<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 16, 1999
TREGA BIOSCIENCES, INC.
(Exact Name of Registrant as Specified in Charter)
DELAWARE 0-27972 51-0336233
(State or Other (Commission (IRS Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
9880 CAMPUS POINT DRIVE, SAN DIEGO, CA 92121
(Address of Principal Executive Offices) (Zip Code)
(619) 410-6500
(Registrant's telephone number, including area code)<PAGE>
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On March 12, 1999, Trega Biosciences, Inc., a Delaware corporation
("Trega"), ChromaXome Corp., a Delaware corporation and a wholly owned
subsidiary of Trega ("ChromaXome"), and TerraGen Discovery Inc., a California
corporation ("TerraGen"), entered into a Purchase and Sale of Assets Agreement
(the "Sale Agreement") providing for the sale of substantially all of the assets
of ChromaXome to TerraGen (the "Sale"). On March 16, 1999, the Sale was
consummated.
ChromaXome, located in San Diego, California, is an early stage
combinatorial biology company which has developed technology to transfer
metabolic pathways from marine and terrestrial microbes in bacteria. Pursuant
to the terms of the Sale Agreement, TerraGen has acquired substantially all of
the assets of ChromaXome for the following consideration:
1. $2,000,000.00 cash, paid at the closing of the Sale.
2. $2,000,000.00 (the "First Balance"), payable upon the earlier of:
(a) one week following the date of any Financing (as defined below)
completed by TerraGen or TerraGen Diversity Inc., a company
organized under the laws of the Province of British Columbia,
Canada and the sole shareholder of TerraGen ("TerraGen Parent"),
following the closing of the Sale (the "First Financing"); or
(b) December 31, 1999.
A "Financing" includes, without limitation, (i) any borrowing of
capital, public offering, private offering or similar distribution of
the securities of TerraGen or TerraGen Parent or (ii) any receipt of
proceeds from collaborative agreements to which Terragen or TerraGen
Parent is a party, such as, but not limited to, licensing agreements.
In the event the net proceeds of the First Financing are less than
$4,000,000.00, fifty percent (50%) of the net proceeds of the First
Financing shall be paid towards the First Balance, with any remaining
amount outstanding under the First Balance being carried forward for
payment no later than December 31, 1999.
3. $1,000,000.00 (the "Second Balance"), payable upon the earlier of:
(a) one week following the date of any Financing completed by
TerraGen or TerraGen Parent following the closing of the First
Financing (the "Second Financing"); or
(b) June 30, 2000.
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<PAGE>
In the event the net proceeds of the Second Financing are less than
$2,000,000.00, fifty percent (50%) of the net proceeds of the Second
Financing shall be paid towards a portion of the First Balance (if
any) and the Second Balance, with any remaining amount outstanding
under the Second Balance being carried forward for payment no later
than June 30, 2000.
4. 600,000 shares of Class "B" preferred stock (the "Shares") in TerraGen
Parent.
The indebtedness of the First Balance and the Second Balance are evidenced
by interest-bearing promissory notes (the "Notes") secured by the assets sold to
TerraGen by ChromaXome in the Sale. TerraGen's obligations under the Notes are
guaranteed by TerraGen Parent. The amount of cash paid and the number of Shares
of TerraGen Parent issued as a result of the Sale were determined by negotiation
between Trega and ChromaXome, on the one hand, and TerraGen and TerraGen Parent,
on the other hand.
Upon the effectiveness of the Sale, all of the employees of ChromaXome (8
persons) resigned their employment with ChromaXome and commenced employment with
TerraGen.
The foregoing description of the transactions involving Trega, ChromaXome,
TerraGen and TerraGen Parent and the various agreements entered into in
connection therewith is qualified in its entirety by reference to the Sale
Agreement, a copy of which is filed as an exhibit to this Form 8-K and
incorporated herein by this reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
A. FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
Not Applicable.
B. PRO FORMA FINANCIAL INFORMATION.
An unaudited pro forma combined balance sheet as of December 31, 1998 and
an unaudited pro forma combined statement of operations for the year ended
December 31, 1998, giving effect to the Sale as of December 31, 1998 for
the pro forma combined balance sheet and for the year ended December 31,
1998 for the pro forma combined statement of operations, are filed as a
part of this report.
C. EXHIBITS.
2.1 Purchase and Sale Agreement dated March 12, 1999 among Trega,
ChromaXome and TerraGen.
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<PAGE>
SIGNATURE
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.
Dated: March 30, 1999
TREGA BIOSCIENCES, INC.
By /s/ Michael G. Grey
------------------------------------
Michael G. Grey
President and Chief Executive Officer
By /s/ Gerard A. Wills
------------------------------------
Gerard A. Wills
Chief Financial Officer
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<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
2.1+ Purchase and Sale Agreement dated March 12, 1999 among Trega,
ChromaXome and TerraGen.
+ The Registrant has requested confidential treatment of certain portions of
this agreement.
<PAGE>
Attachment 7B for Form 8-K
<PAGE>
TREGA BIOSCIENCES, INC
UNAUDITED PRO FORMA COMBINED CONDENSED
BALANCE SHEET
DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
ADJ. FOR THE PRO FORMA
COMBINED TRANSACTION COMBINED
---------------- ------------------ -----------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 9,755 $ 2,000 (a) $ 11,672
(83) (b)
Short term investments 6,507 6,507
Accounts receivable and other current assets 778 - 778
Note receivable 2,000 (a) -
(2,000) (d)
---------------- ------------------ -----------------
Total current assets 17,040 1,917 18,957
Property and equipment, net 4,123 (192) (b) 3,931
Notes receivable 624 1,000 (a) 624
(1,000) (d)
Other assets 7,748 (10) (b) 7,738
---------------- ------------------ -----------------
$ 29,535 $ 1,715 $ 31,250
---------------- ------------------ -----------------
---------------- ------------------ -----------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,539 $ 195 (c) $ 1,734
Accrued compensation and other accrued liabilities 2,399 2,399
Current portion of capital lease obligations 186 (37) (b) 149
Current portion of debt obligations 1,065 1,065
Deferred revenue 3,794 3,794
---------------- ------------------ -----------------
Total current liabilities 8,983 158 9,141
Long-term capital lease obligation 112 (46) (b) 66
Long-term debt obligation 2,577 2,577
Deferred rent 223 223
Stockholders' equity
Common stock 18 18
Common stock issuable 16 16
Additional paid-in capital 86,645 86,645
Deferred compensation (609) (609)
Accumulated deficit (68,430) 1,603 (d) (66,827)
---------------- ------------------ -----------------
Total stockholders' equity 17,640 1,603 19,243
---------------- ------------------ -----------------
$ 29,535 $ 1,715 $ 31,250
---------------- ------------------ -----------------
---------------- ------------------ -----------------
</TABLE>
See Notes to Unaudited Pro Forma Combined Condensed Financial Statements
<PAGE>
TREGA BIOSCIENCES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS EXCEPT FOR NET LOSS PER SHARE)
<TABLE>
<CAPTION>
PRO FORMA 12/31/98
12/31/98 ADJ. FOR THE PRO FORMA
COMBINED TRANSACTION COMBINED
---------------- ------------------ -------------------
<S> <C> <C> <C>
Revenues: (a)
Contract revenue and license fees $ 6,799 $ (11) $ 6,788
Related party contract research 3,970 - 3,970
Net sales 21 - 21
---------------- ------------------ -------------------
10,790 (11) 10,779
Costs and expenses:
Cost of sales 7 - 7
Research and development 17,934 (1,351) 16,583
Acquired in-process research and development 1,000 1,000
Selling, general and administrative 5,181 (88) 5,093
---------------- ------------------ -------------------
24,122 (1,439) 22,683
---------------- ------------------ -------------------
Gain (loss) from operations (13,332) 1,428 (11,904)
Other income (expenses):
Net interest income and other 531 (70) 461
---------------- ------------------ -------------------
Net Income (loss) $ (12,801) $ 1,358 $ (11,443)
---------------- ------------------ -------------------
---------------- ------------------ -------------------
Loss per share data:
Basic and diluted loss per share $ (0.89) $ (0.80)
---------------- -------------------
---------------- -------------------
Shares used in computing basic and
dilutive net loss per share 14,380 14,380
---------------- -------------------
---------------- -------------------
</TABLE>
(a) Adjustment to reflect the disposition of substantially all of the assets of
ChromaXome Corp., the Company's wholly owned subsidiary.
The above Unaudited Pro Forma Combined Statement of Operations does not
include a gain of approximately $1.6 million to be recorded by Trega
Biosciences, Inc. in conjunction with the disposal of all the assets of
ChromaXome Corp.
See Notes to Unaudited Pro Forma Combined Condensed Financial Statements
<PAGE>
Notes to Unaudited Pro Forma Combined Condensed Financial Statements
1. The unaudited pro forma combined condensed financial statements reflect
the sale of substantially all the assets of the Company's wholly-owned
subsidiary, ChromaXome Corp. to TerraGen Discovery Inc. ("TerraGen"),
a privately held company, in consideration for $2.0 million in cash,
two interest bearing notes receivable in the amount of $2.0 million and
$1.0 million and 600,000 of Series B Preferred Stock of TerraGen. The
notes receivable are due no later than December 31, 1999 and June 30,
2000, respectively.
2. The unaudited pro forma combined condensed statement of operations for
December 31, 1998 reflects the Company's results of operations for such
period as if the Company had disposed of such assets as of the
beginning of the period.
3. The unaudited pro forma combined condensed balance sheet includes the
adjustments necessary as if the sale of the assets occurred on December
31, 1998 and reflects the receipt of the consideration, disposal of the
assets and the transaction costs. These adjustments are summarized as
follows:
(a) Receipt of $2.0 million in cash, notes receivable of $3.0
million and 600,000 shares of Series B Preferred Stock valued
at $0.
(b) Disposal of property, equipment and other assets and buy-out
of capital lease obligations associated with the property and
equipment.
(c) Accrue estimated disposal costs to be incurred by Trega
Biosciences, Inc.
(d) Recognition of immediate gain on sale of assets to TerraGen
and deferred gain related to notes receivable from TerraGen.
The unaudited pro forma financial statements have been prepared on the basis
of preliminary estimates which are subject to adjustment. The pro forma
financial statements may not be indicative of the results that actually would
have been achieved if the disposition had been effected on the dates
indicated, or the results which may be achieved in the future. The pro forma
financial statements should be read in conjunction with the consolidated
financial statements of the Company.
<PAGE>
CONFIDENTIAL Exhibit 2.1
CONFIDENTIAL TREATMENT REQUESTED
CONFIDENTIAL TREATMENT REQUESTED: PAGES WHERE CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED ARE MARKED "CONFIDENTIAL TREATMENT REQUESTED" AND APPROPRIATE
SECTIONS, WHERE TEXT HAS BEEN OMITTED, ARE NOTED WITH "[CONFIDENTIAL TREATMENT
REQUESTED]" OR "[* * *]." AN UNREDACTED VERSION OF THIS DOCUMENT HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
THIS PURCHASE AND SALE OF ASSETS AGREEMENT is made and entered into as of this
twelfth (12th) day of March 1999 (the "EFFECTIVE DATE"), between TERRAGEN
DISCOVERY INC., duly incorporated according to the laws of California, having
its head office and principal place of business at 818 West 7th Street, Los
Angeles, California, 90017 (hereinafter referred to as the "PURCHASER"), and
CHROMAXOME CORPORATION, duly incorporated according to the laws of Delaware,
having its head office and principal place of business at 9880 Campus Point
Drive, San Diego, California, 92121 (hereinafter referred to as the "SELLER").
This Agreement is entered into by TREGA BIOSCIENCES, INC., a publicly traded
corporation, duly incorporated according to the laws of Delaware, having its
head office and principal place of business at 9880 Campus Point Drive, San
Diego, California, 92121 (hereinafter referred to as the "PARENT") for the
purposes more fully described hereinbelow.
