
it will advise Supplier one year in advance of its intention to market an
acidified chlorite teat dip product. If such notification occurs during the
contract term, Supplier may immediately add additional distributors in the
Territory.
2.4 Subject to the terms and conditions of this Agreement,
Distributor is authorized to sell the Product purchased from Supplier in such
manner, at such prices and upon such terms as Distributor shall determine.
Distributor is an independent contractor, not an agent or employee of
Supplier.
2.5 Labeling of the Product shall be mutually determined by the
Supplier and Distributor. Any changes to Product labels shall be mutually
agreed upon by Supplier and Distributor.
In any of the Distributor's activities relating to the
promotion and sale of the Product, the Supplier's name and trademark shall
always be prominently displayed in order to protect Supplier's rights and
goodwill in the same. Whenever Supplier's name and trademark are used in
advertising and promotional programs, Supplier retains the right to review
and approve same. Such agreements shall not be unreasonably withheld by
either Supplier or Distributor.
2.6 All trade names, trademarks and product names under which the
Product is sold shall be the property of the Supplier.
3. TERMS AND CONDITIONS OF SALE
3.1 All of Distributor's orders for the Product shall be subject to
the terms and conditions set forth in this Section 3 and in the attached
Schedule C which provides product pricing; no additional or different terms
set forth in Distributor's or Supplier's purchase order, acknowledgment or
other forms or correspondence (other than an amendment to this Agreement
pursuant to Section 8.1 hereof) shall govern any sales of the Product by
Supplier to Distributor.
3.2 Supplier shall be responsible for labeling, packing and
shipping all Product ordered in a form agreed upon between Supplier and
Distributor as being appropriate for the Territory and suitable for ready
sale to the end user in the Territory. All shipments shall be F.O.B. United
States warehousing location and all shipping costs from warehouse shall be at
Distributor's expense.
3.3 Supplier and Distributor have agreed to minimum monthly
commitment amounts of product (as set forth in Schedule A attached) to be
purchased by Distributor during the
<PAGE>
Contract Term. In addition, Supplier and Distributor have agreed to sales
goals (as set forth in Schedule A attached) which exceed the monthly
minimums. Goals will be reviewed quarterly so that appropriate marketing
strategies can be developed and implemented to facilitate attainment of the
goal. Distributor will provide a 12 month forecast of anticipated product
purchases, which forecast will be updated quarterly to facilitate Supplier's
planning. Monthly purchase orders of at least the defined minimums will be
issued by Distributor to Supplier ninety (90) days in advance of the first
day of the month in which delivery is to be made.
The goal amounts listed in Schedule A assume that Supplier will
distribute through both IBA and one other national distributor (or regional
equivalents) throughout the territory. The Alcide selling prices and terms of
sale shall not be such that IBA dealers or distributors (as the case may be)
are at a competitive disadvantage in the local marketplace.
Provided 125% of the annual minimums listed in Schedule A are
attained by Distributor, Supplier shall not appoint additional distributors
other than described above for any portion of the Territory. In no event will
Supplier add more than one additional national distributor (or regional
equivalents).
3.4 Distributor shall make payments to Supplier for Product ordered
and received by Distributor within thirty (30) days of invoice billing date.
3.5 Distributors purchase order for the month of November, 1998
shall be at least the minimum 30,000 gallons plus a one-time stocking order
for the West Coast of an incremental 10,000 gallons.
3.6 Supplier provides the Limited Warranty as described in Schedule
B. Supplier also warrants that Supplier is authorized to enter into this
Agreement and to grant to Distributor the rights provided for in Section 2.1.
Supplier also warrants that patents and trademarks relating to the Product
are owned by Supplier and that the Product is the result of original research
of Supplier.
3.7 Distributor warrants that all advertising and promotional
materials developed by Distributor shall be in accordance with descriptions
of Product provided by Supplier and, to the best of Distributor's knowledge,
shall be accurate in all material respects. Distributor warrants that
Distributor is authorized to enter into this Agreement and the same does not
and shall not infringe upon any other agreements it may have.
3.8 The initial purchase prices for Product are listed on Schedule
C attached hereto.
Prices shown in Schedule C may be revised during the term of
this Agreement following sixty (60) days prior written notice to Distributor
from Supplier.
<PAGE>
3.9 Provided that the Product has been distributed by IBA in
accordance with this Agreement, Alcide shall indemnify and hold harmless IBA
and IBA's officers, directors, employees, agents, dealers and sales
representatives against any claims by third parties which may arise due to
Product defects or defects in instruction and warnings as provided by Alcide
or which may arise due to any other breach by Alcide of its warranties set
forth in Section 3.6 hereof and attached Schedule B. IBA agrees to indemnify
and hold harmless Alcide against any claims by third parties which may arise
due to IBA, its officers, directors or employees advising the use of the
Product in a manner inconsistent with the stated instructions and warnings on
the Product label. Alcide and IBA shall give prompt notice to the other of
any claim, threatened claim or litigation which in any way relates to the
Product distributed under this Agreement. Alcide and IBA shall provide
reasonable cooperation and assistance to each other in the defense of any
claim or litigation relating to the use of Product distributed under this
Agreement.
4. PROMOTIONAL ACTIVITIES
4.1 Supplier shall regularly advise Distributor of any new
developments concerning Product availability and formulation.
4.2 Distributor shall undertake such advertising and promotional
activity relating to Product as is deemed appropriate by Distributor and
Supplier to actively promote sales.
4.3 Within three (3) calendar months of signing of the Agreement,
Distributor shall provide to Supplier a complete marketing plan detailing the
advertising, promotional and distribution activities to be undertaken in the
Territory for the first twelve (12) months of sales.
