<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30,
1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
-------------------------
Commission file number 0-23012
NEXSTAR PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
-------------------------
Delaware 84-1173453
(State of incorporation) (I.R.S. Employer Identification No.)
2860 Wilderness Place
Boulder, Colorado 80301
(Address of principal executive offices)
Registrant's telephone number: (303)444-5893
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
The number of shares of the registrant's Common Stock, par value $.01 per share,
outstanding as of October 31, 1998 was 28,585,934.
<PAGE> 2
NEXSTAR PHARMACEUTICALS, INC.
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -- September 30, 1998 and December 31, 1997.......................3
Condensed Consolidated Statements of Operations -- Three Months and Nine Months Ended
September 30, 1998 and 1997............................................................................4
Condensed Consolidated Statements of Cash Flows -- Nine Months Ended September 30, 1998 and 1997........5
Notes to Condensed Consolidated Financial Statements....................................................6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...................8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.......................................................................................15
Item 6. Exhibits and Reports on Form 8-K........................................................................15
SIGNATURES .......................................................................................................16
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NEXSTAR PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION> September 30, December 31,
1998 1997
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 66,282,000 $ 39,292,000
Marketable securities 141,000 24,997,000
Accounts receivable 44,311,000 34,623,000
Inventories 12,830,000 14,606,000
Prepaid expenses and other 4,067,000 3,872,000
------------- ------------
Total current assets 127,631,000 117,390,000
Property, plant and equipment, net of
accumulated depreciation and amortization 41,741,000 44,778,000
Investment in unconsolidated affiliate 9,809,000 --
Patent and trademark costs, net of accumulated amortization 5,514,000 5,623,000
Other noncurrent assets 5,245,000 2,752,000
------------- ------------
Total assets $189,940,000 $170,543,000
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ -- $ 5,034,000
Accounts payable 4,575,000 5,237,000
Accrued compensation and employee benefits 5,403,000 4,338,000
Accrued litigation settlement and related expenses due within one
year 1,933,000 1,273,000
Accrued interest payable 833,000 2,083,000
Other accrued expenses 5,542,000 4,037,000
Long-term obligations due within one year 3,870,000 5,445,000
-------------- ------------
Total current liabilities 22,156,000 27,447,000
Accrued litigation settlement expenses due after one year 8,084,000 8,767,000
Long-term obligations due after one year 9,579,000 8,327,000
Convertible subordinated debentures 80,000,000 80,000,000
Commitments and contingencies
Stockholders' equity:
Common stock 285,000 274,000
Additional paid-in capital 226,803,000 216,159,000
Deferred compensation (83,000) (151,000)
Cumulative translation adjustment (525,000) (394,000)
Accumulated deficit (156,359,000) (169,886,000)
-------------- ------------
Total stockholders' equity 70,121,000 46,002,000
-------------- ------------
Total liabilities and stockholders' equity $189,940,000 $170,543,000
============== ============
</TABLE>
3
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NEXSTAR PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- ---------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Product revenues $27,014,000 $ 23,054,000 $77,061,000 $ 65,150,000
License fee -- -- 3,000,000 --
Royalties 1,214,000 -- 3,023,000 --
Collaborative agreements and contracts 600,000 614,000 1,950,000 1,773,000
Interest income 877,000 742,000 2,379,000 1,571,000
------------ ------------ ------------ ------------
Total revenues 29,705,000 24,410,000 87,413,000 68,494,000
------------ ------------ ------------ ------------
Expenses:
Cost of goods sold 5,355,000 5,625,000 15,516,000 15,601,000
Research and development 11,795,000 15,952,000 38,302,000 41,289,000
Selling, general and administrative 11,702,000 11,102,000 34,432,000 32,554,000
Litigation settlement and related expenses 317,000 12,424,000 875,000 16,080,000
Interest expense 1,632,000 1,295,000 5,022,000 2,823,000
------------ ------------ ------------ ------------
Total expenses 30,801,000 46,398,000 94,147,000 108,347,000
------------ ------------ ------------ ------------
Operating loss (1,096,000) (21,988,000) (6,734,000) (39,853,000)
Gain on sale of subsidiary 21,480,000 -- 21,480,000 --
------------ ------------ ------------ ------------
Income (loss) before provision for income tax
and equity in loss of unconsolidated affiliate 20,384,000 (21,988,000) 14,746,000 (39,853,000)
Provision for income tax 200,000 31,000 495,000 150,000
Equity in loss of unconsolidated affiliate (724,000) -- (724,000) --
------------ ------------ ------------ ------------
Net income (loss) $19,460,000 $(22,019,000) $13,527,000 $(40,003,000)
============ ============ ============ ============
Net income (loss) per share:
Basic $ 0.68 $ (0.83) $ 0.48 $ (1.51)
============ ============ ============ ============
Diluted $ 0.62 $ (0.83) $ 0.48 $ (1.51)
============ ============ ============ ============
Shares used in computing net income (loss)
per share:
Basic 28,537,000 26,524,000 27,980,000 26,465,000
============ ============ ============ ============
Diluted 33,489,000 26,524,000 28,266,000 26,465,000
============ ============ ============ ============
</TABLE>
See notes to condensed consolidated financial statements.
4
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NEXSTAR PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------------
1998 1997
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 13,527,000 $(40,003,000)
Adjustments to reconcile net income (loss) to net cash used
in operating activities:
Depreciation and amortization of property, plant and equipment 7,275,000 7,013,000
Amortization of intangible assets 1,084,000 2,932,000
Gain on sale of subsidiary (21,480,000) --
Equity in loss of unconsolidated affiliate 724,000 --
Compensation expense related to grant of options and sales of
stock, including amortization of deferred compensation 68,000 203,000
Other 229,000 98,000
Changes in operating assets and liabilities:
Accounts receivable (9,324,000) (8,872,000)
Inventories 1,776,000 1,986,000
Prepaid expenses and other (195,000) (351,000)
Other noncurrent assets (2,113,000) (29,000)
Accounts payable (280,000) (6,139,000)
Accrued compensation and employee benefits 1,130,000 289,000
Accrued interest (1,250,000) 833,000
Accrued litigation settlement and related expenses (23,000) 9,882,000
Other accrued expenses 1,774,000 491,000
------------ ------------
Net cash used in operating activities (7,078,000) (31,667,000)
INVESTING ACTIVITIES
Maturities of marketable securities, net 24,856,000 1,501,000
Additions to property, plant and equipment (7,068,000) (7,099,000)
Proceeds from sale of subsidiary 15,000,000 --
Investment in unconsolidated affiliate (4,900,000) --
Proceeds from sale of investment in life science enterprise -- 2,683,000
Additions to patent costs (771,000) (1,029,000)
Deletions from other noncurrent assets 550,000 706,000
------------ ------------
Net cash provided by (used in) investing activities 27,667,000 (3,238,000)
FINANCING ACTIVITIES
Payments on short-term borrowings, net (5,034,000) (6,807,000)
Proceeds from sale-leaseback transactions -- 1,997,000
Payments on capital lease obligations (2,221,000) (3,394,000)
Proceeds from issuance of long-term debt 4,324,000 16,404,000
Repayments on long-term debt (1,323,000) (24,338,000)
Proceeds from issuance of convertible subordinated debentures,
net of offering costs -- 77,200,000
Proceeds from sale of common stock, net of offering costs 10,655,000 986,000
------------ ------------
Net cash provided by financing activities 6,401,000 62,048,000
------------ ------------
Net increase in cash and cash equivalents 26,990,000 27,143,000
Cash and cash equivalents at beginning of period 39,292,000 21,542,000
------------ ------------
Cash and cash equivalents at end of period $ 66,282,000 $ 48,685,000
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
5
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NEXSTAR PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(UNAUDITED)
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating
results for the three-month and nine-month periods ended September
30, 1998 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1998. For further
information, refer to the consolidated financial statements and
footnotes thereto included in the Company's annual report on Form
10-K for the year ended December 31, 1997.
Certain reclassifications have been made to prior year amounts to
agree with the current year presentation.
NOTE 2: INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
----------- -----------
<S> <C> <C>
Finished goods $ 4,973,000 $ 3,512,000
Work in process 5,460,000 8,161,000
Raw materials 2,397,000 2,933,000
----------- -----------
Total inventories $12,830,000 $14,606,000
=========== ===========
</TABLE>
NOTE 3: NET INCOME (LOSS) PER SHARE
Effective December 31, 1997, the Company adopted Financial
Accounting Standards Board ("FASB") Statement No. 128, "Earnings Per
Share" ("Statement No. 128"), which replaced the calculation of
primary and fully diluted earnings per share with basic and diluted
earnings per share. Unlike primary earnings per share, basic
earnings per share excludes any dilutive effects of options,
warrants and convertible securities. Diluted earnings per share is
very similar to the previous fully diluted earnings per share.
Earnings per share amounts for all periods presented conform to
Statement No. 128.
The Company's basic net income (loss) per share is computed using
the weighted average number of shares of common stock outstanding.
Common equivalent shares from stock options and warrants are
included in the computation of diluted net income per share for the
three months and nine months ended September 30, 1998. In addition,
common equivalent shares from convertible securities are included in
the computation of diluted net income per share for the three months
ended September 30, 1998. Common equivalent shares from stock
options, warrants and convertible securities are excluded from the
computation of diluted net loss per share for the three months and
nine months ended September 30, 1997 as their effect is
antidilutive.
NOTE 4: REPORTING CHANGES
Effective January 1, 1998, the Company adopted FASB Statement No.
131, "Disclosures about Segments of an Enterprise and Related
Information" ("Statement No. 131"). Statement No. 131 establishes
standards for the way that public business enterprises report
information about operating segments in annual financial statements
and requires that those enterprises report selected information
about operating segments in interim financial
6
<PAGE> 7
reports. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. The
Company has reviewed its operations and does not believe that it has
any operating segments which are currently reportable.
NOTE 5: COMMITMENTS AND CONTINGENCIES
In May 1996, the Company's Spanish subsidiary entered into an
agreement to borrow 500 million Spanish Pesetas with such borrowing
being secured by the subsidiary's accounts receivable. In February
1997, the agreement was amended to increase the amount that the
subsidiary could borrow to 750 million Spanish Pesetas. On April 1,
1998, the Company's Spanish subsidiary terminated the loan as to new
borrowings and the balance of the loan was paid in full in September
1998.
In September 1997, the Company entered into a $10 million unsecured
line of credit (the "Credit Agreement") with an average interest
rate of 8.25% with a financial institution. Under the terms of the
Credit Agreement, the Company is required to maintain certain
financial ratios and there are limitations on the Company's ability
to incur additional debt or to engage in certain significant
transactions. The Credit Agreement, which includes a foreign
exchange facility, expires November 1, 1999. As of September 30,
1998, the Company had no borrowings under the Credit Agreement.
NOTE 6: SALE OF SUBSIDIARY
On August 15, 1998, the Company sold a 51% interest (the "Interest")
in its newly established subsidiary Poligo L.L.C., a Delaware
limited liability company ("Proligo"), to SKW Americas, Inc.
("SKW"). Proligo was formed in July 1998 and initially consisted of
the assets of the Company's NeXstar Technology Products division, a
manufacturer of oligonucleotides and specialty chemicals for the
pharmaceuticals industry. As payment for the Interest, the Company
received $15 million and a 49% interest in PerSeptive Biosystems
GmbH, Hamburg, a company in Hamburg, Germany (the "Hamburg
Company"), which specializes in the manufacture of nucleoside
phosphoramidite monomers. The 49% interest of the Hamburg Company
had a fair market value of approximately $4.9 million. In addition,
SKW will pay the Company $3 million in guaranteed payments and up to
$20.5 million in performance-based milestones over the next five
years. As part of the transaction, the Company contributed $4.9
million and its 49% interest in the Hamburg Company to Proligo. SKW
contributed $5.1 million and the remaining 51% interest in the
Hamburg Company to Proligo. In the third quarter of 1998, the
Company recorded a $21.5 million gain in connection with this sale.
NOTE 7: SPIN-OFF OF DRUG DISCOVERY ORGANIZATION
On August 18, 1998, the Company announced that its Board of
Directors was actively evaluating the spin-off to its stockholders
of its drug discovery organization, thereby dividing the existing
company into two independent, publicly traded companies. On October
14, 1998, the Company announced that it will proceed to separate its
existing businesses subject to certain conditions. One company,
which will continue to operate under the NeXstar Pharmaceuticals
name, will become a specialty pharmaceutical company focused on
oncology and infectious diseases, leveraging its core liposomal
technology and the in-licensing of late stage compounds. The other
company, to be named Iterex Technologies, Inc. ("Iterex"), will
further commercialize its proprietary compound discovery
technologies. Iterex will be staffed with approximately 90 employees
of which 85 are currently employed by the Company.
The split will be accomplished through a dividend of shares of
Iterex to existing NeXstar Pharmaceuticals stockholders and is
expected to be finalized during the first half of 1999. The
transaction is intended to qualify as a tax-free spin-off for both
NeXstar Pharmaceuticals and its stockholders and is subject to
certain conditions, including the receipt of a favorable IRS ruling
(or favorable opinion of legal counsel).
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
This Management's Discussion and Analysis of Financial Condition and
Results of Operations contains "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of the Company,
or industry results, to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Such factors include, among other things, risks associated with the
following: reliance on a single product for a substantial portion of the
Company's revenues; general economic and business conditions, including
fluctuations in currency exchange rates; competition; technological advances;
ability to obtain rights to technology; ability to obtain and enforce patents;
ability to commercialize and manufacture products; results of clinical studies;
results of research and development activities; availability of qualified
personnel; changes in, or failure to comply with, governmental regulations;
ability to obtain adequate financing in the future; and other factors referenced
under "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1997. In particular, statements preceded by, followed by
or that include the words "expects", "anticipates" and "plans" are or may
constitute forward-looking statements. The Company's stockholders and potential
investors should consider carefully these risks and uncertainties in evaluating
NeXstar Pharmaceuticals' financial condition and results of operations.
AmBisome, DaunoXome, MiKasome and NeXstar Pharmaceuticals are registered
trademarks of the Company.
NeXstar Pharmaceuticals is an integrated biopharmaceutical company
engaged in the discovery, development, manufacture and marketing of proprietary
pharmaceutical products to treat life-threatening and other serious oncological,
hematological and infectious diseases.
The Company markets AmBisome, a liposomal formulation of
amphotericin B, for the treatment of life-threatening fungal infections and
DaunoXome, a liposomal formulation of the anticancer agent daunorubicin, which
is used as a first line therapy for the treatment of HIV-associated Kaposi's
sarcoma. The Company currently relies on sales of AmBisome in Europe for a
substantial majority of its product revenues and expects sales of AmBisome in
Europe to account for a majority of its revenues during the remainder of 1998.
In the second quarter of 1998, AmBisome received French approval and is now
approved in every European Union country.
The Company is conducting Phase II clinical trials for MiKasome, the
Company's liposomal formulation of amikacin, a potent aminoglycoside antibiotic.
These trials are assessing the effect of MiKasome in patients with (a) chronic
urinary tract infections, (b) infections related to stable Pseudomonas-colonized
cystic fibrosis and (c) nosocomial (hospital-acquired) pneumonia. Additional
phase II studies are anticipated to begin in 1999. The Company also plans to
initiate Phase I clinical trials for NX 211, its liposomal topoisomerase
inhibitor, for oncological indications in the first half of 1999. The timing of
the clinical trials for MiKasome and NX 211 may be affected by many factors
including, among others, unanticipated delays; unexpected preclinical or
clinical trial results, as applicable; and difficulties in enrolling patients.
There can be no assurance that the Company will be able to meet the time
schedule which it has established for any of its products.
Several of the Company's SELEX process-derived compounds (including
aptamer antagonists to vascular endothelial growth factor ("VEGF") and aptamers
which inhibit the activity of certain selectins) are in preclinical or early
preclinical development. In August 1998, the Company's Investigational New Drug
("IND") filing was approved by the U.S. Food and Drug Administration for its
antagonist to VEGF (NX 1838) for the treatment of the most severe ("wet") form
of age-related macular degeneration. The Company is currently conducting a Phase
I clinical trial of NX 1838 in patients with age-related macular degeneration.
In connection with a majority of its European sales, the Company
prices its products in the currencies of the countries into which they are sold
(the "Payment Currencies"), and revenues in the past have been and in the future
could be adversely affected by currency fluctuations. A significant majority of
the Company's manufacturing costs are in U.S. Dollars. Therefore, any decline in
the value of the Payment Currencies relative to the U.S. Dollar is likely to
negatively impact gross margins for the Company's products since the Company's
manufacturing costs would stay approximately the same while its revenue in
8
<PAGE> 9
terms of U.S. Dollars would decline. Sales in Germany, the U.K., Italy and Spain
together accounted for 55% and 56%, respectively, of the Company's product
revenues for the three months and nine months ended September 30, 1998. The
Company prices its products in each of these four countries in the local
currency.
NeXstar Pharmaceuticals hedges certain of its foreign currency
exposures, with respect to its outstanding trade accounts receivable and
accounts payable, through the use of forward contracts. NeXstar Pharmaceuticals
does not currently enter into speculative foreign currency transactions and does
not write speculative options. In the future, the Company may begin currency
hedging in connection with anticipated revenues and expenses and may use options
in addition to forward contracts. Such hedging will be done solely for the
purpose of protecting the Company from foreign currency fluctuations. The
Company recognizes a gain or loss for each forward contract equal to the
difference between the contract rate and the market rate on each balance sheet
date which is recorded as a selling, general and administrative expense. At
present, no deferred accounting is used in connection with the Company's hedging
activities. Notwithstanding its hedging activities (which have not always
included fully hedging against potential gains or losses), the Company has in
the past recognized foreign exchange gains and losses. There can be no assurance
that significant gains or losses will not be incurred in the future.
ANTICIPATED SPIN-OFF; WORKFORCE REDUCTION
On August 18, 1998, the Company announced that its Board of
Directors was actively evaluating the spin-off to its stockholders of its drug
discovery organization, thereby dividing the existing company into two
independent, publicly traded companies. On October 14, 1998, the Company
announced that it will proceed to separate its existing businesses subject to
certain conditions. One company, which will continue to operate under the
NeXstar Pharmaceuticals name, will become a specialty pharmaceutical company
focused on oncology and infectious diseases, leveraging its core liposomal
technology and the in-licensing of late stage compounds. The other company, to
be named Iterex Technologies, Inc. ("Iterex"), will further commercialize its
proprietary compound discovery technologies. Iterex will be staffed with
approximately 90 employees of which 85 are currently employed by the Company.
The split will be accomplished through a dividend of shares of
Iterex to existing NeXstar Pharmaceuticals stockholders (the "Iterex Spin-off")
and is expected to be finalized during the first half of 1999. The Iterex
Spin-off is intended to qualify as a tax-free spin-off for both NeXstar
Pharmaceuticals and its stockholders and is subject to certain conditions,
including the receipt of a favorable IRS ruling (or favorable opinion of legal
counsel).
The Company expects that it will incur Iterex Spin-off related
expenses of approximately $3.0 million prior to the consummation the spin-off.
The Company further expects to realize annual research and general and
administrative expense savings of approximately $17.5 million as a result of the
Iterex Spin-off (including savings from the transfer to Iterex of approximately
85 current Company employees). These cost savings, and the amount of the Iterex
Spin-off related expenses, will be further refined as the Company continues to
identify assets and liabilities to be transferred to Iterex.
In addition, on October 14, 1998, the Company reduced its workforce
by approximately 75 employees (the "Workforce Reduction"). As a result of the
Workforce Reduction, NeXstar Pharmaceuticals expects to realize savings of
approximately $3.5 million per year, and will incur a one-time expense in the
three months ending December 31, 1998 of approximately $2.0 million related to
severance packages for discharged employees.
RESULTS OF OPERATIONS
Three months and nine months ended September 30, 1998
PRODUCT REVENUES. Product revenues increased 17% and 18% to $27.0
million and $77.1 million for the three months and nine months ended September
30, 1998, respectively, from $23.1 million and $65.2 million for the
corresponding periods in 1997 primarily due to an increase in unit sales of
AmBisome in European markets. A significant majority of the Company's product
sales are in European currencies. The Company anticipates that a greater
percentage of sales during future periods will occur outside of Europe as a
result of the U.S. approval of AmBisome in the third quarter of 1997.
9
<PAGE> 10
LICENSE FEE. In the first quarter of 1998, the Company recorded a
$3.0 million milestone payment from Sumitomo Pharmaceuticals Co., Ltd. related
to AmBisome rights in Japan.
ROYALTIES. During the three months and nine months ended September
30, 1998, the Company received royalties of $1.2 million and $3.0 million,
respectively, primarily in connection with the sale of AmBisome in the U.S.
following the third quarter 1997 approval of AmBisome by the U.S. Food and Drug
Administration. This amount will increase if the amount of sales of AmBisome in
the U.S. increases.
COLLABORATIVE AGREEMENTS AND CONTRACTS. Collaborative agreement and
contract revenues were $600,000 and $2.0 million for the three months and nine
months ended September 30, 1998, respectively, compared to $614,000 and $1.8
million for the corresponding periods of 1997. Collaborative agreement and
contract revenue fluctuations are generally the result of changes in the number
of funded research projects as well as the timing and performance of contract
benchmarks.
INTEREST INCOME. Interest income increased to $877,000 and $2.4
million for the three months and nine months ended September 30, 1998,
respectively, compared to $742,000 and $1.6 million for the corresponding
periods of 1997. Interest income generally fluctuates as a result of the average
amount of cash available for investment and prevailing interest rates.
COST OF GOODS SOLD. Cost of goods sold was $5.4 million and $15.5
million, or 20% of product revenues, for the three months and nine months ended
September 30, 1998, respectively, compared to $5.6 million and $15.6 million, or
24% of product revenues, for the corresponding periods of 1997. The decrease in
cost of goods sold as a percentage of product revenue was primarily due to a
reduction in the average manufacturing cost of the products sold by the Company.
The decrease was partially offset by a reduction in the average revenue per vial
of product sold due in part to increased sales of AmBisome to Fujisawa
Healthcare, Inc. ("Fujisawa") at cost in connection with the October 1, 1997
sales launch of AmBisome in the U.S. Pursuant to an agreement between the two
firms, the Company and Fujisawa co-promote AmBisome in the United States and the
Company sells AmBisome to Fujisawa at cost for sale in the U.S. In addition, the
Company receives 20% of the gross profits from all U.S. sales. If the Company's
sales of AmBisome to Fujisawa increase as a percentage of total AmBisome sales,
the cost of goods sold as a percentage of revenues is expected to increase. Cost
of goods sold consists primarily of raw materials, allocations of overhead,
labor and equipment costs and charges associated with services provided by
outside vendors.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses
decreased 26% and 7% to $11.8 million and $38.3 million for the three months and
nine months ended September 30, 1998, respectively, compared to $16.0 million
and $41.3 million for the corresponding periods of 1997. The decrease in
research and development expenses is primarily related to charges in 1997,
including (i) a charge in the third quarter of 1997 of $1.4 million for
validation expenses related to product scale-up; (ii) an expense of $1.3 million
related to the write off of capitalized purchased technology which the Company
had been amortizing over a four-year period, but which the Company decided not
to pursue; and (iii) $500,000 in reorganizational expenses related to research
and development consolidation activities, including certain staff reductions.
The remaining decrease was primarily due to a reduction in research and
development related expenses of the NeXstar Technology Products division due to
its sale on August 15, 1998. For the three months and nine months ended
September 30, 1998, $629,000 and $2.0 million, respectively, of research and
development expenses were sponsored by third parties compared to $656,000 and
$1.7 million for the corresponding periods in 1997. Research and development
expenses consist primarily of salaries and benefits for scientific, consultants,
supplies, occupancy costs and depreciation of laboratory equipment and
facilities.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased 5% and 6% to $11.7 million and $34.4 million
for the three months and nine months ended September 30, 1998, respectively,
compared to $11.1 million and $32.6 million for the corresponding periods of
1997. In August 1998, the Company recorded an expense of approximately $760,000
pursuant to a separation agreement between the Company and Patrick J. Mahaffy
upon his resignation as president, chief executive officer and director of the
Company. The remaining increase was primarily related to an expansion in the
Company's French sales force in anticipation of the third quarter 1998 launch of
AmBisome, offset by a credit recorded in connection with the settlement of a
fully reserved outstanding loan due to the Company from a biotechnology firm.