WITNESSETH:
WHEREAS Seller is a biotechnology company engaged in the business of scientific
research and the development of technology in the combinatorial biology field
working to transfer metabolic pathways from naturally occurring micro-organisms
into manageable industrial hosts;
WHEREAS Seller and Purchaser have reached an understanding with respect to the
purchase of substantially all of the assets of Seller by means of the purchase
of the Purchased Assets for the Purchase Price (each as defined hereinafter)
upon the terms and conditions contained in this Agreement;
WHEREAS Parent has entered into this Agreement for the purposes of (i)
guaranteeing the due and faithful performance of Seller's covenants and
obligations contained in this Agreement; and (ii) undertaking to faithfully
comply with its own covenants and obligations as set forth in Section XIV below;
NOW THEREFORE, in consideration of the mutual covenants, representations and
warranties herein contained and the payments hereinafter provided, it is agreed
by and between the Parties as follows:
SECTION I - DEFINED TERMS
1.1 Where used herein, the following terms shall have the following
meanings:
1.1.1 "ACCOUNTS RECEIVABLE" means all accounts receivable (and other
amounts) due, owing or accruing due to the Seller in connection with the
Business as at the time of Closing, but excluding those related to the
Excluded Assets and Excluded Liabilities, as more particularly set forth
in Schedule 1.1.1 hereto;
1.1.2 "AFFILIATE" means an affiliate as defined in the SECURITIES
EXCHANGE ACT OF 1934, as amended, and the rules and regulations
thereunder;
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1.1.3 "AGREEMENT" means this Purchase and Sale of Assets Agreement,
including the Schedules annexed hereto;
1.1.4 "APPLICABLE LAW" means all applicable provisions of law
(including Environmental Law), the common law, rules and regulations
thereunder, orders of, or agreements with, any Governmental Authority
and decisions, judgements, awards and decrees of any Governmental
Authority;
1.1.5 "ASSUMED CONTRACTS" means all of the agreements and grants and
copies of such agreements and grants with researchers, universities, any
Governmental Authority, (biological) material suppliers, employees,
consultants and other Persons that are in force as at Closing and are
set forth in Schedule 1.1.5 hereto;
1.1.6 "ASSUMED LIABILITIES" means only the liabilities and other
obligations of the Seller assumed by the Purchaser that are set forth in
Schedule 1.1.6 hereto;
1.1.7 "BUSINESS" means the business now and heretofore conducted by
the Seller consisting of scientific research and the development of
technology in the combinatorial biology field, working to transfer
metabolic pathways from naturally occurring micro-organisms into
manageable industrial hosts;
1.1.8 "CLOSING" means the completion of the transaction of purchase
and sale of the Purchased Assets hereunder;
1.1.9 "CLOSING DATE" means the sixteenth (16th) day of March 1999, or
such other date as the Parties may mutually agree upon in writing;
1.1.10 "CODE" means the INTERNAL REVENUE CODE of 1986, as amended. All
citations to provisions of the Code, or to the Treasury Regulations
promulgated thereunder, shall include any amendments thereto and any
substitute or successor provisions thereto;
1.1.11 "COLLATERAL AGREEMENTS" means the Share Purchase Agreement, the
Employment Agreements, the License Agreement, the Services Agreement,
the Sublease Agreement, the Parent Guaranty, the Vector Guaranty and the
Security Agreement;
1.1.12 "CONSENT" means any consent, approval, authorization, waiver,
permit, grant, franchise, concession, agreement, license, exemption or
order of registration, certificate, declaration or filing with, or
report or notice to, any Person;
1.1.13 "DESIGNATED ASSETS" has the meaning ascribed thereto in
Sub-Section 3.4;
1.1.14 "DOLLAR", "DOLLARS" or "$" means lawful money of the United
States of America;
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1.1.15 "EFFECTIVE DATE" means March 12, 1999;
1.1.16 "EMPLOYMENT AGREEMENTS" means those employment agreements dated
the Closing Date to be entered into between the Purchaser and the
Persons identified in Schedule 1.1.16, in the form annexed hereto as
Schedule 1.1.16;
1.1.17 "ENVIRONMENTAL CONTAMINATION" means the presence of any
Hazardous Material in, on or under the air, soil, groundwater, surface
water, sub-surface strata, land surface, indoor environment or any
structure or improvement, so as to result in any liabilities, fines,
penalties, costs, expenses or obligations under any Applicable Law,
including, without limitation, for response, remediation, closure,
medical monitoring or property damage;
1.1.18 "ENVIRONMENTAL LAW" means any federal, state, local, municipal,
national, international, Native American or interstate law (including,
without limitation, common law), statute, contract, treaty, ordinance,
decree, code, directive, order, judgment, consent, rule, regulation, or
standard or requirement of any Governmental Authority relating to air
quality, water quality, solid waste management, Hazardous Materials,
toxic substances, human health, safety of the environment, or
Environmental Contamination;
1.1.19 "ENVIRONMENTAL LIABILITIES" means Losses, Known or unknown,
mature or unmatured, contingent or absolute, or otherwise, arising out
of or relating to any Environmental Law;
1.1.20 "EXCLUDED ASSETS" means those assets of Seller not listed in
Sub-Section 3.1 hereto;
1.1.21 "EXCLUDED LIABILITIES" means those liabilities of Seller not
listed in Schedule 1.1.6 hereto and, without limitation:
(i) any litigation or related claims, including any cause of action
or judicial or administrative action, suit, proceeding or investigation
with respect to the Business pending at the Closing or to the extent
relating to the periods on or before the Closing;
(ii) any failure to comply with any Applicable Law, which failure
occurred on or before the Closing;
(iii) any liability, obligation or commitment related to any credit
facilities with third Persons or other indebtedness of Seller, except as
specifically listed as Assumed Liabilities;
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(iv) any liability of Seller or of any members of its Group for any
Taxes, including, without limitation, any obligation or liability for
Taxes (i) that relate to or arise as a result of any Excluded Assets,
(ii) that relate to or arise as a result of the sale or transfer from
the Seller to the Purchaser of any of the Purchased Assets other than
sales Taxes for which Purchaser shall be liable, or (iii) for any
periods (or portions thereof) ending on or prior to the Closing or (iv)
under TREASURY REGULATION Section 1.1502-6 (or similar provisions of
state or local Applicable Law);
(v) any and all liabilities and obligations of Seller, Parent, or
any Affiliate that is a subsidiary of Parent, of any nature, accrued,
absolute, contingent or otherwise, regardless of when a claim with
respect thereto may be asserted, arising in respect of the Business as
operated by the Seller prior to the Closing, whether or not Seller and
Parent, or any Affiliate that is a subsidiary of Parent, have Knowledge
thereof, other than the Assumed Liabilities;
(vi) any claims asserted by current or former employees of Seller for
benefits pursuant to the CONSOLIDATED OMNIBUS BUDGET RECONCILIATION ACT
OF 1985, as amended ("COBRA"), arising out of or relating to cessation
of employment with the Seller, whether the claim is asserted against
Purchaser or Seller but not to the extent that the Purchaser chooses to
pay on behalf of former employees of Seller sums necessary under COBRA
to continue medical benefits for such Persons;
(vii) any alleged failure to provide notice to Seller's employees
pursuant to WARN, or otherwise comply with WARN in connection with the
transactions contemplated by this Agreement or any other similar
Applicable Law, whether the claim is asserted against Purchaser or
Seller;
(viii) any and all liabilities of Seller in connection with Seller's
employees or Plans relating to periods on or before the Closing;
(x) except to the extent included in the Assumed Liabilities,
liabilities arising by virtue of any use of the Purchased Assets by
Seller on or before the Closing and the conduct of the Business on or
before the Closing; and
(xi) any Pre-Closing Environmental Liabilities;
1.1.22 "FINANCIAL STATEMENTS" means the unaudited statements of
receipts and disbursements of the Seller for the fiscal year ended the
31st day of December, 1998, which have been furnished to the Purchaser
by the Seller;
1.1.23 "FIRST BALANCE" has the meaning attributed thereto in Paragraph
5.1.2 hereof;
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1.1.24 "FIRST FINANCING" means, subject to Paragraph 5.1.4, the
financing completed by the Purchaser or Vector (as hereinafter defined)
that next follows the Closing, including without limitation, (i) any
borrowing of capital, public offering, private placement or similar
distribution of Purchaser's or Vector securities, if any, or (ii) any
receipt of proceeds from collaborative agreements to which the Purchaser
or Vector is a party, such as, but not limited to, licensing agreements;
1.1.25 "FURNISHINGS AND EQUIPMENT" means all of the furnishings,
scientific and research apparatus, measuring and other devices,
equipment, tools, shelves, racks, supplies, computer hardware and
software, signs, accessories, maintenance equipment and all other
tangible property used in the Business and owned or leased by the
Seller, including, without limitation, the furnishings and equipment
listed in Schedule 1.1.25 hereto;
1.1.26 "GOODWILL" means the goodwill of the Seller, including without
limitation, all books, records and other materials relating principally
or solely to the Business, provided that Purchaser's access to books,
records, and other materials relating other than solely to the Business
shall be governed by Sub-Section 3.5 hereof. Goodwill does not include
items relating to the Excluded Liabilities or the Excluded Assets (in
any form or medium). Goodwill does include (i) advertising materials,
catalogues, drawings, technology, blueprints, flow sheets,
correspondence, mailing lists, purchasing materials and records,
reports, data, manuals, accounting records, sales order files, cost
sheets and all other books, documents, records and data relating to the
Business that are in the possession of the Seller or the Parent other
than any such items relating to the Excluded Liabilities or the Excluded
Assets, (ii) all goodwill related to the Intellectual Property, (iii)
all of the Seller's rights and interest in and to the name "ChromaXome
Corporation" and/or any variation or facsimile thereof, the exclusive
right of the Purchaser to represent itself as carrying on the Business
as a continuation of and in succession to the Seller and the right to
use any words indicating that the Business is so carried on, and (iv)
all other goodwill associated with the other Purchased Assets;
1.1.27 "GOVERNMENTAL AUTHORITY" means any nation or government, any
state or other political subdivision thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions
of or pertaining to government, including without limitation, any
government authority, agency, department, board, commission or
instrumentality of the United States, any State of the United States or
any political subdivision thereof, and any tribunal or arbitrator(s) of
competent jurisdiction, and any self-regulatory organization;
1.1.28 "GOVERNMENTAL RULE" means any law, judgment, order, decree,
statute, ordinance, rule or regulation issued or promulgated by any
Governmental Authority;
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1.1.29 "GROUP" means, individually and collectively, (i) Parent, (ii)
the subsidiaries included in the Affiliated group of which Parent is the
common parent within the meaning of Section 1504 of the Code and/or in
which Seller is a member, (iii) state, local or foreign consolidated,
combined or unitary groups, (iv) Seller and (v) any individual, trust,
corporation, partnership or any other entity as to which the Seller is
liable for Taxes (as hereinafter defined) incurred by such individual or
entity either as a transferee or successor, under a contract, or
pursuant to Treasury Regulation Section 1.1502-6, or pursuant to any
other Applicable Law;
1.1.30 "HAZARDOUS MATERIAL" means any substance defined, designated or
regulated by any Environmental Law;
1.1.31 "INTELLECTUAL PROPERTY" means the intellectual property set
forth in Schedule 1.1.31 hereto and all rights thereunder or in respect
thereof, including but not limited to rights to sue and collect for and
remedies against past, present and future infringements thereof, and
rights of priority and protection of interests therein under Applicable
Laws of any jurisdiction worldwide and all tangible embodiments thereof.
Intellectual Property includes all of the Seller's right, title and
interest in and to all (i) inventions, trade secrets, ideas, concepts,
and product and component designs comprising a part of the Business as
well as any Patents; (ii) existing licenses for the use of any Patents
or other items in the other clauses of this definition comprising a part
of the Business; (iii) all information and materials, including but not
limited to, discoveries, improvements, processes, formulas, data,
inventions, know-how, trade secrets, instructions, technology and all
products currently under development by Seller, Parent, or any Affiliate
that is a subsidiary of Parent, or any of their agents or employees,
comprising a part of the Business, including descriptions and any other
material information related thereto; (iv) industrial designs comprising
a part of the Business as well as any registrations or applications for
registration therefor; (v) copyrights (including waivers of moral
rights) comprising a part of the Business; (vi) trademarks, trade names,
brand names, service marks, logos and designs comprising a part of the
Business as well as any registrations or applications for the
registration therefor; and (vii) catalogue files and related marketing
materials comprising a part of the Business including photographs,
brochures, trade show display materials, graphic design computer files
and the remaining inventory of catalogue literature;
1.1.32 "INTERIM PERIOD" means the period from the close of business on
the Effective Date to the time of the Closing;
1.1.33 "INVENTORY" means the raw material inventory set forth in
Schedule 1.1.33 hereto and all inventories of materials of the Seller
relating to the Business, on hand at the Premises or elsewhere on
consignment or in transit at the time of the Closing;
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<PAGE>
CONFIDENTIAL CONFIDENTIAL TREATMENT REQUESTED
1.1.34 "IRS" means the Internal Revenue Service;
1.1.35 "KNOWLEDGE" means that an individual will be deemed to have
Knowledge of a particular fact or other matter if such individual is
actually aware of such fact or other matter. A Person will be deemed to
have Knowledge of a particular fact or other matter if any individual
who is serving as the chief executive officer, chief financial officer
or director of research of such Person shall have actual Knowledge of
such fact or other matter, provided, however, with respect to the
matters set forth in Paragraph 7.1.9, a Person will be deemed to have
Knowledge of a particular fact or other matter if any individual
employed by such Person shall have actual knowledge of such fact or
other matter. In addition to the foregoing, the Seller shall be deemed
to have Knowledge if [* *] has actual knowledge of such fact or other
matter;
1.1.36 "LEASES" means the leases set forth in Schedule 1.1.36 hereto;
1.1.37 "LICENSE AGREEMENT" means the non-exclusive, worldwide, paid-up
license agreement of even date entered into between Purchaser, as
licensor, and Parent, as licensee, with respect to the "macro-droplet
technology" included in the Intellectual Property comprising part of the
Purchased Assets, substantially in the form of the draft license annexed
hereto as Schedule 1.1.37;
1.1.38 "LIENS" means any mortgage, pledge, security interest, lien,
encumbrance, adverse claim or interest, option, right of first refusal,
or other restrictions or limitations of any nature whatsoever other than
"PERMITTED LIENS";
1.1.39 "LOSSES" has the meaning ascribed thereto in Sub-Section 10.2
hereof;
1.1.40 "NOTES" has the meaning ascribed thereto in Sub-Section 5.2
hereof;
1.1.41 "PARENT GUARANTY" means the guaranty dated the Closing Date to
be entered into by Parent and delivered to Purchaser to guarantee the
obligations of Seller and Parent hereunder, in the form annexed hereto
as Schedule 1.1.41;
1.1.42 "PARTIES" means the Purchaser, Seller and Parent, and "PARTY"
means any one of them;
1.1.43 "PATENTS" means the rights, title and interests of Seller in and
to (i) the issued patents and pending patent applications listed in
Schedule 1.1.43, (ii) any issued patents and pending patent applications
(whether filed prior to or following Closing) that claim priority from a
patent or patent application described in clause (i) of this Paragraph
1.1.43 and filed in any country and (iii) all provisional applications,
substitutions, continuations, continuations-in-part, divisions, and
renewals, all letters patent granted thereon, patents-of-additions and
all reissues, re-examinations and extensions of the foregoing, whether
owned solely or jointly by Seller or licensed by Seller in relation to
the Business and "PATENT" means any one of them;
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1.1.44 "PERMITTED LIENS" means those Liens that do not materially or
adversely affect the Purchased Assets or the operation of the Business,
including, (i) Liens for Taxes not yet due and payable, (ii) Liens
relating to any employees for salary or wages earned but not yet due and
payable, and (iii) Liens set forth in Schedule 1.1.44 hereto;
1.1.45 "PERSONS" means any natural person, firm, partnership,
association, corporation, company, trust, business trust, securities
commission, Governmental Authority or other entity, and "PERSON" means
any one of them;
1.1.46 "PRE-CLOSING ENVIRONMENTAL LIABILITIES" means Environmental
Liabilities arising from or relating to acts or omissions occurring, or
circumstances or conditions created or existing, prior to the Closing in
connection with the Seller, the Business, the Premises, the Purchased
Assets, the Excluded Assets, the Designated Assets, any predecessor of
the Seller, or any businesses or assets previously owned, leased,
operated or otherwise used by the Seller or any predecessor of the
Seller;
1.1.47 "PREMISES" means the Seller's principal place of business,
located within 9880 Campus Point Drive, San Diego, California, 92121;
1.1.48 "PURCHASED ASSETS" means the property and assets referred to in
Sub-Section 3.1 hereof;
1.1.49 "PURCHASE PRICE" means the purchase price to be paid by the
Purchaser to the Seller for the Purchased Assets determined in
accordance with the provisions of Section IV hereof;
1.1.50 "SAMPLES" means the genetic materials, compounds and other
substances derived from naturally occurring micro-organisms destined for
molecular manipulation in the combinatorial biology processes used in
the Business to create libraries of compounds for screening for
biological activity and to be delivered to Purchaser by Seller under
this Agreement, together with all modifications, analogues, isolates and
derivatives thereof. A non-exhaustive list of Samples is set forth in
Schedule 1.1.50;
1.1.51 "SECOND FINANCING" means, subject to Paragraphs 5.1.3 and 5.1.4,
the financings completed by the Purchaser or Vector that follow the date
the of the First Financing, including without limitation, (i) any
borrowing of capital, public offering, private placement or similar
distribution of Purchaser's or Vector's securities, if any, or (ii) any
receipt of proceeds from collaborative agreements to which the Purchaser
or Vector is a party, such as, but not limited to, licensing agreements;
1.1.52 "SECURITY AGREEMENT" means the pledge and security agreement
dated the Closing Date to be entered into between Purchaser and Seller,
in the form annexed hereto as Schedule 1.1.52;
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1.1.53 "SHARE PURCHASE AGREEMENT" means the share purchase agreement of
even date entered into between Vector and Parent with respect to the
Shares;
1.1.54 "SHARES" has the meaning ascribed thereto in Paragraph 5.1.5
hereof;
1.1.55 "SUBLEASE AGREEMENT" means the sublease dated the Closing Date
to be entered into between Purchaser and Parent with respect to the
portion of the Premises occupied by Seller at Closing, in the form
annexed hereto as Schedule 1.1.55;
1.1.56 "TAXABLE PERIOD" means any taxable year or any other period that
is treated as a taxable year (or other period, or portion thereof, in
the case of a Tax (as hereinafter defined) imposed with respect to such
other period (e.g., a quarter) with respect to which any Tax may be
imposed under any Applicable Law;
1.1.57 "TAXES" means any and all federal, state, local and foreign
taxes, assessments and other governmental charges, duties, impositions,
levies and liabilities, including, without limitation, taxes based upon
or measured by gross receipts, income, profits, sales, use and
occupation, and value added, AD VALOREM, transfer, gains, franchise,
withholding, payroll, recapture, employment, excise, unemployment
insurance, social security, occupation, business organization, stamp,
environmental and property taxes, together with all interest, penalties
and additions imposed with respect to such amounts. For the purposes of
this Agreement, "TAXES" also includes any obligations under any
agreements or arrangements with any person with respect to the liability
for, or sharing of, Taxes (including, without limitation, pursuant to
Treasury Regulation Section 1.1502-6 or comparable provisions of state,
local or foreign Tax law) and including, without limitation, any
liability for Taxes as a transferee or successor, by contract or
otherwise;
1.1.58 "TAX RETURN" means any report, return, election, notice,
estimate, declaration, information statement and other forms and
documents (including, without limitation, all schedules, exhibits and
other attachments thereto) relating to and filed or required to be filed
with a taxing authority in connection with any Taxes (including, without
limitation, estimated Taxes);
1.1.59 "VECTOR" means TerraGen Diversity Inc., a body politic and
corporate, duly incorporated according to the laws of the Province of
British Columbia, Canada, having its head office and principal place
of business at 2386 East Mall, in the City of Vancouver, Province of
British Columbia, Canada V6T 1Z3 and holder of all of the outstanding
shares in Purchaser;
1.1.60 "VECTOR GUARANTY" means the guaranty dated the Closing Date to
be entered into by Vector and delivered to the Seller and Parent to
guarantee certain of the obligations of Purchaser hereunder, in the form
annexed hereto as Schedule 1.1.60; and
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1.1.61 "WARN," means the WORKER ADJUSTMENT AND RETRAINING NOTIFICATION
ACT, 29 U.S.C. Section 2101 ET SEQ.