4.4 Distributor's subsequent marketing plans shall be provided to
Supplier annually at the anniversary date of thisAgreement. A list of major
meetings, annual shows, seminars and training programs at which Supplier's
participation is desired shall be submitted ninety (90) days in advance by
Distributor.
4.5 A tabulation of Distributor sales by Product and IBA Sales
Region shall be provided by Distributor to Supplier at the end of each fiscal
quarter.
4.6 Supplier shall have free access to inserting eight (8) pages of
advertising or promotional articles relating to Product in Dairy World
magazine for each year of the contract term. Such advertising or promotional
material shall be prepared by Distributor based on technical information
provided by Supplier.
4.7 Supplier shall have access to Distributors dealers through
participation at each of the Distributors twice a year regional meetings.
<PAGE>
4.8 Supplier shall have access to each of the Distributor's Area
Sales Managers and shall be afforded the opportunity to discuss Product
strategy, new products and promotional ideas with Area Sales Managers in a
group meeting at least once during each year of the Agreement.
4.9 Both Distributor and Supplier recognize that Suppliers lactic
acid gel patent expires in April, 1999, and that generic competition may
emerge as a result of this event. It is recognized by both Distributor and
Supplier that it will be in their mutual interest to defend against such
generic competition, and accordingly the parties agree to cooperate in such
defense.
5. TERM AND TERMINATION
5.1 Ninety (90) days prior to expiration of this Agreement,
Distributor and Supplier shall meet to determine their intentions regarding a
new or extended agreement.
5.2 This Agreement may also be terminated by either party,
effective immediately upon notice to the other, in the event that the party
to which such notice is sent becomes the subject of any bankruptcy or
insolvency proceedings. This Agreement may also be terminated by Supplier
effective immediately in the event Distributor is delinquent in payment of
invoices, as defined by Paragraph 3.4, by more than thirty (30) days.
5.3 This Agreement may be terminated by either party in the event
there is a material breach of the contract by the other party. The injured
party shall give written notice of the breach. The party causing the breach
shall then have 60 days to cure the breach. If the breach is not cured
within 60 days, the Agreement shall be terminated.
6. APPLICABLE LAW.
This Agreement shall be construed in accordance with the laws of the
State of Delaware.
7. CONFIDENTIAL INFORMATION
7.1 A. The Supplier and Distributor agree, with respect to any
confidential information received from the other and identified as
confidential information, that:
(1) the receiving party shall use reasonable care to
prevent disclosure of the confidential information to any third party without
prior written consent of the disclosing party, and the degree of care taken
by the receiving party shall be at least as great as the degree of care which
the receiving party takes in protecting its own confidential information; and
(2) The receiving party shall not use confidential
information disclosed by
<PAGE>
the other party for any commercial purpose other than pursuant to this
Agreement, or publish or disclose it to third persons without the prior
written consent of the disclosing party.
B. Neither party shall have any obligation with respect to any
information disclosed by the other party:
(1) which is already in the possession of the receiving
party at the time of its receipt from the disclosing party;
(2) which the receiving party lawfully receives from
another person whose disclosure thereof to the receiving party does not
violate any rights of the disclosing party;
(3) which is or becomes published or otherwise publicly
available through no act or omission of the receiving party.
C. Upon termination of this Agreement, as provided for in
Section 5, the Distributor and Supplier shall each, upon the written request
of the other, return or destroy all materials, copies thereof and extracts
therefrom which include any information designated as confidential by the
other pursuant to Section 7.1.A. Each may, however, retain for legal archival
purposes only, one (1) copy of all such material.
D. The provisions of this Section 7.1 shall survive
termination of this Agreement and remain in full force and effect for a
period of three (3) years as to any item of confidential information.
8. ENTIRE AGREEMENT
8.1 This Agreement constitutes the entire agreement between
Distributor and Supplier and may be amended only by a written document signed
by both parties hereto.
8.2 Either party may change its address by giving prior written
notice to the other party of its new address.
If to Supplier: Alcide Corporation
Attn: Joseph A. Sasenick
with a copy to: James R. Lisbakken
If to Distributor: IBA, Incorporated
Attn: Dan Belsito
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the date first
above written.
ALCIDE CORPORATION
("Supplier")
By /s/ John P. Richards
--------------------------
John P. Richards
Executive Vice President
Hereunto Duly Authorized
IBA, Incorporated
("Distributor")
By /s/ Daniel J. Belsito
--------------------------
Daniel J. Belsito
President
Hereunto Duly Authorized
<PAGE>
EXHIBIT 10.30
Pages containing material for which confidential treatment has been requested
are stamped "Material omitted pursuant to a request for confidential
treatment and filed separately with the Commission." The appropriate
sections have been marked at the appropriate places with a star [*].
<PAGE>
TRANSFER OF ASSETS AND ASSIGNMENT OF CONTRACTS
BETWEEN
NOVUS INTERNATIONAL, INC.
AND
ALCIDE CORPORATION
This TRANSFER OF ASSETS AND ASSIGNMENT OF CONTRACTS ("Agreement") is made
and entered into as of the 11th day of November 1998, by and between NOVUS
INTERNATIONAL, INC., a Delaware corporation with its principal place of
business at 530 Maryville Centre Drive, St. Louis, Missouri 63141 ("Novus"),
and ALCIDE CORPORATION, a Delaware corporation with its principal place of
business at 8561 154th Avenue NE, Redmond, Washington 98052 ("Alcide").
RECITALS
A. Novus and Alcide have entered into an Agreement, made effective
as of May 21, 1997, as supplemented by a letter agreement dated May 20, 1997
and amended by a letter agreement dated August 3, 1998 (the "1997
Agreement"), with respect to commercialization of certain acidified sodium
chlorite compositions to be used as an anti-microbial treatment marketed as
the SANOVA-Registered Trademark- Food Quality System (the "SANOVA System") in
chicken processing plants.