The Company recognized foreign exchange losses of $11,000 and $72,000 for the
three months and nine
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<PAGE> 11
months ended September 30, 1998, respectively, compared to losses of $130,000
and $219,000 for the corresponding periods in 1997.
LITIGATION SETTLEMENT AND RELATED EXPENSES. Litigation settlement
and related expenses decreased to $317,000 and $875,000 for the three months and
nine months ended September 30, 1998, respectively, from $12.4 million and $16.1
million for the corresponding periods of 1997. The amounts in 1997 reflect
litigation expenses due to the settlement in August 1997 of patent litigation
between the Company and The Liposome Company, Inc. ("TLC") related to whether
AmBisome infringed TLC's patents because of the manner in which it is freeze
dried. In the settlement agreement between TLC and the Company (the "Settlement
Agreement"), the Company is required to make payments which began in 1998 based
on AmBisome sales over the next several years. Because the payments are subject
to certain minimum and maximum payments, the Company recorded accounting charges
in 1997 of $10.0 million, which represented the net present value of all future
minimum payments it is required to make. Beginning in 1998, the Company is
recording an amortization expense each quarter related to the difference between
all future minimum payments and the expense recorded in 1997. In addition,
beginning in 1998, the Company is expensing the difference between the minimum
and maximum payments, if any. The Company does not expect the difference between
its future minimum and maximum payments to TLC to be material.
INTEREST EXPENSE. Interest expense increased to $1.6 million and
$5.0 million for the three months and nine months ended September 30, 1998,
respectively, from $1.3 million and $2.8 million for the corresponding periods
of 1997. The increase was primarily due to interest payable under the $80
million of 6 1/4% Convertible Subordinated Debentures due 2004, on which
interest was payable from July 31, 1997 and additional borrowings in connection
with several equipment lease and financing arrangements.
GAIN ON SALE OF SUBSIDIARY. In the third quarter of 1998, the
Company recorded a $21.5 million gain on the sale of its 51% interest (the
"Interest") in its newly established subsidiary, Proligo L.L.C., a Delaware
limited liability company ("Proligo"), to SKW Americas, Inc. ("SKW"). Proligo
was formed in July 1998 and initially consisted of the assets of the Company's
NeXstar Technology Products division, a manufacturer of oligonucleotides and
specialty chemicals for the pharmaceuticals industry. As payment for the
Interest, the Company received $15 million and a 49% interest in PerSeptive
Biosystems GmbH, Hamburg, a company in Hamburg, Germany (the "Hamburg Company"),
which specializes in the manufacture of nucleoside phosphoramidite monomers. The
49% interest of the Hamburg Company had a fair market value of approximately
$4.9 million. In addition, SKW will pay the Company $3.0 million in guaranteed
payments and up to $20.5 million in performance-based milestones over the next
five years. As part of the transaction, the Company contributed $4.9 million and
its 49% interest in the Hamburg Company to Proligo. SKW contributed $5.1 million
and the remaining 51% interest in the Hamburg Company to Proligo.
EQUITY IN LOSS OF UNCONSOLIDATED AFFILIATE. In the third quarter of
1998, the Company recorded $724,000 as its equity in the loss from Proligo
representing its 49% share of losses from August 15 through September 30, 1998.
The Company expects to record additional equity in the loss from its investment
in Proligo L.L.C. through fiscal year 1999.
NET INCOME (LOSS). The Company reported net income of $19.5 million
and $13.5 million, or $0.68 and $0.48 per basic share and $0.62 and $0.48 per
diluted share, for the three months and nine months ended September 30, 1998,
respectively, compared to a net loss of $22.0 million and $40.0 million, or
$0.83 and $1.51 per basic and diluted share, for the corresponding periods of
1997.
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<PAGE> 12
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents and marketable securities
position at September 30, 1998 was $66.4 million compared to $64.3 million on
December 31, 1997. The $2.1 million increase in cash and cash equivalents and
marketable securities position was primarily the result of the following:
<TABLE>
<S> <C>
Net cash used in operating activities $ (6,672,000)
Additions to property, plant and equipment (7,474,000)
Proceeds from sale of subsidiary 15,000,000
Investment in unconsolidated affiliate (4,900,000)
Payments on short-term borrowings, net (5,034,000)
Payments on capital lease obligations (2,221,000)
Proceeds from issuance of long-term debt 4,324,000
Repayments on long-term debt (1,323,000)
Proceeds from sale of common stock, net 10,655,000
Other (221,000)
------------
$ 2,134,000
============
</TABLE>
The Company invests its cash and cash equivalents and marketable
securities in interest-bearing investment grade securities.
The Company's accounts receivable balance at September 30, 1998 was
$44.3 million as compared to $34.6 million on December 31, 1997. The increase in
accounts receivable as of September 30, 1998 compared to December 31, 1997
relates primarily to the increased amount of product sales. Payment practices
vary significantly between countries and increased sales in countries in which
payments tend to be slower, often as a result of the pace at which governmental
entities reimburse the Company's customers, have in the past increased and in
the future may increase the average length that accounts receivable are
outstanding and may increase the financial risk of certain of the Company's
customers. In certain countries, in particular Greece, Italy and Spain, in which
payments have been slow, the amount of accounts receivable owed to the Company
is significant. The Company continually seeks improvement in its collection
process to maximize its cash flow from product sales in a timely manner.
For the nine months ended September 30, 1998, the Company had $4.3
million in proceeds from facilities improvement and capital equipment financing
transactions. As of September 30, 1998, $1.1 million was available under
agreements relating to the financing of manufacturing equipment, general
laboratory and scientific equipment, office equipment, furniture and fixtures
and facilities improvements.
In September 1997, the Company entered into a $10 million unsecured
line of credit (the "Credit Agreement") with an average interest rate of 8.25%
with a financial institution. Under the terms of the Credit Agreement, the
Company is required to maintain certain financial ratios and there are
limitations on the Company's ability to incur additional debt or to engage in
certain significant transactions. The Credit Agreement, which includes a foreign
exchange facility, expires November 1, 1999. As of September 30, 1998, the
Company had no borrowings under the Credit Agreement.
In May 1996, the Company's Spanish subsidiary entered into an
agreement to borrow 500 million Spanish Pesetas with such borrowing being
secured by the subsidiary's accounts receivable. In February 1997, the agreement
was amended to increase the amount that the subsidiary could borrow to 750
million Spanish Pesetas. On April 1, 1998, the Company's Spanish subsidiary
terminated the loan as to new borrowings and the balance of the loan was paid in
full in September 1998.
The Company does not have any commitments to provide additional
funding to Proligo.
The Company believes that in the future it may be advisable to
augment its cash in order to fund all of its activities, including potential
product acquisitions. Therefore, the Company will consider raising cash whenever
market conditions are favorable. Such capital may be raised through additional
public or private financing, as well as collaborative relationships,
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<PAGE> 13
borrowings and other available sources. In addition, in the course of its
business, the Company evaluates products and technologies held by third parties
which, if acquired, could result in the development of product candidates by the
Company or which complement technologies currently being developed by the
Company. The Company expects from time to time to be involved in discussions
with other entities concerning the Company's potential acquisition of rights to
additional pharmaceutical products. In the event that the Company acquires such
products or third-party technologies, the Company may find it necessary or
advisable to obtain additional funding.
The Company's future capital requirements will be substantial and
will depend on, and could increase as a result of, many factors, including:
successful completion of the Iterex spin-off; progress of the Company's
research, drug discovery and development programs; whether the Company acquires
interests in products currently held by third parties; the results and costs of
preclinical and clinical testing of the Company's products, if developed; the
time and costs involved in obtaining regulatory approvals; the costs involved in
filing, prosecuting and enforcing patent claims; competing technological and
market developments; the Company's success in entering into collaborative
agreements; changes in collaborative research relationships; the costs
associated with potential commercialization of its products, if any, including
the development of additional manufacturing, marketing and sales capabilities;
the cost and availability of third-party financing for capital expenditures; and
administrative and legal expenses. In particular, the Company expects to have
significant cash requirements in the near future as a result of, but not limited
to, increased clinical studies, which are required in order to obtain approvals
and expand the indications and markets for the Company's products. There can be
no assurance that additional or sufficient financing will be available, or, if
available, that it will be available on acceptable terms. If additional funds
are raised by issuing equity securities of the Company, dilution to then
existing stockholders may result. If adequate funds are not available, the
Company may be required to significantly curtail one or more of its research and
development programs or commercialization efforts or obtain funds through
arrangements with collaborative partners or others on less favorable terms than
might otherwise be available.
YEAR 2000 ISSUES
The "Year 2000 Issue" is the result of computer programs being
written using two digits rather than four to define the applicable year. Any of
the Company's computer programs or hardware that have date-sensitive software or
embedded chips may recognize a date using "00" as the year 1900 rather than the
year 2000. This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal business
activities.
The Company has substantially completed a review of its internal
computer systems and is conducting a review of the external computer systems on
which it relies to determine what action will be necessary or appropriate in
connection with the Year 2000 issue. As a result of its review, the Company has
determined :
It will be required to modify or replace certain portions of its
software and hardware, and upgrade certain software so that those systems will
properly utilize dates beyond December 31, 1999. The Company presently believes
that with modifications or replacements of existing software and certain
hardware, the Year 2000 Issue can be mitigated. However, if such modifications
and replacements are not made, or are not completed timely, the Year 2000 Issue
could have an impact on the efficiencies of the Company.
The Company's plan to resolve the Year 2000 Issue involves the
following four phases: assessment, planning, testing and implementation and two
categories: information technology systems ("IT Systems") and manufacturing and
laboratory equipment ("Operating Equipment").
With respect to IT Systems, the completed assessment indicated that
most of the Company's significant IT Systems, in particular, the general ledger,
billing, and inventory systems, are Year 2000 compliant. This is a result of (a)
the newness of the Company's personal and mini-computer systems (most of its
date data is stored using four digits for years and the software residing in its
embedded chips recognizes correctly the nuances of the upcoming uncommon leap
year), (b) the Company's reliance primarily on personal and mini-computers and
not on older mainframes for most of its computing needs and (c) the nature of
the Company's business (i.e., the Company is neither a consumer nor
financial-based business). For the remaining IT Systems exposures, to date, the
Company has completed the planning phase and expects to complete software
replacement and upgrades no later than March 31, 1999. Once software is replaced
or upgraded for a system, the Company begins testing and implementation.
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<PAGE> 14
These phases run concurrently for different systems. Completion of the testing
and implementation phases for all significant systems is expected by June 30,
1999.
With respect to Operating Equipment, the assessment indicated that
certain software and embedded chips used in certain Operating Equipment may be
at risk. For its Operating Equipment exposures, the Company is completing its
planning phase. Scheduling and testing of this equipment is more difficult than
the testing of the IT systems; the majority of the testing is planned to occur
during an annual manufacturing shutdown beginning December 1998. Once testing is
complete, the Company will implement any upgrades or replace any non-compliant
software or hardware. Testing and implementation of affected equipment is
expected to be complete by September 30, 1999.
The Company does not share information systems with any suppliers,
subcontractors, customers or other outside parties ("Third-party Entities"). The
Company has requested, and will continue to seek, information from Third-party
Entities on which it relies, certifying that their computer systems will not
negatively affect the Company's operations. The Company currently relies on
third-party vendors in connection with much of its payroll and benefits systems.
In addition, the Company could be affected by the failure of various
governmental entities to appropriately address the Year 2000 Issue. To date, the
Company is not aware of any Third-party Entities with a Year 2000 issue that
would materially impact the Company's results of operations, liquidity, or
capital resources. However, the Company has no means of ensuring that
Third-party Entities will be Year 2000 ready. The inability of Third-party
Entities to complete their Year 2000 resolution process in a timely fashion
could materially impact the Company. The effect of non-compliance by Third-party
Entities is not determinable.
The Company will utilize both internal and external resources to
reprogram, or replace, test, and implement the software and Operating Equipment
for Year 2000 modifications. It is the Company's belief that the costs to the
Company as a result of the Year 2000 Issue will be nominal, but no assurance can
be given that there will not be some unforeseen issue, in particular, in
connection with Third-party Entities' computer systems, that may materially
affect the Company's operations.
Management of the Company believes it has an effective program in
place to resolve the Year 2000 issue in a timely manner. As noted above, the
Company has not yet completed all necessary phases of the Year 2000 program. In
the event that the Company does not complete any additional phases, it may
affect manufacturing and laboratory efficiencies. The Company has contingency
plans for certain critical applications and is working on such plans for others.
In addition, disruptions in the economy generally resulting from Year 2000
issues could also materially adversely affect the Company. The amount of
potential liability and lost revenue cannot be reasonably estimated at this
time.
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<PAGE> 15
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company believes that there will continue to be
significant litigation in the pharmaceutical industry regarding
patents and other intellectual property rights, but cannot
predict the likelihood of it being involved in any disputes. Any
new litigation could consume a substantial portion of the
Company's resources regardless of the outcome of such litigation.
Both the Company and certain of its competitors have
filed oppositions against each other as to patents granted by the
European Patent Office and patents granted by the Japanese Patent
Office. The Liposome Company, Inc. ("TLC") and the University of
California each has patents or patent applications relating to
active drug loading techniques that the owners could claim are
used in the manufacture of products such as DaunoXome. The
Company has opposed the grant of a European and a Japanese patent
owned by TLC and is involved in an interference proceeding with a
U.S. patent application owned by the University of California
relating to such loading technology.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
2.1 Purchase Agreement, dated August 15, 1998,
by and among SKW Americas, Inc., Proligo
L.L.C. and Registrant.
10.1 Amended and Restated Limited Liability
Company Agreement of Proligo L.L.C., dated
August 15, 1998, by and among NeXstar
Pharmaceuticals International, Inc., SKW
Americas, Inc. and Registrant.
10.2 First Amendment to Credit Agreement, dated
May 1, 1998, by and between Registrant and
Wells Fargo Bank, National Association
amending Credit Agreement, dated September
1, 1997, by and between the Registrant and
Wells Fargo Bank, National Association.
10.3 Letter agreement, dated September 1, 1998,
between Registrant and Wells Fargo Bank,
National Association amending Credit
Agreement, dated September 1, 1997, as
amended, by and between the Registrant and
Wells Fargo Bank, National Association.
10.4 Second Amendment to Credit Agreement, dated
November 1, 1998, by and between Registrant
and Wells Fargo Bank, National Association
amending Credit Agreement, dated September
1, 1997, as amended, by and between the
Registrant and Wells Fargo Bank, National
Association.
11.1 Statement Re: Computation of Net Income
(Loss) Per Share.
27.1 Financial Data Schedule.
(b) REPORTS ON FORM 8-K
1. On August 19, 1998, the Company filed a
report on Form 8-K with respect to the
announcements that its Board of Directors
began actively evaluating the spin out to
its stockholders of its drug discovery
organization and of the resignation of
Patrick J. Mahaffy as president, chief
executive officer and director.
2. On August 28, 1998, the Company filed a
report on Form 8-K with regard to the
Company's sale of its 51% interest in its
newly established subsidiary Proligo L.L.C.
to SKW Americas, Inc.
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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 thereunto duly authorized.
NEXSTAR PHARMACEUTICALS, INC.
Dated: November 16, 1998 By: /S/LAWRENCE M. GOLD
--------------------
Lawrence M. Gold
Chairman of the Board of Directors
Dated: November 16, 1998 By: /S/MICHAEL E. HART
------------------
Michael E. Hart
Vice President and Chief Financial
Officer (Principal Financial Officer
and Principal Accounting Officer)
16
<PAGE> 1
EXHIBIT 2.1
PURCHASE AGREEMENT
This Purchase Agreement ("Agreement") is made as of August 15, 1998, by
SKW Americas, Inc., a Delaware corporation ("Buyer"), Proligo L.L.C., a Delaware
limited liability company (the "Company"), and NeXstar Pharmaceuticals, Inc., a
Delaware corporation ("Seller").
BACKGROUND
1. Seller established the Company on July 27, 1998, in order to conduct
the Business (as hereinafter defined).
2. Seller has heretofore conducted the Business through its NTP Division
(as hereinafter defined).
3. Seller intends to contribute the Business to the Company, including
all assets and liabilities relating to the Business, in accordance with the
terms and conditions set forth in this Agreement.
4. Buyer intends to purchase an interest (the "Interest") equal to
fifty-one (51) percent of the Membership Interests (as hereinafter defined) in
the Company subject to the terms of this Agreement.
5. Buyer, Seller, Company and their respective Affiliates (as
hereinafter defined) intend to enter into various other agreements among them as
specified in this Agreement (including an Operating Agreement, Sublease
Agreements, Supply Agreement, Seller Transition Agreement and Revolving Loan
Agreement).
6. This Agreement is intended to specify the obligations of the parties
hereto with respect to the foregoing and establish the rights and obligations of
the parties hereto with respect to the sale of the Interest to Buyer.
7. In connection with the purchase of the Interest, the Buyer will make
certain payments to the Seller on the Closing Date. In addition, Buyer will make
certain payments in the future that are (i) fixed and payable on specified dates
and (ii) contingent on the occurrence of certain events.
8. Buyer has established and owns all of the Membership Interests in
Proligo Holdings L.L.C. ("Holdings"). Holdings has established and owns all of
the shares of Caroline Dritte Vermogensverwaltungsgesellschaft mbH ("Caroline").
Buyer is in the process of negotiating a notarial deed (the "Notarial Deed")
pursuant to which Buyer (through Caroline) will purchase all of the ownership
interests in PerSeptive Biosystems GmbH - Hamburg, a German GmbH registered in
Hamburg ("PerSeptive").
9. In the event that Buyer completes the acquisition of PerSeptive in
the manner specified herein, Buyer intends to transfer to Seller an ownership
interest in Holdings ("Seller's Holdings Interest") representing an indirect
forty-nine (49) percent ownership interest in PerSeptive ("Seller's PerSeptive
Interest"). In such event, Buyer will retain an ownership interest in Holdings
("Buyer's Holdings Interest") representing an indirect fifty-one (51) percent
ownership interest in PerSeptive ("Buyer's PerSeptive Interest").
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10. Upon Seller's receipt of Seller's Holdings Interest, each of Buyer
and Seller will contribute their respective ownership interests in Holdings to
the Company in accordance with this Agreement.
AGREEMENT
The parties hereto, intending to be legally bound, agree as follows:
ARTICLE I.
DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
1.1. "AFFILIATE" -- of any Person, any other Person that, directly or
indirectly, controls, is under common control with, or is controlled by, that
Person. For purposes of this definition, "control" (including, with its
correlative meanings, the terms "controlled by" and "under common control
with"), as used with respect to any Person, shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of such Person, whether through the ownership of voting securities
or by contract or otherwise.
1.2. "BEST EFFORTS" -- the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to ensure that such result
is achieved as expeditiously as possible; provided, however, that an obligation
to use Best Efforts under this Agreement does not require the Person subject to
that obligation to take actions that would result in a materially adverse change
in the benefits to such Person of this Agreement and the Contemplated
Transactions.
1.3. "BREACH" -- a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement will be deemed to have occurred if there is or has
been any inaccuracy in or breach of, or any failure to perform or comply with,
such representation, warranty, covenant, obligation, or other provision.
1.4. "BUSINESS" -- the business of supplying the pharmaceutical and
biopharmaceutical industry, including Seller, with nucleic acid and peptide
synthesis products for sale and use as laboratory research reagents and in
therapeutic and diagnostic products in clinical trials and to ultimately serve
the expected opportunity in therapeutic products and diagnostic products based
upon oligonucleotides or their analogues when such products have been approved
and are commercialized.
1.5. "BUYER" -- as defined in the first paragraph of this Agreement.
1.6. "BUYER'S HOLDINGS INTEREST" -- as defined in the "Background"
section of this Agreement.
1.7. "BUYER'S PERSEPTIVE INTEREST" -- as defined in the "Background"
section of this Agreement.
1.8. [Intentionally left blank]
1.9. "CITY OF HAMBURG DEED" -- as defined in Section 4.2(c)(v) hereof.
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<PAGE> 3
1.10. "CLOSING"-- as defined in Section 2.3.
1.11. "CLOSING BALANCE SHEET" -- as defined in Section 2.5 hereof.
1.12. "CLOSING DATE" -- the date and time as of which the Closing
actually takes place.
1.13. "COMPANY" -- as defined in the first paragraph of this Agreement.
1.14. "CONSENT" -- any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
1.15. "CONTEMPLATED TRANSACTIONS" -- all of the transactions
contemplated by this Agreement, including:
(a) the sale of the Interest by Seller to Buyer and Buyer's
acquisition and ownership of the Interest;
(b) the execution, delivery, and performance of the agreements
set forth in Sections 2.4(a) and (b);
(c) the performance by Buyer and Seller of their respective
covenants and obligations under this Agreement; and
(d) to the extent Buyer elects, the acquisition of PerSeptive,
transfer of Seller's Holdings Interest to Seller, and the contribution by Seller
and Buyer of their interests in Holdings to the Company.
1.16. "CONTRACT" -- any contract which is necessary to the functioning
of the Company as a successor to the NTP Division, excluding any contract for
goods or services which would be available to the Company at standard prices in
the market. All Contracts are listed in Part 3.17(a) of the Disclosure Letter.
1.17. "DAMAGES" -- as defined in Section 10.2.
1.18. "DISCLOSURE LETTER" -- the disclosure letter delivered by Seller
to Buyer concurrently with the execution and delivery of this Agreement.
1.19. "EBITDA" -- Net Income (as reflected in the Company's annual
certified consolidated financial statement for a particular fiscal year as
prepared in accordance with GAAP) as adjusted: (i) to exclude any dividend or
interest income; (ii) to exclude any interest expense or tax imposed on the
Company with respect to income, franchise and the like; (iii) to exclude any
depreciation or amortization; and (iv) to exclude any research and development
expenses in excess of the amount stipulated with respect thereto in the
"Business Plan" of the Company for such fiscal year annexed to the Operating
Agreement (without regard to any amendments to such Business Plan). Net Income
(and all adjustments with respect thereto) shall be determined on a consolidated
basis to reflect the Net Income (and appropriate inclusion and exclusion of
items specified above) of each Person in which the Company owns a sufficient
percentage of the ownership interests therein as will allow consolidation in
accordance with GAAP.
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1.20. "EMPLOYMENT AGREEMENT" -- the employment and non-competition
agreement with Wolfgang Pieken to be executed by the Company and Dr. Pieken.
1.21. "ENCUMBRANCE" -- shall mean any mortgage, pledge, security
interest, lien, restriction on use or transfer, voting agreement, adverse claim
or encumbrance or charge of any kind (including any agreement to give any of the
foregoing), any conditional sale or other title retention agreement, any lease
in the nature thereof, and the filing of, or any agreement to give, any
financing statement under the Uniform Commercial Code or similar law of any
jurisdiction.
1.22. "ENVIRONMENT" -- soil, land surface or subsurface strata, surface
waters (including navigable waters, ocean waters, streams, ponds, drainage
basins, and wetlands), groundwaters, drinking water supply, stream sediments,
ambient air (including indoor air), plant and animal life, and any other
environmental medium or natural resource.