SECTION II - SCHEDULES
2.1 The following are the Schedules annexed to and incorporated into this
Agreement by this reference and deemed to be a part hereof:
Schedule 1.1.1 - Accounts Receivable
Schedule 1.1.5 - Assumed Contracts
Schedule 1.1.6 - Assumed Liabilities
Schedule 1.1.16 - Employment Agreements
Schedule 1.1.25 - Furnishings and Equipment
Schedule 1.1.31 - Intellectual Property
Schedule 1.1.33 - Inventory
Schedule 1.1.36 - Leases
Schedule 1.1.37 - License Agreement
Schedule 1.1.41 - Parent Guaranty
Schedule 1.1.43 - Patents
Schedule 1.1.44 - Permitted Liens
Schedule 1.1.50 - Samples
Schedule 1.1.52 - Security Agreement
Schedule 1.1.55 - Sublease Agreement
Schedule 1.1.59 - Vector Guaranty
Schedule 3.4 - Designated Assets
Schedule 4.2 - Allocation of Purchase Price
Schedule 5.2 - Notes
Schedule 6.3.1 - Changes in Purchased Assets
Schedule 9.2.7 - Seller's Legal Opinion
Schedule 9.3.7 - Purchaser's Legal Opinion
DISCLOSURE SCHEDULES
Schedule 7.1.3- Purchased Assets
Schedule 7.1.4- Financial Statements
Schedule 7.1.9- Intellectual Property
Schedule 7.1.10- Litigation
Schedule 7.1.12- Third Person Consents
Schedule 7.1.13- Affiliates
Schedule 7.1.14- Insurance
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SECTION III - ASSETS TO BE PURCHASED AND SOLD AND ASSUMPTION OF LIABILITIES
3.1 PURCHASED ASSETS. The Seller hereby agrees to sell, convey, assign and
transfer to the Purchaser and the Purchaser in reliance upon the
representations, warranties and covenants of the Seller contained herein, and
subject to the terms and conditions hereof, hereby agrees to purchase from the
Seller, effective as of the Closing Date, the undertaking, property and assets
of the Business listed in the Schedules hereto (hereinafter referred to
collectively as the "PURCHASED ASSETS"), namely:
3.1.1 the Accounts Receivable;
3.1.2 the Furnishings and Equipment;
3.1.3 the Goodwill;
3.1.4 the Intellectual Property;
3.1.5 the Inventory;
3.1.6 the Prepaid Expenses;
3.1.7 the Samples;
3.1.8 subject to Sub-Section 6.6 hereof regarding third Person
Consents, all of the Seller's right, title and interest in and pursuant
to the Assumed Contracts, including all rights which the Seller may have
to set off or compensate against amounts owing under the Assumed
Contracts; and
3.1.9 subject to Sub-Section 6.6 hereof regarding third Person
Consents, the benefit of all restrictive covenants and agreements which
the Seller may have with its, employees, officers, directors and
independent contractors, past or present, to the extent assignable under
Applicable Law.
3.2 ASSUMED LIABILITIES. Subject to the terms and conditions stipulated
herein, the Purchaser undertakes to pay, satisfy, discharge, perform and fulfil
the Assumed Liabilities to the full and complete exoneration of the Seller.
3.3 EXCLUDED LIABILITIES. The Purchaser shall not assume or be obligated to
pay, satisfy, discharge, perform or fulfil the Excluded Liabilities or any other
liability, obligation, debt, charge or expense of Seller of any kind,
description, or character not included in the Assumed Liabilities, whether
relating to the Business or otherwise, fixed or contingent, accrued, actual,
disclosed or undisclosed. The Seller hereby covenants that it shall indemnify
and save and hold Purchaser harmless from and against all liabilities,
obligations (whether fixed or contingent, accrued, actual, disclosed or
undisclosed), claims and demands of
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whatsoever nature relating to the Business and/or the Purchased Assets existing
at or incurred prior to the Closing which are not included in the Assumed
Liabilities.
3.4 DESIGNATED ASSETS. The Purchaser acknowledges that certain assets
(collectively, the "Designated Assets") of the Parent that are used by the
Seller in operating the Business but that are not primarily or solely related to
the Business or that are not owned by Seller, are not included in the Purchased
Assets being sold to the Purchaser under the terms of this Agreement. The
Parties agree that the Seller shall retain its rights, obligations and
liabilities with respect to such Designated Assets. The Parties agree to
cooperate to determine whether an asset relating to the Business is a Purchased
Asset or a Designated Asset. The Designated Assets are listed or described in
Schedule 3.4 hereto.
3.5 ACCESS TO CERTAIN DESIGNATED ASSETS. Following Closing, the Seller
agrees to allow the Purchaser reasonable access to the pre-Closing accounting
books, records, and other materials that relate to the Purchased Assets that are
not delivered to the Purchaser as provided in Sub-Section 3.1. The Seller will
allow the Purchaser access thereto at all reasonable times and will permit the
Purchaser to make copies of the relevant Business information contained in such
books, records and other materials at the Purchaser's expense. During a seven
(7) year period beginning on the Closing Date, the Seller will not dispose of or
permit the disposal of any such books, records and other materials without first
giving sixty (60) days' prior written notice to the Purchaser offering to
surrender the same to the Purchaser at the Purchaser's expense. In the event
the Purchaser does not indicate its desire to retain such books, records and
other materials during the said sixty (60) day period, the Seller will be free
to dispose of same. In the event the Purchaser should reasonably require access
to any of the Seller's employee records after the Closing concerning employees
hired by the Purchaser, Seller agrees that they shall endeavor to provide copies
of the requested records, subject to any confidentiality restrictions imposed by
Applicable Law or to an effective written waiver of such restrictions provided
by the individual whose records are requested.
SECTION IV - PURCHASE PRICE AND ALLOCATION
4.1 PURCHASE PRICE. The Purchase Price for the Purchased Assets shall be
the sum of six million five hundred thousand Dollars ($6,500,000.00).
4.2 ALLOCATION OF THE PURCHASE PRICE. On or prior to the Closing Date, the
Seller and the Purchaser shall mutually agree in writing on an allocation of the
Purchase Price and the amount of the Assumed Liabilities (and all other
capitalizable costs) among the Purchased Assets and other relevant items in
accordance with Section 1060 of the Code and the regulations promulgated
thereunder and all applicable provisions of state, local and foreign law (such
allocations being hereinafter referred to as the "Section 1060 Allocations"). A
description of the Section 1060 Allocations shall be attached hereto as Schedule
4.2 at Closing. If the Seller and the Purchaser are unable to agree with
respect to the Section 1060 Allocations, the Seller and the Purchaser shall
engage reviewing accountants to determine such allocations. The conclusions of
the reviewing accountants shall be binding on the
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Parties. The fees and expenses of the reviewing accountants shall be shared
equally by the Seller and the Purchaser. Each of the Parties hereto agrees
(i) to prepare and file Tax Returns, including Form 8594, in a manner
consistent with the Section 1060 Allocations, as finally determined pursuant
to this Sub-Section 4.2, (ii) to report this transaction for federal, state,
local and foreign income Tax purposes in accordance with the Section 1060
Allocations, as finally determined pursuant to this Sub-Section 4.2, and
(iii) to use its best efforts to sustain the Section 1060 Allocations, as
finally determined pursuant to this Sub-Section 4.2, in any subsequent Tax
audit or dispute.
4.3 CLOSING PRORATION. After the Closing, any AD VALOREM, use, real and
personal property and other Taxes, installments or special assessments, utility,
water or similar payments arising from, or relating to, the Purchased Assets or
the conduct of the Business, which become due and payable on or after the
Closing Date and relate to periods both before and after the Closing, shall be
prorated and adjusted between the Seller and the Purchaser as of the Closing
Date on a PER DIEM basis and Seller shall be responsible for and pay to the
Purchaser the portion of such amounts allocatable to the period prior to the
Closing Date for which payment is due on or after the Closing Date at least two
(2) business days prior to the date such Taxes become due and payable.
Purchaser shall provide Seller with reasonable notice of any such claim
hereunder. Seller shall remain responsible for paying the PER DIEM amounts due
from Seller under this Sub-Section 4.3, notwithstanding any failure by Purchaser
to provide Seller with reasonable notice; it being understood that failure on
the part of the Purchaser to provide reasonable notice as aforesaid shall only
relieve Seller of the obligation to pay such amounts at least two (2) business
days prior to the due date thereof.
SECTION V - PAYMENT OF THE PURCHASE PRICE
5.1 PAYMENT OF PURCHASE PRICE. The Purchase Price shall be paid and
satisfied by the Purchaser as follows:
5.1.1 CLOSING CASH PAYMENT. The sum of two million Dollars
($2,000,000.00) (the "CLOSING CASH PAYMENT") shall be payable by
certified check or wire transfer at the Closing;
5.1.2 FIRST BALANCE.
(a) Subject to Sub-Paragraph (b) of this Paragraph 5.1.2
and to Paragraph 5.1.4, the sum of two million Dollars
($2,000,000.00) (the "FIRST BALANCE") shall be paid by certified
check or wire transfer on the earlier of:
(i) one (1) week following the date of the First
Financing; and
(ii) December 31, 1999.
(b) Where the net proceeds of the First Financing are
four million Dollars ($4,000,000.00) or more, the amount of the
First Balance shall be paid in full.
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Where the net proceeds of the First Financing are less than four
million Dollars ($4,000,000.00), fifty percent (50%) of the net
proceeds shall be advanced towards payment of a portion of the
First Balance, with the remaining amount outstanding under the
First Balance being carried forward for payment no later than
December 31, 1999. For the purpose of this Sub-Paragraph (b),
"NET PROCEEDS" shall mean the gross amount received by the
Purchaser or Vector from the First Financing, less all agents',
consultants' and professional commissions or fees, Taxes, duties
or charges applicable to the First Financing, provided that such
commissions, fees, Taxes, duties or charges can be reasonably
allocated to such transaction;
5.1.3 SECOND BALANCE.
(a) Subject to Sub-Paragraph (b) of this Paragraph 5.1.3
and to Paragraph 5.1.4, the sum of one million Dollars
($1,000,000.00) (the "SECOND BALANCE") shall be paid by
certified check or wire transfer on the earlier of:
(i) one (1) week following the date of the Second
Financing; and
(ii) June 30, 2000.
(b) Where the net proceeds of the Second Financing are
two million Dollars ($2,000,000.00) or more, the amount of the
Second Balance shall be paid in full (after first applying such
net proceeds to any amounts of the First Balance remaining
outstanding). Where the net proceeds of the Second Financing
are less than two million Dollars ($2,000,000.00), fifty percent
(50%) of the net proceeds shall be advanced towards payment of a
portion of the First Balance (if any) and Second Balance, with
the remaining amount under the Second Balance being carried
forward for payment no later than June 30, 2000. For the
purpose of this Sub-Paragraph (b), "NET PROCEEDS" shall mean the
gross amount received by the Purchaser or Vector from the Second
Financing, less (i) amounts required to pay any portion of the
First Balance carried forward under Sub-Paragraph 5.1.2(b) and
(ii) all agents', consultants' and professional commissions or
fees, taxes, duties or charges applicable to the Second
Financing, provided that such commissions, fees, taxes, duties
or charges can be reasonably allocated to such transaction.
Where the net proceeds of the Second Financing immediately
following the First Financing are insufficient to pay off all
outstanding portions of the First Balance and the Second
Balance, the provisions of this Sub-Paragraph 5.1.3(b) shall
apply, MUTATIS MUTANDIS, to any subsequent financing completed
by Purchaser or Vector, until such time as the First Balance and
Second Balance are paid in full. In any event, (y) the First
Balance shall be paid in full no later than December 31, 1999
and (z) the Second Balance shall be paid in full no later than
June 30, 2000.
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5.1.4 FINANCING EXCEPTION. Notwithstanding anything to the contrary
herein contained, with respect to any financing carried out by Purchaser
or Vector as part of a transaction whereby Vector or any of it
Affiliates acquires all of the shares or substantially all of the assets
of a third Person, only the net proceeds raised in excess of the amount
required to fund such acquisition shall be included in the definition of
First Financing or Second Financing.
5.1.5 SHARES. The sum of one million five hundred thousand Dollars
($1,500,000.00) payable by the issuance to the Seller of six hundred
thousand (600,000) Class "B" preferred shares (the "SHARES") in the
share capital of Vector, deliverable at Closing, in accordance with the
Share Purchase Agreement.
5.2 PROMISSORY NOTES. To evidence the indebtedness of the First Balance and
the Second Balance, the Purchaser shall issue to the Seller interest-bearing
promissory notes (the "NOTES") secured by the Security Agreement and in amounts
equal to the First Balance and the Second Balance respectively, the whole in the
form of and containing the provisions set out in the draft promissory notes
attached as Schedule 5.2 hereto.
SECTION VI - CLOSING DATE AND CLOSING DOCUMENTS TO BE DELIVERED
6.1 CLOSING DATE. The purchase and sale contemplated by this Agreement
shall close on the Closing Date.
6.2 PLACE OF CLOSING. The Closing shall take place at the offices of
Pillsbury, Madison & Sutro LLP, 11975 El Camino Real, Suite 200, San Diego,
California 92130, on the Closing Date, at the hour of 10:00 o'clock in the
forenoon, or at such other place and/or at such other time as may be agreed in
writing between the Parties.