B. Pursuant to the 1997 Agreement, Novus has given notice of
termination of the 1997 Agreement effective November 30, 1998. In
anticipation of such termination, Novus has agreed to sell certain assets and
assign certain customer contracts to Alcide, and Alcide has agreed to
purchase, or shall have an option right to purchase, such assets and assume
such contracts, upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, Novus and Alcide agree as follows:
1. TRANSFER OF ASSETS
1.1 Effective as of the close of business (5:00 p.m. St. Louis
time) on November 30, 1998 (the "Effective Time"):
(i) Subject to the terms of this Agreement, Novus hereby
sells and assigns to Alcide and Alcide hereby purchases all of Novus' right,
title and interest in and to the equipment and other assets identified in
Exhibit A (the "Assets").
(ii) The purchase price for the Assets is as set forth in
Exhibit A, provided that in the event any Asset shall be materially damaged
or destroyed prior to the Effective Time and Novus has not repaired or
replaced the Asset (which Novus may use Spare Parts or
<PAGE>
"Material omitted pursuant to a
request for confidential
treatment and filed separately
with the Commission."
Option Assets or other materials to effectuate), then Alcide may elect to
either (a) exclude such Asset from the Assets being purchased under this
Agreement or (b) purchase such Asset at a price to be equitably adjusted
taking into account the damage thereto. Subject to Article 6, the purchase
price for the Assets shall be paid by Alcide to Novus pursuant to the
purchase terms set forth in Exhibit A, provided that, at Alcide's election,
the full purchase price for any Asset may be paid by application to, and
taking a current credit against, the [*] due under Section 5.1(i). At the
Effective Time, Novus will provide Alcide with a Bill of Sale for the Assets
in the form of Exhibit B hereto, and Alcide will execute appropriate
financing statements covering all of the Assets providing a security interest
therein in connection with any amounts due under this Agreement which have
not been paid in full.
(iii) Alcide shall take custody of the Assets and be
responsible for all costs and risk of loss as of the Effective Time, prior to
which Novus shall be responsible for all risk of loss and costs shall
continue to be governed by the 1997 Agreement. Any personal property taxes
or other taxes or charges will be prorated as of such date (based on a year
of 365 days), and Novus and Alcide will each pay to the other, within 10
calendar days of receipt of a written request accompanied by copies of
appropriate tax invoices or similar documentation, such amounts as are
necessary to accomplish such proration.
1.2 During the period ending at the close of business on November
30, 1999:
(i) Alcide shall have the right to purchase from time to
time other parts and equipment that Novus currently owns in connection with
the 1997 Agreement identified in Exhibit C hereto (the "Option Assets").
(ii) To exercise such right Alcide must provide written
notice(s) to Novus no later than the close of business on November 30, 1999,
specifying the Option Assets to be purchased. The Option Assets must be
purchased in "unit" increments, as described in Exhibit C.
(iii) The purchase price for the Option Assets will be as set
forth in Exhibit C, and shall be paid to Novus with the written notice(s)
referred to in Section 1.2(ii). Promptly after such payment, Novus shall
promptly provide Alcide with a Bill of Sale similar in form to Exhibit B.
(iv) Alcide shall take custody of, arrange for the storage
of, or remove any Option Assets purchased within 10 days after the date of
the written notice(s) referred to in Section 1.2(ii), and Alcide shall be
liable for all storage and/or warehouse costs incurred by Novus after that
period, and for any packing, shipping, transportation or similar costs or
charges. Any personal property taxes or other taxes or charges will be
prorated as of the earlier of the date on which Alcide takes custody or is
required to take custody (based on a
<PAGE>
"Material omitted pursuant to a
request for confidential
treatment and filed separately
with the Commission."
year of 365 days), and Novus and Alcide will each pay to the other, within 10
calendar days of receipt of a written request accompanied by copies of
appropriate tax invoices or similar documentation, such amounts as are
necessary to accomplish such proration.
2. ASSIGNMENT OF AGREEMENTS
2.1 Subject to the terms of this Agreement, as of the Effective
Time Novus hereby assigns and transfers to Alcide all of its rights and
obligations under the customer contracts identified on Exhibit D hereto (the
"Assigned Contracts"), to the extent such rights and obligations accrue on or
after the Effective Time.
2.2 Subject to the terms of this Agreement, as of the Effective
Time Alcide hereby accepts the assignment of the Assigned Contracts and
agrees that it and its successors will assume and perform all obligations of
Novus thereunder in accordance with the terms of the Assigned Contracts, to
the extent such obligations accrue on or after the Effective Time.
2.3 Novus will use commercially reasonable efforts to obtain
consent to the Assignment of the SANOVA System Agreement with [*] as soon as
possible. If such consent has not been obtained by the Effective Time:
(i) Such SANOVA System Agreement shall not be included
within the Assigned Contracts under this Agreement, shall be deemed deleted
from Exhibit D and shall not be assigned to Alcide.
(ii) The Assets identified in Item II(iii) of Exhibit A shall
be treated as Option Assets rather than Assets, with the purchase thereof
(including without limitation payment of the purchase price therefore)
governed by the provisions of Section 1.2 rather than by Section 1.1 at the
total purchase price set forth in Item II(iii) of Exhibit A.
(iii) All references to the [*] shall be deemed deleted from
this Agreement.
2.4 Notwithstanding the provisions of Sections 2.1 and 2.2, and
except to the extent covered by Section 6 of the 1997 Agreement, Alcide shall
not assume, succeed to and be obligated to perform, and Novus shall be
responsible for, any liability or obligation, arising out of any or all of
the following:
(i) any breach by Novus of the Assigned Contracts or failure
by Novus to discharge or perform any liability or obligation, in each such
case to the extent arising prior to the Effective Time, but not including any
breach arising out of the assignment; and
<PAGE>
(ii) any claim, demand, cause of action, suit, proceeding,
arbitration or investigation resulting from any act or omission of Novus
prior to the Effective Time.