1.23. "ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES" -- any cost,
damages, expense, liability, obligation, or other responsibility arising from or
under Environmental Law or Occupational Safety and Health Law and consisting of
or relating to:
(a) any environmental, health, or safety matters or conditions
(including on-site or off-site contamination, occupational safety and health,
and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and response,
investigative, remedial, or inspection costs and expenses arising under
Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or
Occupational Safety and Health Law for cleanup costs or corrective action,
including any investigation, cleanup, removal, containment, or other remediation
or response actions ("Cleanup") required by applicable Environmental Law or
Occupational Safety and Health Law (whether or not such Cleanup has been
required or requested by any Governmental Body or any other Person) and for any
natural resource damages; or
(d) any other compliance, corrective, investigative, or remedial
measures required under Environmental Law or Occupational Safety and Health Law.
The terms "removal," "remedial," and "response action," include the types of
activities covered by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq., as amended
("CERCLA").
1.24. "ENVIRONMENTAL LAW"--any Legal Requirement that requires or
relates to:
(a) advising appropriate authorities, employees, and the public
of intended or actual releases of pollutants or hazardous substances or
materials, violations of discharge limits, or other prohibitions and of the
commencements of activities, such as resource extraction or construction, that
could have significant impact on the Environment;
(b) preventing or reducing to acceptable levels the release of
pollutants or hazardous substances or materials into the Environment;
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(c) reducing the quantities, preventing the release, or
minimizing the hazardous characteristics of wastes that are generated;
(d) assuring that products are designed, formulated, packaged,
and used so that they do not present unreasonable risks to human health or the
Environment when used or disposed of;
(e) protecting resources, species, or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or other potentially
harmful substances;
(g) cleaning up pollutants that have been released, preventing
the threat of release, or paying the costs of such clean up or prevention; or
(h) making responsible parties pay private parties, or groups of
them, for damages done to their health or the Environment, or permitting
self-appointed representatives of the public interest to recover for injuries
done to public assets.
1.25. "ERISA" -- the Employee Retirement Income Security Act of 1974 or
any successor law, and regulations and rules issued pursuant to that Act or any
successor law.
1.26. "FACILITIES" -- any real property, leaseholds, or other interests
currently or formerly owned or operated by the NTP Division or the Company and
any buildings, plants, structures, or equipment (including motor vehicles, tank
cars, and rolling stock) currently or formerly owned or operated by the NTP
Division or the Company.
1.27. "FINANCIAL STATEMENT" as defined in Section 3.4.
1.28. "GAAP" -- United States generally accepted accounting principles,
applied on a consistent basis.
1.29. "GOVERNMENTAL AUTHORIZATION" -- any approval, consent, license,
permit, waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
1.30. "GOVERNMENTAL BODY" -- any:
(a) nation, state, county, city, town, village, district, or
other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other
government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or entity and
any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority or
power of any nature.
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1.31. "HAZARDOUS ACTIVITY" -- the distribution, generation, handling,
importing, management, manufacturing, processing, production, refinement,
Release, storage, transfer, transportation, treatment, or use (including any
withdrawal or other use of groundwater) of Hazardous Materials in, on, under,
about, or from the Facilities or any part thereof into the Environment, and any
other act, business, operation, or thing that increases the danger, or risk of
danger, or poses an unreasonable risk of harm to persons or property on or off
the Facilities, or that may affect the value of the Facilities, the NTP Division
or the Company.
1.32. "HAZARDOUS MATERIALS" -- any waste or other substance that is
listed, defined, designated, or classified as, or otherwise determined to be,
hazardous, radioactive, or toxic or a pollutant or a contaminant under or
pursuant to any Environmental Law, including any admixture or solution thereof,
and specifically including petroleum and all derivatives thereof or synthetic
substitutes therefor and asbestos or asbestos-containing materials.
1.33. "HSR ACT" -- the Hart-Scott-Rodino Antitrust Improvements Act of
1976 or any successor law, and regulations and rules issued pursuant to that Act
or any successor law.
1.34. "INTELLECTUAL PROPERTY ASSETS" -- as defined in Section 3.22.
1.35. "INTEREST" -- as defined in the "Background" section of this
Agreement.
1.36. "IRC" -- the Internal Revenue Code of 1986 or any successor law,
and regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
1.37. "IRS" -- the United States Internal Revenue Service or any
successor agency, and, to the extent relevant, the United States Department of
the Treasury.
1.38. "KNOWLEDGE" -- means the actual knowledge of an individual after
due inquiry by such individual of a fact, circumstance or situation. A Person
(other than an individual) will be deemed to have "Knowledge" of a particular
fact or other matter if any individual who is serving as a director, officer,
manager, partner, executor, or trustee of such Person (or in any similar
capacity) has, or at any time had, Knowledge of such fact or other matter.
1.39. "LEGAL REQUIREMENT" -- any federal, state, local, municipal,
foreign, international, multinational, or other administrative order,
constitution, law, ordinance, principle of common law, regulation, statute, or
treaty.
1.40. "LICENSE AGREEMENT" -- the license agreement in the form of
Exhibit 2.4(a)(ix) to be executed by Seller and the Company.
1.41. "MATERIAL INTEREST" -- as defined in Section 1.55.
1.42. "MEMBERSHIP INTEREST" -- a member's entire interest in a company,
including, but not limited to, (i) the percentage interest now or hereafter
owned by it, (ii) its share in any net income, net loss and any distributions of
the company, and (iii) its right to participate in the management of the company
or any other decision of the members.
1.43. "NOTARIAL DEED" -- as defined in the "Background" section of this
Agreement.
1.44. "NTP EMPLOYEES" -- the employees identified on Part 3.20 of the
Disclosure Letter.
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1.45. "NTP DIVISION" -- the division within Seller known as NeXstar
Technology Products.
1.46. "OCCUPATIONAL SAFETY AND HEALTH LAW" -- any Legal Requirement
designed to provide safe and healthful working conditions and to reduce
occupational safety and health hazards, and any program, whether governmental or
private (including those promulgated or sponsored by industry associations and
insurance companies), designed to provide safe and healthful working conditions.
1.47. "OPERATING AGREEMENT" -- the Limited Liability Company Agreement
for the Company in the form of Exhibit 2.4(a)(iii), to be executed by Buyer,
Seller, Seller's Subsidiary NeXstar Pharmaceutical International, Inc. ("NPII")
and the Company.
1.48. "ORDER" -- any award, decision, injunction, judgment, order,
ruling, subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
1.49. "ORDINARY COURSE OF BUSINESS" -- an action taken by a Person will
be deemed to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such
Person and is taken in the ordinary course of the normal day-to-day operations
of such Person;
(b) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons exercising
similar authority) and is not required to be specifically authorized by the
parent company (if any) of such Person; and
(c) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the board of directors (or by
any Person or group of Persons exercising similar authority), in the ordinary
course of the normal day-to-day operations of other Persons that are in the same
line of business as such Person.
1.50. "ORGANIZATIONAL DOCUMENTS" -- (a)the articles or certificate of
incorporation and the bylaws of a corporation; (b)the partnership agreement and
any statement of partnership of a general partnership; (c)the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (d) the certificate of formation and the operating or management
agreement of a limited liability company; (e)any charter or similar document
adopted or filed in connection with the creation, formation, or organization of
a Person; and (f)any amendment to any of the foregoing.
1.51. "PERSEPTIVE" -- as defined in the "Background" section of this
Agreement.
1.52. "PERSON" -- any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
1.53. "PRIME RATE" -- the rate of interest publicly announced by the
Chase Manhattan Bank, N.A. from time to time as its Prime Rate for U.S. dollar
loans.
1.54. "PROCEEDING" -- any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Body or arbitrator.
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1.55. "PURCHASE PRICE" -- as defined in Section 2.2.
1.56. "RELATED PERSON" -- with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by such
individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material Interest;
and
(d) any Person with respect to which such individual or one or
more members of such individual's Family serves as a manager, director, officer,
partner, executor, or trustee (or in a similar capacity). For purposes of this
definition, (a) the "Family" of an individual includes (i) the individual, (ii)
the individual's spouse, (iii) any other natural person who is related to the
individual or the individual's spouse within the second degree, and (iv) any
other natural person who resides with such individual, and (b) "Material
Interest" means direct or indirect beneficial ownership (as defined in Rule
13d-3 under the Securities Exchange Act of 1934) of voting securities or other
voting interests representing at least 10% of the outstanding voting power of a
Person or equity securities or other equity interests representing at least 10%
of the outstanding equity securities or equity interests in a Person.
1.57. "RELEASE" -- any spilling, leaking, emitting, discharging,
depositing, escaping, leaching, dumping, or other releasing into the
Environment, whether intentional or unintentional.
1.58. "REPRESENTATIVE" -- with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor, or other representative
of such Person, including legal counsel, accountants, and financial advisors.
1.59. "REVOLVING LOAN AGREEMENT" -- a credit agreement in the form of
Exhibit 2.4(a)(vii), to be executed by the Company and SKW Trostberg AG, the
parent company of Buyer.
1.60. "SECURITIES ACT" -- the Securities Act of 1933 or any successor
law, and regulations and rules issued pursuant to that Act or any successor law.
1.61. "SELLER" -- as defined in the first paragraph of this Agreement.
1.62. "SELLER TRANSITION AGREEMENT" -- the intercompany service and
transition agreement in the form of Exhibit 2.4(a)(iv), to be executed by Seller
and the Company.
1.63. "SELLER'S HOLDINGS INTEREST" -- as defined in the"Background"
section of this Agreement.
1.64. "SELLER'S PERSEPTIVE INTEREST" -- as defined in the "Background"
section of this Agreement.
1.65. "SUBLEASE AGREEMENTS" -- shall refer collectively to the subleases
and assignment agreements in the form of Exhibit 2.4(a)(xi), to be executed by
Seller, the Company and, in certain
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cases, by third parties relating to premises and equipment leased by Seller for
the NTP Division or to equipment and facilities improvements financed by Seller
for the NTP Division.
1.66. "SUBSIDIARY" -- with respect to any Person (the "Owner"), any
corporation or other Person of which securities or other interests having the
power to elect a majority of that corporation's or other Person's board of
directors or similar governing body, or otherwise having the power to direct the
business and policies of that corporation or other Person (other than securities
or other interests having such power only upon the happening of a contingency
that has not occurred) are held by the Owner or one or more of its Subsidiaries;
when used without reference to a particular Person, "Subsidiary" means a
Subsidiary of the Company.
1.67. "SUPPLY AGREEMENT" -- the supply agreement in the form of Exhibit
2.4(a)(vi), to be executed by Seller and the Company.
1.68. "TAXES" -- any federal, state, local or foreign income, receipts,
sales, franchise, ad valorem, profits, license, lease, use, payroll,
withholding, employment, property, excise, occupation, customs, duties or other
tax, fee or assessment of any kind whatever.
1.69. "TAX RETURN" -- any return (including any information return),
report, statement, schedule, notice, form, or other document or information
filed with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection,
or payment of any Tax or in connection with the administration, implementation,
or enforcement of or compliance with any Legal Requirement relating to any Tax.
1.70. "THREAT OF RELEASE" -- a substantial likelihood of a Release that
may require action in order to prevent or mitigate damage to the Environment
that may result from such Release.
1.71. "THREATENED" -- a claim, Proceeding, dispute, action, or other
matter will be deemed to have been "Threatened" if any demand or statement has
been made in writing or any notice has been given in writing, or if any other
event has occurred or any other circumstances exist, that would lead a prudent
Person to conclude that such a claim, Proceeding, dispute, action, or other
matter is likely to be asserted, commenced, taken, or otherwise pursued in the
future.
1.72. "TRADE SECRET" -- know-how, trade secrets, confidential
information, customer lists, software, technical information, data, process
technology, plans, drawings and blue prints; owned, used or licensed by the
Company, as licensee or licensor.
ARTICLE II.
SALE AND TRANSFER OF INTEREST; CLOSING
2.1. SALE OF INTEREST. Subject to the terms and conditions of this
Agreement, at the Closing, Seller will sell and transfer the Interest to Buyer,
and Buyer will purchase the Interest from Seller.
2.2. PURCHASE PRICE. The purchase price (the "Purchase Price") for the
Interest shall be payable as follows:
(a) Buyer shall pay to Seller by certified check or wire transfer
(to an account specified by the Seller):
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(i) the sum of Fifteen Million Dollars ($15 million) on
the Closing Date and
(ii) the amounts indicated on Schedule 2.2(a) hereto at
such time as the conditions specified therein have been satisfied.
(b) In the event that Buyer completes the acquisition of
PerSeptive as indicated in the Background section of this Agreement and Buyer
completes transfer of Seller's Holding Interest to Seller, the payments
described in Section 2.2(a)(ii) shall be modified in the manner set forth on
Schedule 2.2(b) and Buyer shall only be required to make the payments described
in this Section 2.2(b) and not in Schedule 2.2(a). Upon receipt by the Company
of Seller's contribution of Seller's Holdings Interest and Buyer's contribution
of Buyer's Holding Interest, the Company shall reflect the contribution on its
books and records as a capital contribution (in proportion to the respective
Holdings Interests of the Parties hereto) in an amount equal to the original
purchase price paid by Caroline for PerSeptive as increased by the license fee
paid by PerSeptive to The Perkin Elmer Corporation.
2.3. CLOSING. The purchase and sale (the "Closing") provided for in this
Agreement will take place at the offices of Buyer's counsel at 90 Park Avenue,
New York, New York 10016, at 4:00 p.m. (local time) on August 15, 1998 or at
such other time and place as the parties hereto may agree. Subject to the
provisions of Section 9, failure to consummate the purchase and sale provided
for in this Agreement on the date and time and at the place determined pursuant
to this Section 2.3 will not result in the termination of this Agreement and
will not relieve any party of any obligation under this Agreement.
2.4. CLOSING OBLIGATIONS. At the Closing:
(i) Seller will deliver to Buyer:
(ii) evidence of the formation and good standing of the
Company;
(iii) a certificate representing the Interest, duly
endorsed for transfer to Buyer;
(iv) the Operating Agreement, executed by Seller, NPII and
the Company;
(v) the Seller Transition Agreement, executed by Seller
and the Company;
(vi) [Intentionally left blank]
(vii) the Supply Agreement, executed by Seller and the
Company;
(viii) the Revolving Loan Agreement, executed by the
Company;
(ix) evidence of the transfer, assignment and delivery by
Seller to the Company of title to all Seller's assets related to the Business,
including all Contracts, accounts receivable, patents and patent files, and
assignment of confidentiality agreements relating to certain employees;
(x) the License Agreement, executed by Seller and the
Company;
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(xi) the Employment Agreement, executed by Dr. Pieken and
the Company;
(xii) the Sublease Agreements, executed by Seller and the
Company;
(xiii) [Intentionally left blank]
(xiv) a capital contribution by Seller or its Affiliate to
the Company in the sum of Four Million Nine Hundred Thousand Dollars ($4.9
million).
(xv) Buyer will deliver to Seller:
(xvi) the sum of Fifteen Million Dollars ($15 million) by
bank cashier's or certified check payable to the order of or by wire transfer to
the account specified by Seller;
(xvii) the Operating Agreement, executed by Buyer;
(xviii)the Revolving Loan Agreement, executed by Buyer or
one of its Affiliates;
(xix) [Intentionally left blank]
(xx) a capital contribution by Buyer to the Company in the
sum of Five Million One Hundred Thousand Dollars ($5.1 million).
2.5. PURCHASE PRICE ADJUSTMENT.
(a) Within forty-five (45) days after the Closing Date, Buyer
shall prepare and submit to Seller an unaudited balance sheet of the Company as
of the Closing Date (the "Closing Balance Sheet") without consolidation of any
interest in Holdings or any Person which is owned by Holdings and without taking
into account the $10 million of cash contributions to be made at Closing by
Buyer and Seller. The Closing Balance Sheet shall be prepared in accordance with
GAAP as applied by the Company in preparing the Financial Statements and shall
present fairly, in all material respects, the assets and liabilities of the
Company as of the Closing Date. Seller shall cooperate with Buyer as needed to
prepare the Closing Balance Sheet.
(b) Seller shall have the right to examine the Closing Balance
Sheet for a period of fifteen (15) days following the date of receipt thereof.
If Seller does not object to the Closing Balance Sheet in writing within such
fifteen (15) day period, then the Closing Balance Sheet shall be deemed final
and adopted. If Seller objects to the Closing Balance Sheet in writing within
such fifteen (15) day period, Seller and Buyer shall have an additional fifteen
(15) day period from the date of Buyer's receipt of Seller's objection within
which to resolve mutually and in good faith any of Seller's objections. Upon
expiration of such additional fifteen (15) day period, the Closing Balance
Sheet, as amended by Buyer and Seller, shall be deemed final and adopted.
(c) Immediately after the Closing Balance Sheet is deemed final
and adopted, to the extent that the differences described below (other than
differences arising from August 1st to the Closing Date with respect to the
accrual in the Ordinary Course of Business of depreciation, liabilities under
ongoing Contracts, payments on leasing and financings of equipment and tenant
improvements or other amounts in respect of which adjustments are provided for
in Section 2.6 below or arising from
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accounts payable incurred in the Ordinary Course of Business for assets which
under GAAP are expensed and not capitalized) exceed $50,000, the Parties shall
make the following payments:
(i) Buyer shall pay to Seller an amount equal to 49% of
the excess, if any, of the members' equity as reflected on the Closing Balance
Sheet over the "Intercompany Payable to Parent" as reflected on the Financial
Statement; or
(ii) Seller shall pay to Buyer an amount equal to 51% the
excess, if any, of the "Intercompany Payable to Parent" as reflected on the
Financial Statement over the members' equity as reflected on the Closing Balance
Sheet.
2.6. PRORATION OF PREPAID EXPENSES, ROYALTIES AND TAXES.
(a) To the extent that the NTP Division or the Company pays or
incurs any expenses, real estate or usage taxes, or similar items, or pays or
receives any royalties, which cover periods of time extending both before and
after the Closing Date, such items shall be prorated by the parties hereto on a
fair and equitable basis. Within thirty (30) days after the Closing Date, Seller
shall prepare a Statement of Prepaid Expenses and an allocation of
responsibility for the same setting forth the amount of Prepaid Expenses payable
by Seller and the Company such that the Prepaid Expenses are allocated between
the Company and the Seller on a fair and equitable basis.
(b) Buyer shall have the right to examine the Statement of
Prepaid Expenses for a period of fifteen (15) days following the date of receipt
thereof. If Buyer does not object to the Statement of Prepaid Expenses in
writing within such fifteen-day period, the Statement of Prepaid Expenses shall
be deemed final and adopted. If Buyer objects to the Statement of Prepaid
Expenses in writing within such fifteen-day period, Seller and Buyer shall have
an additional fifteen-day period from the date of Seller's receipt of Buyer's
objection within which to resolve mutually and in good faith any of Buyer's
objections. Upon expiration of such additional fifteen-day period, the Statement
of Prepaid Expenses, as amended by Buyer and Seller, shall be deemed final and
adopted. Immediately following the determination of such proration, Seller and
the Company shall make any necessary payments to the other consistent with the
foregoing proration.
(c) As to items such as (but not limited to) royalty income where
the data may not be available within such initial thirty (30) day period,
allocations will be made in good faith by the parties promptly after receipt of
the relevant data.
2.7. ARBITRATION.
(a) In the event that Seller and Buyer are unable to mutually
resolve in good faith an objection to the Closing Balance Sheet in accordance
with Section 2.5(b), such dispute shall be settled by arbitration in New York
City. Within sixty (60) days from the expiration of the last fifteen (15) day
period provided in Section 2.5(b), Buyer and Seller in good faith shall
designate one arbitrator, who shall be an accountant and senior partner at the
accounting firm of Arthur Anderson & Co. (the "Arbitrator"). Judgment by the
Arbitrator shall be conclusive and the decision rendered may be entered in the
courts of the State of New York, County of New York, or if it has or can acquire
jurisdiction, in the United States District Court of the Southern District of
New York.
(b) In the event that Seller and Buyer are unable to mutually
resolve in good faith an objection to the Statement of Prepaid Expenses in
accordance with Section 2.6(b), such dispute shall
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be settled in accordance with Section 2.7(a), except that Buyer and Seller shall
designate the Arbitrator within sixty (60) days from the expiration of the last
fifteen (15) day period provided in Section 2.6(b).
2.8. ALTERNATIVE MANUFACTURING FACILITY. In the event that the
transactions contemplated with respect to PerSeptive are not consummated in the
manner described above, the parties shall confer and negotiate in good faith and
endeavor to establish a suitable alternative for bulk manufacturing facilities
in a manner such that the economic obligations, burdens and benefits to the
parties will be substantially the same as if the transactions contemplated
herein with respect to PerSeptive had been realized.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
3.1. ORGANIZATION AND GOOD STANDING.
(a) The Company is a limited liability company, duly organized,
validly existing, and in good standing under the laws of Delaware, with full
power and authority to conduct its business as it is now being conducted, to own
or use the properties and assets that it purports to own or use, and to perform
all its obligations under Contracts of the NTP Division. The Company is duly
qualified to do business as a foreign company in Colorado.
(b) Seller is a corporation, duly incorporated, validly existing,
and in good standing under the laws of Delaware.
(c) Seller has delivered to Buyer copies of the Organizational
Documents, as amended, of the Company, as currently in effect.
3.2. AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and binding
obligation of Seller and the Company, enforceable against Seller and the Company
in accordance with its terms. Upon the execution and delivery by Seller and/or
the Company, as the case may be, of this Agreement, the Operating Agreement, the
Seller Transition Agreement, the Supply Agreement, the Revolving Loan Agreement,
the License Agreement, the Sublease Agreements and the Employment Agreement
(collectively, the "Seller's Closing Documents"), Seller's Closing Documents
will constitute the legal, valid, and binding obligations of Seller and the
Company, respectively, enforceable against Seller and the Company in accordance
with their respective terms. Seller and the Company have the absolute and
unrestricted right, power, authority, and capacity to execute and deliver this
Agreement and the other Seller's Closing Documents to which each is a party and
to perform their obligations under this Agreement and the other Seller's Closing
Documents to which each is a party.
(b) Except as set forth in Part 3.2 of the Disclosure Letter,
neither the execution and delivery of this Agreement nor the consummation or
performance of any of the Contemplated Transactions on the Closing Date will,
directly or indirectly (with or without notice or lapse of time):
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(i) contravene, conflict with, or result in a violation of
(A)any provision of the Organizational Documents of the Company or Seller, or
(B)any resolution adopted by the managers or members of the Company or the
shareholders or board of directors of Seller;
(ii) contravene, conflict with, or result in a violation
of, or give any Governmental Body or other Person the right to challenge any of
the Contemplated Transactions or to exercise any remedy or obtain any relief
under, any Legal Requirement or any Order to which Seller or the Company, or any
of the assets owned or used by Seller or the Company, may be subject;
(iii) contravene, conflict with, or result in a violation
of any of the terms or requirements of, or give any Governmental Body the right
to revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental
Authorization that is held by the Company or that otherwise relates to the
Business of, or any of the assets owned or used by, the Company;
(iv) cause Buyer or the Company to become subject to, or
to become liable for the payment of, any Tax;
(v) cause any of the assets owned by the Company to be
reassessed or revalued by any taxing authority or other Governmental Body;
(vi) contravene, conflict with, or result in a violation
or breach of any provision of, or give any Person the right to declare a default
or exercise any remedy under, or to accelerate the maturity or performance of,
or to cancel, terminate, or modify, any Contract of the NTP Division; or
(vii) result in the imposition or creation of any
Encumbrance upon or with respect to any of the assets owned or used by the
Company.
Except as set forth in Part 3.2 of the Disclosure Letter, neither Seller
nor the Company is or will be required to give any notice to or obtain any
Consent from any Person in connection with the execution and delivery of this
Agreement or the consummation or performance of any of the Contemplated
Transactions on the Closing Date.