6.3 SELLER'S DOCUMENTS. At Closing, the Seller shall deliver or cause to be
delivered to the Purchaser:
6.3.1 CHANGE IN PURCHASED ASSETS. A Schedule 6.3.1 identifying any
changes in the Purchased Assets from the Purchased Assets as described
in the exhibits and Schedules delivered to the Purchaser on the date
hereof, provided that any such changes shall only be permitted in
accordance with the provisions of Section XI hereof;
6.3.2 TRANSFER DOCUMENTATION. Such executed documentation as may
reasonably be required to transfer and assign Seller's rights in the
Purchased Assets being sold, transferred and assigned, including, but
not limited to, bills of sale, assignments and other instruments of
conveyance and transfer and Consents, (or, in the case of Patents
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and trademarks, appropriate filings with the appropriate trademark and
patent offices) conveying the Purchased Assets being sold, transferred
and assigned, including without limitation, assignments covering the
Assumed Contracts and Intellectual Property and any required transfer
Tax forms and affidavits;
6.3.3 RELEASES. Full or partial releases, as the case may be, from
Seller's lenders and creditors in a form satisfactory to Purchaser,
acting reasonably, to transfer the Purchased Assets to Purchaser free
and clear of all Liens;
6.3.4 OPINION OF SELLER'S COUNSEL. The legal opinion referred to in
Sub-Section 9.2.7 hereof;
6.3.5 CERTIFICATES. The certificates of Seller required under Section
IX hereof;
6.3.6 PARENT GUARANTY. The Parent Guaranty, duly executed; and
6.3.7 OTHER DOCUMENTS. Such other documents, instruments and
materials as Purchaser may reasonably request.
6.4 PURCHASER'S DOCUMENTS. At Closing, the Purchaser shall deliver or cause
to be delivered to the Seller:
6.4.1 CLOSING CASH PAYMENT. The Closing Cash Payment, or evidence
thereof;
6.4.2 PROMISSORY NOTES. The Notes, duly executed;
6.4.3 SECURITY AGREEMENT. The Security Agreement, duly executed;
6.4.4 SHARES. The Shares;
6.4.5 OPINION OF PURCHASER'S COUNSEL. The legal opinion referred to
in Sub-Section 9.3.7 hereof;
6.4.6 CERTIFICATES. The certificates of Purchaser required under
Section IX hereof;
6.4.7 VECTOR GUARANTY. The Vector Guaranty, duly executed; and
6.4.8 OTHER DOCUMENTS. Such other documents, instruments and
materials as Seller may reasonably request.
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6.5 FURTHER DOCUMENTS. From time to time after Closing and without further
consideration from Purchaser, Seller shall execute and deliver such other
instruments of conveyance and transfer, and take such other action, as Purchaser
may reasonably request to more effectively convey, assign and transfer to
Purchaser, Seller's interest in and title to, and to put Purchaser in possession
of, any of the Purchased Assets.
6.6 THIRD PERSON CONSENTS. Notwithstanding anything to the contrary in this
Agreement, this Agreement shall not constitute an agreement to sell, assign or
transfer any Consent, instrument, contract, lease, permit or other agreement or
arrangement or any claim, right or benefit arising thereunder or resulting
therefrom if an assignment or transfer or an attempt to make such an assignment
or transfer without the Consent of a third Person would constitute a breach or
violation thereof, or affect adversely the rights of the Purchaser or Seller
thereunder; and any transfer or assignment that requires the Consent of a third
Person shall be made subject to such Consent being obtained. Subject to this
Sub-Section and to Paragraphs 7.1.8 and 7.1.13, Purchaser shall not assume the
applicable agreement or obligation until such Consent is obtained. Seller shall
undertake all reasonable efforts in order to secure and deliver at Closing third
Person Consents required for the sale, assignment or transfer of any Purchased
Assets and the ownership and operation thereof to Purchaser. In the event that
any such Consent is not obtained on or prior to the Closing Date, Seller and
Purchaser shall continue to use all reasonable efforts (which shall not require
the expenditure of funds by the Purchaser except for reasonable legal and
related costs incurred in the discretion of the Purchaser and except for amounts
due as Assumed Liabilities and which shall not require the expenditure of funds
by the Seller except for reasonable legal and related costs incurred in the
discretion of the Seller and for amounts due as Excluded Liabilities) to obtain
any such Consent, and Seller shall reasonably cooperate with Purchaser in any
lawful arrangement requested or approved by Purchaser to provide Purchaser with
the benefits under such Consent, instrument, contract, lease or other agreement
or arrangement; including performance by the Seller, as agent, if economically
feasible, PROVIDED that the Purchaser shall undertake to pay or satisfy the
corresponding liabilities for the enjoyment of such benefit to the extent the
Seller would have been responsible therefor if such Consent or approval had been
obtained. Subject to Section 11 hereof, cooperation of the Seller shall not be
deemed to include bringing or participating in any lawsuit.
SECTION VII - SELLER'S REPRESENTATIONS AND WARRANTIES
7.1 REPRESENTATIONS AND WARRANTIES. The Seller hereby represents and
warrants to the Purchaser as follows and acknowledges that the Purchaser is
relying upon said representations and warranties in connection with the purchase
of the Purchased Assets and further acknowledges that the Purchaser would not
have entered into this Agreement without same. The Seller hereby represents and
warrants that the following representations and warranties are true and accurate
as of the Effective Date:
7.1.1 CORPORATE ORGANIZATION. The Seller is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware.
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7.1.2 CORPORATE POWER.
7.1.2.1 The Seller has all necessary corporate power,
authority and capacity to own its property and assets and to
carry on the Business as presently conducted.
7.1.2.2 The Seller has all necessary corporate power and
authority to enter into this Agreement and each of the
Collateral Agreements to which it is a party, to perform its
obligations hereunder and thereunder and to consummate the
transactions contemplated hereby. A duly authorized
representative of the Seller has executed this Agreement and the
Collateral Agreements to which the Seller is a party on behalf
of the Seller. The execution, delivery and performance of this
Agreement and the Collateral Agreements to which the Seller is a
party shall not violate any provision of the articles of
incorporation or by-laws of the Seller. All corporate or other
organizational proceedings on the part of Seller necessary to
authorize this Agreement and the Collateral Agreements to which
it is a party and the transactions contemplated hereby have been
taken;
7.1.2.3 This Agreement and all Collateral Agreements to
which the Seller is a party constitute valid and binding
obligations on the Seller enforceable against it in accordance
with their terms, except as such enforceability may be limited
by (i) applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application relating to or
affecting enforcement of creditors' rights and (ii) rules of law
governing specific performance, injunctive relief and other
equitable remedies;
7.1.2.4 The execution and delivery of this Agreement and of
each of the Collateral Agreements to which the Seller is a
party do not, and the consummation of the transactions
contemplated hereby and the compliance with the terms hereof
will not (i) violate any Governmental Rule applicable to Seller,
(ii) conflict with or result in any breach of any of the terms,
conditions or provisions of or constitute (with due notice or
lapse of time, or both) a default (or give rise to any right of
termination, cancellation or acceleration) under, or result in
the creation of any Lien upon any of the Purchased Assets under,
any Assumed Contract (except as any of the foregoing may,
individually or in the aggregate, have only an immaterial effect
on the Seller or the Purchased Assets), or (iii) to the
Knowledge of Purchaser, require any approval, authorization,
Consent, license, exemption, filing or registration with any
court, arbitrator or Governmental Authority, except for such
approvals, authorizations, Consents, actions or filings which
have been obtained or made.
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7.1.3 PURCHASED ASSETS.
7.1.3.1 Except as set forth in Schedule 7.1.3 hereto, the
Seller owns and has the right, title and interest necessary to
sell, transfer and assign the tangible Purchased Assets with
good and marketable title free and clear of all Liens and of any
rights or privileges capable of becoming Liens and the Seller
has the full power and authority and is entitled to sell,
transfer and assign good and marketable title to the tangible
Purchased Assets to the Purchaser, free and clear of any Liens;
7.1.3.2 To the Knowledge of Seller, no Person has any
agreement, option or understanding or any right capable of
becoming an agreement, option or understanding for the purchase
of all or any of the Purchased Assets other than pursuant to
purchase orders accepted by the Seller in the ordinary course of
operating the Business or as provided for in the Assumed
Contracts;
7.1.3.3 Except as set forth in Schedule 7.1.3 hereto, the
Seller is not required to pay fees or other consideration to any
Person with respect to the use of the Purchased Assets;
7.1.3.4 Schedule 1.1.25 hereto is a complete list of all the
Furnishings and Equipment (having a cost in excess of five
thousand Dollars ($5,000) for each such item) used by the Seller
as of the Effective Date in the conduct of the Business;
7.1.3.5 The Seller has all material Consents, licenses,
permits, quotas and other similar arrangements which are
necessary for the conduct of the Business and such Consents,
licenses, permits, quotas and other similar arrangements are in
full force and effect and there has been no material change in
the facts or circumstances reported or assumed in the
applications for or the granting of such Consents, licenses,
permits, quotas and other similar arrangements;
7.1.3.6 Except as set forth in Schedule 7.1.3 hereto, in the
conduct of the Business, the Seller has not entered into any
non-arm's length transaction, or transaction with an Affiliate
that, to the Knowledge of Seller, are on terms more favorable
than if such transaction were with a third Person; and
7.1.3.7 Other than the Purchased Assets and the Designated
Assets, there are no assets that are material to the operation
of the Business, as operated by Seller immediately prior to the
Effective Date.
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7.1.4 FINANCIAL RECORDS.
7.1.4.1 FINANCIAL STATEMENTS. Set forth in Schedule 7.1.4
hereto are true, correct and complete copies of the Financial
Statements. The Financial Statements have been prepared from
and are in accordance with the books and records of Seller and
completely and accurately reflect the receipts and disbursements
of the Seller as at December 31, 1998.
7.1.4.1 FINANCIAL RECORDS; UNDISCLOSED LIABILITIES. Seller
has responded in good faith to questions posed by Purchaser
about the financial condition and performance of the Business.
There are no liabilities or obligations related to the Business,
except (i) as reflected in the Financial Statements, (ii) as
disclosed in Schedule 7.1.4 hereto, (iii) liabilities incurred
in the ordinary course of operating the Business since December
31, 1998, consistent (in amount and kind) with past practice and
(iv) Excluded Liabilities.
7.1.5 INVENTORY. The Seller maintains no material raw material or
finished goods Inventory. The Inventory has been properly stored and
protected. None of the Inventory is on consignment to any other Person.
The Purchaser agrees to purchase the Inventory strictly "as is" and in
its present condition.
7.1.6 SAMPLES. The Seller owns and has the right, title and interest
necessary to sell, transfer and assign the Samples to the Purchaser with
good and marketable title free and clear of all Liens and of any rights
or privileges capable of becoming Liens, other than as set forth in the
documents or instruments establishing Seller's right, title and interest
in such Samples. Notwithstanding the foregoing, the Parties acknowledge
that, other than as may expressly be provided for under the terms of
this Agreement, the Samples are to be provided to Purchaser by Seller
without any other warranties or conditions of any kind, either express
or implied, including, without limitation, warranties of merchantability
or of fitness for a particular purpose.
7.1.7 ASSUMED CONTRACTS.
7.1.7.1 Schedule 1.1.5 hereto sets forth all contracts,
agreements and other commitments, oral or written, that are
material to the operation of the Business, with brief
descriptions of oral agreements. The Seller has not received
any prepayment or been paid in advance pursuant to any of the
Assumed Contracts; and
7.1.7.2 The Assumed Contracts are valid and enforceable in
accordance with their respective terms and conditions, except as
such enforceability may be limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general
application relating to or affecting enforcement of creditors'
rights and (ii) rules of law governing specific performance,
injunctive
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relief and other equitable remedies. The Seller and the parties
to the Assumed Contracts are not in default under the terms of
the Assumed Contracts, and, to the Knowledge of Seller, no
condition or event has occurred which would constitute a default
or breach under any Assumed Contracts, and all the Assumed
Contracts are in full force and effect and the Seller is
entitled to all benefits hereunder;
7.1.8 NAME. The Seller has not entered into any agreement whereby it
has conferred the right to the use of its name or any part thereof to
any third Person. The Seller shall, within thirty (30) days of the
Closing Date, change its name to a name which will, in the reasonable
opinion of the Purchaser, in no manner resemble or be similar to
"ChromaXome Corporation" and shall desist from the registration of its
name wherever such registration has been effectuated, properly
indicating that the Seller no longer carries on business under such
name, in accordance with all Applicable Laws, effective at the time of
the Closing;
7.1.9 INTELLECTUAL PROPERTY.
7.1.9.1 Schedule 1.1.31 hereto sets forth a complete list of
all the Patents. Other than the Intellectual Property, no
intellectual property is used or required by the Seller in the
conduct of the Business as conducted by the Seller as of the
Closing Date. Should any Intellectual Property fail to be
transferred to the Purchaser at Closing, the Seller shall
promptly and on demand convey all of its right, title and
interest in and to any of same to the Purchaser without payment
of any additional consideration but at the Purchaser's sole cost
and expense. The Seller solely, validly and beneficially owns
all right, title and interest in and to all of the Patents with
the sole and exclusive right to use same, and owns or holds
adequate licenses or other rights to use all of the Intellectual
Property, without the payment to others of any royalties or
other sums and without the obligation to grant rights to others
in exchange, save as disclosed in Schedule 7.1.9, a true and
complete copy of each arrangement requiring such payment or
imposing such obligation being annexed to Schedule 1.1.5.
Seller is listed in the records of the appropriate U.S. and
foreign Government Agency as the sole and exclusive owner of the
registered Patents listed in Schedule 1.1.31. To the Knowledge
of Seller, the issued Patents included in the Patents are in
good standing and duly registered in all jurisdictions where
registered, as indicated in Schedule 1.1.31;
7.1.9.2 Except as disclosed in Schedule 7.1.9, the Seller
has not received any notice of adverse claims pending or
threatened, or of any Liens affecting the Intellectual Property.
