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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 2054
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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) December 23, 1998
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GALAGEN INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 0-27976 41-1719104
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(State or other (Commission File Number) (IRS Employer
jurisdiction Identification No.)
of incorporation)
1275 RED FOX ROAD
M-S 7420
ARDEN HILLS, MINNESOTA 55112
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(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code (651) 634-4233
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On December 23, 1998 GalaGen Inc., a Delaware corporation (the
"Company"), acquired certain assets of Nutrition Medical, Inc., a Minnesota
corporation ("NMI"), pursuant that certain Asset Purchase Agreement, dated as of
September 1, 1998, as amended on October 28, 1998 and December 23, 1998 (the
"Purchase Agreement"), by and between the Company and NMI.
Pursuant to the terms of the Purchase Agreement, the Company acquired
certain assets of NMI used in connection with NMI's critical care business. The
acquired assets include: (i) all of NMI's rights to the Acquired Products (as
defined herein); (ii) certain fixed assets of NMI; (iii) all of NMI's interest
in inventories of the Acquired Products, supplies, raw materials, parts,
finished goods, work-in-process, product labels and packaging materials used in
connection with the Acquired Products and NMI's interest in all orders or
contracts for the purchase of supplies, raw materials, parts, product labels and
packaging materials used in connection with the Acquired Products after
December 23, 1998; (iv) all of NMI's rights under contracts, purchase orders and
agreements pursuant to which the Company has agreed to purchase and sell the
Acquired Products after December 23, 1998; (v) all of NMI's rights under any
warranty or guarantee by any applicable manufacturer, supplier or other
transferor of the Acquired Products; (vi) copies of all sales and purchase
records, customer lists, supplier lists, production records and other similar
records related to the Acquired Products or associated with the Acquired
Products; (vii) all advertising, marketing and promotional materials associated
with the Acquired Products; (viii) all of NMI's rights to indentures,
guarantees, leases commitments and other agreements related to the Acquired
Products; (ix) all of NMI's interest in any copyrights, patents, trademarks,
trade names, logos, trade secrets, inventions, know how, other confidential
information and other intellectual property of any nature related to or arising
from the Acquired Products, together with pending applications for any of the
foregoing; (x) NMI's interest in those franchises, approvals, permits, licenses,
orders, registrations, certificates, variances and similar rights obtained from
governments and government agencies related to or associated with the Acquired
Products that are assignable to the Company; and (xi) all goodwill and other
general intangibles of NMI related to or arising from the Acquired Products.
The "Acquired Products" consist of: Fiber-PRO, Glutasorb-TM- Ready to
Use, GlucoPro-TM- Vanilla, L-Emental-TM- Hepatic, L-Emental-TM- Pediatric,
L-Emental-TM-, Nitro-PRO, Pro-Peptide-TM- for Kids, Pro-Peptide-TM- Unflavored,
Pro-Peptide-TM- VHN, Pro-Peptide-TM- Vanilla, Nutrition Liquid, Nutrition Plus
Liquid, Instant Nutrition, Instant Nutrition (Lactose Free), ISO-PRO, ISO-LAN,
ULTRA-PRO, ULTRA-LAN, and NUTRA-LAN.
The assets acquired were used by NMI in the critical care nutritional
products market and the Company intends to continue such use.
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In connection with the acquisition, the Company delivered $71,516.29
in cash and a certificate for 318,800 shares of common stock, par value $.01, of
the Company (the "Shares") to NMI. The Company also agreed to pay NMI a royalty
equal to 9% of net sales received by the Company for sales of the Acquired
Products (other than Glutasorb Ready to Use) in the United States that exceed
(i) $5 million during the year ended December 31, 2000, (ii) $6 million during
the year ended December 31, 2001, and (iii) $7.5 million during the year ended
December 31, 2002. In addition, the Company agreed to pay NMI an international
royalty for direct sales of the Acquired Products (other than Glutasorb Ready to
Use) made by the Company in all countries other than the United States and of
Glutasorb Ready to Use in all countries except the United States, Japan, France,
England, Scotland, Belgium, Holland, Switzerland, Denmark, Sweden, Norway and
Finland equal to 5% of net sales (less uncollectible accounts) that exceed
$200,000 during the year ending December 23, 1999 and 2.5% of net sales (less
uncollectible accounts) that exceed $200,000 during the year ending December 23,
2000.
The amount of consideration paid for the acquired assets was
determined through arm's length negotiations between the Company and NMI.
The cash consideration was paid from the cash reserves of the Company.
The Shares were issued from the authorized but unissued shares of common stock
of the company.
The acquisition will be accounted for using the purchase method of
accounting.
The Company and NMI were parties to a Marketing Agreement dated
September 1, 1998 and an amendment dated October 1, 1998 (collectively, the
"Marketing Agreement") pursuant to which NMI granted the Company the right to
market, sell and distribute the Acquired Products in the United States and
worldwide, pending closing of the transactions contemplated by the Purchase
Agreement, at prices and terms determined by the Company. NMI granted the
Company a royalty-free license to use NMI's trademarks, trade names and other
identifying slogans in connection with the distribution of the Acquired Products
under the Marketing Agreement. NMI agreed to purchase Acquired Products from
Acquired Product manufacturers for resale and shipping to the Company at a price
to be paid by the Company equal to NMI's invoice price from the applicable
Acquired Product manufacturer, plus shipping, labor and other specified costs.