3.3. CAPITALIZATION. Seller or NPII own an interest equal to one hundred
(100) percent of all Membership Interests in the Company. Seller is and will be
on the Closing Date the record and beneficial owner and holder of the Interest,
free and clear of all Encumbrances. Seller owns all of the outstanding capital
stock of NPII. No legend or other reference to any purported Encumbrance appears
upon any certificate representing a Membership Interest in the Company, except
as required by the Operating Agreement. All of the Membership Interests in the
Company have been duly authorized and validly issued and are fully paid and
nonassessable. Other than the Operating Agreement, there are no contracts
relating to the issuance, sale, or transfer of any interest in the Company. None
of the Membership Interests in the Company was issued in violation of any Legal
Requirement. Other than the Contemplated Transactions related to PerSeptive, the
Company does not own, or have any contract to acquire, any equity securities or
other securities of any Person or any direct or indirect equity or ownership
interest in any other business. Upon consummation of the transactions
contemplated in this Agreement, Buyer will own a Membership Interest in the
Company (free and clear of all Encumbrances) equal to fifty-one (51) percent of
the aggregate Membership Interests in the Company.
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3.4. FINANCIAL STATEMENT. Seller has delivered to Buyer as Part 3.4 of
the Disclosure Letter an unaudited pro forma balance sheet for the NTP Division
as of and for the period ended July 31, 1998 (the "Financial Statement"). The
Financial Statement fairly presents in all material respects the assets and
liabilities of the NTP Division. The Financial Statement was prepared in
accordance with standard accounting practices for the preparation of pro forma
balance sheets and was derived from the books and records of Seller relating to
the NTP Division.
3.5. BOOKS AND RECORDS. The books of account, minute books, stock record
books, and all other records of the Company shall be complete and correct and
shall have been maintained in accordance with sound business practices.
3.6. TITLE TO PROPERTIES; ENCUMBRANCES. (a) The Company has, or as of
the Closing Date will have, good and valid title to all material assets
reflected on the Financial Statement or thereafter acquired, except those sold
or otherwise disposed of since the date of the Financial Statement in the
Ordinary Course of Business (the "Assets") consistent with past practice and not
in violation of this Agreement, in each case free and clear of all Encumbrances,
except: (i) such matters as are set forth in Part 3.6 to the Disclosure Letter;
(ii) mechanics', carriers', workmen's, repairmen's or other like liens arising
or incurred in the Ordinary Course of Business that are not yet delinquent or if
delinquent, are being contested in good faith by appropriate proceedings, liens
arising under original purchase price conditional sales contracts and equipment
leases with third parties hereto entered into or in the Ordinary Course of
Business and liens for Taxes and other governmental charges which are not due
and payable or which may thereafter be paid without penalty; and (iii) other
imperfections of title or encumbrances, if any, which do not, individually or in
the aggregate, materially impair the continued use and operation of the assets
to which they relate in the business of the Company, as presently conducted (the
mortgages and Encumbrances described in clauses (i) and (ii) above are
hereinafter referred to collectively as "Permitted Liens").
(b) Part 3.6 of the Disclosure Letter sets forth a complete list
of all real property and interests in real property leased by the Company (the
"Leased Property"). The Company has good and valid title to the leasehold
estates in all Leased Property free and clear of all Encumbrances except;
(i) leases, subleases and similar agreements set forth in
Part 3.6;
(ii) Permitted Liens;
(iii) easements, covenants, rights-of-way and other
similar restrictions of record;
(iv) any conditions that may be shown by a current,
accurate survey or physical inspection of any Leased Property made prior to
Closing; and
(v) (1) zoning, building and other similar restrictions;
(2) Encumbrances, easements, covenants, rights-of-way
and other similar restrictions that have been placed by any developer, landlord
or other third party on property over which the Company has easement rights or
on any Leased Property and subordination or similar agreements relating thereto;
and
(3) unrecorded easements, covenants, rights-of-way
and other similar restrictions, none of which items set forth in this clause
(v), individually or in the aggregate,
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materially impair the continued use and operation of the property to which they
relate in the business of the Company as presently conducted. The Company does
not own any real estate.
3.7. CONDITION AND SUFFICIENCY OF ASSETS. Except as set forth in Part
3.7 of the Disclosure Letter, the Company's buildings, plants, structures, and
equipment are structurally sound, are in good operating condition and repair,
and are adequate for the uses to which they are being put, and none of such
buildings, plants, structures, or equipment is in need of maintenance or repairs
except for ordinary, routine maintenance and repairs that are not material in
nature or cost.
3.8. ACCOUNTS RECEIVABLE. Except as set forth in Part 3.8 of the
Disclosure Letter, all the Company's accounts receivable that are reflected on
the Financial Statement or on the accounting records of the Company as of the
Closing Date (collectively, the "Accounts Receivable") represent or will
represent valid obligations arising from sales actually made or services
actually performed in the Ordinary Course of Business. There is no contest,
claim or right of set-off, other than returns in the Ordinary Course of
Business, under any Contract with any obligor of an Accounts Receivable relating
to the amount or validity of such Accounts Receivable.
3.9. INVENTORY. All the Company's inventory, whether or not reflected in
the Financial Statement, consists of a quality and quantity usable and salable
in the Ordinary Course of Business, except for obsolete items and items of
below-standard quality, all of which have been written off or written down to
net realizable value in the Financial Statement or on the Company's accounting
records as of the Closing Date, as the case may be.
3.10. NO UNDISCLOSED LIABILITIES. Except as set forth in Part 3.10 of
the Disclosure Letter, the Company has no liabilities or obligations of any
nature (whether known or unknown and whether absolute, accrued, contingent, or
otherwise) except for liabilities or obligations reflected or reserved against
in the Financial Statement and current liabilities incurred in the Ordinary
Course of Business since the date thereof.
3.11. TAXES. Except as otherwise disclosed in Part 3.11 of the
Disclosure Letter:
(i) the Company has filed when due all Tax Returns
required by applicable law to be filed with respect to the Company and all Taxes
shown to be due on such Tax Returns have been paid;
(ii) all Taxes relating to periods ending on or before the
Closing Date owed by the Company, if required to have been paid, have been paid
(except for Taxes which are being contested in good faith);
(iii) any liability of the Company for Taxes not yet due
and payable, or which are being contested in good faith, has been provided for
on the Financial Statement in accordance with generally accepted accounting
principles; and
(iv) there are no Tax liens with respect to Seller that
may affect the Assets of the Company.
3.12. NO MATERIAL ADVERSE CHANGE. Since the date of the Financial
Statement, there has not been any material adverse change in the business,
operations, properties, assets, or condition of the Company or the NTP Division.
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3.13. PERSEPTIVE. Seller makes no representation or warranty with
respect to Holdings, Caroline or PerSeptive.
3.14. COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS.
(a) Except as set forth in Part 3.14 of the Disclosure Letter:
(i) the NTP Division is, and at all times has been, in
full compliance with each Legal Requirement in all material respects that is or
was applicable to it or to the conduct or operation of its business or the
ownership or use of any of its assets; and
(ii) the NTP Division has not received, at any time, any
notice or other communication in writing from any Governmental Body or any other
Person regarding (A) any actual, alleged, possible, or potential violation of,
or failure to comply with, any Legal Requirement, or (B) any actual, alleged,
possible, or potential obligation on the part of the NTP Division to undertake,
or to bear all or any portion of the cost of, any remedial action of any nature.
(b) Part 3.14 of the Disclosure Letter contains a complete and
accurate list of each Governmental Authorization that is held by the NTP
Division or that otherwise relates to the business of, or to any of the assets
owned or used by, the NTP Division. Except as set forth in Part 3.14 of the
Disclosure Letter, each Governmental Authorization listed or required to be
listed in Part 3.14 of the Disclosure Letter is valid and in full force and
effect and all such Governmental Authorizations which are assignable have been
assigned to the Company, or equivalent new Governmental Authorizations have been
obtained for the Company. Except as set forth in Part 3.14 of the Disclosure
Letter:
(i) the NTP Division is in full compliance with all of the
terms and requirements of each Governmental Authorization identified or required
to be identified in Part 3.14 of the Disclosure Letter;
(ii) the NTP Division has not received, at any time, any
notice or other communication in writing from any Governmental Body or any other
Person regarding (A) any actual, alleged, possible, or potential violation of or
failure to comply with any term or requirement of any Governmental
Authorization, or (B) any actual, proposed, possible, or potential revocation,
withdrawal, suspension, cancellation, termination of, or modification to any
Governmental Authorization; and
(iii) all applications required to have been filed for the
renewal of the Governmental Authorizations listed or required to be listed in
Part 3.14 of the Disclosure Letter have been duly filed on a timely basis with
the appropriate Governmental Bodies, and all other filings required to have been
made with respect to such Governmental Authorizations have been duly made on a
timely basis with the appropriate Governmental Bodies.
The Governmental Authorizations listed in Part 3.14 of the Disclosure
Letter collectively constitute all of the Governmental Authorizations necessary
to permit the NTP Division to lawfully conduct and operate its business in the
manner it currently conducts and operates such business and to permit the NTP
Division to own and use its assets in the manner in which it currently owns and
uses such assets.
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3.15. LEGAL PROCEEDINGS; ORDERS
(a) Except as set forth in Part 3.15 of the Disclosure Letter,
there is no pending Proceeding:
(i) that has been commenced by or against the Company or
with respect to or involving the NTP Division, or that otherwise relates to or
may affect the business of, or any of the assets owned or used by, the Company
or the NTP Division; or
(ii) that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions.
To the Knowledge of Seller, (1) no such Proceeding has been Threatened,
and (2) no event has occurred or circumstance exists that has given rise to or
serves as a basis for the commencement of any such Proceeding. Seller has
delivered to Buyer copies of all pleadings, correspondence, and other documents
relating to each Proceeding listed in Part 3.15 of the Disclosure Letter. The
Proceedings listed in Part 3.15 of the Disclosure Letter will not have a
material adverse effect on the business, operations, assets, condition, or
prospects of the Company.
(b) Except as set forth in Part 3.15 of the Disclosure Letter,
there is no Order to which the Company, the Business, or any of the assets owned
or used by the Company or the NTP Division of Seller, is subject.
3.16. ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth in Part
3.16 of the Disclosure Letter, since the date of the Financial Statement, each
of the NTP Division and the Company have conducted business only in the Ordinary
Course of Business and there has not been any:
(a) change in the Company's Membership Interests other than a
transfer by Seller to NPII; grant of any option or right to purchase Membership
Interests in the Company; issuance of any security convertible into such
Membership Interests; purchase, redemption, retirement, or other acquisition by
the Company of any Membership Interests; or declaration or payment of any
dividend or other distribution or payment in respect of Membership Interests;
(b) amendment to the Organizational Documents of the Company,
except as contemplated in the Operating Agreement;
(c) payment or increase of any bonuses, salaries, or other
compensation to any member, manager, officer, or (except in the Ordinary Course
of Business) employee or entry into any employment, severance, or similar
Contract with any member, manager, director, officer, or employee of the NTP
Division or the Company, except with respect to inducement to stay bonuses,
raises in salary of up to five (5) percent, the establishment of a 401(k) plan,
disability plan and insurance plan with respect to employees offered positions
by the Company as disclosed to the Buyer, and the severance from Seller of the
NTP Employees on the Closing Date;
(d) damage to or destruction or loss of any asset or property of
the Company, whether or not covered by insurance, materially and adversely
affecting the properties, assets, business, or financial condition of the NTP
Division or the Company, taken as a whole;
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(e) entry into, termination of, receipt of notice of termination
of, or cancellation or waiver of any claims or rights with respect to, any
Contract;
(f) sale (other than sales of inventory in the Ordinary Course of
Business), lease, or other disposition of any asset or property of the Company
or mortgage, pledge, or imposition of any lien or other encumbrance on any
material asset or property of the NTP Division or the Company, including the
sale, lease, or other disposition of any of the Intellectual Property Assets;
(g) material change in the accounting methods used by the
Company; or
(h) agreement in writing by the NTP Division or the Company to do
any of the foregoing.
3.17. CONTRACTS; NO DEFAULTS.
(a) Part 3.17(a) of the Disclosure Letter contains a complete and
accurate list, and Seller has delivered to Buyer true and complete copies, of
each Contract and each amendment, supplement and modification thereto in
writing.
(b) Each Contract will have been assigned to the Company on or
prior to the Closing Date. Except as set forth in Part 3.17(b) of the Disclosure
Letter, no further consents or approvals are needed for the effectiveness or
validity of such assignments.
(c) Except as set forth in Part 3.17(c) of the Disclosure Letter:
(i) neither Seller nor any Related Person of Seller has or
may acquire any rights under, and neither Seller nor any Related Person of
Seller has or may become subject to any obligation or liability under, any
Contract that relates to the business of, or any of the assets owned or used by,
the Company other than those which are subleased or assigned to the Company; and
(ii) to the Knowledge of Seller and the Company, no
manager, member, officer, agent, employee, consultant, or contractor of the
Company is bound by any Contract that purports to limit the ability of such
manager, member, officer, agent, employee, consultant, or contractor to (A)
engage in or continue any conduct, activity, or practice relating to the
business of the Company, or (B) assign to the Company or to any other Person any
rights to any invention, improvement, or discovery.
(d) Except as set forth in Part 3.17(d) of the Disclosure Letter,
each Contract identified or required to be identified in Part 3.17(a) of the
Disclosure Letter is in full force and effect and is valid and enforceable in
accordance with its terms.
(e) Except as set forth in Part 3.17(e) of the Disclosure Letter:
(i) the NTP Division is and at all times has been, in full
compliance with all applicable terms and requirements of each Contract under
which the NTP Division has or had any obligation or liability or by which the
NTP Division or any of the assets owned or used by the NTP Division is or was
bound;
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(ii) each other Person that has or had any obligation or
liability under any Contract under which the NTP Division has or had any rights
is, and has been, in full compliance with all applicable terms and requirements
of such Contract;
(iii) no event has occurred or circumstance exists that
(with or without notice or lapse of time) may contravene, conflict with, or
result in a violation or breach of, or give the NTP Division or other Person the
right to declare a default or exercise any remedy under, or to accelerate the
maturity or performance of, or to cancel, terminate, or modify, any Contract;
and
(iv) the NTP Division has not given to or received from
any other Person, at any time any notice or other communication in writing
regarding any actual, alleged, possible, or potential violation or breach of, or
default under, any Contract.
(f) There are no renegotiations of, attempts to renegotiate, or
outstanding rights to renegotiate any material amounts paid or payable to the
NTP Division under current or completed Contracts with any Person and, to the
Knowledge of Seller and the NTP Division, no such Person has made written demand
for such renegotiation.
(g) The Contracts relating to the sale, design, manufacture, or
provision of products or services by the NTP Division have been entered into in
the Ordinary Course of Business and have been entered into without the
commission of any act alone or in concert with any other Person, or any
consideration having been paid or promised, that is or would be in violation of
any Legal Requirement.
3.18. INSURANCE.
(a) Part 3.18(a) of the Disclosure Letter contains a true and
complete list of all policies of insurance to which the Company is a party or
will be a party as of the Closing Date.
(b) Part 3.18(b) of the Disclosure Letter sets forth, with
respect to the Company (or the NTP Division with respect to periods prior to the
Closing Date), by year, for each of the last three (3) policy years, a statement
describing each claim under an insurance policy for an amount in excess of
Twenty-Five Thousand Dollars ($25,000) in so far as such claim relates to the
NTP Division.
(c) Except as set forth on Part 3.18(c) of the Disclosure Letter:
(i) Seller has not received, insofar as would affect the
NTP Division or the Company: (A) any refusal of coverage or any notice that a
defense will be afforded with reservation of rights, or (B) any notice of
cancellation or any other indication that any insurance policy is no longer in
full force or effect or will not be renewed or that the issuer of any policy is
not willing or able to perform its obligations thereunder; and
(ii) the Company has paid or is in the process of paying
all premiums due within any applicable grace period, and have otherwise
performed all of its respective obligations, under each policy to which it is a
party or that provides coverage to it or any of its managers or directors.
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3.19. ENVIRONMENTAL MATTERS. Except as set forth in Part 3.19 of the
Disclosure Letter:
(a) The Seller has not received any actual or Threatened order,
notice, or other communication from (i) any Governmental Body or private citizen
acting in the public interest, or (ii) the current or prior owner or operator of
any Facilities, of any actual or potential violation or failure to comply with
any Environmental Law, or of any actual or Threatened obligation to undertake or
bear the cost of any Environmental, Health, and Safety Liabilities with respect
to any of the Facilities or any other properties or assets (whether real,
personal, or mixed) in which Seller (in connection with the Business) or the
Company has had an interest, or with respect to any property or Facility at or
to which Hazardous Materials were generated, manufactured, refined, transferred,
imported, used, or processed by Seller (in connection with the Business), or
from which Hazardous Materials have been transported, treated, stored, handled,
transferred, disposed, recycled, or received. Seller has not received, in
respect of the NTP Division, any notice of potential responsibility or letter of
inquiry from any private party or Governmental Body for any on-site or off-site
facility under CERCLA or any state or local counterpart thereof.
(b) There are no pending or, to the Knowledge of Seller
Threatened claims, Encumbrances, or other restrictions of any nature, resulting
from any Environmental, Health, and Safety Liabilities or arising under or
pursuant to any Environmental Law, with respect to or affecting any of the
Facilities or any other properties and assets (whether real, personal, or mixed)
in which Seller (in connection with the Business) or the Company have or had an
interest.
(c) Neither Seller nor the Company has Knowledge , nor has any of
them or any other Person for whose conduct they are or may be held responsible,
received, any citation, directive, inquiry, notice, Order, summons, warning, or
other communication that relates to Hazardous Activity, Hazardous Materials, or
any alleged, actual, or potential violation or failure to comply with any
Environmental Law, or of any alleged, actual, or potential obligation to
undertake or bear the cost of any Environmental, Health, and Safety Liabilities
with respect to any of the Facilities or any other properties or assets (whether
real, personal, or mixed) in which Seller (in connection with the Business) or
the Company had an interest, or with respect to any property or facility to
which Hazardous Materials generated, manufactured, refined, transferred,
imported, used, or processed by Seller (in connection with the Business), the
Company, or any other Person for whose conduct they are or may be held
responsible, have been transported, treated, stored, handled, transferred,
disposed, recycled, or received. Seller has obtained and is in compliance with
all environmental permits and other authorizations required for its operations
(in connection with the Business) at the Facilities by any applicable
Environmental Laws.
(d) Seller does not have any Environmental, Health, and Safety
Liabilities with respect to the Facilities or, to the Knowledge of Seller and
the Company with respect to any other properties and assets (whether real,
personal, or mixed) in which Seller (in connection with the Business) or the
Company (or any predecessor), has or had an interest, or any such other property
or assets.
(e) Neither Seller nor the Company, or to the Knowledge of Seller
and the Company, any other Person, has permitted or conducted, or is aware of,
any Hazardous Activity conducted with respect to the Facilities or any other
properties or assets (whether real, personal, or mixed) in which Seller (in
connection with the Business) or the Company have or had an interest except in
full compliance with all applicable Environmental Laws.
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(f) Except such as were made in full compliance with all
applicable Environmental Laws, there has been no disposal, Release or, to the
Knowledge of Seller and the Company, Threat of Release, of any Hazardous
Materials at or from the Facilities or at any other locations where any
Hazardous Materials were generated, manufactured, refined, transferred,
produced, imported, used, or processed from or by the Facilities, or from or by
any other properties and assets (whether real, personal, or mixed) in which
Seller (in connection with the Business) or the Company have or had an interest,
whether by Seller, the Company, or any other Person.
(g) Seller has delivered to Buyer true and complete copies and
results of any reports, studies, analyses, tests, or monitoring possessed or
initiated by Seller or the Company pertaining to Hazardous Materials or
Hazardous Activities in, on, or under the Facilities, or concerning compliance
by Seller (in connection with the Business), and the Company, with Environmental
Laws.
3.20. EMPLOYEES.
(a) Part 3.20 of the Disclosure Letter contains a complete and
accurate list of the following information for each employee or manager of the
NTP Division or of the Seller to become involved with the Company, including
each employee on leave of absence or layoff status: name; job title; current
compensation paid or payable and any change in compensation since January 1,
1998 including changes related to any Person while employed by Seller with
respect to the NTP Division; vacation accrued; and service credited for purposes
of vesting and eligibility to participate under any pension, retirement,
profit-sharing, thrift-savings, deferred compensation, stock bonus, stock
option, cash bonus, employee stock ownership (including investment credit or
payroll stock ownership), severance pay, insurance, medical, welfare, or
vacation plan, other Employee Pension Benefit Plan or Employee Welfare Benefit
Plan, or any other employee benefit plan or any Director Plan of the Company.
(b) No employee or manager of the Company is a party to, or is
otherwise bound by, any agreement or arrangement, including any confidentiality,
non-competition, or proprietary rights agreement (other than agreements and
arrangements assigned to the Company by Seller), between such employee or
manager and any other Person ("Proprietary Rights Agreement") that in any way
adversely affects or will affect (i) the performance of his duties as an
employee or manager of the Company, or (ii) the ability of the Company to
conduct its business, including any Proprietary Rights Agreement with the
Company by any such employee or manager. To Seller's Knowledge, no written
notice has been received that any manager, officer, or other key employee of the
Company intends to terminate his employment with the Company.
3.21. LABOR RELATIONS; COMPLIANCE. Seller (in connection with the NTP
Division) has not been and is not a party to any collective bargaining or other
labor Contract. Since January 1, 1998, there has not been, there is not
presently pending or existing, and to Seller's Knowledge there is not Threatened
with respect to the NTP Division, (a) any strike, slowdown, picketing, work
stoppage, or employee grievance process, (b) any Proceeding against or affecting
the NTP Division relating to the alleged violation of any Legal Requirement
pertaining to labor relations or employment matters, including any charge or
complaint filed by an employee or union with the National Labor Relations Board,
the Equal Employment Opportunity Commission, or any comparable Governmental
Body, organizational activity, or other labor or employment dispute against or
affecting the NTP Division or its premises, or (c) any application for
certification of a collective bargaining agent. To Seller's Knowledge, no event
has occurred or circumstance exists that could provide the basis for any work
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stoppage or other labor dispute. There is no lockout of any employees by the NTP
Division and no such action is contemplated by the NTP Division. The NTP
Division has complied in all respects with all Legal Requirements relating to
employment, equal employment opportunity, nondiscrimination, immigration, wages,
hours, benefits, collective bargaining, the payment of social security and
similar taxes, occupational safety and health, and plant closing. The NTP
Division is not liable for the payment of any compensation, damages, taxes,
fines, penalties, or other amounts, however designated, for failure to comply
with any of the foregoing Legal Requirements.