Except as disclosed in Schedule 7.1.9, to the Knowledge of
Seller, (i) Seller has not heretofore infringed and is not now
infringing upon any patent, trade name, trademark, copyright,
trade secret or license belonging to any other Person, (ii) the
registrations for Intellectual Property are not subject to any
challenge or revocation and Seller has not engaged in and it is
not now
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engaged in any form of unfair competition and no Person has
alleged any of same, and (iii) all Patents and rights of
invention heretofore owned or held by any employee, director or
officer of the Seller and relating to the Business in any manner
have been duly and effectively transferred to the Seller and
shall be transferred to the Purchaser as part of the
Intellectual Property;
7.1.9.3 Except as disclosed in Schedule 7.1.9, all
registration and maintenance fees that have become due and
payable in respect of any grant or registration of any Patents
have been paid and no act has been done or omitted to be done by
Seller, Parent or any Affiliate that is a subsidiary of Parent,
or to the Knowledge of Seller, any holder of any rights with
respect thereto, to impair or dedicate to the public or entitle
any U.S. or foreign Governmental Authority or any other Person
to cancel, forfeit, modify or consider abandoned any
Intellectual Property, or to give any Person any rights with
respect thereto (except to the extent research funded by
government may give rise to certain government rights to
intellectual property resulting from such research), and, to the
Knowledge of Seller, (i) all of Seller's rights in the issued
Patents are valid, enforceable and free of defects (except to
the extent of minor defects correctable without impairment to
the value of such Patents) and (ii) the Patents other than the
issued Patents have been prepared and filed in compliance with
the technical and legal requirements of the respective patent
offices where filed (except to the extent of minor defects
correctable without impairment to the value of such Patents),
the subject matters of such other Patents are owned by the
Seller, and that such filings are otherwise regular on their
respective faces. Except as set forth in Schedule 7.1.9, (y)
Seller has no Knowledge of any facts or claims that would cause
any issued Patent to be invalid or unenforceable, in whole or in
part, or any Patent application to be ultimately substantially
rejected, and (z) Seller has no Knowledge of any fact that could
cause any Person to assert a claim of invalidity or
unenforceability against any issued Patent;
7.1.9.4 To the Knowledge of Seller, Seller will own or have
rights in and to the Intellectual Property on the Closing Date,
free and clear of all Liens, except as set forth in Schedule
7.1.9;
7.1.10 LITIGATION.
7.1.10.1 Except as disclosed in Schedule 7.1.10 hereto, there
is no claim, action, suit, dispute, investigation, arbitration
or other proceeding of any kind (including appeals and
applications for review) in progress, pending or, to the
Knowledge of Seller, threatened against or affecting the Seller,
the Business and/or the Purchased Assets, under any Applicable
Law, domestic or foreign. The Seller has no Knowledge of any
existing ground upon which any such claim, action, suit,
dispute, investigation, arbitration or other proceeding might be
commenced subsequent to the date hereof, except as disclosed in
Schedule 7.1.10;
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7.1.10.2 There is no litigation pending or, to the Knowledge
of Seller, threatened, which will affect its ability to perform
its obligations under this Agreement;
7.1.10.3 Except as disclosed in Schedule 7.1.10. hereto there
is not presently outstanding against the Seller or affecting the
Purchased Assets or the Business, any judgement, decree,
injunction, writ, rule or order of any Governmental Authority,
domestic or foreign, and the Seller is not a party to any
action, suit or proceeding in which any claim or demand is
asserted in its favor with respect to the Business or the
Purchased Assets and no such claims or demands are presently
contemplated. The Seller is not in default with respect to any
such judgement, decree, injunction, writ, rule or order directed
at it which default would have an adverse effect on the Business
or the Purchased Assets;
7.1.10.4 Since August 1, 1996, the Seller has not been
obliged or required to suspend or terminate, under any
Applicable Law, its operation of the Business or been subjected
to a fine or penalty as a result of the operation of the
Business;
7.1.10.5 The Seller has not committed any act of bankruptcy,
is not insolvent, has not proposed a compromise or arrangement
to its creditors generally, has not had any petition for a
receiving order in bankruptcy filed against it, has not made a
voluntary assignment in bankruptcy, has not taken any proceeding
with respect to a compromise or arrangement with its creditors,
has not taken any proceeding to have itself declared bankrupt or
wound-up, has not taken any proceeding to have a receiver
appointed to any part of its assets, or otherwise taken
advantage of any insolvency or bankruptcy legislation, has not
had any encumbrance placed upon or Person take possession of any
of its property and has not had any execution become enforceable
or become levied upon any of its property; and
7.1.10.6 Seller has complied in all material respects with
all Governmental Rules applicable to it that relate primarily to
the Purchased Assets. Seller has maintained all records
required to be maintained by all Governmental Authorities and
there are no presently existing circumstances Known to Seller
which would result in violation of any Governmental Rules.
7.1.11 ENVIRONMENTAL MATTERS.
7.1.11.1 To the Knowledge of the Seller, the Seller has
obtained or made all Consents required under applicable
Environmental Laws in connection with the Business, the
Premises, and the Purchased Assets, all such Consents are in
full force and effect and there has been no change in the facts
or circumstances reported or assumed in the applications for or
the granting of such Consents;
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7.1.11.2 To the Knowledge of the Seller, the Seller the
Business, the Premises and the Purchased Assets are in
compliance in all respects with, and have complied in all
respects with, all Environmental Laws, including without
limitation record-keeping, reporting, disclosure, employee
training and employee testing requirements imposed by
Environmental Laws, and neither Seller nor Parent has received
any notice of any pending or threatened claim, action, suit,
dispute, proceeding, hearing, investigation, charge, complaint,
notice of violation, notice of potential liability or demand
against or affecting the Business, the Premises, the Purchased
Assets or Seller arising under Environmental Laws;
7.1.11.3 To the Knowledge of the Seller, none of the Seller,
the Premises or the Business is subject to the requirements of
the TOXIC SUBSTANCES CONTROL ACT, 15 U.S.C. 2601 ET SEQ., as
amended, including, without limitation the regulations
promulgated thereunder at 40 C.F.R. PARTS 700, 720, 721, 723,
AND 725, as amended;
7.1.11.4 To the Knowledge of the Seller, none of the Seller,
the Premises, the Business or the Purchased Assets are or have
been subject to any order, judgment, decree, settlement, or
agreement relating to Environmental Laws and, Seller has not
been identified as a potentially responsible party or its
equivalent under any Environmental Law;
7.1.11.5 To the Knowledge of the Seller, none of the Seller
or any of its employees or, any other Person has, in connection
with the Business, the Purchased Assets, or the Premises, (i)
generated, transported, released, treated, stored, or otherwise
managed or used any Hazardous Material at any location, (ii)
arranged for the treatment, storage, or disposal of any
Hazardous Material at any location, (iii) exposed any employee
or other individual to any Hazardous Material at any location or
(iv) owned, operated or otherwise used the Business, the
Premises or the Purchased Assets, except, in each case, in
compliance with Environmental Laws and in a manner that could
not reasonably be expected to give rise to any Loss of or to
Seller or Purchaser arising under any Environmental Laws;
7.1.11.6 To the Knowledge of the Seller, the transactions
contemplated by this Agreement do not impose any obligations
under any Environmental Laws for site investigation or clean-up
or notification to any Person;
7.1.11.7 To the Knowledge of the Seller, no facts, events or
conditions relating to the past or present assets, property,
operations or facilities (including leasehold interests) of
Seller, or of any Affiliate or predecessor of Seller, would
prevent material compliance by Purchaser with, or give rise to
any Loss of Seller pursuant to, any Environmental Law; and
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7.1.11.8 Seller and Parent have delivered to Purchaser copies
of all environmental reports, surveys or assessments relating to
any current or former assets or properties (including leasehold
interests) of Seller which are in the custody or control of
either of them.
7.1.12 THIRD PERSON CONSENT. Except as disclosed in Schedule 7.1.12
hereto, the Consent of any third Person is not necessary to authorize
the execution of this Agreement or any of the Collateral Agreements to
which the Seller is a Party or the transfer of any of the Purchased
Assets, other than as provided for in the Assumed Contracts;
7.1.13 AFFILIATE. Except as described in Schedule 7.1.13 hereto,
neither the Seller, the Parent nor any Affiliate that is a subsidiary of
the Parent, directly or indirectly carries on a business similar to the
Business;
7.1.14 INSURANCE. Schedule 7.1.14 hereto contains a complete list of
all insurance policies maintained by the Seller on the Purchased Assets,
specifying the name of the insurer, policy number, type of insurance and
amount of coverage. All of the tangible Purchased Assets are adequately
insured against loss or damage and other hazards or risks of a character
usually insured against by companies in the same or similar business as
the Business. Since August 1, 1996, (i) the Seller has not been in
default of any of the provisions of the above-mentioned insurance
policies, (ii) has not failed to give any notice or present any claim
under any such insurance policies in a timely fashion, and (iii) there
have been no claims or any other claims for damages against the Seller
pertaining to the Purchased Assets under such insurance policies. The
Parties acknowledge and agree that the Seller has no Knowledge as to
whether, at all times prior to August 1, 1996, there have been any such
claims for damages, failures to give notice of claims or defaults in
respect of any insurance policies pertaining to the tangible Purchased
Assets;
7.1.15 EMPLOYMENT MATTERS.
7.1.15.1 Except for the employment agreements set forth in
Schedule 1.1.16 hereto, there are no written contracts of
employment entered into with any employees of the Seller
employed in connection with the Business and all such written
contracts of employment or oral contracts of employment entered
into with employees of the Seller employed in connection with
the Business are terminable on the giving of reasonable notice
in accordance with Applicable Law and such listed contracts;
7.1.15.2 There are no labor strikes or, to the Knowledge of
Seller, other labor disputes pending or threatened against or
affecting the Seller and there have not been any strikes or
lockouts since the commencement of operation of the Business by
the Seller;
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7.1.15.3 There is no collective bargaining agreement which is
binding upon the Seller and the Seller has not made any
agreement with any labor union or employee association nor made
any commitment to or conducted negotiations with any labor union
or employee association with respect to any future agreement.
No union or association which might qualify as a union is
presently certified to represent the employees of the Seller
employed in connection with the Business and the Seller is not
aware of any current attempt to organize or establish any labor
union or employee association with respect to the Business or
any part thereof nor, to the Knowledge of Seller, have there
been any such attempts since August 1, 1996;
7.1.15.4 The Seller has no unfunded pension or sickness
disability fund;
7.1.15.5 Schedule 1.1.16 hereto contains a complete list of
all the employees of the Seller employed in connection with the
Business, showing their functions, annual salaries and other
remuneration and benefits as well as their respective lengths of
service with the Seller and all predecessor companies. Except
as set forth in Schedule 1.1.16, the Seller has not made any
commitment to increase any employee remuneration or benefits,
nor made any commitment to adopt any other employee benefit plan
relating to its employees. There have been no increases in
compensation or bonuses or similar payments committed to be made
to any director, officer, employee or agent of the Seller,
except as disclosed in Schedule 1.1.16;
7.1.15.6 The Seller, as of the time of the Closing, will have
paid or made due provision for the payment of all salaries,
commissions and other forms of compensation, fringe benefits,
vacation pay and severance pay due as at such date, and any
amounts payable as at such date under all employee pension,
retirement, profit sharing, bonus or other employee benefit
plans, programs, or arrangements to which it is a party;
7.1.15.7 The Seller, to its Knowledge, is not engaged in any
unfair labor practice nor, to the Knowledge of Seller, is the
Seller in violation of any Applicable Law respecting employment
and employment practices, terms and conditions of employment,
hours and wages, occupational health and safety or human rights,
nor has the Seller received notice of any alleged or actual
violation of any such Applicable Law;
7.1.15.8 All required employer contributions under the Plans
to the date hereof have been made.
7.1.16 LEASES. The Seller is not in material default in the observance
and performance of any of its covenants or obligations under any of the
Leases. Subject to the Services Agreement, the Leases shall be paid in
full by Seller immediately prior to Closing.
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7.1.17 REAL PROPERTY. The Seller owns or leases no real property. The
Premises constitute all real property (including all land and buildings)
that is leased by the Parent and presently occupied by the Seller as
lessee or sublessee.
7.1.18 TAXES.
7.1.18.1 Each member of the Group (including, without
limitation, Seller) has duly and timely filed, or had Parent
file on its behalf (and with respect to Tax Returns due after
the date hereof and prior to the Closing Date will duly and
timely file or have Parent file on its behalf), with the
appropriate federal, state, local and foreign taxing authorities
all Tax Returns required to be filed by or with respect to each
member of the Group. All such Tax Returns were (and, as to Tax
Returns not filed as of the date hereof, will be) true, correct
and complete in all material respects as of the time of filing.
Parent, with respect to the consolidated federal income Tax
Returns, and each member of the Group, with respect to any other
Tax Return, has paid (and, until the Closing Date, will pay) in
full on a timely basis all Taxes due with respect to such Tax
Returns;
7.1.18.2 All monies that each member of the Group was
required by Applicable Laws to withhold from employee wages have
been withheld (and, until the Closing Date, will be withheld)
and either timely paid to the proper Governmental Authority or
set aside in accounts for such purposes and accrued on the books
of the Group or member, as the case may be;
7.1.18.3 None of the Tax Returns of any member of the Group
has been or is currently being examined by the IRS or relevant
state, local or foreign Taxing authorities. No state of facts
exists or has existed which would constitute grounds for the
assessment of any liability for Taxes with respect to periods
(or portions thereof) that have not been audited by the IRS or
other Taxing authority. There are no examinations or other
administrative or court proceedings relating to Taxes in
progress or pending nor has any member of the Group received a
revenue agent's or similar report asserting a Tax deficiency.
There are, to the best Knowledge of the Seller, no threatened
actions, suits, proceedings, investigations or claims relating
to or asserted for Taxes of any member of the Group and there is
no basis for any such claim;
7.1.18.4 There are no Liens on any of the Purchased Assets
that arose in connection with any failure (or alleged failure)
to pay any Taxes;
7.1.18.5 The Seller is not a party to any agreement relating
to allocating or sharing the payment of, or liability for, Taxes
with respect to any Taxable Period; and
7.1.18.6 None of the Purchased Assets is (i) "tax exempt use
property" within the meaning of Section 168(h) of the Code, or
(ii) a lease made pursuant to Section 168(f)(8) of the Internal
Revenue Code of 1954.
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7.2 MATERIAL TRUTH. No representation or warranty by the Seller
contained in this Agreement and no statement contained in any document,
certificate or other instrument or exhibit furnished or to be furnished to
the Purchaser pursuant hereto (including without limitation the Schedules
hereto) or in connection with the transactions contemplated hereby, contains
or will contain any untrue statement of a material fact or omits or will omit
any material fact necessary in order to make the statements contained therein
not misleading.
7.3 FURTHER ACTIONS. Subject to the terms and conditions of this
Agreement, the Seller shall use its reasonable efforts to take, or cause to
be taken, all action, and to do, or cause to be done, all things necessary,
proper or advisable under Applicable Law to consummate and make effective the
transactions contemplated by this Agreement by the Closing Date.
7.4 DISCLOSURES AND EXCEPTIONS. Any matter specifically disclosed or
exception taken in this Agreement or in any Schedule hereto shall be deemed
to have been disclosed or taken for all purposes under this Agreement; it
being understood that the failure to disclose multiple times or take
exception multiple times hereunder or on the Schedules hereto shall not
constitute a breach of this Agreement.
SECTION VIII - PURCHASER'S REPRESENTATIONS AND WARRANTIES
8.1 REPRESENTATIONS AND WARRANTIES. The Purchaser hereby represents and
warrants to the Seller as follows and acknowledges that the Seller is relying
upon said representations and warranties in connection with the sale of the
Purchased Assets and further acknowledges that the Seller would not have
entered into this Agreement without same. The Purchaser hereby represents
and warrants that the following representations and warranties are true and
accurate as of the Effective Date:
8.1.1 CORPORATE ORGANIZATION. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the
State of California;
8.1.2 CORPORATE POWER.
8.1.2.1 The Purchaser has all necessary corporate power,
authority and capacity to own its property and assets and to
carry on its business as presently conducted;
8.1.2.2 The Purchaser has all necessary corporate power and
authority to enter into this Agreement and each of the
Collateral Agreements to which it is a party, to perform its
obligations hereunder and thereunder and to consummate the
transactions contemplated hereby. A duly authorized
representative of the Purchaser has executed this Agreement and
the Collateral Agreements to which the Purchaser is a party on
behalf of the Purchaser. The execution, delivery and
performance of this Agreement and the Collateral Agreements to
which the Purchaser is party shall not violate any provision of
the articles of incorporation or by-laws of the Purchaser. All
corporate or other
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organizational proceedings on the part of Purchaser necessary
to authorize this Agreement and the transactions contemplated
hereby have been taken;
8.1.2.3 This Agreement and each of the Collateral Agreements
to which the Purchaser is a party constitute valid and binding
obligations on the Purchaser enforceable against it in
accordance with their terms, except as such enforceability may
be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application
relating to or affecting enforcement of creditors' rights and
(ii) rules of law governing specific performance, injunctive
relief and other equitable remedies;
8.1.2.4 The execution and delivery of this Agreement and
each of the Collateral Agreements to which the Purchaser is a
party do not, and the consummation of the transactions
contemplated hereby and the compliance with the terms hereof
will not (i) violate any Governmental Rule applicable to
Purchaser, (ii) conflict with any material contract to which the
Purchaser is a party, or (iii) to the Knowledge of Purchaser
require any approval, authorization, Consent, license,
exemption, filing or registration with any court, arbitrator or
Governmental Authority, except for such approvals,
authorizations, Consents, actions or filings which have been
obtained or made.