2.5 Alcide will seek to replace all Assigned Contracts with
agreements directly between Alcide and the customers on commercially
reasonable terms as soon as possible, which agreements would terminate the
replaced Assigned Contracts. Alcide will not extend or renew any Assigned
Contract unless Novus receives from the customer a written full and
unconditional release releasing Novus from any and all obligations and
liabilities thereunder.
2.6 Within ten days after the date of this Agreement and prior to
the Effective Time, John Richards from Alcide and an appropriate
representative from Novus shall together seek to meet with each customer
under an Assigned Contract in order to discuss and arrange for a smooth
transition of service and equipment from Novus to Alcide effective November
30, 1998. In addition, prior to the Effective Time Novus shall reasonably
cooperate and otherwise reasonably assist Alcide in making arrangements for
the customer's transition.
3. REPRESENTATIONS AND WARRANTIES
3.1 Novus and Alcide each represent and warrant to the other that
it has all necessary corporate power and authority to enter into this
Agreement and carry out its obligations hereunder.
3.2 Novus represents and warrants to Alcide that on the date hereof
and, with respect to specific Assets, Option Assets and Assigned Contracts,
the date of transfer of such Assets, Option Assets and Assigned Contracts:
(a) it holds good and marketable title in and to the Assets and the Option
Assets, free and clear of any liens, encumbrances, claims or other
restrictions; (b) the sale, assignment and transfer of the Assets, Option
Assets and Assigned Contracts will not result in any lien, claim or
encumbrance arising out of any action taken by Novus and will not violate,
conflict with, result in a breach of, or constitute a default under any
contract or judgment to which Novus is a party; (c) true and complete copies
of the Assigned Contracts, including all amendments or modifications thereof
through the date of this Agreement, are attached as Exhibit D hereto, and
Novus will not further amend or modify any of the Assigned Contracts prior to
the Effective Time without Alcide's prior written consent (which will not be
unreasonably withheld); and (d) Novus has not received any written notice of
any claim under any of the Assigned Contracts.
3.3 EXCEPT AS SET FORTH IN THIS AGREEMENT, NOVUS MAKES NO OTHER
WARRANTIES OR REPRESENTATIONS WITH RESPECT TO THE ASSETS, THE OPTION ASSETS
OR THE ASSIGNED CONTRACTS, EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. THE ASSETS AND THE
OPTION ASSETS ARE BEING SOLD AND ASSIGNED TO ALCIDE "AS IS, WHERE IS".
<PAGE>
"Material omitted pursuant to a
request for confidential
treatment and filed separately
with the Commission."
4. INDEMNIFICATION
It is recognized and agreed that the indemnification provisions of
Section 6 of the 1997 Agreement survive.
5. ADDITIONAL MATTERS RELATED TO 1997 AGREEMENT
5.1 Certain disagreements have arisen between Alcide and Novus with
respect to the 1997 Agreement. In order to settle such disagreements, the
parties have agreed as follows:
(i) Novus shall pay Alcide the [*] minimum payment due for
the period ending August 31, 1998 upon the earlier of (a) satisfaction of all
"COP Conditions" (as defined in Article 6) or (b) November 30, 1999.
(ii) Alcide shall pay to Novus the amount due Novus as
reflected in item II(b) of Exhibit E upon the earlier of (a) satisfaction of
all COP Conditions or (b) November 30, 1999, which amount will be offset
against the payment due pursuant to Section 5.1(i).
(iii) On November 30, 1998, (a) Novus shall pay to Alcide the
sum of all amounts due Alcide as reflected in item I of Exhibit E, which
amounts relate to raw materials, and (b) Alcide will pay Novus for raw
materials pursuant to item III of Exhibit A and its share of cost of goods
sold pursuant to item II(a) of Exhibit E. Such payments shall be subject to
reconciliation pursuant to Section 5.2.
(iv) As soon as practicable following the Effective Time,
Novus will provide to Alcide copies of the reports, dossiers and translations
associated with items II (b) (4) and (5) of Exhibit E. In the event any
applications or dossiers relating to use of the Assets or the performance of
the Assigned Contracts are pending with any governmental authorities as of
the Effective Time, Novus will use commercially reasonable efforts to assign
such applications and dossiers to Alcide, and following the Effective Time
Alcide will assume all responsibility for them.
5.2 As soon as practicable, and in any event within 30 days
following the Effective Time, the parties will determine the actual costs
incurred with respect to items III and IV of Exhibit A and items I(b) and II
(a) on Exhibit E, and Novus will pay to Alcide or Alcide will pay to Novus,
as appropriate, the difference between the estimated amounts noted on Exhibit
A and E and the actual costs incurred.
<PAGE>
"Material omitted pursuant to a
request for confidential
treatment and filed separately
with the Commission."
5.3 On November 30, 1998, Novus will deliver to Alcide executed
assignments in the forms attached hereto as Exhibit F, transferring to Alcide
rights to the SANOVA-Registered Trademark- trademark, and Alcide shall pay
Novus the sum of [*]. Such assignment will be pursuant to the following
terms and conditions:
(i) Novus will assign to Alcide all of Novus' ownership
rights in the trademark "SANOVA" for anti-microbial treatment for meats,
poultry, fish, eggs, fruits and vegetables and related products and services
throughout the world, and the goodwill associated with such trademark,
including U.S. Trademark Registration No. 2,182,024 and all foreign trademark
applications and registrations.