3.22. INTELLECTUAL PROPERTY.
(a) Intellectual Property Assets --The term "Intellectual
Property Assets" includes the patents listed in Part 3.22(a) of the Disclosure
Letter and the patent applications and invention disclosures listed in Part
3.22(a) of the Disclosure Letter, all of the inventions described therein and
including any and all foreign counterparts thereof, as well as all trademarks
and tradenames used in connection with the Business. Except as otherwise
disclosed in Part 3.22(a) of the Disclosure Letter:
(i) all Intellectual Property Assets were owned by Seller,
were duly conveyed to the Company and shall be owned by the Company as of the
Closing Date; the record title to said patents and patent applications is in
Seller but will be in the Company upon the filing of all relevant documents of
assignment, and Seller has the capacity to convey good title to said inventions,
patent and patent applications to the Company free and clear of all
Encumbrances;
(ii) the patents listed in Part 3.22(a) of the Disclosure
Letter are duly issued either by the United States Patent and Trademark Office
or by a foreign patent office, as applicable, and have been fully maintained,
are in full force and effect, and will remain so until the Closing;
(iii) the patent applications listed in Part 3.22(a) of
the Disclosure Letter have been fully maintained and are presently in good
standing and not abandoned, and will remain so until the Closing;
(iv) all of the inventions of Seller which relate to the
NTP Division and which are necessary for the Company to commence and/or conduct
its Business in, the production and sale of oligonucleotide products utilizing
Seller's "PASS" solution phase synthesis technique and Seller's associated
technology, are the subject of the pending patent applications and/or invention
disclosures listed in Part 3.22(a) of the Disclosure Letter, and no other such
Seller inventions are known to Seller or to its employees or are otherwise
within Seller's possession, custody or control;
(v) other than the Koster patents and the rights being
assigned with respect to the Caruthers patents, all of the inventions which are
the subject of the patent applications and /or invention disclosures listed in
Part 3.22(a) of the Disclosure Letter have been developed by the employees of
Seller in the course of their employment by Seller, and to the extent that
assignments thereof from such employees to Seller have not yet been executed,
Seller is entitled to confirmatory assignments thereof without charge or
condition, and Seller will use its Best Efforts to obtain such assignments prior
to the Closing;
(vi) as far as Seller is currently aware, the patents
listed in Part 3.22(a) of the Disclosure Letter are valid, and the inventions
which are the subject of the patent applications (as presently written and
claimed) and/or the invention disclosures listed in Part 3.22(a) of the
Disclosure
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<PAGE> 24
Letter are believed to be patentable. It is Seller's further belief that the
patents which may subsequently be obtained therefrom will be valid;
(vii) to the Knowledge of Seller, there is no claim or
action or Proceeding, pending or Threatened, by any person concerning, and there
is no notice of conflict with, the asserted rights of others which challenges
Seller's exclusive rights with respect to the patents listed in Part 3.22(a) of
the Disclosure Letter and/or the patent applications listed in Part 3.22(a) of
the Disclosure Letter;
(viii) as far as Seller is currently aware, no
infringements of the patents listed in Part 3.22(a) of the Disclosure Letter ,
and no potential infringements of the subject matter (as presently claimed) of
the patent applications listed in Part 3.22(a) of the Disclosure Letter , are
believed to exist;
(ix) as far as Seller is currently aware, the practice of
the PASS process, as such process is described and claimed in the NEX47 series,
does not infringe the proprietary rights of any third party. This representation
does not extend to any specific chemical compounds or synthesis chemistries that
can be utilized in the PASS process. Seller has not received infringement
assertions by any third party with respect to the manufacture and sale of
oligonucleotide products under any other patents or patent applications in Part
3.22(a) of the Disclosure Agreement;
(x) the intent to use trademark application(s) listed in
Part 3.22(a) of the Disclosure Letter, including any and all foreign counterpart
thereof, are owned by Seller; the record title to said trademark applications is
in Seller, and Seller has the capacity to and has conveyed good title thereto to
the Company;
(xi) the trademark applications listed in Part 3.22(a) of
the Disclosure Letter have been fully maintained and are presently in good
standing and not abandoned, and will remain so until the Closing; and
(xii) to the Knowledge of Seller, there is no claim or
action or Proceeding, pending or Threatened, by any person concerning, and there
is no notice of conflict with, the asserted rights of others which challenges
Seller's or the Company's exclusive rights with respect to the use of the
trademark(s) and the ownership of the trademark application(s) listed in Part
3.22(a) of the Disclosure Letter.
(b) Know-How/Trade Secrets.
(i) Each of Seller and the Company have taken all
reasonable precautions to protect the secrecy, confidentiality, and value of the
Trade Secrets which relate to the Business.
(ii) All documentation, lab notebooks and invention
disclosure schedules relating to know-how and work in progress by employees of
the NTP Division have been transferred and are available to the Company.
3.23. CERTAIN PAYMENTS. Since January 1, 1996, neither Seller (in
connection with the Business), any director, officer, member, manager, agent, or
employee of Seller, nor, to Seller's Knowledge, any other Person associated with
or acting for or on behalf of Seller (in connection with the Business), has
directly or indirectly (a) made any contribution, gift, bribe, rebate, payoff,
influence payment, kickback, or other payment to any Person, private or public,
regardless of form,
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whether in money, property, or services (i) to obtain favorable treatment in
securing business, (ii) to pay for favorable treatment for business secured,
(iii) to obtain special concessions or for special concessions already obtained,
for or in respect of Seller (in connection with the Business), or (iv) in
violation of any Legal Requirement, (b) established or maintained any fund or
asset that has not been recorded in the books and records of Seller as the case
may be.
3.24. DISCLOSURE. No representation or warranty of Seller or the Company
in this Agreement and no statement in the Disclosure Letter omits to state a
material fact necessary to make the statements herein or therein, in light of
the circumstances in which they were made, not misleading.
3.25. RELATIONSHIPS WITH RELATED PERSONS. Except for Seller's interests
in the NTP Division and the Company as described in the "Background" section of
this Agreement, neither Seller nor any Related Person of Seller or of the
Company has any interest in any property (whether real, personal, or mixed and
whether tangible or intangible), used in or pertaining to the Company's
Business. Neither Seller nor any Related Person of Seller or of the Company owns
(of record or as a beneficial owner) an equity interest or any other financial
or profit interest in, a Person that has (i) had business dealings or a material
financial interest in any transaction with the Company other than business
dealings or transactions conducted in the Ordinary Course of Business with the
Company at substantially prevailing market prices and on substantially
prevailing market terms, or (ii) engaged in competition with the Company with
respect to any line of the products or services of such company (a "Competing
Business") in any market presently served by such company. Except as set forth
in Part 3.25 of the Disclosure Letter, neither Seller nor any Related Person of
Seller or of the Company is a party to any Contract with, or has any claim or
right against the Company.
3.26. BROKERS OR FINDERS. Neither Seller, the Company, nor any of their
agents has incurred any obligation or liability, contingent or otherwise, for
brokerage or finders' fees or agents' commissions or other similar payment in
connection with this Agreement.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
4.1. ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware. Buyer is a wholly owned Subsidiary of SKW Trostberg AG, a German
Aktiengesellschaft.
4.2. AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms.
Upon the execution and delivery by Buyer of this Agreement, the Revolving Loan
Agreement, and the Operating Agreement (collectively, the "Buyer's Closing
Documents"), the Buyer's Closing Documents will constitute the legal, valid, and
binding obligations of Buyer or its Affiliates, as the case may be, enforceable
against Buyer in accordance with their respective terms. Buyer or its Affiliates
have the absolute and unrestricted right, power, and authority to execute and
deliver this Agreement and the Buyer's Closing Documents and to perform its or
their obligations under this Agreement and the Buyer's Closing Documents.
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(b) All necessary corporate authorizations of the parent company
of Buyer, SKW Trostberg AG, and its parent company, VIAG Aktiengesellschaft,
have been obtained insofar as the same are necessary to consummate the
transactions described in this Agreement.
(c) Except as set forth in Schedule 4.2, neither the execution
and delivery of this Agreement nor the consummation or performance of any of the
Contemplated Transactions on the Closing Date will, directly or indirectly (with
or without notice or lapse of time):
(i) contravene, conflict with, or result in a violation of
(A)any provision of the Organizational Documents of Buyer or its Affiliates; or
(B)any resolution adopted by the shareholders or board of directors of Buyer or
its Affiliates;
(ii) contravene, conflict with, or result in a violation
of, or give any Governmental Body or other Person the right to challenge any of
the Contemplated Transactions or to exercise any remedy or obtain any relief
under, any Legal Requirement or any Order to which Buyer or its Affiliates, or
any of the assets owned or used by Buyer or its Affiliates, may be subject;
(iii) contravene, conflict with, or result in a violation
of any of the terms or requirements of, or give any Governmental Body the right
to revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental
Authorization that is held by Buyer or its Affiliates or that otherwise relates
to the Business of, or any of the assets owned or used by, Buyer or its
Affiliates;
(iv) cause Seller or the Company to become subject to, or
to become liable for the payment of, any Tax (other than by reason of transfers
or contributions made by Seller, its Affiliates or on their behalf);
(v) contravene, conflict with, or result in a violation or
breach of any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate, or modify, the deed entered into by PerSeptive with the
City of Hamburg, Germany dated August 26, 1994 ("City of Hamburg Deed").
Buyer and its Affiliates are not and will not be required to obtain any
Consent from any Person in connection with the execution and delivery of this
Agreement or the consummation or performance of any of the Contemplated
Transactions.
(d) The transfer (whether direct or indirect) of PerSeptive to
the Company in the manner contemplated herein will not violate the laws of the
Federal Republic of Germany in any material respect.
4.3. INVESTMENT INTENT. Buyer is acquiring the Interest for its own
account and not with a view to their distribution within the meaning of Section
2(11) of the Securities Act.
4.4. CERTAIN PROCEEDINGS. There is no pending Proceeding that has been
commenced against Buyer that challenges, or may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the Contemplated
Transactions. To Buyer's Knowledge, no such Proceeding has been Threatened.
4.5. BROKERS OR FINDERS. Buyer and its officers and agents have incurred
no obligation or liability, contingent or otherwise, for brokerage or finders'
fees or agents' commissions or other similar payment in connection with this
Agreement and will indemnify and hold Seller harmless from
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any such payment alleged to be due by or through Buyer as a result of the action
of Buyer or its officers or agents.
4.6. PERSEPTIVE.
(a) Buyer and Seller have reviewed and discussed the terms of the
Notarial Deed between Caroline and the Seller of PerSeptive as well as the City
of Hamburg Deed together with any amendments or modifications thereto through
the date hereof (the "Hamburg Agreements"). Seller has approved the terms of the
Hamburg Agreements it being understood that they may be modified hereafter in a
reasonable manner taking into consideration the circumstances, provided, that
they will not be modified or amended in a manner which would have a material
adverse effect upon Buyer, Seller or the Company. The Hamburg Agreements are
valid, binding and enforceable against the parties thereto in accordance with
their respective terms, and shall be in full force and effect upon proper
execution and delivery.
(b) The Buyer shall have performed all obligations, including,
but not limited to, the timely making of any payments, required to be performed
by it under, and is not in default or breach in respect of, the Notarial Deed,
and no event shall have occurred which, with due notice or lapse of time or
both, would constitute such a default prior to the transfer of PerSeptive to the
Company. As of the date of such transfer, to the Knowledge of Buyer, no other
party to any Hamburg Agreement shall be in default in respect thereof, and no
event shall have occurred which, with due notice or lapse of time or both, would
constitute such a default. The rights of the Buyer under the Notarial Deed are
assignable to the Company. The Buyer (through its Affiliate) has acquired valid
and marketable title to all of the outstanding shares of capital stock of
PerSeptive. The transfer of Seller's Holdings Interest to Seller and the
transfer of the Seller's Holdings Interest and the Buyer's Holdings Interest to
the Company hereunder or under the Operating Agreement, as the case may be, will
vest title to Seller's Holdings Interest in the Seller and the Seller's Holdings
Interest and Buyer's Holdings Interest in the Company, in each case, free and
clear of any Encumbrances. To the Knowledge of the Buyer, none of the
representations or warranties in the Hamburg Agreements are untrue in any
material respect or omit to state a material fact.
(c) Holdings is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has full power and authority to enter into the relevant documents and
instruments to be executed and delivered by it pursuant to the Contemplated
Transactions; and Caroline is a German GmbH duly organized and currently
existing under the laws of the Federal Republic of Germany, and has full
corporate power and authority to enter into the relevant documents and
instruments to be executed and delivered by it pursuant to the Contemplated
Transactions. Neither Holdings nor Caroline have any material liabilities other
than (i) amounts due to or from one another or PerSeptive; or (ii) liabilities
relating to formation expenses or expenses relating to the purchase of
PerSeptive.
4.7. BUYER FINANCIAL STATEMENT. The consolidated financial statements of
Buyer as of and for the period ending December 31, 1997 have been prepared in
accordance with GAAP applied on a consistent basis and fairly present the
financial condition, results of operations and cash flows of the Buyer as of the
respective dates and for the periods referred to in such financial statements.
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ARTICLE V.
COVENANTS OF SELLER PRIOR TO CLOSING DATE
5.1. ACCESS AND INVESTIGATION. Between the date of this Agreement and
the Closing Date, Seller will, and will cause each of the NTP Division and the
Company and its Representatives to, (a) afford Buyer and its Representatives and
prospective lenders and their Representatives (collectively, "Buyer's Advisors")
full and free access to Seller's and Company's personnel, properties (including
subsurface testing), contracts, books and records, and other documents and data
relating to the Company and/or the NTP Division, (b) furnish Buyer and Buyer's
Advisors with copies of all such contracts, books and records, and other
existing documents and data relating to the Company and/or the NTP Division as
Buyer may reasonably request, and (c) furnish Buyer and Buyer's Advisors with
such additional financial, operating, and other data and information as Buyer
may reasonably request relating to the Company and/or the NTP Division.
5.2. OPERATION OF THE BUSINESS OF THE COMPANY. Between the date of this
Agreement and the Closing Date, Seller will cause the NTP Division and the
Company to:
(a) conduct the business of the NTP Division and the Company only
in the Ordinary Course of Business;
(b) use its Best Efforts to preserve intact the current business
organization of the NTP Division and the Company, keep available the services of
the current managers, officers, employees, and agents of the NTP Division and
the Company, and maintain the relations and good will with suppliers, customers,
landlords, creditors, employees, agents, and others having business
relationships with the NTP Division and the Company;
(c) confer with Buyer concerning operational matters of a
material nature with respect to the NTP Division and the Company; and
(d) otherwise report periodically to Buyer concerning the status
of the business, operations, and finances of the NTP Division and the Company.
5.3. NEGATIVE COVENANT. Except as otherwise expressly permitted by this
Agreement, between the date of this Agreement and the Closing Date, Seller will
not, and will cause the NTP Division and the Company not to, without the prior
consent of Buyer, take any affirmative action, or fail to take any reasonable
action within its control, as a result of which any of the changes or events
listed in Section 3.16 is likely to occur.
5.4. REQUIRED APPROVALS. Seller acknowledges that there are no filings
required by Legal Requirements to be made by Seller in order to consummate the
Contemplated Transactions including filings under the HSR Act.
5.5. NOTIFICATION. Between the date of this Agreement and the Closing
Date, Seller or Buyer, as the case may be, will promptly notify the other party
in writing if the notifying party (in case of Seller, Seller or the Company)
becomes aware of any fact or condition that causes or constitutes a Breach of
any of its representations and warranties as of the date of this Agreement, or
if the notifying party (in case of Seller, Seller or the Company) becomes aware
of the occurrence after the date of this Agreement of any fact or condition that
would (except as expressly contemplated by this Agreement)
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cause or constitute a Breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence or discovery
of such fact or condition. Should any such fact or condition require any change
in the Disclosure Letter if the Disclosure Letter were dated the date of the
occurrence or discovery of any such fact or condition, the notifying party will
promptly deliver to the other party a supplement to the Disclosure Letter
specifying such change. During the same period, the notifying party will
promptly notify the other party of the occurrence of any Breach of any of its
covenants in this Section 5 or of the occurrence of any event that may make the
satisfaction of the conditions in Section 7 or 8 (as the case may be) impossible
or unlikely.
5.6. PAYMENT OF INDEBTEDNESS BY RELATED PERSONS. Except as expressly
provided in this Agreement, Seller will cause all indebtedness owed to the
Company by Seller or any Related Person of Seller to be paid in full prior to
Closing.
5.7. NO NEGOTIATION. Until such time, if any, as this Agreement is
terminated pursuant to Section 9, Seller will not, and will cause the Company
and each of their Representatives not to, directly or indirectly solicit,
initiate, or encourage any inquiries or proposals from, discuss or negotiate
with, provide any non-public information to, or consider the merits of any
unsolicited inquiries or proposals from, any Person (other than Buyer) relating
to any transaction involving the sale of the business or assets (other than in
the Ordinary Course of Business) of the Company, or any of the Membership
Interests in the Company, or any merger, consolidation, business combination, or
similar transaction involving the Company.
5.8. BEST EFFORTS. Between the date of this Agreement and the Closing
Date, Seller will use its Best Efforts to cause the conditions in Sections 7 and
8 to be satisfied.
5.9. NON-SOLICITATION OF EMPLOYEES.
(a) Except with the written consent of the other party, each of
Buyer and Seller hereby agree that neither of them will, and Buyer and Seller
will cause Holdings, Caroline or PerSeptive not to, for a period of three months
commencing on the Closing Date, hire, or make, offer, solicit or induce to enter
into any written or oral arrangement, agreement or understanding regarding
employment or retention of any person who was, within one week after the Closing
Date, an employee of the Company.
(b) Except with the written consent of Seller, Buyer shall cause
the Company not to, for a period of three months commencing on the Closing Date,
hire, or make, offer, solicit or induce to enter into any written or oral
arrangement, agreement, or understanding regarding employment or retention of
any person who is an employee of Seller.
5.10. SUBLEASE DEFAULT. In the event that the Company defaults in the
making of any payments under a Sublease Agreement which the Company has entered
into with the Seller or any other Contract assumed by the Company, and such
payment obligation of the Company is paid by Seller, Buyer agrees to reimburse
to Seller (upon demand) an amount equal to fifty-one (51) percent of the
payments which the Company failed to pay provided that all funds available to
the Company have been exhausted.
5.11. CONSENT OF THIRD PARTIES SEPARATION OF LEASE OBLIGATIONS. Certain
equipment and tenant improvements which are to be transferred or subleased to
the Company are subject to master lease and financing obligations as identified
in the Disclosure Letter. Such equipment and tenant
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improvements will be subleased or assigned to the Company as of the Closing
Date. Within six (6) months after the Closing Date, Seller will use reasonable
efforts to separate the master lease agreements and the financing agreements
such that equipment subleased or assigned to the Company will be segregated into
a separate lease agreement to be entered into between the master lessor or
financial institution and the Company. To the extent that such separation is not
feasible without incurring cost or expense acceptable to Buyer and Seller, the
sublease agreements will remain in place for the duration of the master lease or
financing agreement and any purchase option under a master lease agreement will
be exercised by Seller in its sole discretion.
5.12. EMPLOYEES.
(a) Hiring of NTP Employees. Immediately following the Closing,
Buyer shall cause the Company to offer employment to all of the NTP Employees
(as indicated in Part 3.20 of the Disclosure Letter) at salaries at least equal
to the salaries paid by Seller as of the Closing Date, and with employee
benefits (including medical, disability, severance pay, and life insurance and
retirement benefits (including a 401(k) plan but excluding stock plans) that are
substantially comparable (considered in the aggregate and not with regard to
each plan offered by the Seller prior to the Closing) to those provided by the
Seller as of the date of this Agreement. Buyer shall also cause the Company to
offer salary increases and retention bonuses substantially on the basis
previously discussed between Buyer and Seller. Seller makes no representations
as to whether any employee will accept employment with the Company. The NTP
Employees who accept employment with the Company shall be referred to as the
"Transferred Employees."
(b) Seller's and Buyer's Obligations with Respect to NTP
Employees. With respect to each NTP Employee:
(i) Seller shall be responsible for, and shall indemnify
and hold harmless Buyer against, any actions, claims or proceedings brought by
or on behalf of any NTP Employee at any time, including but not limited to,
wrongful termination, breach of fiduciary duty, discrimination, sexual
harassment, workers compensation or other employment-related matter ("Employee
Claims"), to the extent such claims are based solely upon actions, events or
circumstances which occurred before the Closing Date.
(ii) Seller shall be responsible for all benefits provided
pursuant to all of Seller's employee benefit plans, including but not limited to
deferred compensation, non-qualified and incentive plans or policies with
respect to services rendered on or before the Closing Date; provided, however,
that the Company shall be responsible for satisfying obligations with respect to
accrued vacation time of Transferred Employees or reimburse Seller for cash
payments made to Transferred Employees in respect of such accrued vacation time.
(iii) Buyer shall cause the Company to take such action as
is necessary such that each Transferred Employee shall be credited with such
employee's service with Seller for purposes of determining benefits under any
employee benefit plans, programs and policies (including but not limited to
vacation and severance) made available to employees of the Company, based on the
years of service shown for such employee on Part 3.20 of the Disclosure Letter.
5.13. ENVIRONMENTAL SITE ASSESSMENT. No later than three (3) months
after the Closing, Buyer shall cause the Company to perform a Phase I
Environmental Site Assessment of the real property leased by the NTP Division as
of the date hereof and assigned to the Company pursuant to
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the Contemplated Transactions, as well as a similar assessment of the real
property owned by PerSeptive.
5.14. PAYMENT OF CERTAIN BUYER EXPENSES. Buyer has or will incur certain
legal, accounting, notarial and tax expenses in connection with the
establishment of Holdings and Caroline as well in connection with the
acquisition of PerSeptive by Caroline. Such expenses shall be reimbursed by the
Company to the Buyer (or its Affiliates) upon request.
5.15. DISCHARGE OF CERTAIN GUARANTY OBLIGATIONS. In connection with the
purchase of PerSeptive, an Affiliate of Buyer (the "Guarantor") has given a
guaranty with respect to certain payment obligations of PerSeptive. In the event
that the Guarantor is required to pay any amount, or discharge any obligation,
with respect to PerSeptive, Seller shall be responsible for and discharge forty
nine (49) percent of all payment or other obligations imposed as Guarantor.
5.16. USE OF NEXSTAR NAME. The Company shall not acquire any rights to
the use of the "NexStar" name, except as provided in this Section 5.16. The
Company shall promptly take such steps as are necessary to alter its sales
literature, presentation slides, invoices, order forms, business cards and other
business forms (collectively, "Business Forms"), to remove references to NeXstar
Technology Products or any variation of the name NeXstar and to commence the use
of its own name on all such Business Forms. In order to permit an orderly
transition, the Company shall, however, be permitted to continue to use the
NeXstar name on its Business Forms during a thirty (30) day period following the
Closing Date, provided that by rubber stamp or adhesive label, the Company shall
include on each of such forms its own business name.
5.17. EXISTING LICENSE RIGHTS. Buyer and the Company acknowledge:
(a) having been informed by Seller that Seller has previously
granted the following limited non-exclusive rights (the "Pre-Existing Rights"):
(i) certain rights to the PASS process (NEX47 Series of
Part 3.22(a) of the Disclosure Letter) to Glaxo Group Limited and Glaxo
Wellcome, Inc. (collectively, "Glaxo"), including providing comparable limited
non-exclusive rights to improvements to the PASS process;
(ii) certain rights to the use of 4, 5-dicyanoimidazole
("DCI") in oligonucleotide synthesis (NEX55 Series of Part 3.22(a) of the
Disclosure Letter) to Glen Research;
(iii) certain rights to the synthesis method of specific
2' -modified oligonucleotides (NEX16 Series of Part 3.22(a) of the Disclosure
Letter) to JBL Scientific, Inc. ("JBL"); and
(b) that the assignment to the Company of the patents and trade
secrets related to the Intellectual Property Assets described in Part 3.22(a) of
the Disclosure Letter are subject to the grant of such Pre-Existing Rights.
Buyer and the Company agree to honor the obligations of Seller to Glaxo, JBL and
Glen Research in respect of such Pre-Existing Rights. Correspondingly, to the
extent the Seller obtains rights to improvements in the PASS process from Glaxo,
it shall make the same available to the Company.
5.18. HAUSER AGREEMENT. In connection with the Agreement dated
October 24, 1996, between Seller and Hauser Chemical Research, Inc. ("Hauser"),
Seller is required to make a payment on October 1, 1999 equal to the difference
between the fees previously paid and $432,000 (the "Final
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Payment"). It is currently anticipated that the Final Payment will be $177,000.
Seller agrees to either have Hauser cancel the obligation to make the Final
Payment or to make the Final Payment or to reimburse the Company in the event
that the Company makes the Final Payment.
ARTICLE VI.
COVENANTS OF BUYER PRIOR TO CLOSING DATE
6.1. APPROVALS OF GOVERNMENTAL BODIES. Buyer acknowledges that there are
no filings required by Legal Requirements to be made by Buyer in order to
consummate the Contemplated Transactions including filings under the HSR Act.