8.1.3 NO LITIGATION. There is no litigation pending or, to the
Knowledge of Purchaser, threatened that will affect its ability to
perform its obligations under this Agreement or the Collateral
Agreements to which it is a party;
8.1.4 VALID OBLIGATION. This Agreement constitutes a valid and
binding obligation, enforceable against the Purchaser in accordance with
the terms hereof, except as such enforceability may be limited by (i)
applicable bankruptcy, insolvency, reorganization, moratorium or other
laws of general application relating to or affecting enforcement of
creditors' rights and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies;
8.1.5 SELLER BREACH. To the Knowledge of Purchaser, Seller is not in
breach of this Agreement.
8.1.6 ASSUMPTION OF OBLIGATIONS. The Purchaser shall fulfil the
Seller's obligations under the Assumed Liabilities and shall indemnify
and save and hold the Seller harmless from and against all liabilities
and obligations of whatsoever nature as a result of Purchaser's failure
to do so; and
8.1.7 FURTHER ACTIONS. Subject to the terms and conditions of this
Agreement, the Purchaser shall use its reasonable efforts to take, or
cause to be taken, all action, and to do, or cause to be done, all
things necessary, proper or advisable under Applicable Law to consummate
and make effective the transactions contemplated by this Agreement by
the Closing Date.
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8.1.8 NO DERIVATIVE BREACH. The Purchaser shall not be deemed to be in
breach under this Agreement or any Collateral Agreement to which it is a
party in respect of any breach relating to the Purchased Assets or the
Business (i) that began as a breach by the Seller hereunder at or prior
to Closing and was continued by the Purchaser after Closing or (ii)
resulting from Purchaser's operation of the Business at the Premises in
a manner consistent with the Seller's operation of the Business prior to
the Closing.
SECTION IX - CONDITIONS PRECEDENT TO CLOSING
9.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The obligations of the Parties
to consummate the transactions contemplated hereby shall be subject to the
fulfillment on or prior to the Closing Date of the following conditions:
9.1.1 NO INJUNCTION. Consummation of the transactions contemplated
hereby shall not have been restrained, enjoined, or otherwise prohibited
by any Applicable Law, including any order, injunction, decree or
judgement of any court or other Governmental Authority. No court or
other Governmental Authority shall have determined any Applicable Law to
make illegal the consummation of the transactions contemplated hereby or
by the Collateral Agreements, and no proceedings with respect to the
application of any such Applicable Law to such effect shall be pending.
9.1.2 CORPORATE RESOLUTIONS. All Parties shall have delivered to the
other Parties a resolution of their respective board of directors
certified by their respective secretary authorizing the execution and
delivery of this Agreement, and such of the Parent Guaranty, the Vector
Guaranty, the Notes and the documents and instruments contemplated
hereby, as well as the completion of the transactions contemplated
hereby in each case, to which the relevant Party is a party, stating
that all corporate actions necessary to authorize such execution,
delivery and completion have been duly taken and completed; and
9.1.3 COLLATERAL AGREEMENTS. The Share Purchase Agreement, the Parent
Guaranty, the Vector Guaranty, the Notes, the Sublease Agreement, the
Services Agreement, the License Agreement and the Security Agreement
shall have been executed and delivered by all of the respective parties
thereto.
9.2 CONDITIONS TO OBLIGATIONS OF PURCHASER. Notwithstanding any provision
contained herein, the obligations of the Purchaser to consummate the
transactions contemplated hereby shall be subject to the satisfaction of or
compliance with, at or prior to Closing, each of the conditions set forth below,
all of which are agreed to be material, are included for the exclusive benefit
of the Purchaser and may be waived in full or in part by Purchaser at any time:
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9.2.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of the Seller contained in this Agreement
and in any statement, deed, certificate, Schedule or other document
delivered pursuant hereto or in connection with the transactions
contemplated hereby shall be deemed to have been made and shall be true
and accurate in all material respects on and as of the Closing Date;
9.2.2 COMPLIANCE BY SELLER. The Seller shall have performed and
complied with all agreements, conditions and covenants required by this
Agreement to have been performed or complied with by Seller before
Closing;
9.2.3 FINANCING. The Purchaser shall have been able, prior to the
Closing Date, to complete the necessary financing arrangements in order
to obtain sufficient funds to pay the Closing Cash Payment, on terms and
conditions satisfactory to Purchaser;
9.2.4 THIRD PERSON CONSENTS. The Seller shall have delivered to the
Purchaser the Consent of all third Persons required in order for the
Seller to execute this Agreement and the Collateral Agreements to which
it is a party;
9.2.5 DELIVERY OF PURCHASED ASSETS. At the Closing, Seller shall have
delivered to Purchaser such deeds, bills of sale, endorsements,
assignments, and other good and sufficient instruments of conveyance and
transfer (including, without limitation, recordable assignments of any
Patents in recordable form), in form and substance reasonably
satisfactory to Purchaser and its counsel. Simultaneously with such
delivery, Seller shall take or cause to be taken all such other steps as
are reasonably required hereunder to put Purchaser in actual possession
and operating control of the Purchased Assets;
9.2.6 CERTIFICATE. There shall have been delivered to the Purchaser a
certificate signed by an officer of Seller, confirming and attesting to
the matters set forth in Sub-Sections 9.2.1 and 9.2.2, and such other
certificates and documents as are required in accordance with the terms
of this Agreement;
9.2.7 LEGAL OPINION. Seller shall deliver an opinion from the law
firm of Pillsbury, Madison & Sutro, LLP, addressed to the Purchaser,
dated as of the Closing satisfactory in form and substance to the
Purchaser and which shall include the opinions set forth in the document
attached hereto as Schedule 9.2.7;
9.2.8 ALL SCHEDULES. All Schedules to this Agreement shall have been
received by the Purchaser and shall be in form and substance
satisfactory to the Purchaser, acting reasonably;
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9.2.9 NO MATERIALLY ADVERSE EFFECTS.
9.2.9.1 Since December 31, 1998, there has not been and
until the Closing there shall not be (i) any damage
or destruction of or loss to any of the Purchased
Assets, whether or not covered by insurance, that
has had a material and adverse effect on or, to the
Knowledge of Seller, may be reasonably anticipated
to materially and adversely affect the future
prospects of the Business or (ii) any labor trouble
or other event, development or condition of any
character, including, without limitation, any change
in Applicable Law, whether or not covered by
insurance, that has had a material and adverse
effect on the Business;
9.2.9.2 No claim, action, suit, investigation or other
proceeding shall be pending or threatened by any
third Person (including any Governmental Authority)
before any court or administrative agency
challenging or otherwise relating to the
transactions provided for herein or which may affect
Purchaser, or the Purchased Assets in a manner which
is materially adverse;
9.2.10 ABSENCE OF CHANGES. Since December 31, 1998, the Seller has
not, and until the Closing the Seller will not have, in relation to the
Business (i) written off and/or disposed of any of the Inventory other
than in the ordinary course of its business, (ii) sold, assigned or
transferred any of the Purchased Assets except, in the ordinary course
of operating the Business, (iii) sold, assigned, leased or otherwise
disposed of any of its assets or properties, except in the ordinary
course of operating the Business, (iv) granted any Lien on any of the
Purchased Assets, or (v) made any change in its accounting principles,
practices or methods as heretofore applied.
9.2.10 TAX AFFIDAVITS. Seller shall have delivered to Purchaser an
affidavit ("FIRPTA Affidavit"), in form and substance satisfactory to
Purchaser, duly executed and acknowledged, certifying that Seller is a
"domestic corporation" within the meaning of Sections 7701(a)(3) and (4)
of the Code and Section 1.897-1(j) of the applicable Treasury
Regulations.
9.3 CONDITIONS TO OBLIGATIONS OF SELLER. Notwithstanding any provision
contained herein, the obligations of the Seller to consummate the transactions
contemplated hereby shall be subject to the satisfaction of or compliance with,
at or prior to Closing, each of the conditions set forth below, all of which are
agreed to be material, are included for the exclusive benefit of Seller and may
be waived in full or in part by Seller at any time:
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9.3.1 NOTES. The Notes shall be issued only upon the fulfillment of
the following conditions: (i) that the Purchaser be a body politic and
corporate, duly incorporated according to the laws of a State of the
United States of America, (ii) that the Notes be fully guaranteed by
Vector, and (iii) that the Purchaser undertake to retain the Purchased
Assets in its control until such time as the Notes have been fully paid
by or on behalf of the Purchaser;
9.3.2 ACCURACY OF REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of the Purchaser contained in this
Agreement and in any statement, deed, certificate, Schedule or other
document delivered pursuant hereto or in connection with the
transactions contemplated hereby shall be deemed to have been made and
shall be true and accurate in all material respects on and as of the
Closing Date;
9.3.3 COMPLIANCE BY PURCHASER. The Purchaser shall have performed and
complied with all agreements, conditions and covenants required by this
Agreement to have been performed or complied with by Closing;
9.3.4 CERTIFICATE. There shall have been delivered to the Seller a
certificate signed by an officer of Purchaser, confirming and attesting
to the matters set forth in Sub-Sections 9.3.1 and 9.3.2, and such other
certificates and documents as are required in accordance with the terms
of this Agreement;
9.3.5 EMPLOYMENT. Subject to Section XIII, the Purchaser shall make
offers of employment to all of Seller's employees listed in Schedule
1.1.16 hereto, upon terms and conditions no less favorable, in the
aggregate, to such conditions as they enjoy with Seller under the
employment agreements listed in Schedule 1.1.16;
9.3.6 PURCHASER FINANCING. The Purchaser shall have been able, prior
to the Closing Date, to complete the necessary financing arrangements in
order to obtain sufficient funds to pay the Closing Cash Payment.
9.3.7 LEGAL OPINION. Seller shall deliver an opinion from the law firm
of Dewey, Ballantine, LLP, addressed to the Purchaser, dated as of the
Closing satisfactory in form and substance to the Purchaser and which
shall include the opinions set forth in the document attached hereto as
Schedule 9.3.7;
9.3.8 PURCHASE PRICE. The Purchaser shall have paid the Closing Cash
Payment upon delivery of the Purchased Assets;
9.3.9 SECURITY AGREEMENT. The Purchaser shall have executed and
delivered the Security Agreement and Financial Statements (UCC-1's) in
form reasonably satisfactory to Seller and Seller's counsel; and
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9.3.10 VECTOR GUARANTY. Vector shall have executed and delivered the
Vector Guaranty.
9.4 OPTION. In the event that any of the foregoing conditions precedent to
Closing shall not have been fulfilled and/or performed at or prior to Closing
Date, the Party in whose favor such condition was granted may terminate this
Agreement on or prior to the Closing Date by notice in writing to the other
Party, in which event, none of the Parties to this Agreement shall be under any
obligation to any other Party, provided, however, that the Party in whose favor
such condition exists shall be entitled to waive in writing, compliance with any
of such conditions in whole or in part without prejudice to any of its rights of
termination in the event of non-compliance with any other of the foregoing
conditions precedent. Notwithstanding the foregoing, if the Closing does not
take place as a result of Seller's failure to comply with the condition provided
in Sub-Paragraph 9.2.9.2 because of a pending or threatened action from a third
Person claiming prior rights to the Purchased Assets, the Purchaser shall be
entitled to exercise such rights and recourses in respect of such failures as
are available to it under Applicable Law.
SECTION X - SURVIVAL OF THE REPRESENTATIONS AND WARRANTIES AND INDEMNIFICATION
10.1 SURVIVAL. Purchaser's right to seek indemnification under this
Agreement shall survive for one (1) year following the Closing, PROVIDED,
HOWEVER, that (i) the indemnity period shall not expire, but shall survive
forever, for claims with respect to the representations, warranties, covenants,
and agreements regarding the Excluded Liabilities, (ii) the indemnity period for
claims with respect to representations and warranties relating to Intellectual
Property shall survive for two (2) years following Closing, and (iii) the
indemnity period for claims with respect to a breach of any covenant of Seller
hereunder shall survive until ninety (90) days following the expiration of such
covenant. Seller's right to seek indemnification under this Agreement shall
survive for one (1) year following the Closing, PROVIDED, HOWEVER, that the
indemnity period for such claims with respect to a breach of any covenant of
Purchaser hereunder shall survive for ninety (90) days following the expiration
of such covenant. The indemnity period hereunder shall not expire, but shall
survive forever for the benefit of all Parties with respect to the
representations and warranties regarding enforceability of this Agreement. The
making of a claim for indemnification under this Agreement shall toll the
running of the limitation period with respect to that claim. For purposes of
the preceding sentence, a claim shall be deemed made upon the commencement of an
independent judicial proceeding with respect to the matter underlying the claim
or receipt by Seller or Purchaser (as applicable) of a written notice of claim
delivered by the indemnified Party for the amount of the claim (if Known by
Seller or Purchaser, as applicable) and a general description of the facts
underlying the claim.
10.2 INDEMNIFICATION BY SELLER. Subject to Sub-Sections 10.1 and 10.6,
Seller agrees to fully indemnify, defend and hold harmless Purchaser and
Purchaser's Affiliates, and their respective directors, officers, employees,
shareholders, representatives, and agents from and
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against any and all actions, causes of actions, filings, settlements,
judgments, investigations, proceedings, arbitrations, mediations, suits or
other proceedings, losses, liabilities, claims, demands, obligations,
damages, penalties, fines, costs and expenses (including reasonable
attorneys', experts' and consultants' fees and expenses and investigation and
litigation costs incurred in relation to the indemnified matter or in
enforcing such indemnity) whether civil or criminal or based on negligence,
trespass, intentional tort, strict liability, contribution, indemnification,
common or decisional or otherwise (collectively, "LOSSES") arising out of or
by reason of:
(a) any facts, circumstances or events constituting an inaccuracy or
a misrepresentation or breach of any representation or warranty made by
Seller in this Agreement or in any document delivered by Seller to
Purchaser pursuant to the terms of this Agreement in connection with the
Closing of the transactions contemplated by this Agreement, regardless
of whether the inaccuracy, misrepresentation or breach was deliberate,
reckless, negligent, innocent or unintentional, except with respect to
which Seller can demonstrate was Known to Purchaser at the time of
delivery at Closing (and Purchaser hereby agrees not to institute any
action or make any claim with respect to such Known matters). Nothing
in this Paragraph 10.2(a) shall relieve Seller of its indemnification
obligations with respect to the items mentioned in Paragraphs 10.2(b),
(c) and/or (d);
(b) any facts, circumstances or events constituting a material
breach or non-performance of any covenant (the indemnity obligation set
forth in Paragraph 10.2(c) below to be deemed to be a covenant of Seller
without expiration) or agreement made to be performed by Seller in this
Agreement or in any document delivered by Seller to Purchaser pursuant
to the terms of this Agreement in connection with the Closing of the
transactions contemplated by this Agreement, regardless of whether the
breach or non-performance was deliberate, reckless, negligent, innocent
or unintentional;
(c) the Excluded Liabilities; and
(d) any fees and expenses payable by Seller pursuant to any
provisions of this Agreement.