(ii) Novus and Alcide will execute any other documents which
the other might reasonably request to effect the above described transfer of
the trademarks in the appropriate Trademark Offices or to otherwise reflect
this Agreement.
(iii) Novus will retain all rights to the "SANOVA" trademark
until the Effective Time, including without limitation for use in the poultry
processing in connection with the performance of the 1997 Agreement.
(iv) Except as provided in this Section 5.3, Alcide shall
have no right, title, interest or license to use, and shall discontinue any
use of, any Novus trademarks or servicemarks. This includes and covers any
use of NOVUS-Registered Trademark-, including the stylized "O"-Registered
Trademark-(including as shown in U.S. Trademark Registration Nos. 1,850,984
and 1,820,399), AIMS-Registered Trademark-, PROVUS-TM-, or "NOVA" or any
variation or derivative thereof (including without limitation the use of
"NOVA" as a prefix or suffix), or any term, design or symbol confusingly
similar thereto. Novus shall have no right, title, interest or license to
use, and shall discontinue any use of, any Alcide trademarks or servicemarks,
or any term, design or symbol confusingly similar thereto. This includes and
covers any use of the "SANOVA" trademark following the Effective Time.
5.4 It is recognized and agreed that, contemporaneously with this
Agreement, the parties are entering into a License Agreement and a
SANOVA-Registered Trademark- Services Agreement. Further, it is recognized
and agreed that the 1997 Agreement will continue through the Effective Time,
and that except as otherwise provided herein any obligations accrued prior to
the Effective Time and the provisions of Sections 6, 7, 8 and 9 of the 1997
Agreement shall survive. The letter agreement between the parties dated
August 11, 1998 will be terminated and of no further force and effect as of
the Effective Time.
5.5 The letter agreement between the parties dated October 23, 1998
with respect to [*] will remain in full force and effect, except that (a)
costs shall be allocated and paid as provided in the 1997 Agreement, (b) any
assignment of the SANOVA System Agreement
<PAGE>
"Material omitted pursuant to a request
for confidential treatment and filed
separately with the Commission."
shall be in accordance with this Section 5.5 and liabilities, in the event of
such assignment, shall be governed by this Agreement and (c) since the
equipment has not been assigned to [*], it will be assigned to Alcide in
connection with the assignment of the SANOVA Systems Agreement, in which case
such equipment shall be deemed to be part of the Assets hereunder. Pursuant
to that letter agreement, in the event the SANOVA System Agreement of May 14,
1998 between Novus and [*] is still in effect as of the Effective Time, such
agreement shall be assigned to Alcide, and shall be deemed to be part of the
Assigned Contracts hereunder. Payments shall be made quarterly to Novus out
of Alcide's gross profit from the equipment (revenue received less cost of
goods and maintenance costs), wherever located, pursuant to Paragraph 6 of
the October 23, 1998 letter agreement.
5.6 Except as expressly otherwise provided herein, Novus and Alcide
each, for themselves and their respective representatives, successors and
assigns, hereby releases the other and its successors and assigns from any
and all claims, liabilities or obligations arising out of or relating to the
1997 Agreement, the prior course of conduct of the parties, or any other
understandings or agreements related thereto, whether any such claim,
liability or obligation is known or unknown as of the date of this Agreement.
This release is expressly intended to, and shall, operate as a bar to any
action at law or equity which either party, its shareholders,
representatives, successors or assigns might have against the other or its
successors and assigns with respect to any such claim, liability or
obligation. The provisions of this Section 5.6 shall not, however, affect
any claim, liability or obligation under this Agreement or any of the
additional agreements expressly contemplated hereby, whether accruing or
related to periods before or after the date hereof.
6. COP CONDITIONS
6.1 The payments provided for herein are subject to satisfaction of
certain conditions relating to United States Department of Agriculture, Food
Safety and Inspection Service ("USDA") approval of continuous on-line
processing ("COP"). As used in this Agreement, such conditions shall be
defined as follows:
(i) The "[*] COP Condition" shall be deemed satisfied if the
USDA continues approval of the protocol for confirming the efficacy of online
reprocessing of poultry carcasses using the SANOVA System and the USDA
approves expansion of testing under the protocol for all four processing
lines for Phase II at the [*] facility in [*].
(ii) The "[*] COP Condition", the "[*] COP Condition", the
"[*]COP Condition" and the [*] COP Condition" shall each be deemed satisfied
upon receipt
<PAGE>
"Material omitted pursuant to a
request for confidential
treatment and filed separately
with the Commission."
by Alcide or the customer, directly or through an agent or representative, of
approval by USDA of a protocol (including approval to commence individual
plant testing) for confirming the efficacy of on-line reprocessing of poultry
carcasses using the SANOVA System applicable to the [*] facility at [*], the
[*] facility at [*], the [*] facility at [*], and the [*] facility at [*],
respectively, provided that, with respect to the [*] facility and prior to
such approval, [*] has agreed to the current form of amendment to Appendix D
to its Assigned Contract to cover the [*] facility. In the event the proviso
to the preceding sentence is not satisfied on or before the Effective Time,
(a) the Assets identified in Item I(ii) of Exhibit A shall be treated as
Option Assets rather than Assets, with the purchase thereof (including
without limitation payment of the purchase price therefore) governed by the
provisions of Section 1.2 rather than by Section 1.1 and the payment terms
set forth in Section 1.2(iii), and (b) all references to the [*] COP
Condition shall be deemed deleted from this Agreement.
(iii) The [*] COP Condition, the [*] COP Condition (subject to
the last sentence of Section 6.1(ii)), the [*] COP Condition and the [*] COP
Condition (subject to Section 2.3(iii)) are referred to collectively in this
Agreement as the "COP Conditions."