6.2. BEST EFFORTS. Except as set forth in the proviso to Section 6.1,
between the date of this Agreement and the Closing Date, Buyer will use its Best
Efforts to cause the conditions in Sections 7 and 8 to be satisfied.
ARTICLE VII.
CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Interest and to take the other
actions required to be taken by Buyer at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by Buyer, in whole or in part):
7.1. SELLER'S PERFORMANCE.
(a) All of the covenants and obligations that Seller is required
to perform or to comply with pursuant to this Agreement at or prior to the
Closing must have been duly performed and complied with in all material
respects.
(b) Seller must have delivered each of the documents required to
be delivered by Seller pursuant to Section 2.4(a).
7.2. CONSENTS. Except as set forth in Part 3.17 of the Disclosure
Letter, each of the Consents that have to be obtained in order to assign a
Contract as identified in Part 3.2 of the Disclosure Letter, and each Consent
identified in Schedule 4.2, must have been obtained and must be in full force
and effect.
7.3. ADDITIONAL DOCUMENTS. Each of the following documents must have
been delivered to Buyer:
(a) evidence that the Company has received the insurance coverage
as described on Exhibit 7.4(a); and
(b) such other documents as Buyer may reasonably request for the
purpose of (i) evidencing the accuracy of any of Seller's representations and
warranties, (ii) evidencing the performance by Seller of, or the compliance by
Seller with, any covenant or obligation required to be performed or complied
with by Seller, (iii) evidencing the satisfaction of any condition referred to
in this Section 7, or (iv) otherwise facilitating the consummation or
performance of any of the Contemplated Transactions.
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7.4. NO PROCEEDINGS. Since the date of this Agreement, there must not
have been commenced or Threatened against Buyer, or against any Affiliate of
Buyer, any Proceeding (a) involving any challenge to, or seeking damages or
other relief in connection with, any of the Contemplated Transactions, or (b)
that may have the effect of preventing, delaying, making illegal, or otherwise
interfering with any of the Contemplated Transactions.
ARTICLE VIII.
CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE
Seller's obligation to sell the Interest and to take the other actions
required to be taken by Seller at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Seller, in whole or in part):
8.1. BUYER'S PERFORMANCE.
(a) All of the covenants and obligations that Buyer is required
to perform or to comply with pursuant to this Agreement at or prior to the
Closing must have been duly performed and complied with in all material
respects.
(b) Buyer must have delivered each of the documents required to
be delivered by Buyer pursuant to Section 2.4(b) and must have made the cash
payment required to be made by Buyer pursuant to Section 2.4(b)(i).
8.2. CONSENTS. Except as otherwise disclosed in Part 3.17 of the
Disclosure Letter, each of the Consents identified in Part 3.2 of the Disclosure
Letter must have been obtained and must be in full force and effect.
8.3. ADDITIONAL DOCUMENTS. Buyer must have caused the delivery to Seller
of such other documents as Seller may reasonably request for the purpose of (i)
evidencing the accuracy of any representation or warranty of Buyer, (ii)
evidencing the performance by Buyer of, or the compliance by Buyer with, any
covenant or obligation required to be performed or complied with by Buyer, (iii)
evidencing the satisfaction of any condition referred to in this Section 8, or
(iv) otherwise facilitating the consummation of any of the Contemplated
Transactions.
8.4. NO PROCEEDINGS. Since the date of this Agreement, there must not
have been commenced or Threatened against Seller, or against any Affiliate of
Seller, any Proceeding (a) involving any challenge to, or seeking damages or
other relief in connection with, any of the Contemplated Transactions, or (b)
that may have the effect of preventing, delaying, making illegal, or otherwise
interfering with any of the Contemplated Transactions.
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ARTICLE IX.
TERMINATION
9.1. TERMINATION EVENTS. This Agreement may, by notice given prior to or
at the Closing, be terminated:
(a) by either Buyer or Seller if a material Breach of any
provision of this Agreement has been committed by the other party and such
Breach has not been waived or cured within 10 days after the breaching party has
received written notice from the non-breaching party;
(b) (i) by Buyer if any of the conditions in Section 7 has not
been satisfied as of the Closing Date or if satisfaction of such a condition is
or becomes impossible (other than through the failure of Buyer to comply with
its obligations under this Agreement) and Buyer has not waived such condition on
or before the Closing Date; or (ii) by Seller, if any of the conditions in
Section 8 has not been satisfied of the Closing Date or if satisfaction of such
a condition is or becomes impossible (other than through the failure of Seller
to comply with its obligations under this Agreement) and Seller has not waived
such condition on or before the Closing Date;
(c) by mutual consent of Buyer and Seller; or
(d) by either Buyer or Seller if the Closing has not occurred
(other than through the failure of any party seeking to terminate this Agreement
to comply fully with its obligations under this Agreement) on or before
September 30, 1998, or such later date as the parties hereto may agree upon.
9.2. The failure of Buyer and its Affiliates and The Perkin Elmer
Corporation and its Affiliates to execute and close the Notarial Deed shall not
be considered grounds for termination of this Agreement.
9.3. EFFECT OF TERMINATION. Each party's right of termination under
Section 9.1 is in addition to any other rights it may have under this Agreement
or otherwise, and the exercise of a right of termination will not be an election
of remedies. If this Agreement is terminated pursuant to Section 9.1, all
further obligations of the parties hereto under this Agreement will terminate,
except that the obligations in Sections 11.1 and 11.3 will survive; provided,
however, that if this Agreement is terminated by a party because of the Breach
of the Agreement by the other party or because one or more of the conditions to
the terminating party's obligations under this Agreement is not satisfied as a
result of the other party's failure to comply with its obligations under this
Agreement, the terminating party's right to pursue all legal remedies will
survive such termination unimpaired.
ARTICLE X.
INDEMNIFICATION; REMEDIES
10.1. SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE. All
representations, warranties, covenants, and obligations in this Agreement, the
Disclosure Letter, the supplements to the Disclosure Letter, and any other
certificate or document delivered pursuant to this Agreement will survive the
Closing. The right to indemnification, payment of Damages or other remedy based
on such representations, warranties, covenants, and obligations will not be
affected by any investigation
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conducted with respect to, or any Knowledge acquired at any time, whether before
or after the execution and delivery of this Agreement or the Closing Date, with
respect to the accuracy or inaccuracy of or compliance with, any such
representation, warranty, covenant, or obligation. Notwithstanding anything to
the contrary in this Agreement, Seller will have no liability or obligation to
Buyer pursuant to Sections 10.2 or 10.3 or otherwise for any Damages (i) arising
out of any breach by Seller of any representation or warranty, or in the
performance of or compliance with any covenant or obligation, made in this
Agreement if disclosed in writing to Buyer at or prior to the Closing or (ii)
with respect to any matter to the extent such matter was reflected in the
calculation of the adjustment to the Purchase Price, if any, pursuant to Section
2.5 or any payments made pursuant to the proration of Prepaid Expenses pursuant
to Section 2.6.
10.2. INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLER. Seller will
indemnify, defend and hold harmless Buyer, the Company, and their respective
Representatives, members, controlling persons, and Affiliates (collectively, the
"Indemnified Persons") for, and will pay to the Indemnified Persons the amount
of, any loss, liability, claim, damage, expense (including costs of
investigation and defense and reasonable attorneys' fees) or diminution of
value, whether or not involving a third-party claim (collectively, "Damages"),
arising, directly or indirectly, from or in connection with:
(a) any Breach of any representation or warranty made by Seller
in this Agreement, the Disclosure Letter, or any other certificate or document
delivered by Seller or the Company pursuant to this Agreement;
(b) any Breach by Seller or the Company of any covenant or
obligation of Seller or the Company in this Agreement;
(c) any product shipped or manufactured by, or any services
provided by Seller or the Company prior to the Closing Date;
(d) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with either Seller or the Company
(or any Person acting on their behalf) in connection with any of the
Contemplated Transactions; or
(e) any claim by any Person with respect to any business of
Seller unrelated to the NTP Division.
The remedies provided in this Section 10.2 shall be the exclusive
remedies of the parties hereto in connection with any breach of a representation
or warranty, or non-performance, partial or total, of any covenant or agreement
contained herein.
10.3. INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLER - ENVIRONMENTAL
MATTERS. In addition to the provisions of Section 10.2, Seller will indemnify,
defend and hold harmless Buyer, the Company, and the other Indemnified Persons
for, and will pay to Buyer, the Company, and the other Indemnified Persons the
amount of, any Damages (including costs of cleanup, containment, or other
remediation) arising, directly or indirectly, from or in connection with:
(a) any Environmental, Health, and Safety Liabilities arising out
of or relating to: (i) (A) the ownership, operation, or condition at any time on
or prior to the Closing Date of the Facilities or any other properties and
assets (whether real, personal, or mixed and whether tangible or
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<PAGE> 36
intangible) in which Seller or the Company has or had an interest, or (B) any
Hazardous Materials or other contaminants that were present on the Facilities or
such other properties and assets at any time on or prior to the Closing Date to
the extent of any liability which occurred on or prior to the Closing Date; or
(ii) (A) any Hazardous Materials or other contaminants, wherever located, that
were, or were allegedly, generated, transported, stored, treated, Released, or
otherwise handled by Seller or the Company or by any other Person for whose
conduct they are or may be held responsible at any time on or prior to the
Closing Date, or (B) any Hazardous Activities that were, or were allegedly,
conducted by Seller or the Company or by any other Person for whose conduct they
are or may be held responsible at any time on or prior to the Closing Date; or
(b) any bodily injury (including illness, disability, and death,
and regardless of when any such bodily injury occurred, was incurred, or
manifested itself), personal injury, property damage (including trespass,
nuisance, wrongful eviction, and deprivation of the use of real property), or
other damage of or to any Person, including any employee or former employee of
Seller or the Company or any other Person for whose conduct they are or may be
held responsible, in any way arising from or allegedly arising from any
Hazardous Activity conducted or allegedly conducted with respect to the
Facilities or the operation of Seller, or the Company prior to the Closing Date,
or from Hazardous Material that was (i) present or suspected to be present on or
before the Closing Date on or at the Facilities (or present or suspected to be
present on any other property, if such Hazardous Material emanated or allegedly
emanated from any of the Facilities and was present or suspected to be present
on any of the Facilities on or prior to the Closing Date) to the extent of any
liability which occurred on or prior to the Closing Date or (ii) Released or
allegedly Released by Seller or the Company or any other Person for whose
conduct they are or may be held responsible, at any time on or prior to the
Closing Date.
Seller will be entitled to control any cleanup, any related proceeding,
and, except as provided in the following sentence, any other Proceeding with
respect to which indemnity may be sought under this Section 10.3. Seller shall
provide Buyer with the opportunity to participate in any such cleanup and/or
related proceeding provided, however, that such participation shall be at
Buyer's sole expense. The procedure described in Section 10.8 will apply to any
claim solely for monetary damages relating to a matter covered by this Section
10.3.
10.4. INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER. Buyer will
indemnify and hold harmless Seller, and will pay to Seller the amount of any
Damages arising, directly or indirectly, from or in connection with (a) any
Breach of any representation or warranty made by Buyer in this Agreement or in
any certificate delivered by Buyer pursuant to this Agreement, (b) any Breach by
Buyer of any covenant or obligation of Buyer in this Agreement, or (c) any claim
by any Person for brokerage or finder's fees or commissions or similar payments
based upon any agreement or understanding alleged to have been made by such
Person with Buyer (or any Person acting on its behalf) in connection with any of
the Contemplated Transactions.
10.5. TIME LIMITATIONS. If the Closing occurs, Seller will have no
liability (for indemnification or otherwise) with respect to any representation
or warranty, or covenant or obligation to be performed and complied with prior
to the Closing Date, other than those in Sections 3.3 and 3.19, unless within
one (1) year from the Closing Date, Buyer notifies Seller of a claim specifying
the factual basis of that claim in reasonable detail to the extent then known by
Buyer; a claim with respect to Section 3.19 or a claim for indemnification or
reimbursement not based upon any representation or warranty or any covenant or
obligation to be performed and complied with prior to the Closing Date, may be
made within three (3) years from the Closing Date; claims with respect to
Section 3.3 shall be
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<PAGE> 37
valid in perpetuity. If the Closing occurs, Buyer will have no liability (for
indemnification or otherwise) with respect to any representation or warranty, or
covenant or obligation to be performed and complied with prior to the Closing
Date, unless within one (1) year from the Closing Date, Seller notifies Buyer of
a claim specifying the factual basis of that claim in reasonable detail to the
extent then known by Seller.
10.6. LIMITATIONS ON AMOUNT -- SELLER. Seller will have no liability
(for indemnification or otherwise) with respect to the matters described in
clause (a), clause (b) or, to the extent relating to any failure to perform or
comply prior to the Closing Date, clause (c) of Section 10.2 until the total of
all Damages with respect to such matters exceeds $250,000, and then only for the
amount by which such Damages exceed $250,000. However, this Section 10.6 will
not apply to any Breach of any of Seller's representations and warranties of
which either Seller had Knowledge at any time prior to the date on which such
representation and warranty is made or any intentional Breach by either Seller
of any covenant or obligation. Seller shall not be required to make
indemnification payments at any given time pursuant to this Article X to the
extent indemnification payments hereunder would exceed in the aggregate (i)
Seven Million Dollars ($7,000,000) plus (ii) the amount of all "milestone"
payments, if any, made by Buyer to Seller in accordance with Section 2.2(a)(ii)
of this Agreement or Schedule 2.2(b) (the "Maximum Indemnification Amount"). For
avoidance of doubt, the Maximum Indemnification Amount shall be increased from
time to time as Buyer makes payments under Section 2.2(a)(ii) of this Agreement.
10.7. LIMITATIONS ON AMOUNT -- BUYER. Buyer will have no liability (for
indemnification or otherwise) with respect to the matters described in clause
(a) or (b) of Section 10.4 until the total of all Damages with respect to such
matters exceeds $250,000, and then only for the amount by which such Damages
exceed $250,000. However, this Section 10.7 will not apply to any Breach of any
of Buyer's representations and warranties of which Buyer had Knowledge at any
time prior to the date on which such representation and warranty is made or any
intentional Breach by Buyer of any covenant or obligation, and Buyer will be
liable for all Damages with respect to such Breaches.
10.8. PROCEDURE FOR INDEMNIFICATION -- THIRD PARTY CLAIMS.
(a) Promptly after receipt by an indemnified party under Section
10.2, 10.4, or (to the extent provided in the last sentence of Section 10.3)
Section 10.3 of notice of the commencement of any Proceeding against it, such
indemnified party will, if a claim is to be made against an indemnifying party
under such Section, give notice to the indemnifying party of the commencement of
such claim, but the failure to notify the indemnifying party will not relieve
the indemnifying party of any liability that it may have to any indemnified
party, except to the extent that the indemnifying party demonstrates that the
defense of such action is prejudiced by the indemnifying party's failure to give
such notice.
(b) If any Proceeding referred to in Section 10.8(a) is brought
against an indemnified party and it gives notice to the indemnifying party of
the commencement of such Proceeding, the indemnifying party will, unless the
claim involves Taxes, be entitled to participate in such Proceeding and, to the
extent that it wishes (unless (i) the indemnifying party is also a party to such
Proceeding and the indemnified party determines in good faith that joint
representation would be inappropriate, or (ii) the indemnifying party fails to
provide reasonable assurance to the indemnified party of its financial capacity
to defend such Proceeding and provide indemnification with respect to such
Proceeding), to assume the defense of such Proceeding with counsel satisfactory
to the indemnified party and, after notice from the indemnifying party to the
indemnified party of its election
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<PAGE> 38
to assume the defense of such Proceeding, the indemnifying party will not, as
long as it diligently conducts such defense, be liable to the indemnified party
under this Section 10 for any fees of other counsel or any other expenses with
respect to the defense of such Proceeding, in each case subsequently incurred by
the indemnified party in connection with the defense of such Proceeding, other
than reasonable costs of investigation. If the indemnifying party assumes the
defense of a Proceeding, (i) it will be conclusively established for purposes of
this Agreement that the claims made in that Proceeding are within the scope of
and subject to indemnification; (ii) no compromise or settlement of such claims
may be effected by the indemnifying party without the indemnified party's
consent unless (A) there is no finding or admission of any violation of Legal
Requirements or any violation of the rights of any Person and no effect on any
other claims that may be made against the indemnified party, and (B) the sole
relief provided is monetary damages that are paid in full by the indemnifying
party; and (iii) the indemnified party will have no liability with respect to
any compromise or settlement of such claims effected without its consent. If
notice is given to an indemnifying party of the commencement of any Proceeding
and the indemnifying party does not, within ten days after the indemnified
party's notice is given, give notice to the indemnified party of its election to
assume the defense of such Proceeding, the indemnifying party will be bound by
any determination made in such Proceeding or any compromise or settlement
effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable probability that a
Proceeding may adversely affect it or its Affiliates with respect to any
injunctive action, and such matter is covered by an indemnity obligation under
this Agreement, the indemnified party may, by notice to the indemnifying party,
assume the exclusive right to defend, compromise, or settle such Proceeding, but
the indemnifying party will not be bound by any determination of a Proceeding so
defended or any compromise or settlement effected without its consent (which may
not be unreasonably withheld).
10.9. PROCEDURE FOR INDEMNIFICATION -- OTHER CLAIMS. A claim for
indemnification for any matter not involving a third-party claim may be asserted
by notice to the party from whom indemnification is sought.
10.10. CLAIMS RELATING TO PERSEPTIVE. Except as to representations and
warranties of Buyer under Section 4.6 hereof, notwithstanding anything in this
Agreement to the contrary, the sole remedy of Buyer, Seller or the Company with
respect to any claims which Seller, Company or Buyer may have with respect to
PerSeptive shall be solely governed by the Notarial Deed as executed, and
neither Buyer, Seller nor the Company shall have any liability among themselves
or vis-a-vis each other with respect to any matter that relates to, arises out
of or is connected with PerSeptive.
ARTICLE XI.
GENERAL PROVISIONS
11.1. EXPENSES. Except as otherwise expressly provided in this
Agreement, each party to this Agreement will bear its respective expenses
incurred in connection with the preparation, execution, and performance of this
Agreement and the Contemplated Transactions, including all fees and expenses of
agents, representatives, counsel, and accountants.
11.2. PUBLIC ANNOUNCEMENTS. Seller and Buyer will consult with each
other concerning the means by which the Company's employees, customers, and
suppliers and others having dealings with
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<PAGE> 39
the Company will be informed of the Contemplated Transactions, and Seller and
Buyer will have the right to be present for any such communication.
Notwithstanding the foregoing, Seller or its Affiliates, or Buyer or its
Affiliates, may make such public announcements as may be necessary as a matter
of U.S. or German law.
11.3. CONFIDENTIALITY. Between the date of this Agreement and the
Closing Date, except as may otherwise be required to enable Seller or Buyer to
comply with their respective disclosure obligations under applicable law, Buyer
and Seller will maintain in confidence, and will cause the directors, officers,
employees, agents, and advisors of Buyer and the Company to maintain in
confidence, and not use to the detriment of another party or the Company any
written, oral, or other information obtained in confidence from another party or
the Company in connection with this Agreement or the Contemplated Transactions,
unless (a) such information is already known to such party or to others not
bound by a duty of confidentiality or such information becomes publicly
available through no fault of such party, (b) the use of such information is
necessary or appropriate in making any filing or obtaining any consent or
approval required for the consummation of the Contemplated Transactions, or (c)
the furnishing or use of such information is required by or necessary or
appropriate in connection with legal proceedings.
If the Contemplated Transactions are not consummated, each party will
return or destroy as much of such written information as the other party may
reasonably request. Whether or not the Closing takes place, Seller waives, and
will upon Buyer's request cause the Company to waive, any cause of action,
right, or claim arising out of the access of Buyer or its representatives to any
trade secrets or other confidential information of the Company except for the
intentional competitive misuse by Buyer of such trade secrets or confidential
information.
11.4. NOTICES. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt), (b)
sent by telecopier (with written confirmation of receipt), provided that a copy
is mailed by registered mail, return receipt requested, or (c) when received by
the addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties hereto):
Seller: NeXstar Pharmaceuticals, Inc.
2860 Wilderness Place
Boulder, CO 80301
Attention: President and Chief Executive Officer
Facsimile No.: (303) 546-7603
with a copy to: Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019-6099
Attention: Peter H. Jakes, Esq.
Facsimile No.: (212) 728-8111
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<PAGE> 40
Buyer: SKW Americas, Inc.
23700 Chagrin Boulevard
Cleveland, Ohio 44122-5554
Attention: President
Facsimile No.: (216) 831-4802
with a copy to: Walter, Conston, Alexander & Green, P.C.
90 Park Avenue
New York, New York 10016
Attention: Aydin S. Caginalp, Esq.
Facsimile No.: (212) 210-9444
Company: Proligo L.L.C.
2830 Wilderness Place
Boulder, CO 80301
Attention: President
Facsimile No.: (303) 448-1420
with a copy to: Peter H. Jakes, Esq. and Aydin S. Caginalp,
at the same addresses set forth above.
11.5. JURISDICTION; SERVICE OF PROCESS. Any action or proceeding seeking
to enforce any provision of, or based on any right arising out of, this
Agreement may be brought against any of the parties hereto in the courts of the
State of New York, County of New York, or, if it has or can acquire
jurisdiction, in the United States District Court for the Southern District of
New York, and each of the parties hereto consents to the jurisdiction of such
courts (and of the appropriate appellate courts) in any such action or
proceeding and waives any objection to venue laid therein. Process in any action
or proceeding referred to in the preceding sentence may be served on any party
anywhere in the world.
11.6. FURTHER ASSURANCES. The parties hereto agree (a) to furnish upon
request to each other such further information, (b) to execute and deliver to
each other such other documents, and (c) to do such other acts and things, all
as the other party may reasonably request for the purpose of carrying out the
intent of this Agreement and the documents referred to in this Agreement.
11.7. NO SET-OFF. Buyer shall not set-off against the Purchase Price any
amounts payable in respect of an indemnification obligation hereunder unless and
until its right to indemnification has been judicially determined to be payable
in respect of any Damages, at which time Seller's obligation to indemnify for
Damages shall be reduced by the amount so set-off.
11.8. WAIVER. The rights and remedies of the parties hereto are
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed
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by the other party; (b) no waiver that may be given by a party will be
applicable except in the specific instance for which it is given; and (c) no
notice to or demand on one party will be deemed to be a waiver of any obligation
of such party or of the right of the party giving such notice or demand to take
further action without notice or demand as provided in this Agreement or the
documents referred to in this Agreement.
11.9. ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes all
prior agreements between the parties hereto with respect to its subject matter
and constitutes (along with the documents referred to in this Agreement) a
complete and exclusive statement of the terms of the agreement between the
parties hereto with respect to its subject matter. This Agreement may not be
amended except by a written agreement executed by the party to be charged with
the amendment.
11.10. DISCLOSURE LETTER. In the event of any inconsistency between the
statements in the body of this Agreement and those in the Disclosure Letter
(other than an exception expressly set forth as such in the Disclosure Letter
with respect to a specifically identified representation or warranty), the
statements in the body of this Agreement will control.
11.11. ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS. Neither party
may assign any of its rights under this Agreement without the prior consent of
the other parties hereto, which will not be unreasonably withheld, except that
Buyer may assign any of its rights under this Agreement to any Affiliate of
Buyer provided that Buyer shall remain fully liable for all obligations under
this Agreement. Subject to the preceding sentence, this Agreement will apply to,
be binding in all respects upon, and inure to the benefit of the successors and
permitted assigns of the parties hereto. Nothing expressed or referred to in
this Agreement will be construed to give any Person other than the parties
hereto any legal or equitable right, remedy, or claim under or with respect to
this Agreement or any provision of this Agreement. This Agreement and all of its
provisions and conditions are for the sole and exclusive benefit of the parties
hereto and their successors and assigns.