10.3 INDEMNIFICATION BY PURCHASER. Subject to Sub-Sections 10.1 and 10.6,
Purchaser agrees to indemnify, defend and hold harmless Seller and Seller's
Affiliates, and their respective directors, officers, employees, shareholders,
representatives, and agents from and against any and all Losses arising out of
or by reason of:
(a) any facts, circumstances or events constituting an inaccuracy,
misrepresentation or breach of any representation or warranty made by
Purchaser in this Agreement or any document delivered by Purchaser to
Seller pursuant to the terms of this Agreement in connection with the
Closing of the transactions contemplated by this Agreement, regardless
of whether the inaccuracy, misinterpretation or breach was deliberate,
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reckless, negligent, innocent or unintentional, except with respect to
which Purchaser can demonstrate was Known to Seller at the time of
delivery at Closing (and Seller hereby agrees not to institute any
action or make any claim with respect to such Known matters). Nothing
in this Paragraph 10.3(a) shall relieve Purchaser of its indemnification
obligations with respect to the items mentioned in Paragraphs 10.3(b),
(c) and/or (d);
(b) any facts, circumstances or events constituting a material
breach or non-performance of any covenant (the indemnity obligation set
forth in Paragraph 10.3(c) below to be deemed to be a covenant of
Purchaser without expiration) or agreement made to be performed by
Purchaser in this Agreement or in any document delivered by Purchaser to
Seller pursuant to the terms of this Agreement in connection with the
Closing of the transactions contemplated by this Agreement, regardless
of whether the breach or non-performance was deliberate, reckless,
negligent, innocent or unintentional;
(c) the ownership or operation of the Business or the Purchased
Assets from and after the Closing; and
(d) any fees and expenses payable by Purchaser pursuant to any
provisions of this Agreement.
10.4 NOTICE OF CLAIMS. As soon as is reasonably practicable after becoming
aware of a claim for indemnification under this Agreement (including a claim or
suit by a third Person) the indemnified Person shall promptly give notice to the
indemnifying Party of such a claim. The failure of the indemnified Person to
give notice shall not relieve the indemnifying Party of its obligations except
to the extent to the extent that the indemnifying Party shall have been
prejudiced thereby.
10.5 THIRD PERSON CLAIMS. In the case of any third Person claim, suit,
action or proceeding, the indemnifying Party may, at its own expense (provided
Purchaser shall not have determined, in Purchaser's reasonable business
judgement based upon the written advice of legal counsel, to retain control over
the claim, suit, action or proceeding, as described below), (i) participate in
the defense of any claim, suit, action or proceeding and (ii) upon notice to the
indemnified Person, and the indemnifying Party's delivering to the indemnified
Person a written agreement that the indemnified Person is entitled to
indemnification pursuant to Sub-Section 10.2 or 10.3 for all Losses arising out
of such claim, suit, action or proceeding and that the indemnifying Party shall
be liable for any Loss, may at any time during the course of any such claim,
suit, action or proceeding, assume the defense thereof; provided, however, that
(a) the indemnifying Party's counsel is reasonably satisfactory to the
indemnified Person, and (b) the indemnifying Party shall thereafter consult with
the indemnified Person upon the indemnified Person's reasonable request for such
consultation from time to time with respect to such claim, suit, action or
proceeding. If the indemnifying Party assumes such defense, the indemnified
Person shall have the right (but not the duty) to participate in the defense
thereof and to employ counsel, at its own expense, separate from the counsel
employed by the indemnifying Party.
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10.6 LIMITATIONS. Neither Party shall have any liability hereunder until the
aggregate Losses arising out of or by reason of any one (1) or more claims for
which indemnification is sought equals or exceeds twenty five thousand Dollars
($25,000), at which point the indemnified Party shall be entitled to seek
recovery of the entire amount of such Losses. Notwithstanding the foregoing,
this Sub-Section 10.6 shall not apply to any intentional breach of either
Party's representations, warranties, covenants or obligations hereunder, and the
breaching Party shall be liable for all Losses with respect to such breaches.
10.7 NO CONSEQUENTIAL DAMAGES; LIMITATIONS. IN NO EVENT WILL THE SELLER OR
THE PURCHASER BE LIABLE HEREUNDER FOR ANY INCIDENTAL, SPECIAL OR CONSEQUENTIAL
DAMAGES.
NOTHING IN THIS AGREEMENT SHALL BE CONSTRUED AS A REPRESENTATION MADE, OR
WARRANTY GIVEN THAT ANY PATENT WILL ISSUE BASED UPON ANY PENDING PATENT
APPLICATION WITHIN THE INTELLECTUAL PROPERTY, THAT ANY PATENT WITHIN THE
INTELLECTUAL PROPERTY WHICH ISSUES HEREAFTER WILL BE VALID, OR THAT THE USE OF
ANY INTELLECTUAL PROPERTY WILL NOT INFRINGE THE PATENT RIGHTS OF ANY PERSON
(OTHER THAN AN AFFILIATE OF SELLER) ARISING AFTER THE CLOSING DATE. THE
FOREGOING LIMITATIONS SHALL NOT BE READ IN CONTRAVENTION OF THE SELLER'S
REPRESENTATIONS AND WARRANTIES SET FORTH IN PARAGRAPH 7.1.9 WITH REGARD TO
INTELLECTUAL PROPERTY MATTERS AT THE TIME OF EXECUTION AND DELIVERY OF THIS
AGREEMENT AND AT THE TIME OF CLOSING.
SECTION XI - CONDUCT OF THE BUSINESS DURING THE INTERIM PERIOD
11.1 INTERIM PERIOD. During the Interim Period, the Seller covenants and
warrants that:
11.1.1 REPRESENTATIONS AND WARRANTIES. It shall not take any action
that would prevent it from affirming, on the Closing Date, that the
representations and warranties contained in this Agreement are true and
correct at and as of the Closing Date. It shall not purchase or agree
to purchase, lease or agree to lease, acquire or agree to acquire any
additional assets or properties even in the ordinary course of operating
the Business (in excess of ten thousand Dollars ($10,000.00) in any one
case and fifty thousand Dollars ($50,000.00) in the aggregate) except
for purchases of materials and supplies for use in the ordinary and
usual course of operating the Business and in accordance with
Sub-Section 11.2 hereof, nor shall the Seller incur any obligation or
liability, absolute or contingent, in connection with the Business,
except in the usual and ordinary course of operating the Business and in
accordance with Sub-Section 11.2 hereof. It shall promptly notify the
Purchaser in writing of the existence or happening of any fact, event or
occurrence of which it has Knowledge which may alter the accuracy or
completeness of any representation or warranty contained in this
Agreement;
11.1.2 CONDUCT OF BUSINESS. It shall carry on the Business only in the
usual and ordinary course, shall not, by any act or omission alter or
affect the character and operations of the Business and shall not
undertake any different business in the
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operation of the Business. The Seller shall use its reasonable efforts
to preserve intact the Business organization and Goodwill and maintain
its relationships with researchers, universities, (biological) material
suppliers, Government Authorities and others having business relations
with it and retain in its employ, subject to Section XIII hereinbelow,
all of its present employees and not engage any new employees, other
than to fill vacancies, without the Purchaser's prior written Consent.
In relation to the Business, Seller shall not change (or permit to be
changed) any accounting or Tax method, procedure or practice or its
financial structure or make (or permit to be made) any Tax election or
settle or compromise any liability for Taxes;
11.1.3 INSURANCE. Seller shall maintain in full force and effect all
existing public liability insurance and insurance covering the tangible
Purchased Assets (and shall use its best efforts to have the Purchaser
named as an additional insured party on all such policies as and from
the Effective Date, until the earlier of such time as the Purchaser has
vacated the Premises in accordance with the provisions of the Services
Agreement and August 31, 1999;
11.1.4 PURCHASED ASSETS. Seller shall maintain the Purchased Assets in
the same working order, condition and repair as on the Effective Date
and shall maintain same as it has done in the past in the ordinary
course of operating the Business;
11.1.5 ASSUMED CONTRACTS. Seller shall perform its obligations under
the Assumed Contracts and it shall not amend or Consent to the amendment
of any Assumed Contract without the prior written Consent of the
Purchaser; nor shall it, in connection with the Business, enter into or
agree to enter into, any contract, agreement, obligation or commitment
of the type required to be disclosed hereunder without the prior written
Consent of the Purchaser;
11.1.6 LIEN. Seller shall not grant a Lien or alienate any of the
Purchased Assets except in the ordinary course of operating the Business
and in accordance with Sub-Section 11.3 hereof;
11.1.7 OFFICERS, DIRECTORS, SHAREHOLDERS AND EMPLOYEES. Except as set
forth in Schedule 11.1.7, no change will be made or promised in the
compensation or rate of compensation, commissions or bonuses payable by
the Seller to officers, directors, shareholders or employees of the
Business, and no bonus, profit-sharing or other extraordinary
compensation of any kind will be paid by the Seller to officers,
directors, shareholders or employees of the Business; nor will any
officer, director, shareholder or employee benefit plan, arrangement or
commitment to officers, directors, shareholders or employees be adopted
or entered into or be amended in any respect, nor will the Seller
solicit any of the employees of the Business who have chosen to accept
employment by the Purchaser to remain in the employ of the Seller
subsequent to the Closing Date;
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11.1.8 NO LICENSE. Seller shall not grant any license on any of its
Intellectual Property, and shall not enter into any new license
agreement or otherwise grant its Consent for such license;
11.1.9 NO WAIVER. Seller shall not waive any right of substantial
value in connection with the conduct of the Business or the Purchased
Assets;
11.1.10 ACCESS TO PURCHASER. Subject to Section 11.2, Seller shall give
to the Purchaser, its agents and representatives, including, without
limitation, technical and other advisory personnel, full and free access
during reasonable business hours to the Purchased Assets and furnish the
Purchaser with all relevant information concerning the Business, the
Purchased Assets and the Premises, including, without limitation, all
workpapers, schedules, returns and other documentation pertaining to
Taxes relating to the Business, as well as copies of all such documents
as the Purchaser may reasonably request. The Seller shall permit the
Purchaser or its representatives to make whatever inspections and
non-destructive tests it or its experts may deem advisable relating to
the Purchased Assets. All such information revealed to the Purchaser
shall be treated as confidential to the extent such information has not
been made public, is not required by Applicable Law to be disclosed, or
would not be disclosed in the ordinary course of business;
11.1.11 THIRD PERSONS. Seller shall use its reasonable efforts to
obtain any Consents or agreements of third Persons necessary for the
fulfillment by the Seller of its obligations under this Agreement and
the consummation of the transactions contemplated hereby;
11.1.12 APPLICABLE LAWS. Seller shall comply in all material respects
with all Applicable Laws affecting the Business or the Purchased Assets;
and
11.1.13 CONDITIONS PRECEDENT. Seller shall use its reasonable efforts
to satisfy or cause to be satisfied all of the conditions precedent to
the favor of the Purchaser set forth in Section IX hereof.
11.2 MANAGEMENT. During the Interim Period, the Seller shall allow at least
one (1), but no more than three (3), representatives of the Purchaser to remain
on the Premises from where the Business is operated during normal Business hours
in order to discuss various matters with the management of the Business, to
observe how the Business is operated and to ensure compliance with the
provisions of this Section XI, provided, however, that the normal activities of
the Business are not materially disrupted. In the event that the Closing does
not take place for any reason, the Purchaser agrees that all information
obtained by it from the Seller will be kept confidential. The foregoing
sentence shall not be construed in derogation of that certain amended and
restated mutual nondisclosure agreement between Vector and Parent, dated
August 19, 1998.
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CONFIDENTIAL CONFIDENTIAL TREATMENT REQUESTED
11.3 EMPLOYEE SALARIES. During the Interim Period the salaries and benefits
of the employees of the Business shall be paid by the Seller in the ordinary
course of operating the Business.
11.4 TAX MATTERS. Notwithstanding any other provision of this Agreement, all
transfer, registration, stamp, documentary, sales, use and similar Taxes, any
penalties, interest and additions to Tax, and court, registration and filing
fees incurred in connection with this Agreement shall be the responsibility of
and be timely paid by the Seller and the Seller hereby covenants and warrants
that any and all such Taxes shall be timely paid; provided, however, that the
Seller and the Purchaser shall cooperate in the timely making of all filings,
returns, reports and forms as may be required in connection therewith.
SECTION XII - GUARANTEE BY PARENT
12.1 COGNIZANCE AND INTEREST. The Parent hereby declares having taken
cognizance of all of the provisions contained in this Agreement, with which it
declares itself to be entirely satisfied and familiar, and hereby declares
having an interest in guaranteeing the covenants of the Seller hereunder and
confirming the truthfulness of the representations and warranties made by the
Seller hereunder.
12.2 REPRESENTATION AND WARRANTIES. The Parent jointly and severally with
the Seller hereby confirms the truthfulness of the representations and
warranties of the Seller and jointly and severally guarantees and covenants that
the Seller shall duly and punctually perform all of its obligations hereunder
and furthermore hereby jointly and severally covenants and agrees that it will
fulfil or cause to be fulfilled all of the said obligations and covenants of the
Seller under this Agreement, the whole in accordance with the terms and
provisions of the Parent Guaranty.
12.3 JOINT AND SEVERAL LIABILITY. The liability of the Parent hereunder
shall be joint and several with that of the Seller and shall be absolute and
unconditional. The undersigned shall, for all purposes of the Parent guaranty,
be regarded as in the same position as the Seller and the undersigned hereby
expressly and irrevocably waives presentment, demand, protest and any notice, as
well as any requirement that at any time any action may be taken by any Person
against Purchaser or any other Person.
SECTION XIII - EMPLOYEES OF THE BUSINESS
13.1 EMPLOYEES. Subject to Sub-Section 7.1.15 hereof, at Closing, the
Purchaser shall offer employment to the employees listed on Schedule 1.1.16, on
terms and conditions substantially similar (other than with respect to stay
bonuses and similar benefits) to those relating to their employment with the
Seller immediately prior to Closing. The Purchaser further agrees that any
listed full time employee terminated other than for cause within the six (6)
month period immediately following Closing shall be entitled to receive
[CONFIDENTIAL TREATMENT REQUESTED]
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CONFIDENTIAL CONFIDENTIAL TREATMENT REQUESTED
[CONFIDENTIAL TREATMENT REQUESTED] For greater certainty, the entitlement
referred to in the preceding sentence shall not apply to any part time employees
and shall cease to apply for full time employees at the end of the sixth (6th)
month following Closing. The Purchaser agrees to commence accruing each listed
full time employee's vacation time from January 1, 1999.