In addition, the Company agreed to pay NMI an amount equal to 15% of the
Company's selling price to its customers for such Acquired Products that covered
NMI's warehouse rent and support services, invoicing services and collection
services. NMI also made its computer systems and customer databases available
to the Company's employees and permitted the Company's employees to process
orders at NMI's facility. The Company agreed to pay NMI certain
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office space charges. The Marketing Agreement terminated on December 23, 1998
upon the closing of transactions contemplated by the Purchase Agreement.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statement of business acquired: not required
(b) PRO FORMA financial information: not required
(c) Exhibits:
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<CAPTION>
Method of
Exhibit No. Description Filing
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2.1 Asset Purchase Agreement by and Incorporated
between the Registrant and Nutrition by Reference
Medical, Inc. dated as of
September 1, 1998. (1)
The Registrant hereby agrees to
furnish supplementally a copy of any
omitted schedule or exhibit to the
Commission upon request.
2.2 Amendment to Asset Purchase Agreement Electronic
dated as of October 28, 1998. Transmission
2.3 Second Amendment to Asset Purchase Electronic
Agreement, dated December 23, 1998. Transmission
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(1) Incorporated by reference to
Exhibit 10.26 to the Registrant's
Quarterly Report on Form 10-Q for the
quarterly period ending September 30,
1998 (File No. 0-27976).
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GALAGEN INC.
Date: January 6, 1999 By /s/ Gregg A. Waldon
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Gregg A. Waldon
Vice President, Chief Financial Officer,
Treasurer and Secretary
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AMENDMENT TO
ASSET PURCHASE AGREEMENT
THIS AMENDMENT to that certain Asset Purchase Agreement dated
September 1, 1998 (the "Purchase Agreement") by and between GalaGen Inc., a
Delaware corporation ("Buyer"), and Nutrition Medical, Inc., a Minnesota
corporation ("Seller"), is made as of this 28th day of October, 1998.
Capitalized terms not otherwise defined herein are used with the meaning given
such terms in the Purchase Agreement.
RECITALS
The Purchase Agreement provides for Buyer to acquire certain assets of
Seller subject to the terms and conditions thereof.
The Purchase Agreement contemplates that prior to the Closing Date,
Buyer will enter into an International Marketing Agreement with an International
Marketing Entity whereby, effective upon the Closing, Buyer will license to the
International Marketing Entity the exclusive right to market, sell and
distribute certain Products in certain countries other than the United States in
return for the International Marketing Consideration. The Purchase Agreement
further provides that the International Marketing Consideration to be received
by Buyer from the International Marketing Entity pursuant to the International
Marketing Agreement will be delivered or assigned to Seller.
Buyer and Seller no longer anticipate that Buyer will enter into the
International Marketing Agreement and wish to provide that Buyer will retain all
international marketing, sales and distribution rights related to the Products
in exchange for making certain payments to Seller in lieu of the International
Marketing Consideration.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants and conditions contained herein, the parties do hereby amend
the Purchase Agreement as follows:
1. Section 2.1(a) is amended and restated in its entirety to read as follows:
(a) Cash in the amount of $206,000, adjusted as set forth in Section 2.4
hereof, by wire transfer of immediately available funds to the cash account
or accounts as may be specified by Seller, and;
2. Section 2.2 is amended and restated in its entirety to read as follows:
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2.2 INTERNATIONAL ROYALTY. Buyer will pay to Seller an international
royalty (the "International Royalty") (a) of five percent (5%) of net
International Sales (as defined herein), reduced by uncollectible accounts,
of the Products in excess of $200,000 during the year ending on the first
anniversary of the Closing Date, and (b) of two and one half percent (2
1/2%) of net International Sales, reduced by uncollectible accounts, of the
Products in excess of $200,000 during the year ending on the second
anniversary of the Closing Date. Buyer will make payment, if any, of the
Intentional Royalty no later than 120 days after the end of the year to
which such royalty relates, accompanied by such documentation as may be
agreed upon by Buyer and Seller. "International Sales" as used herein
means sales of the Product known as "Glutasorb Ready to Use" in all
countries except the United States, Japan, France, England, Scotland,
Belgium, Holland, Switzerland, Denmark, Sweden, Norway and Finland and
sales of all Products other than "Glutasorb Ready to Use" in all countries
except the United States.
3. Section 2.3 is amended and restated in its entirety to read as follows:
2.3 DOMESTIC ROYALTY. Buyer will pay Seller a domestic royalty (the
"Domestic Royalty") of nine percent (9%) of net Domestic Sales (as defined
herein), reduced by uncollectible accounts, of the Products in excess of
(a) $5,000,000 during the year ending December 31, 2000, (b) $6,000,000
during the year ending December 31, 2001, and (c) $7,500,000 during the
year ending December 31, 2002. Buyer will make payment, if any, of the
Domestic Royalty no later than 120 days after the end of the year to which
such royalty relates, accompanied by such documentation as may be agreed
upon by the parties. Buyer will promptly inform Seller if it discontinues
sales of any of the Products for any reason, including due to development
of alternative products. "Domestic Sales" as used herein means all sales
of the Products except International Sales.