6.2 Alcide shall use commercially reasonable efforts to accomplish
the satisfaction of each of the COP Conditions as soon as possible. Alcide
represents and warrants that it has filed letters requesting approval to
commence COP testing at the plants located in [*], and will promptly file
such a letter with respect to the plant located in [*].
6.3 In the event any of the Assets are being used (wherever
located) to provide anti-microbial services on or at any time after November
30, 1999 in connection with the commercialization by Alcide of any
anti-microbial treatment, including SANOVA, and Alcide is receiving revenue
in connection therewith, then the COP Condition for the particular facility
at which such Assets were originally located ([*]) shall be deemed to have
been satisfied from and after such date.
7. GENERAL
7.1 Notices. Any notice, report or other document required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been sufficiently given if delivered in person, transmitted by
nationally recognized commercial courier or by facsimile (with receipt
verified) or mailed, postage prepaid, by first class, certified or registered
mail, return receipt requested, addressed as follows:
<PAGE>
If to Novus:
Novus International, Inc.
Attention: General Counsel
530 Maryville Centre Drive
St. Louis, Missouri 63141
Facsimile: (314) 576-4250
If to Alcide:
Alcide Corporation
Attention: President
8561 154th Avenue NE
Redmond, Washington 98052
Facsimile: (425) 861-0173
or to such other address as may be specified from time to time by either
party in a written notice given in accordance herewith. The parties shall
acknowledge in writing the receipt of any such notice given in person, and
any such notice given by courier, facsimile or mail shall be effective when
received.
7.2 Assignment. This Agreement may not be assigned by either party
without the prior written consent of the other party, which consent may be
granted or denied by the other party in its sole discretion. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of
the parties and their respective successors and assigns.
7.3 Independent Contractors. It is agreed and understood by the
parties that each of Novus and Alcide, in its performance of its obligations
and responsibilities under this Agreement, is an independent contractor and
that nothing herein contained shall be deemed to create any agency,
employment, joint venture, partnership, representation or fiduciary
relationship between the parties, or any other similar relationship, the
existence of which is hereby expressly denied. Neither party shall have the
authority to, nor shall either party attempt to, create any obligation on
behalf of the other party. The provisions of this Agreement shall not be
construed as authorizing or providing either party any right to exercise any
control or discretion over the operation, activities, officers, employees or
agents of the other party in connection with this Agreement, it being
understood and agreed that the entire control and direction of such
operations, activities, officers, employees or agents shall remain with such
party.
7.4 Disputes; Governing Law and Jurisdiction. The parties agree
insofar as possible to use every reasonable effort to settle any dispute or
disagreement between them relating to this Agreement by amicable means and
not to resort to legal action unless and
<PAGE>
until the parties have in good faith attempted to settle such dispute or
disagreement in the foregoing manner. The validity, interpretation and
performance of this Agreement shall be governed and construed in accordance
with the laws of the State of Illinois, U.S.A., not including any of such
state's choice of law rules. Any controversy or claim arising out of, or
relating to, this Agreement, or any breach thereof shall be exclusively
settled by the courts and authorities within the State of Illinois, to whose
exclusive jurisdiction the parties hereby submit. The parties consent and
agree irrevocably to any venue within the geographic limits of Cook County,
Illinois, hereby waiving any other venue to which they might be entitled by
virtue of domicile or otherwise.
7.5 Offset. Either party shall have the right to offset under this
Agreement, meaning that either may deduct from amounts to be paid to the
other party, any sums such other party may owe the offsetting party under
this Agreement.
7.6 Complete Agreement. This Agreement constitutes the full
understanding of the parties, a complete allocation of risks between them and
a complete and exclusive statement of the terms and conditions of their
agreement relating to the subject matter hereof.
7.7 Headings. Headings as to the contents of particular provisions
of this Agreement are for convenience only and are in no way to be construed
as part of this Agreement nor as a limitation of the scope of the particular
provisions to which they refer.
7.8 Severability. The provisions of this Agreement shall be
interpreted, if possible, so as to be valid, legal and enforceable. In the
event that any provision of this Agreement conflicts with the law under which
this Agreement is to be construed or is otherwise held to be invalid, illegal
or unenforceable by a court with jurisdiction over the parties to this
Agreement, such provision shall be deemed to be restated to reflect as nearly
as possible the original intentions of the parties in accordance with
applicable law, and the remainder of this Agreement shall remain in full
force and effect.
7.9 Amendments; Waivers. This Agreement may be amended, modified,
or waived only by another writing signed by the authorized representatives of
both parties. The delay or failure of either party to this Agreement to
enforce or insist upon compliance with any of the terms or conditions of this
Agreement or to exercise any remedy provided herein, the waiver of any term
or condition of this Agreement, or the granting of an extension of time for
performance shall not constitute the permanent waiver of any term, condition
or remedy of or under this Agreement, and this Agreement and each of its
provisions shall remain at all times in full force and effect until modified
as provided herein.
7.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which taken
together shall be one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto through their respective
authorized representatives have executed this Agreement, effective as of the
day and year first written above.
ALCIDE CORPORATION NOVUS INTERNATIONAL, INC.
By /s/ John Richards By /s/ W.J. Privott
------------------------ -------------------
Name John Richards Name W.J. Privott
------------------------ -------------------
Title Executive Vice President Title Pres./CEO
------------------------ -------------------
<PAGE>
"Material omitted pursuant to a
request for confidential
treatment and filed separately
with the Commission."
EXHIBIT A
TRANSFERRED ASSETS AND PURCHASE PRICE
I. Assets associated with [*] facilities:
(i) [*]:
(a) Asset: All equipment installed (including spare parts on
site) related to the SANOVA System, including components to
monitor inventory levels and certain other variables, at the [*]
facility located in [*].
Purchase Price: [*].