13.2 NO RETENTION OBLIGATIONS. Notwithstanding anything to the contrary
herein contained, the Purchaser shall have no obligation following the Closing
to retain any employee for any designated period of time and shall be free to
terminate its employees in its sole discretion, subject to Applicable Law.
SECTION XIV - RESTRICTIVE COVENANTS
14.1 COMPETITION.
14.1.1 The Seller and the Parent hereby each acknowledge that (i) this
Agreement includes certain consideration in respect of the Goodwill
associated with the operation of the Business by the Seller; (ii) the
covenants of the Seller and the Parent contained in this Section XIV are
a material inducement to the Purchaser to enter into this Agreement;
(iii) the Purchaser and each of its Affiliates (each an "Entity" and
collectively the "Purchaser Entities") has expended and will expend
considerable time, effort and capital to further develop the Business;
and (iv) the Purchaser and each of the Purchaser Entities has a
legitimate business interest in protecting its investment in the
Business and may suffer irreparable damages if the Seller or the Parent
were to breach the covenants set forth in this Section XIV.
Accordingly, each of the Seller and the Parent agrees that the covenants
set forth in this Section XIV (x) are separate and independent covenants
for which valuable consideration has been paid, the receipt, adequacy
and sufficiency of which are acknowledged by each of them; (y) are
cumulative to all other covenants of the Seller in favor of the
Purchaser and the other Purchaser Entities contained in this Agreement
and shall survive the termination of this Agreement for the purposes
intended; and (z) do not impose an undue hardship upon either of the
Seller or the Parent, do not unreasonably restrict either of the Seller
or the Parent with respect to or from the performance of services of,
relating to or connected with the Business, the management thereof or
otherwise, and are reasonable with respect to their duration,
geographical area and scope.
14.1.2 Each of the Seller and the Parent covenants and agrees that it
shall not, directly or indirectly, either individually, in partnership,
jointly or in conjunction with any other Person, in any capacity:
(i) during a period of [* * * * * *], directly or
indirectly, engage in or be connected with any business in
competition with the Business (a "Competing Business") anywhere
in the world (the "Restricted Territory"). The foregoing
covenant shall not be deemed to prohibit either the Seller or
the Parent from acquiring as an investment not
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CONFIDENTIAL CONFIDENTIAL TREATMENT REQUESTED
more than five percent (5%) of the capital stock of a Competing
Business; and/or
(ii) during a period of [* * * * * *], solicit, directly
or indirectly, any employee of any Purchaser Entity, if such
employee is engaged in the Business or a Competing Business, or
fulfils a similar function with any Purchaser Entity, for the
purpose or with the intent of inducing or enticing such Person
away from or out of the employ of any Purchaser Entity;
14.1.3 For the purpose of this Sub-Section 14.1, any business, the
substance of which is the development or application of technology
relating to the creation of chemical diversity and finding and
developing lead compounds other than through the use of technology
covered by the scope of the Patents shall not be considered a Competing
Business.
14.1.4 In recognition of the substantial nature of such potential
damages and the difficulty of measuring economic losses to any Purchaser
Entity as a result of a breach of the foregoing covenants, and because
of the immediate and irreparable damage that could be caused to any such
Purchaser Entity for which it would have no other adequate remedy, the
Seller and the Parent each agree that in the event of breach by the
Seller or the Parent of the foregoing covenant, without prejudice to any
additional rights it may have hereunder or under Applicable Law, such
Purchaser Entity shall be entitled to seek injunctive and other
equitable relief.
14.2 SIMILAR NAME. Except as specifically provided for in the Collateral
Agreements, each of the Seller and the Parent covenants and agrees that, from
and after the Closing Date, the Seller and the Parent shall not be connected
directly or indirectly as an owner, shareholder, subsidiary, joint venturer or
agent with any business using "ChromaXome Corporation" or any name similar
thereto for any purpose, including without limitation any marketing, promotional
or other such similar purposes, provided however that the restriction set out in
this Sub-Section 14.2 shall not apply for a period of thirty (30) days after the
Closing Date, by which date the Seller shall change its corporate name and cease
using "ChromaXome Corporation".
14.3 INFORMATION. Each of the Seller and the Parent covenants and agrees
that, for a period of five (5) years from and after the Closing Date, unless
expressly authorized in writing by the Purchaser, the Seller and the Parent
shall not disclose directly or indirectly to any Person not in the employ of the
Purchaser any information concerning the Business, including, without
limitation, the Goodwill and Intellectual Property, except (i) in accordance
with the provisions of Sub-Section 16.12, (ii) as disclosed to its lawyers,
accountants, brokers or consultants, provided the same are under obligations of
confidentiality to Seller or Parent, (iii) as disclosed to persons conducting
diligence investigations of Seller or Parent who are under obligations of
confidentiality to Seller or Parent, or (iv) as may otherwise be required by
law. The provisions of this Sub-Section 14.3 shall not detract from the
provisions of Sub-Section 14.7 in relation to Intellectual Property or the
provisions of the amended and restated
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mutual non-disclosure agreement between Parent and Vector dated August 19, 1998
(the "Non-Disclosure Agreement").
14.4 PURCHASER'S REQUEST. The Parties acknowledge and agree that the
performance of services by the Seller at the request of the Purchaser shall not
be construed as a default of the Seller's obligations undertaken pursuant to
this Section XIV.
14.5 WIND-UP. Parent covenants and agrees that, until the Notes have been
discharged and the Purchaser and Vector have been released from their objections
thereunder, Parent shall not, without the prior written Consent of the
Purchaser, grant its Consent to the voluntary wind-up, liquidation or
dissolution of the Seller.
14.6 INTELLECTUAL PROPERTY. Each of the Seller and the Parent acknowledges
and agrees that, upon consummation of the transactions provided for hereunder,
Purchaser shall hold all right, title and interest in and to the Intellectual
Property. Accordingly, Seller and Parent hereby covenant not to (a) challenge
the rights of the Purchaser in and to the Intellectual Property, (b) subject to
the terms of the Security Agreement and except as otherwise specifically
provided for herein, challenge the validity of any assignments of any rights in
the Intellectual Property and (c) assist any third Person, either directly or
indirectly, in challenging such rights in or the validity of any assignments of
such rights. Nothing in this Sub-Section 14.6 shall prohibit or estop the
Seller from exercising any rights it may have under Applicable Law as a licensee
under the License Agreement to challenge the "macro-droplet" technology, as
licensed back to Seller thereunder. The provisions of this Sub-Section 14.7
shall survive the termination or expiration of this Agreement.
14.7 SEVERABILITY. The covenants in this Section XIV are severable and
separate, and the non-enforceability of any specific covenant shall not affect
the provisions of any other covenant. Moreover, in the event any court of
competent jurisdiction shall determine that the scope, time or territorial
restrictions set forth are unreasonable, then it is the intention of the parties
that such restrictions be enforced to the fullest extent which the court deems
reasonable, and the Agreement shall be reformed in accordance therewith.
14.8 ENFORCEMENT. All of the covenants in this Section XIV shall be
construed as an agreement independent of any other provision in this Agreement,
and the existence of any claim or cause of action of the Seller or of the Parent
against any Purchaser Entity, whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by any Purchaser Entity of
such covenants.
SECTION XV - BULK SALES PROVISIONS
15.1 BULK SALES LAWS. The Parties hereto hereby waive compliance with the
provisions of any applicable bulk sales laws, including Article 6 of the Uniform
Commercial Code, as it may be in effect in any applicable jurisdiction. This
provision shall not be deemed in any way to limit the indemnity provided for in
Sub-Section 10.2 above.
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SECTION XVI - MISCELLANEOUS PROVISIONS
16.1 HEADINGS. The division of this Agreement into Sections, Sub-Sections
and other subdivisions and the insertion of headings are for convenience of
reference only and shall not affect or be utilized in the construction or
interpretation hereof.
16.2 ENTIRE AGREEMENT. This Agreement together with the Collateral
Agreements and any documents to be delivered pursuant hereto or thereto and the
Non-Disclosure Agreement constitute the entire agreement between the Parties
hereto pertaining to the subject matter hereof and supersede all prior
agreements, understandings, negotiations, and discussions, whether oral or
written, of the Parties hereto.
16.3 SINGULAR, PLURAL AND GENDER. In this Agreement, the singular includes
the plural and the masculine includes the feminine and neuter and vice versa
unless the context otherwise requires.
16.4 SUCCESSORS AND ASSIGNS. This Agreement binds and benefits the Parties
and their respective heirs, executors, administrators, personal representatives,
successors and assigns.
16.5 ASSIGNMENTS. This Agreement shall not be assignable or otherwise
transferable by either Party without the prior written Consent of the other
Party provided that Purchaser may assign all or any portion of its rights and/or
obligations hereunder to any Affiliate of Purchaser, so long as Purchaser shall
remain liable to Seller therefor, and provided that Parent or Seller may assign
all or any portion of their respective rights and/or obligations hereunder to
any Affiliate of Parent or Seller, so long as Parent and Seller shall both
remain liable to Purchaser therefor.
16.6 GOVERNING LAW; DISPUTE RESOLUTION. This Agreement shall be governed in
all respects including as to validity, interpretation and effect, by the laws of
the State of California, without giving effect to the conflict of laws rules
thereof. Any controversy or claim arising out of or relating to this Agreement
or any Collateral Agreement (other than the Share Purchase Agreement) or the
breach hereof or thereof, including any claim or controversy as to the
arbitrability of any claim or controversy and any claim for rescission, shall be
settled by binding arbitration in Los Angeles County, California, if initiated
by the Seller and in San Diego County, California, if initiated by the
Purchaser, in each case, before an arbitrator selected by or in accordance with
the rules of the Judicial Arbitration and Mediation Service. There shall be no
appeal from the decision or findings of the arbitrator(s), which shall be final
and binding upon the Parties and judgement upon the award rendered by the
arbitrator may be entered in any court having proper jurisdiction. The costs of
any arbitration, including administrative and arbitrators' fees, shall be shared
equally by the Parties and each Party shall bear its own costs and attorneys'
and witness' fees. The arbitration carried out hereunder shall apply to the
exclusion of regular legal means, provided that the rights of the Parties in
urgent situations in which time is of the essence to obtain proper remedies in
courts of Applicable Law shall remain unimpaired.
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16.7 TIME IS OF THE ESSENCE. Time shall be of the essence of this Agreement.
16.8 FURTHER ACTION. Each of the Parties agrees to cooperate with the other
to take such action as may be reasonably requested in order to give full effect
to this Agreement, including without limitation, the execution of such
assignments, Consents, clearances or further assurances necessary or desirable
to assure the proper and effective completion of this Agreement.
16.9 PROFESSIONAL FEES. Except as provided for in Sub-Sections 10.2 and
10.3, each of the Parties hereto shall pay for their own legal, brokerage and
other professional fees incurred in connection with the preparation of this
Agreement and all of the Collateral Agreements and the transactions contemplated
hereby.
16.10 SEVERABILITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the other provisions hereof and this Agreement
shall be construed in all respects as if such invalidated provisions were
omitted.
16.11 COUNTERPARTS. This Agreement may be executed by facsimile and via
multiple counterparts, each of which shall be deemed to be an original and all
of which shall be construed together as one agreement.
16.12 PUBLIC ANNOUNCEMENTS. Neither Purchaser nor Seller nor any of their
respective subsidiaries or Affiliates, shall make any public announcements or
issue any press releases of any kind concerning the transactions contemplated by
this Agreement and the Collateral Agreements without the prior written Consent
of the other Party (which Consent shall not be unreasonably withheld or
delayed), except as may be required by Applicable Law, in which case the Party
making such announcement or release shall use all its reasonable efforts to
permit the other Party to review and comment upon such announcement or release
in advance.
16.13 U.S. EXPORT LAWS AND REGULATIONS. Each Party hereby acknowledges that
the rights and obligations of this Agreement and the transactions contemplated
hereby are subject to the Applicable Laws of the United States relating to the
export of products and technical information. Without limitation, each Party
shall comply with all such Applicable Laws and regulations.
16.14 NOTICES. All notices, requests, demands and other communications which
are required or may be given under this Agreement shall be in writing and hand
delivered, telexed, facsimilied or mailed by registered or certified mail, and
shall be deemed to have been received either on the date of their delivery,
telex or facsimile or, if mailed, on the date two (2) business days following
the date of mailing. The Parties' addresses for the purposes hereof are as
follows:
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If to the Seller: If to the Parent:
ChromaXome Corp. Trega BioSciences, Inc.
9880 Campus Point Drive 9880 Campus Point Drive
San Diego, California San Diego, California
U.S.A. 921921 U.S.A. 921921
Attention: President Attention: President
------------------------- -------------------------
with a copy to: with a copy to:
Trega BioSciences, Inc. Trega BioSciences, Inc.
9880 Campus Point Drive 9880 Campus Point Drive
San Diego, California San Diego, California
U.S.A. 921921 U.S.A. 921921
Attention: General Counsel Attention: General Counsel
--------------------------- ---------------------------
If to the Purchaser:
TerraGen Discovery Inc.
At the address first listed above and
to 9880 Campus Point Drive
San Diego, California
U.S.A. 921921
Attention: President
--------------------
with a copy to:
TerraGen Diversity Inc.
2386 East Mall - UBC
Unit #3
Vancouver, BC
V6T 1Z3
Attention: President
--------------------
O'Connor, Greenspoon
2000 Mansfield
Suite 1400
Montreal, Quebec
H3A 3A2
Attention: J. David Butts
-------------------------
or to any such other address as any Party shall have specified by notice in
writing to the others.
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16.14 COUNTERPARTS AND FACSIMILE. This Agreement, and any certificates or
writing delivered in connection herewith, may be executed in any number of
counterparts with the same effect as if all Parties had all signed the same
documents, and all such counterparts will be construed together and will
constitute one and the same instrument. The execution of this Agreement and any
other writing by any Party hereto or thereto will not become effective until
counterparts hereof or thereof, as the case may be, have been executed by all
the Parties hereto or thereto, and executed copies delivered to each Party who
is a Party hereto or thereto. Such delivery may be made by facsimile
transmission of the execution page or pages, hereof or thereof, to each of the
other Parties by the Party signing such facsimile transmission, if an originally
executed execution page or pages is forwarded by prepaid express courier to each
of the other Parties by the Party signing the particular counterpart.
IN WITNESS WHEREOF, the Parties have signed effective the 12th day of March
1999.
TERRAGEN DISCOVERY INC.
BY: /S/ MARIO THOMAS
---------------------------------- -----------------------------------
MARIO THOMAS, CEO WITNESS
NAME:
CHROMAXOME CORPORATION
BY: /S/ MICHAEL G. GREY /S/ DEBRA K. LIEBERT
---------------------------------- -----------------------------------
WITNESS
NAME:
TREGA BIOSCIENCES, INC.
BY: /S/ MICHAEL G. GREY /S/ DEBRA K. LIEBERT
---------------------------------- -----------------------------------
WITNESS
NAME:
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* Certain of the exhibits and schedules have been omitted from this
Agreement as filed with the Securities and Exchange Commission (the
"SEC"). The omitted information is considered immaterial from an
investor's perspective. Trega will furnish supplementally a copy of any
of the documents to the SEC upon request of the SEC.
48