4. Section 4 is amended and restated in its entirety to read as follows:
4. CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Faegre &
Benson LLP, Minneapolis, Minnesota, at 10:00 a.m. on the seventh business
day following fulfillment or appropriate waiver of all of the conditions
specified in Sections 10 and 11 hereof, or such other date as Buyer and
Seller may mutually agree (the "Closing Date"). At the Closing (a) Buyer
shall (i) pay to Seller cash in the amount specified in Section 2.1(a)
hereof, (ii) deliver to Seller a certificate for the number of Shares as
specified in Section 2.1(b) hereof, and (iii) deliver to Seller the various
certificates, instruments and documents referred to in Section 11 hereof,
and (b) Seller shall (i) deliver to Buyer such bills of sale, assignments
and other documents of transfer reasonably required to transfer to Buyer
the interest of Seller in the Assets and
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(ii) deliver to Buyer the various certificates, instruments and documents
referred to in Section 10 hereof.
5. Section 11.11 and all references thereto are deleted and Sections 11.12 and
11.13 and all references thereto are renumbered 11.11 and 11.12,
respectively.
6. Section 14.3 and all references thereto are deleted and Sections 14.4,
14.5, 14.6, 14.7 and 14.8 and all references thereto are renumbered 14.3,
14.4, 14.5, 14.6 and 14.7, respectively.
7. A new Section 14.8 is added and reads in its entirety as follows:
14.8 PROHIBITED SALES. After the Closing Buyer will not sell any Products
to Prime Companies or to any companies affiliated with Dr. Samin until
Buyer receives notice from Seller that all amounts owed by Prime Companies
to Seller have been paid.
8. Except as expressly set forth herein, the terms and conditions of the
Purchase Agreement remain unmodified and in full force and effect.
9. This Amendment may be executed in counterparts, each of which shall be
considered an original.
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IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed by their duly authorized representatives to be effective as of the date
first given above.
NUTRITION MEDICAL, INC. GALAGEN INC.
By /s/ Richard J. Hegstrand By /s/ Gregg A. Waldon
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Its COO Its CFO
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SECOND AMENDMENT TO
ASSET PURCHASE AGREEMENT
THIS SECOND AMENDMENT to that certain Asset Purchase Agreement dated
September 1, 1998 (the "Purchase Agreement") by and between GalaGen Inc., a
Delaware corporation ("Buyer"), and Nutrition Medical, Inc., a Minnesota
corporation ("Seller"), is made as of this 23rd day of December, 1998.
Capitalized terms not otherwise defined herein are used with the meaning given
such terms in the Purchase Agreement.
RECITALS
The Purchase Agreement provides for Buyer to acquire certain assets of
Seller subject to the terms and conditions thereof.
The Purchase Agreement was amended by an Amendment To Asset Purchase
Agreement (the "Amendment") dated as of September 28, 1998.
The Amendment provides that Buyer will pay to Seller an International
Royalty on certain sales of the Products. Buyer and Seller wish to further
specify in this Second Amendment the sales of the Products to which the
International Royalty applies.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants and conditions contained herein, the parties do hereby amend
the Purchase Agreement as follows:
1. Section 2.2 is amended and restated in its entirety to read as follows:
2.2 INTERNATIONAL ROYALTY. Buyer will pay to Seller an international
royalty (the "International Royalty") (a) of five percent (5%) of net
International Sales (as defined herein), reduced by uncollectible accounts,
in excess of $200,000 during the year ending on the first anniversary of
the Closing Date, and (b) of two and one half percent (2 1/2%) of net
International Sales, reduced by uncollectible accounts, in excess of
$200,000 during the year ending on the second anniversary of the Closing
Date. Buyer will make payment, if any, of the International Royalty no
later than 120 days after the end of the year to which such royalty
relates, accompanied by such documentation as may be agreed upon by Buyer
and Seller. "International Sales" as used herein means sales made directly
by Buyer of the Product known as "Glutasorb Ready to Use" to customers in
all countries except the United States, Japan, France, England, Scotland,
Belgium, Holland, Switzerland, Denmark, Sweden, Norway and Finland and
sales made directly by Buyer of all Products other
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than "Glutasorb Ready to Use" to customers in all countries except the
United States.
2. Except as expressly set forth herein, the terms and conditions of the
Purchase Agreement, as amended by the Amendment, remain unmodified and in
full force and effect.
3. This Second Amendment may be executed in counterparts, each of which shall
be considered an original.
IN WITNESS WHEREOF, the parties have caused this Second Amendment to
be executed by their duly authorized representatives to be effective as of the
date first given above.
NUTRITION MEDICAL, INC. GALAGEN INC.
By /s/ Richard J. Hegstrand By /s/ Gregg A. Waldon
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Its COO Its CFO
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