11.12. SEVERABILITY. If any provision of this Agreement is held invalid
or unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
11.13. SECTION HEADINGS, CONSTRUCTION. The headings of Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
11.14. GOVERNING LAW. This Agreement will be governed by the laws of the
State of New York without regard to conflicts of laws principles.
11.15. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.
Buyer: Seller:
By: /s/ W.F. Sullivan By: /s/ Patrick Mahaffy
Name: W.F. Sullivan Name: Patrick Mahaffy
Title: Vice President, Finance Title: President
The Company:
By: /s/ Wolfgang Pieken
Name: Wolfgang Pieken
Title: President & CEO
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<PAGE> 1
EXHIBIT 10.1
- - --------------------------------------------------------------------------------
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
PROLIGO L.L.C.
DATED AS OF AUGUST 15, 1998
- - --------------------------------------------------------------------------------
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<TABLE>
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TABLE OF CONTENTS
page
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ARTICLE I. DEFINITIONS 2
Section 1.1. DEFINITIONS ..........................................................2
Section 1.2. USAGE GENERALLY; INTERPRETATION.......................................6
ARTICLE II. ORGANIZATIONAL AND OTHER MATTERS; MEMBERSHIP 7
Section 2.1. FORMATION; ADMISSION..................................................7
Section 2.2. NAME .................................................................7
Section 2.3. BUSINESS PURPOSE......................................................7
Section 2.4. OFFICES ..............................................................7
Section 2.5. TERM .................................................................7
Section 2.6. MEMBERS ..............................................................7
Section 2.7. PLACE OF MEMBERS' MEETINGS............................................7
Section 2.8. MEETINGS .............................................................8
Section 2.9. TELEPHONIC MEETINGS...................................................8
Section 2.10. NOTICE OF MEETINGS....................................................8
Section 2.11. WAIVERS ..............................................................8
Section 2.12. QUORUM ...............................................................8
Section 2.13. PROXIES ..............................................................8
Section 2.14. VOTING POWER..........................................................9
Section 2.15. WRITTEN CONSENT.......................................................9
Section 2.16. WITHDRAWAL OF NEXSTAR.................................................9
ARTICLE III. BOARD OF MANAGERS; POWERS; VOTING; MEETINGS 9
Section 3.1. BOARD OF MANAGERS.....................................................9
Section 3.2. ELECTION AND TERM OF MANAGERS; COMMITTEE MEMBERS.....................10
Section 3.3. VACANCIES ...........................................................10
Section 3.4. REMOVAL OF MANAGERS AND COMMITTEE MEMBERS............................10
Section 3.5. RESIGNATION .........................................................10
Section 3.6. PLACE OF MEETINGS....................................................11
Section 3.7. MEETINGS ............................................................11
Section 3.8. TELEPHONIC MEETINGS..................................................11
Section 3.9. NOTICE OF MEETINGS...................................................11
Section 3.10. WAIVERS .............................................................11
Section 3.11. QUORUM; BOARD ACTION.................................................11
Section 3.12. PROXIES .............................................................12
Section 3.13. VOTING POWER.........................................................12
Section 3.14. WRITTEN CONSENT......................................................12
Section 3.15. COMMITTEES ..........................................................12
Section 3.16. COMPENSATION.........................................................13
ARTICLE IV. OFFICERS AND EMPLOYEES 13
Section 4.1. CHIEF EXECUTIVE OFFICER; ELECTION; TERM..............................13
Section 4.2. OTHER OFFICERS AND EMPLOYEES.........................................13
Section 4.3. REMOVAL OF OFFICERS AND EMPLOYEES; RESIGNATION.......................13
Section 4.4. DUTIES; POWERS.......................................................13
Section 4.5. MANAGEMENT POLICIES; MEETINGS WITH MANAGEMENT COMMITTEE..............14
Section 4.6. RESTRICTED ACTIVITIES................................................14
ARTICLE V. FINANCE 14
Section 5.1. INITIAL CAPITAL CONTRIBUTIONS........................................14
Section 5.2. ADDITIONAL CAPITAL CONTRIBUTIONS.....................................14
Section 5.3. SKW CREDIT AGREEMENT.................................................14
</TABLE>
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<TABLE>
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Section 5.4. MEMBERS' CAPITAL ACCOUNTS...........................................15
Section 5.5. PROFITS/LOSSES......................................................16
Section 5.6. BANKING; INVESTMENTS................................................18
Section 5.7. DISTRIBUTIONS.......................................................18
Section 5.8. RETURN OF CONTRIBUTION..............................................18
Section 5.9. BUDGET; BUSINESS PLAN...............................................18
Section 5.10. LOANS FROM AFFILIATES; CONTRACTS WITH AFFILIATES....................19
ARTICLE VI. ACCOUNTING; TAX MATTERS 19
SECTION 6.1. BOOKS; FISCAL YEAR..................................................19
SECTION 6.2. REPORTS ............................................................19
Section 6.3. COMPANY INFORMATION.................................................20
Section 6.4. RECORDS ............................................................20
Section 6.5. TAX CHARACTERIZATION................................................21
Section 6.6. TAX RETURNS ........................................................21
Section 6.7. TAX MATTERS PARTNER.................................................21
Section 6.8. TAX ELECTIONS.......................................................22
ARTICLE VII. TRANSFERS 22
Section 7.1. PROHIBITED TRANSFERS................................................22
Section 7.2. TRANSFERS TO AFFILIATES.............................................22
Section 7.3. TRANSFER OF NXSUB MEMBERSHIP INTEREST...............................23
Section 7.4. RIGHTS OF FIRST REFUSAL.............................................24
Section 7.5. NXSUB TAG-ALONG RIGHTS..............................................26
ARTICLE VIII. SKW PURCHASE OPTIONS 26
Section 8.1. BUY/SELL OPTION.....................................................26
Section 8.2. CLOSING DELIVERIES..................................................30
ARTICLE IX. LIMITED LIABILITY; INDEMNIFICATION 30
Section 9.1. LIMITED LIABILITY...................................................30
Section 9.2. INDEMNIFICATION.....................................................30
ARTICLE X. DISSOLUTION; LIQUIDATION 32
Section 10.1. DISSOLUTION.........................................................32
Section 10.2. WITHDRAWAL OF MEMBERS...............................................32
Section 10.3. DISTRIBUTION UPON DISSOLUTION.......................................32
Section 10.4. TIME FOR LIQUIDATION................................................33
Section 10.5. WINDING UP AND FILING ARTICLES OF CANCELLATION......................33
ARTICLE XI. MEMBERSHIP INTERESTS; CERTIFICATES 33
Section 11.1. CERTIFICATES........................................................33
Section 11.2. LOST OR DESTROYED CERTIFICATES......................................34
Section 11.3. TRANSFER OF MEMBERSHIP INTERESTS....................................34
Section 11.4. REGULATIONS.........................................................34
Section 11.5. REGISTERED MEMBERS..................................................34
ARTICLE XII. MISCELLANEOUS 35
Section 12.1. SEVERABILITY........................................................35
Section 12.2. NOTICES ............................................................35
Section 12.3. CAPTIONS ...........................................................36
Section 12.4. ENTIRE AGREEMENT....................................................36
Section 12.5. COUNTERPARTS........................................................36
Section 12.6. AMENDMENTS; WAIVER..................................................36
Section 12.7. FURTHER ASSURANCES..................................................37
Section 12.8. GOVERNING LAW.......................................................37
Section 12.9. THIRD PARTY BENEFICIARY.............................................37
Section 12.10. ASSIGNMENT..........................................................37
Section 12.11. SUCCESSORS AND ASSIGNS..............................................37
ii
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<TABLE>
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Section 12.12. RELATIONSHIP........................................................37
Section 12.13. CONSENT TO JURISDICTION.............................................37
Section 12.14. EQUITABLE REMEDIES..................................................37
Section 12.15. FEES AND EXPENSES...................................................38
iii
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<PAGE> 5
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
PROLIGO L.L.C.
THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (the
"Agreement") of PROLIGO L.L.C., a Delaware Limited Liability Company (the
"Company"), is made and entered into as of this 15th day of August, 1998, by and
among NeXstar Pharmaceuticals International, Inc., a corporation organized and
existing under the laws of Delaware, with its principal place of business at
2860 Wilderness Place, Boulder, CO 80301 ("NXSUB"), SKW Americas, Inc., a
corporation organized and existing under the laws of Delaware, with its
principal place of business at 23700 Chagrin Boulevard, Cleveland, OH
44122-5554,("SKW") and NeXstar Pharmaceuticals, Inc., a corporation organized
and existing under the laws of Delaware, with its principal place of business at
2860 Wilderness Place, Boulder, CO 80301 ("NeXstar").
WHEREAS, the Company was formed as a limited liability company pursuant
to the Delaware Limited Liability Company Law (6 Del. C. Section 18-101, et
seq., as it may be amended from time to time, or any successor statute (the
"LLCL")) by the filing of a Certificate of Formation with the Office of the
Secretary of State of the State of Delaware on July 27, 1998;
WHEREAS, NeXstar has contributed the assets constituting its NeXstar
Technology Products Division to the Company;
WHEREAS, pursuant to a Purchase Agreement, dated as of the date hereof,
among the Company, NeXstar, and SKW, SKW has purchased 51% of NeXstar's
Membership Interest in the Company (the "Purchase Agreement");
WHEREAS, NeXstar has contributed the remaining 49% of its Membership
Interest in the Company to NXSUB; and
WHEREAS, the parties hereto desire to amend and restate the Limited
Liability Company Agreement (the "Original Agreement") of the Company, dated as
of July 27, 1998, executed by NeXstar, to provide for the withdrawal of NeXstar,
and the admission of SKW and NXSUB as Members and to establish herein the
respective rights and obligations of NXSUB and SKW with respect to the Company;
NOW, THEREFORE, in consideration of the conditions and provisions
contained herein, NeXstar, NXSUB and SKW hereby agree as follows:
<PAGE> 6
ARTICLE I.
DEFINITIONS
Section 1.1. DEFINITIONS. The following terms shall, for the purposes
of this Agreement and the Schedules and Exhibits hereto, have the following
meanings (terms defined in the singular or the plural include the plural or the
singular, as the case may be):
"Affiliate" of any Person shall mean any other Person that, directly or
indirectly, controls, is under common control with or is controlled by that
Person. For purposes of this definition, "control" (including, with its
correlative meanings, the terms "controlled by" and "under common control
with"), as used with respect to any Person, shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of such Person, whether through the ownership of voting securities
or by contract or otherwise.
"Bankruptcy" of a Member shall mean (a) the filing by a Member of a
voluntary petition seeking liquidation, reorganization, arrangement or
readjustment, in any form, of his debts under Title 11 of the United States Code
(or corresponding provisions of future laws) or any other federal, foreign or
state insolvency law, or a Member's filing of an answer consenting to or
acquiescing in any such petition; (b) the making by a Member of any assignment
for the benefit of its creditors or the admission by a Member in writing of its
inability to pay its debts as they mature; or (c) the expiration of 60 days
after the filing of an involuntary petition under Title 11 of the United States
Code (or corresponding provisions of future laws), seeking an application for
the appointment of a receiver for the assets of a Member, or an involuntary
petition seeking liquidation, reorganization, arrangement or readjustment of its
debts under any other federal, foreign or state insolvency law, provided that
the same shall not have been vacated, set aside or stayed within such 60-day
period.
"Book Value" shall mean, except as set forth below, the adjusted basis
of any Company asset for federal income tax purposes. The initial Book Value of
any assets contributed by a Member to the Company shall be the gross fair market
value of such assets at the time of such contribution. The Book Values of all of
the Company's assets may be adjusted by the Company to equal their respective
gross fair market values, as determined by the Members, as of the following
times: (a) the admission of a new Member to the Company or the acquisition by an
existing Member of an additional interest in the Company from the Company; (b)
the distribution by the Company of money or property to a retiring or continuing
Member in consideration for the retirement of all or a portion of such Member's
interest in the Company; (c) the termination of the Company for federal income
tax purposes pursuant to section 708(b)(1)(B) of the Code; and (d) such other
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times as determined by the Members. The Book Value of a Company asset shall be
adjusted for the depreciation and amortization of such asset taken into account
in computing Net Profits and Net Losses and for Company expenditures and
transactions that increase or decrease the asset's Federal income tax basis.
"Budget" shall mean the annual statement of projected expenses, revenue
and capital requirements of the Company.
"Business" shall mean the business of supplying the pharmaceutical and
biopharmaceutical industry, including NeXstar, with nucleic acid and peptide
synthesis products for sale and use as laboratory research reagents and in
therapeutic and diagnostic products in clinical trials and to ultimately serve
the expected opportunity in therapeutic products and diagnostic products based
upon oligonucleotides or their analogues when such products have been approved
and are commercialized.
"Business Day" shall mean any day, other than a Saturday or Sunday, on
which federally chartered banks in the United States are open for business.
"Business Plan" shall mean a five-year business plan for the Company
setting forth a statement of projected expenses, revenue and capital
requirements of the Company over such period.
"Certificate of Formation" means the Certificate of Formation of the
Company filed on July 27, 1998 with the Secretary of State of the State of
Delaware pursuant to the LLCL, as such Certificate of Formation may be amended
or restated from time to time.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Credit Agreement" shall mean the Credit Agreement, dated the date
hereof, between SKW and the Company.
"Distributable Cash" shall mean the excess of the Company's positive
cash flow on a consolidated basis over the Company's consolidated working
capital needs as determined in U.S. dollars in accordance with GAAP. The
Company's positive cash flow on a consolidated basis shall mean the excess of
consolidated cash receipts (excluding the proceeds of any borrowing by the
Company or any subsidiary thereof) over consolidated cash disbursements for any
given period. The Company's working capital needs shall be determined in good
faith by the Board and shall include, but not be limited to, reasonable reserves
for current and future operating expenses, debt service, business expansion and
acquisitions, contingencies and emergencies.
"Encumbrance" shall mean any mortgage, pledge, security interest, lien,
restriction on use or transfer, voting agreement, adverse claim or encumbrance
or charge of any kind (including any
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agreement to give any of the foregoing), any conditional sale or other title
retention agreement, any lease in the nature thereof, and the filing of, or any
agreement to give, any financing statement under the Uniform Commercial Code or
similar law of any jurisdiction.
"Fiscal Year" of the Company shall mean the twelve (12) month period
ending December 31 in each year.
"GAAP" shall mean United States generally accepted accounting principles
as in effect from time to time, consistently applied.
"Governmental Body" shall mean any domestic or foreign national, state
or municipal or other local government or multi-national body (including, but
not limited to, the European Union), any subdivision, agency, commission or
authority thereof, or any quasi-governmental or private body exercising any
regulatory authority thereunder and any corporation, partnership or other entity
directly or indirectly owned by or subject to the control of any of the
foregoing.
"Majority in Interest of the Members" means, at any time, Members owning
a majority of all of the outstanding Membership Interests in the Company.
"Member" shall mean at anytime NXSUB and SKW if at such time they have a
Membership Interest in the Company and any Person who at such time has a
Membership Interest in the Company.
"Member-Funded Debt" shall mean any non-recourse debt of the Company
which is loaned or guaranteed by any Member and/or is treated as "partner
non-recourse debt" under Section 1.704-2(b)(4) of the Treasury Regulations.
"Membership Interest" shall mean a Member's entire interest in the
Company, including, but not limited to, (i) the Percentage Interest now or
hereafter owned by it; (ii) its share in any Net Income, Net Loss and any
distributions of the Company; and (iii) its right to participate in the
management of the Company or any other decision of the Members pursuant to this
Agreement.
"Minimum Gain" shall mean an amount equal to the excess of the principal
amount of debt, for which no Member is liable ("non-recourse debt"), secured by
any property of the Company over the adjusted basis of such Property which
represents the minimum taxable gain which would be recognized by the Company if
the non-recourse debt were foreclosed upon and the property was transferred to
the creditor in satisfaction thereof, and which is referred to as "minimum gain"
in Section 1.704-1(b)(4)(iv) of the Treasury Regulations. A Member's share of
Minimum Gain shall be determined pursuant to the above-cited Treasury
Regulations.
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"Net Profits" and "Net Losses" shall mean the income and loss of the
Company as determined in accordance with the accounting methods followed by the
Company for Federal income tax purposes including income exempt from tax and
described in Code Section 705(a)(1)(B), treating as deductions items of
expenditure described in, or under Treasury Regulations deemed described in,
Code Section 705(a)(2)(B) and treating as an item of gain (or loss) the excess
(deficit), if any, of the fair market value of distributed property over (under)
its Book Value. Depreciation, depletion, amortization, income and gain (or loss)
with respect to Company assets shall be computed with reference to their Book
Value rather than to their adjusted basis.
"NXSUB Change of Control" shall mean the occurrence of (i) a
consolidation or merger of NeXstar with or into another company, as a result of
which the holders of NeXstar's voting securities prior to the transaction do not
hold more than 50% of the voting securities of the surviving corporation
following consummation of the transaction; (ii) a sale, transfer or disposition
of (x) all or substantially all of the voting securities, business or assets of
NeXstar to any single purchaser or group of persons affiliated with a single
purchaser or (y) NXSUB by NeXstar other than to an Affiliate.
"Percentage Interest" shall mean a Member's aggregate economic
percentage interest in the Company as set forth on Schedule I hereto as each
such percentage may be adjusted from time to time by the Members by mutual
consent or upon any Transfer by a Member.
"Permitted Encumbrances" shall mean as of a particular date (i)
Encumbrances reflected in the financial statements of the Company (including,
but not limited to, purchase money liens which are not overdue as of a
particular date or which are being contested in good faith), (ii) Encumbrances
arising out of contracts entered into in the ordinary course of the Business,
(iii) mechanics', materialmen's or similar inchoate liens relating to
liabilities not yet due and payable and (iv) liens for current taxes not yet
delinquent, to the extent the validity thereof is being contested in good faith
by appropriate proceedings, which proceedings have the effect of preventing
foreclosure or enforcement of such liens and where adequate reserves are
established and maintained in accordance with GAAP.
"PerSeptive Biosystems" shall mean PerSeptive Biosystems GmbH-Hamburg.
"Person" shall mean an individual, sole proprietorship, corporation,
partnership, joint venture, trust, unincorporated organization, mutual company,
joint stock company, estate, union, employee organization, bank, trust company,
land trust, business trust or other organization, whether or not a legal entity,
or a Governmental Body.
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"Prime Rate" for any period shall mean the interest rate for such period
as announced by Citibank N.A. (or its successors) at its principal office in New
York City as its base rate for loans.
"Purchase Agreement" shall mean the Purchase Agreement by and among
NeXstar, SKW and the Company, dated as of the date hereof.
"Supply Agreement" shall mean the Supply Agreement, dated as of the date
hereof, by and between the Company and NeXstar.
"Transfer" shall mean any sale, assignment, conveyance, transfer,
donation or any other means to dispose of, or pledge, hypothecate or otherwise
encumber in any manner whatsoever, or permit or suffer any Encumbrance of any
interest in the Company (whether profits, management or Percentage Interest).
"Transition Services Agreement" shall mean the Transition Services
Agreement, dated as of the date hereof, by and between the Company and NeXstar.
"Treasury Regulations" means the regulations promulgated by the U.S.
Department of the Treasury under the Code.
Section 1.2. USAGE GENERALLY; INTERPRETATION. Whenever the context may
require, any pronoun includes the corresponding masculine, feminine and neuter
forms. All references herein to Articles and Sections shall be deemed to be
references to Articles and Sections of this Agreement unless the context
otherwise requires. The words "include", "includes" and "including" shall be
deemed to be followed by the phrase "without limitation". The words "hereof",
"herein" and "hereunder" and words of similar import when used in this Agreement
refer to this Agreement as a whole and not to any particular provision of this
Agreement. Unless otherwise expressly provided herein, any agreement, instrument
or statute defined or referred to herein or in any agreement or instrument that
is referred to herein means such agreement, instrument or statute as from time
to time amended, modified or supplemented, including (in the case of agreements
or instruments) by waiver or consent and (in the case of statutes) by succession
of comparable successor statutes and references to all attachments thereto and
instruments incorporated therein. Except to the extent a provision of this
Agreement expressly incorporates federal income tax rules by reference to
sections of the Code or Treasury Regulations or is expressly prohibited or
ineffective under the LLCL, this Agreement shall govern, even when inconsistent
with, or different than, the provisions of the LLCL or any other law or rule. To
the extent any provision of this Agreement is prohibited or ineffective under
the LLCL, this Agreement shall be deemed to be amended to the least extent
necessary in order to make this Agreement effective under the LLCL. In the event
the LLCL is subsequently amended or interpreted in such a way to make any
provision of this Agreement that was formerly invalid valid, such
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provision shall be considered to be valid from the effective date of such
interpretation or amendment.
ARTICLE II.
ORGANIZATIONAL AND OTHER MATTERS; MEMBERSHIP
Section 2.1. FORMATION; ADMISSION. The Company was formed as a limited
liability company under the provisions of the LLCL by the filing on July 27,
1998 of the Certificate of Formation with the Secretary of State of the State of
Delaware. Each of the Persons listed on Schedule I hereto, by virtue of the
execution of this Agreement, are being admitted to the Company as a Member. The
rights and liabilities of the Members shall be as provided in the LLCL, except
as is otherwise expressly provided herein. This Agreement hereby amends and
restates the Original Agreement in its entirety.
Section 2.2. NAME. The name of the Company shall be, and the business of
the Company shall be conducted under the name of, Proligo L.L.C.
Section 2.3. BUSINESS PURPOSE. The purpose of the Company is to engage
in the Business or such other business as determined by the Board in accordance
with Section 3.11(b).
Section 2.4. OFFICES. The Company's principal office shall be located at
2830 Wilderness Place, Boulder, CO 80301. The Company may have other offices at
such other places within or without the State of Colorado as the Board (as
hereinafter defined) from time to time may select.
Section 2.5. TERM. The Company commenced on the date of the filing of
the Certificate of Formation, and the term of the Company shall continue until
the close of business on August 2, 2028, or until the earlier dissolution of the
Company in accordance with the provisions of ARTICLE X hereof or as otherwise
provided by law.
Section 2.6. MEMBERS. The Members of the Company as of the date of this
Agreement are NXSUB and SKW. Subject to the prior written consent of all
Members, a new Person may be admitted from time to time as a Member; provided,
however, that each such new Member shall execute an appropriate supplement to
this Agreement pursuant to which the new Member agrees to be bound by the terms
and conditions of this Agreement, as it may be amended from time to time.
Admission of a new Member shall not be cause for the dissolution of the Company.
Section 2.7. PLACE OF MEMBERS' MEETINGS. Meetings of the Members (each,
a "Members' Meeting") shall be held at the principal office of the Company, or
at such other place as the Members shall mutually agree.
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Section 2.8. MEETINGS. A Members' Meeting may be called by any Member
for any matter which is appropriate for consideration thereat. Members' Meetings
shall be held from time to time, but no fewer than once in each calendar year.
Section 2.9. TELEPHONIC MEETINGS. Members' Meetings may be held through
the use of conference telephone or similar communications equipment so long as
all persons participating in such Members' Meetings can hear one another at the
time of such Members' Meeting. Participation in Members' Meeting via conference
telephone or similar communications equipment in accordance with the preceding
sentence constitutes presence in person at the Members' Meeting.
Section 2.10. NOTICE OF MEETINGS. Written notice of each Members'
Meeting shall state the place, date and hour of such Members' Meeting, and the
general nature of the business to be transacted. Notice shall be given in the
manner prescribed in Section 12.2 hereof not fewer than ten (10) days nor more
than three (3) months before the date thereof.