(b) Asset: The receivable due Novus from [*] for Johnson
birdwashers installed at the [*] facility and financed by Novus.
[*].
Purchase Price: Alcide will assume this receivable and pay Novus
the outstanding balance as of the Effective Time, [*].
(c) [*].
(ii) [*]:
(a) Asset: Any and all equipment needed for installation of a
SANOVA System, to the extent available from inventories held by
Novus, at the [*] facility located in [*].
Purchase Price: [*].
II. Assets associated with [*] facilities:
(i) [*]:
Asset: All equipment installed (including spare parts on site)
related to the SANOVA System, including components to monitor
inventory levels and certain other variables, at the [*] facility
located at [*].
<PAGE>
"Material omitted pursuant to a
request for confidential
treatment and filed separately
with the Commission."
Purchase Price: [*].
(ii) [*]
Asset: All equipment installed (including spare parts on site)
related to the SANOVA System, including components to monitor
inventory levels and certain other variables, at the [*] facility
located at [*].
Purchase Price: [*].
(iii) [*]
Asset: All equipment installed (including spare parts on site)
related to the SANOVA System, including components to monitor
inventory levels and certain other variables, at the [*] facility
located at [*].
Purchase Price: [*].
III. Raw Materials at Customers:
Asset: All raw materials held at customers, including without
limitation SANOVA base and activator, as of the Effective Time.
Purchase Price: [*]. Alcide will pay Novus this amount [*].
This amount will be reconciled according to Section 5.2 of this
Agreement.
IV. Spare Parts:
Asset: All inventory of spare parts for installed SANOVA
systems. A complete inventory list will be provided 10 days
before the Effective Time.
Purchase Price: [*], such amount to be paid on [*] and to be
reconciled according to Section 5.2 of this Agreement. [*].
<PAGE>
EXHIBIT B-1
BILL OF SALE AND ASSIGNMENT
OF EQUIPMENT AND RAW MATERIALS
KNOW ALL MEN BY THESE PRESENTS, that Novus International, Inc., a
Delaware corporation ("Novus"), for good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged by it, does hereby
sell, transfer, convey, assign and deliver to Alcide Corporation, a Delaware
corporation ("Alcide"), all of its right, title and interest in and to the
equipment and other assets identified in Exhibit X, all of which are being
transferred pursuant to the Transfer of Assets and Assignment of Contracts
between Novus and Alcide dated ______________, 1998 (the "Agreement"), which
is incorporated herein by reference.
This Bill of Sale and Assignment shall be binding upon and inure to
the benefit of Alcide and Novus and their respective successors and assigns.
NOVUS INTERNATIONAL, INC.
By _____________________________
Name _____________________________
Title _____________________________
ACCEPTED BY:
ALCIDE CORPORATION
By _____________________________
Name _____________________________
Title _____________________________
<PAGE>
"Material omitted pursuant to a
request for confidential
treatment and filed separately
with the Commission."
EXHIBIT X
TRANSFERRED EQUIPMENT AND RAW MATERIALS
I. Assets associated with [*] facilities:
(i) [*]:
(a) All equipment installed (including spare parts on site)
related to the SANOVA System, including components to monitor
inventory levels and certain other variables, at the [*] facility
located in [*].
(b) The receivable due Novus from [*] for Johnson birdwashers
installed at the [*] facility and financed by Novus.
(ii) [*]:
Any and all equipment needed for installation of a SANOVA System,
to the extent available from inventories held by Novus, at the
[*] facility located in [*].
II. Assets associated with [*]:
(i) [*]:
All equipment installed (including spare parts on site) related
to the SANOVA System, including components to monitor inventory
levels and certain other variables, at the [*] facility located
at [*].
(ii) [*]
All equipment installed (including spare parts on site) related
to the SANOVA System, including components to monitor inventory
levels and certain other variables, at the [*] facility located
at [*].
<PAGE>
"Material omitted pursuant to a
request for confidential
treatment and filed separately
with the Commission."
(iii) [*]
All equipment installed (including spare parts on site) related
to the SANOVA System, including components to monitor inventory
levels and certain other variables, at the [*] facility located
at [*].
III. Raw Materials at Above Listed Locations:
All raw materials held at the locations listed above, including
without limitation SANOVA base and activator, as of the Effective
Time.
<PAGE>
EXHIBIT B-2
BILL OF SALE AND ASSIGNMENT
OF SPARE PARTS
KNOW ALL MEN BY THESE PRESENTS, that Novus International, Inc., a
Delaware corporation ("Novus"), for good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged by it, does hereby
sell, transfer, convey, assign and deliver to Alcide Corporation, a Delaware
corporation ("Alcide"), all of its right, title and interest in and to the
assets identified in Exhibit Y, all of which are being transferred pursuant
to the Transfer of Assets and Assignment of Contracts between Novus and
Alcide dated ______________, 1998 (the "Agreement"), which is incorporated
herein by reference.
This Bill of Sale and Assignment shall be binding upon and inure to
the benefit of Alcide and Novus and their respective successors and assigns.
NOVUS INTERNATIONAL, INC.
By _________________________
Name _________________________
Title _________________________
ACCEPTED BY:
ALCIDE CORPORATION
By _____________________________
Name _____________________________
Title _____________________________
<PAGE>
EXHIBIT Y
TRANSFERRED SPARE PARTS
<PAGE>
"Material omitted pursuant to a
request for confidential
treatment and filed separately
with the Commission."
EXHIBIT C
OPTION ASSETS
I. Uninstalled Units
(a) [*]
(b) [*]
(c) [*]
II. Skids (including cabinets and associated spare parts) - to be
purchased as "units" at a price of [*] for any of the [*] units used in USDA
trials, and [*] for any of the [*] unused units.
III. Monfort Skid - purchase price to be [*].
IV. Lohmann Skid and associated Raw Materials - purchase price to be [*].
If customer requests removal, Novus will notify Alcide and if Alcide does not
purchase within 10 days, Novus may remove the equipment and sell or otherwise
dispose of it, as it deems appropriate.
V. Dip Tank: A Dip Tank as described in Novus drawing "D 43 PP SK02" as
submitted to the USDA and subsequently approved May 1, 1997. Purchase Price
to be [*].
PAYMENT TERMS: Payment of the purchase price of any of the above assets will
accompany the written notice of desire to purchase such asset, as set out in
Section 1.2 (ii).
<PAGE>
"Material omitted pursuant to a
request for confidential
treatment and filed separately
with the Commission."
EXHIBIT D
ASSIGNED CONTRACTS
SANOVA System Agreements between Novus International, Inc. and the
following customers:
[*]
<PAGE>
"Material omitted pursuant to a
request for confidential
treatment and filed separately
with the Commission."
EXHIBIT E
SETTLEMENT OF CERTAIN PAYMENTS
I. Amounts due from Novus to Alcide
(a) [*] for raw material costs through August 31, 1998
(b) Estimated raw material purchases, September 1, 1998 through
November 30, 1998 - [*](1)
II. Amounts due from Alcide to Novus
(a) 1/2 of estimate of cost of goods sold, net of revenue, through
November 30, 1998 - [*](1)
(b) The following items, which the parties have agreed to settle for
an aggregate of [*]:
1) 1/2 of [*] expenses
2) 1/2 of insurance premium from September 1, 1998 through
November 30, 1998
3) Cost of the COP trial at [*]
4) Fees for European Consultants for August through October,
1998
5) Cost of Canadian regulatory consultants (Cantox)
6) Settlement of claims for USDA trial costs
____________________________
(1) To be reconciled pursuant to Section 5.2
<PAGE>
EXHIBIT F
TRADEMARK ASSIGNMENTS
[FORMS OF ASSIGNMENT WHICH ACCOMPANIED KEMP LETTER OF 10/23/98 TO BE ATTACHED]
<PAGE>
"Material omitted pursuant to a
request for confidential
treatment and filed separately
with the Commission.
AMENDMENT TO THE
TRANSFER OF ASSETS AND ASSIGNMENT OF CONTRACTS
AGREEMENT DATED NOVEMBER 11, 1998 BETWEEN NOVUS INTERNATIONAL, INC.
("NOVUS") AND ALCIDE CORPORATION ("ALCIDE")
Section 2.3 of the Transfer of Assets and Assignment of Contracts
Agreement ("TOA Agreement") required Novus to use commercially reasonable
efforts to obtain [*] consent to the assignment of its SANOVA-Registered
Trademark- System Agreement ("SANOVA Agreement") to Alcide. Novus promptly
met with [*] to try and obtain its consent; however, despite Novus' best
commercial efforts, [*] will not consent to assignment of its SANOVA
Agreement until [*]receives COP approval.
Thus, Novus and Alcide desire to amend Section 2.3 of the TOA
Agreement respecting the [*] SANOVA Agreement, referenced on Exhibit D of the
TOA Agreement, and the [*] Assets, identified in Item II (iii) of Exhibit A,
by deleting Section 2.3 and replacing it with a new Section 2.3 as follows:
2.3 As of the Effective Time, Alcide, as Novus' agent, will at its
expense perform and be subject to all of Novus' rights and
obligations under the June 5, 1998 [*] SANOVA System Agreement
("SANOVA Agreement"), and shall fully indemnify and hold Novus
harmless with respect to Alcide's performance thereunder.
(i) At the Effective Time, Novus will transfer the [*] Asset,
identified on Exhibit A, at II (iii), pursuant to the terms
and conditions set forth in Section 1.1.
<PAGE>
"Material omitted pursuant to a
request for confidential treatment and
filed separately with the Commission."
(ii) In addition to the terms and conditions set forth in
Exhibit A, at II (iii), the purchase price for the [*]
Asset shall not be payable to Novus until [*] has consented
to the assignment of the SANOVA Agreement to Alcide or an
agreement has been reached between [*] and Alcide for
Alcide to provide SANOVA services.
(iii) If [*] desires to terminate its SANOVA Agreement with
Novus, Novus will permit [*] to do so, and Novus agrees to
notify Alcide of such termination as soon as practicable.
Except as specifically set forth herein, all other terms and
conditions of the TOA Agreement shall continue to apply.
Please evidence Alcide's agreement to the provisions of this Addendum
by executing both originals, then returning one executed original to Novus.
The other original is for your file.
ALCIDE CORPORATION NOVUS INTERNATIONAL, INC.
By: /s/ John Richards By: /s/ Thad Simons
----------------------- -----------------------
Name: John Richards Thad Simons
-----------------------
Title: Exec. V.P. Vice President
-----------------------
12/1/98 11/30/98
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-START> SEP-01-1998
<PERIOD-END> NOV-30-1998
<CASH> 9,188,985
<SECURITIES> 0
<RECEIVABLES> 3,921,636
<ALLOWANCES> 0
<INVENTORY> 2,045,671
<CURRENT-ASSETS> 17,011,434
<PP&E> 339,505
<DEPRECIATION> 233,680
<TOTAL-ASSETS> 17,906,635
<CURRENT-LIABILITIES> 1,459,150
<BONDS> 0
0
190,377
<COMMON> 28,756
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 17,906,635
<SALES> 2,668,869
<TOTAL-REVENUES> 2,817,565
<CGS> 1,180,992
<TOTAL-COSTS> 2,756,754
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 60,811
<INCOME-TAX> 22,136
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 38,675
<EPS-PRIMARY> .02
<EPS-DILUTED> .01
</TABLE>