Section 2.11. WAIVERS. Notice of a Members' Meeting need not be given
to any Member who signs a waiver of notice, in person or by proxy, whether
before or after the Members' Meeting. The attendance of any Member at a Members'
Meeting, in person or by proxy, without protesting prior to the conclusion of
such Members' Meeting the lack of notice of such Members' Meeting, shall
constitute a waiver of notice by such Member, provided that such Member has been
given an adequate opportunity at the meeting to protest such lack of notice.
Section 2.12. QUORUM. A Majority in Interest of the Members shall
constitute a quorum at a Members' Meeting for the transaction of any business;
provided, however, that in order to constitute a quorum, each of the Members
must be represented in person or by proxy; provided, further, that if the
failure of a Member to attend two consecutive Members' Meetings duly called in
accordance with Section 2.10 hereof, after proper notice of such meetings,
results in the failure to reach the necessary quorum at such meetings to conduct
business as provided above, then the presence of such Member shall not be
required to constitute a quorum at such second meeting. A Majority in Interest
of the Members present may adjourn the Members' Meeting, whether or not a quorum
is present. An adjournment may include notice of the date, hour and place that
the Members shall reconvene. Notice of the adjournment (with the new date, time
and place) shall be given to all Members who were absent at the time of the
adjournment and, unless such date, hour and place are announced at the Members'
Meeting, to the other Members.
Section 2.13. PROXIES. Every Member entitled to vote at a Members'
Meeting may authorize another person or persons to act for it by proxy. Every
proxy must be signed by the Member or his attorney-in-fact. No proxy shall be
valid after the expiration
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of eleven (11) months from the date thereof unless otherwise provided in the
proxy. Every proxy shall be revocable in writing at the pleasure of the Member
executing it.
Section 2.14. VOTING POWER. Each Member shall be entitled to vote in
proportion to such Member's Percentage Interest.
Section 2.15. WRITTEN CONSENT. Any action required or permitted to be
taken at any Members' Meeting may be taken without a meeting if all Members
consent thereto in writing. Any such written consents shall be filed with the
minutes of the proceedings.
Section 2.16. WITHDRAWAL OF NEXSTAR. Contemporaneously with the
execution of this Agreement (and the admission of SKW as a Member), NeXstar is
hereby withdrawing as a Member of the Company and SKW and NXSUB are succeeding
to the Capital Account of NeXstar and shall have initial Capital Accounts as set
forth in Section 5.4 hereof and Schedule I hereto.
ARTICLE III.
BOARD OF MANAGERS; POWERS; VOTING; MEETINGS
Section 3.1. BOARD OF MANAGERS.
(a) The business, property and affairs of the Company shall be
managed under the direction of the Board of Managers (the "Board") consisting of
five (5) Managers (the "Managers").
(b) Without limiting the foregoing provisions of this Section
3.1, the Managers shall have the general power to manage or cause the management
of the Company within the scope of the business purpose set forth in Section
2.3, including, without limitation, the following powers which may, subject to
any limitations set forth in this Agreement(including those set forth in Section
3.11(b) and 4.6), be delegated to the officers of the Company:
(i) To have developed and prepared a Budget each year
which will set forth the operating goals and plans for the Company;
(ii) To execute and deliver or to authorize the execution
and delivery of contracts, deeds, leases, licenses, instruments of transfer and
other documents in the ordinary course of business on behalf of the Company;
(iii) To employ, retain, consult with and dismiss such
personnel as may be required for accomplishment of the business purpose set
forth in Section 2.3;
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(iv) To establish and enforce limits of authority and
internal controls with respect to all personnel and functions;
(v) To engage attorneys, consultants and accountants for
the Company;
(vi) To develop or cause to be developed accounting
procedures for the maintenance of the Company's books of account;
(vii) To appoint auditors; and
(viii) To do all such other acts as shall be specifically
authorized in this Agreement or by the Members in writing from time to time.
Section 3.2. ELECTION AND TERM OF MANAGERS; COMMITTEE MEMBERS. SKW
shall be entitled to designate three (3) Managers and NXSUB shall be entitled to
designate two (2) Managers. Each of SKW and NXSUB hereby agrees to vote its
respective Membership Interests and take whatever action may be necessary in
respect of its Membership Interest to cause the election or removal of all such
designees as contemplated by this Article III. Each Member who is entitled to
designate a Manager or Committee Member pursuant to Section 3.15 hereof, shall
have the authority to designate a successor to that Manager or Committee Member
should such Manager or Committee Member resign, be removed or otherwise no
longer be a Manager or Committee Member of the Company. In addition, at the
request of a Member who desires to remove a Manager or Committee Member
designated by such Member and designate a successor Manager or Committee Member,
the Members agree to take all necessary action to remove such Manager or
Committee Member and appoint the successor Manager or Committee Member. The
initial Board shall be constituted as set forth on Schedule 3.2.
Section 3.3. VACANCIES. Vacancies occurring on the Board or any
Committee thereof, for any reason shall be filled by the Member which appointed
the Manager whose resignation, death or removal caused such vacancy.
Section 3.4. REMOVAL OF MANAGERS AND COMMITTEE MEMBERS. A Manager or
Committee Member may be removed at any time for any reason by the Member which
appointed such Manager or Committee Member.
Section 3.5. RESIGNATION. A Manager or Committee Member may resign at
any time by giving written notice to the Members and the Company. Unless
otherwise specified in such notice or consent, the resignation shall take effect
upon receipt of such notice by all of the Members.
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Section 3.6. PLACE OF MEETINGS. Unless otherwise agreed by each of the
Members or each Committee Member in the case of a Committee Meeting (as
hereinafter defined), Meetings of the Board (each, a "Board Meeting") and any
committees thereof ("Committee Meetings") shall be held at the principal office
of the Company.
Section 3.7. MEETINGS. A Board Meeting may be called by any Manager or
by the Chief Executive Officer. Board Meetings shall be held from time to time,
but no fewer than once in any calendar quarter. Committee Meetings may be called
by a member thereof, or by the Board or by the Chief Executive Officer.
Section 3.8. TELEPHONIC MEETINGS. Board Meetings and Committee Meetings
may be held through the use of conference telephone or similar communications
equipment so long as all persons participating in such Board Meetings and
Committee Meetings can hear one another at the time of such Board Meeting or
Committee Meeting. Participation in such Board Meeting or Committee Meeting via
conference telephone or similar communications equipment in accordance with the
preceding sentence constitutes presence in person at the Board Meeting or
Committee Meeting.
Section 3.9. NOTICE OF MEETINGS. Written notice of each Board Meeting
and Committee Meeting shall state the place, date and hour of such Board Meeting
or Committee Meeting, and the general nature of the business to be transacted.
Notice shall be given in the manner prescribed in Section 12.2 hereof to each of
the Managers and the Members at the addresses set forth therein and, in the case
of the Managers, to their addresses appearing on the records of the Company and
not fewer than ten (10) days (provided that in case of an economic emergency,
the notice period may be reduced to three (3) business days at the request of a
Member) nor more than three (3) months before the date thereof.
Section 3.10. WAIVERS. Notice of a Board Meeting need not be given to
any Manager or Committee Member who signs a waiver of notice, in person or by
proxy, whether before or after the Board Meeting or Committee Meeting. The
attendance of any Manager or Committee Member at a Board Meeting or Committee
Meeting, in person or by proxy, without protesting prior to the conclusion of
such Board Meeting or Committee Meeting the lack of notice of such Board Meeting
or Committee Meeting, shall constitute a waiver of notice by such Manager or
Committee Member, provided that such Manager or Committee Member has been given
an adequate opportunity at the meeting to protest such lack of notice.
Section 3.11. QUORUM; BOARD ACTION.
(a) A majority of the Managers shall constitute a quorum at a
Board Meeting for the transaction of any business. A majority of the Managers
present may adjourn the Board Meeting, whether or not a quorum is present. An
adjournment may include
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notice of the date, hour and place that the Members shall reconvene. Notice of
the adjournment (with the new date, time and place) shall be given to all
Managers who were absent at the time of the adjournment and, unless such date,
hour and place are announced at the Board Meeting, to the other Managers. Except
as otherwise expressly provided in this Agreement, the vote of a majority of the
Managers present at a meeting at which a quorum is present shall be the act of
the Board. The Board shall keep a written record of its proceedings.
(b) Without the prior affirmative unanimous vote of all of the
Managers then in office, the Company shall not, and shall not permit any
subsidiary to, and no officer, employee or agent of the Company or any
subsidiary thereof shall, take any of the actions specified in Schedule 3.11(b).
(c) If the Board is unable to resolve any material matter subject
to approval under Section 3.11(b), the matter shall be referred to the Chief
Executive Officers of NeXstar and SKW for resolution, which resolution shall be
final and binding on the Members.
Section 3.12. PROXIES. Every Manager entitled to vote at a Board
Meeting or a Committee Meeting may authorize another person or persons to act
for him by proxy. Every proxy must be signed by the Manager or his
attorney-in-fact. No proxy shall be valid after the expiration of eleven (11)
months from the date thereof unless otherwise provided in the proxy. Every proxy
shall be revocable in writing at the pleasure of the Manager executing it.
Section 3.13. VOTING POWER. Each Manager of record shall be entitled to
one vote.
Section 3.14. WRITTEN CONSENT. Any action required or permitted to be
taken at any Board Meeting or Committee Meeting may be taken without a meeting
if all Managers or Committee Members consent thereto in writing. Any such
written consents shall be filed with the minutes of the proceedings of the Board
or Committee.
Section 3.15. COMMITTEES. The Board may, by resolution passed by a
majority of the whole Board, designate two or more of their number to constitute
committees of the Board to hold office at the pleasure of the Board; provided,
however, that each such committee shall have at least one member (a "Committee
Member") designated by SKW and one member designated by NXSUB. Any person
ceasing to be a Manager shall ipso facto cease to be a member of each Committee
of which they were a member. A majority of the members of a committee shall
constitute a quorum; provided at least one Committee Member designated by SKW
and one Committee Member designated by NXSUB are present. The act of a majority
of the members of a committee present at any meeting at which a quorum is
present shall be the act of such committee. The
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members of a committee shall act only as a committee, and the individual members
thereof shall not have any powers as such. A Committee may act on such matters
as authorized by the Board; provided, however, a Committee may not act on any
matter requiring unanimous Board approval.
Section 3.16. COMPENSATION. No Manager rendering services to the
Company shall be entitled to compensation for services rendered in his capacity
as a Manager or Committee Member. Each Member shall be responsible for the
compensation and expenses of its representatives on the Board or any committee
thereof.
ARTICLE IV.
OFFICERS AND EMPLOYEES
Section 4.1. CHIEF EXECUTIVE OFFICER; ELECTION; TERM. The Board may
elect or appoint a Chief Executive Officer from time to time, who shall have
such duties, powers and functions as hereinafter provided and whose term shall
be as determined by the Board from time to time.
Section 4.2. OTHER OFFICERS AND EMPLOYEES. In addition to the Chief
Executive Officer, the Board may appoint such other officers as they may from
time to time determine to be appropriate.
Section 4.3. REMOVAL OF OFFICERS AND EMPLOYEES; RESIGNATION. Any person
serving as Chief Executive Officer or any other officer or employee appointed,
hired or otherwise approved by the Board shall cease to serve in such position
upon the written notification at any time by the Board. Any officer or employee
hired by the Company without requirement of approval by the Board may be
dismissed at any time by the Chief Executive Officer. The Chief Executive
Officer may resign by giving written notice to the Board. Unless otherwise
specified in such notice, the resignation shall take effect upon the receipt of
such notice by the Board, and the acceptance of the resignation shall not be
necessary to make it effective.
Section 4.4. DUTIES; POWERS. The Chief Executive Officer shall
implement all orders and resolutions of the Board. Subject to the terms and
conditions of this Agreement, including without limitation Sections 3.11(b) and
4.6, and except as may be limited from time to time by the Board, the Chief
Executive Officer shall manage the affairs of the Company and shall be
authorized on the Company's behalf to make all management decisions in the
ordinary course of the Company's business, including, without limitation, the
decisions relating to the employment, hiring and termination of employees, as
well as the execution and delivery of (i) all contracts and documents covering
or affecting the Company's assets; (ii) all checks, drafts and other orders for
the payment from the Company's funds; (iii) all promissory notes, loans,
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security agreements and other similar documents; and (iv) all other instruments
of any other kind relating to the Company's affairs whether like or unlike the
foregoing.
Section 4.5. MANAGEMENT POLICIES; MEETINGS WITH MANAGEMENT COMMITTEE.
(a) The Chief Executive Officer and other officers and employees of the Company
shall develop and implement management policies consistent with the general
policies and programs established by the Board.
(b) Unless otherwise specifically requested by the Board, the
Chief Executive Officer shall attend all meetings of the Board. The Board may
also request any other Person (including officers and employees of the Company)
to attend any meeting of the Board.
Section 4.6. RESTRICTED ACTIVITIES. Without the prior approval of the
Board, the Company shall not, and shall not permit any subsidiary to, and no
officer, employee or agent of the Company or any subsidiary thereof shall, take
any actions specified in Schedule 4.6.
ARTICLE V.
FINANCE
Section 5.1. INITIAL CAPITAL CONTRIBUTIONS. (a) The Members have made
capital contributions in the amounts specified opposite their respective names
on Schedule I hereto, including cash and certain other assets all as set forth
on Schedule I hereto.
(b) To the extent the acquisition of PerSeptive Biosystems by SKW
or an Affiliate thereof is consummated, the members shall contribute to the
capital of the Company all of the shares of capital stock of PerSeptive
Biosystems in the manner contemplated by, and as set forth in, the Purchase
Agreement and on Schedule I hereto.
Section 5.2. ADDITIONAL CAPITAL CONTRIBUTIONS. No Member shall be
required or permitted to make additional capital contributions to the Company
without the consent of all of the Members; provided, however, that if at any
time the Members shall jointly agree in writing that the Company requires
additional funds for or in respect of the business of the Company or any of its
obligations or expenses, or one or more persons are admitted to the Company as
new members, funds shall be contributed to the capital of the Company, in such
amounts and upon such terms and conditions as may then be agreed upon.
Section 5.3. SKW CREDIT AGREEMENT. Notwithstanding anything to the
contrary contained in Section 5.2, contemporaneously with the execution and
delivery of this Agreement, SKW shall execute and deliver to the Company, and
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NXSUB and SKW shall cause the Company to execute and deliver to SKW, the Credit
Agreement in the form of Exhibit A hereto, pursuant to which the Company may
borrow funds from SKW in accordance with the terms and conditions thereof. Upon
the request of NXSUB, the Company shall be permitted and required to prepay any
amounts owing under the Credit Agreement.
Section 5.4. MEMBERS' CAPITAL ACCOUNTS. No Member shall have any right
to withdraw any portion of its Capital Account, except as otherwise provided
herein. For purposes hereof, "Capital Account" shall mean the separate capital
account maintained for each Member in accordance with Treasury Regulations (as
hereinafter defined) Section 1.704-1(b), as of any particular date. Each
Member's Capital Account initially shall be equal to such Member's initial
capital contribution, as set forth on Schedule I attached hereto (except as
otherwise set forth therein) and thereafter shall be adjusted as follows:
(a) The Capital Account of each Member shall be increased by:
(i) The amount of any Net Profits, allocated on or
after the date hereof to such Member;
(ii) The amount, if any, of any Company liabilities
assumed by such Member or taken subject to in connection with the distribution
of property to such Member by the Company on or after the date hereof;
(iii) the amount of any cash contributed by the
Member to the Company; and
(iv) The fair market value of property contributed to
the Company by such Member on or after the date hereof.
(b) The Capital Account of each Member shall be decreased by:
(i) The amount of cash distributed to such Member by
the Company on or after the date hereof;
(ii) The amount of any Net Losses allocated to such
Member on or after the date hereof;
(iii) The fair market value of any property
distributed to such Member by the Company on or after the date hereof; and
(iv) The amount of any liabilities of such Member
assumed by the Company or taken subject to in connection with the contribution
of property by such Member to the Company on or after the date hereof.
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The foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Treasury Regulations under Section 704(b) of the Code and, to the extent not
inconsistent with the provisions of this Agreement, shall be interpreted and
applied in a manner consistent with such Treasury Regulations.
Section 5.5. PROFITS/LOSSES.
(a) Allocation of Income and Loss. (i) Net Profits shall be
allocated among the Members in proportion to their Percentage Interests.
(ii) Net Losses shall be allocated among the Members in
proportion to their Percentage Interests.
(b) Tax credits, if any, shall be allocated among the Members in
proportion to their Percentage Interests.
(c) When the Book Value of a Company asset differs from its basis
for Federal or other income tax purposes, solely for purposes of the relevant
tax and not for purposes of computing Capital Account balances, income, gain,
loss, deduction and credit shall be allocated among the Members under the
traditional method with curative allocations under Treasury Regulation Section
1.704-3(c).
(d) Determinations by the Members. All matters concerning the
allocation of Net Income and Net Loss among the Members, tax elections (except
as may otherwise be required by the income tax laws) and accounting procedures
not expressly and specifically provided by the terms of this Agreement, shall be
determined in good faith by the Members, and on a basis which is in conformity
with the requirements imposed under Code Section 704 and the Treasury
Regulations thereunder as equitably applied among the Members.
(e) Interest. Except for interest payable under the Credit
Agreement or pursuant to Member loans permitted to be made hereunder, no
interest shall be paid by the Company on capital contributions, balances in
Member's Capital Accounts or any other funds contributed to the Company or
distributed or distributable by the Company under this Agreement.
(f) Minimum Gain Chargeback. Notwithstanding the allocations
provided for in Section 5.5(a), (b), (c), (d) or (e), if there is a net decrease
in Minimum Gain during a taxable year of the Company (including any Minimum Gain
attributable to Member-Funded Debt), each Member at the end of such year shall
be allocated, before any other allocations of Net Profits or Net Losses for such
year, items of income and gain for such year (and, if necessary, subsequent
years) in the amount and in the
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proportions described in Section 1.704-2(f) of the Treasury Regulations.
(g) Qualified Income Offset. Notwithstanding the allocations
provided for in Section 5.5(a), (b), (c), (d) or (e), no allocation of an item
of loss or deduction shall be made to a Member to the extent such allocation
would cause or increase a deficit Capital Account balance in such Member's
Capital Account as of the end of the taxable year to which such allocation
relates, after taking into account any adjustment, allocation or distribution
described in Section l.704-1(b)(2)(ii)(d)(4), (5) or (6) of the Treasury
Regulations, and if any such adjustment, allocation or distribution unexpectedly
occurs, the Members shall be allocated items of income and gain in an amount and
manner to eliminate any Capital Account deficit attributable to such adjustment,
allocation or distribution as quickly as possible. For purposes of this Section
5.5(g), there shall be excluded from a Member's deficit Capital Account balance
at the end of a taxable year of the Company (x) such Member's share, determined
in accordance with Section 704(b) of the Code and Section 1.704-2(g) of the
Treasury Regulations, of Minimum Gain (provided that in the case of Minimum Gain
attributable to Member-Funded Debt, such Minimum Gain shall be allocated only to
the Member or Members to which such debt is attributable pursuant to Section
1.704-2(i) of the Treasury Regulations); (y) the amount of any loans (other than
Member-Funded Debt) for which such Member is personally liable (whether as a
result of a guarantee or otherwise); and (z) the amount such Member is obligated
to restore to the Company under Section 1.704-l(b)(2)(ii) of the Treasury
Regulations.
(h) Member-Funded Debt. Notwithstanding the allocations provided
for in Section 5.5(a), (b), (c), (d) or (e), if there is a net increase in
Minimum Gain during a taxable year of the Company that is attributable to
Member-Funded Debt then, first depreciation, to the extent the increase in such
Minimum Gain is allocable to depreciable property, and then a proportionate part
of other deductions and expenditures described in Section 705(a)(2)(B) of the
Code, shall be allocated to the lending or guaranteeing Member, provided that,
the total amount of deductions so allocated for any year shall not exceed the
increase in Minimum Gain attributable to such Member-Funded Debt in such year.
(i) Regulatory Allocations. The allocations set forth in Sections
5.4(f), (g) and (h) (the "Regulatory Allocations") are intended to comply with
certain requirements of Section 1.704-1(b) of the Treasury Regulations. The
Regulatory Allocations shall be taken into account in allocating other Net
Profits and Net Losses so that, to the extent possible, the net amount of such
other allocations and the Regulatory Allocations to each Member shall be equal
to the net amount that would have been allocated to such Member if the
Regulatory Allocations had not been made.
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Section 5.6. BANKING; INVESTMENTS. All funds of the Company shall be
deposited in such bank account or accounts, or invested, and withdrawals from
any such bank account shall be made upon such signature or signatures, as shall
be established and designated by the Board.
Section 5.7. DISTRIBUTIONS.
(a) Except as otherwise required by law or provided in this
Agreement, no Member shall have any right to withdraw any portion of its Capital
Account without the consent of all the other Members.
(b) The Company shall, within ninety (90) days after the end of
each Fiscal Year (the "Distribution Period") apply Distributable Cash as of the
date of the proposed distribution, in the following order of priority:
(i) First, the Company shall distribute to each
Member an amount equal to fifty percent (50%) of the taxable income of the
Company (for Federal income tax purposes) multiplied by the Percentage Interest
of such Member, but not in excess of Distributable Cash;
(ii) Second, if there is any Distributable Cash
remaining and if there is any outstanding principal under the Credit Agreement,
the Company shall pay to SKW an amount equal to such outstanding principal; and
(iii) Third, if there is any Distributable Cash
remaining, the Company shall distribute such amount to each Member in proportion
to such Members' Percentage Interests.
Section 5.8. RETURN OF CONTRIBUTION. Except as required by the LLCL, no
Member shall be personally liable for the return of any capital contribution, or
any portion thereof, or the return of any additions to the Capital Accounts of
the other Members, or any portion thereof, it being agreed that any return of
capital as may be made at any time, or from time to time, shall be made solely
from the assets of the Company, and only in accordance with the terms hereof.
Section 5.9. BUDGET; BUSINESS PLAN.
(a) Budget. The Budget for the balance of 1998 and for the Fiscal
Year ending December 31, 1999 is annexed hereto as Schedule 5.9(a) and is hereby
adopted and approved by the Members. No later than September 1st of each Fiscal
Year, the Chief Executive Officer shall furnish to the Board a Budget for the
such Fiscal Year and each calendar month thereof which shall be prepared in a
manner substantially similar to and contain the same level of detail as that set
forth in the Budget for the Fiscal Year ending December 31, 1999. Such Budget
shall be subject to the review and approval of the Board. If the Board
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approves any Budget item, the Company may make the capital and other
expenditures set forth in the Budget with respect to such item, provided it has
the necessary funds or can borrow such funds (x) under the Credit Agreement or
(y) if authorized by the Board in accordance with this Agreement, from third
party lenders.
(b) Business Plan. The initial Business Plan is annexed hereto as
Schedule 5.9(b). No later than June 1st of each Fiscal Year, the Chief Executive
Officer shall prepare and furnish to the Board, for its review and approval, a
Business Plan which shall be prepared in a manner substantially similar to and
contain the same level of detail as that set forth in the initial Business Plan.
(c) Other Reports. The Chief Executive Officer shall also furnish
to the Board such other reports and budgets as the Board may request from time
to time.
Section 5.10. LOANS FROM AFFILIATES; CONTRACTS WITH AFFILIATES. Subject
to Section 3.11(b) hereof, any Member, or any Affiliate of the Company or of any
Member, may (but shall not be required to) lend funds to the Company or enter
into an agreement with the Company to provide services or supplies to the
Company in the ordinary course of business in connection with the operation of
the business of the Company, including, without limitation, pursuant to the
Credit Agreement, the Supply Agreement and the Transition Services Agreement.
Any such Member, or Affiliate of the Company or of any Member, who loans funds
to the Company shall be treated, in respect of such loan(s), as a creditor of
the Company. Such loans shall be repaid as and when the Company has funds
available therefor, and such loans and interest thereon (at rates to be agreed
upon by the lending Member and the Company) shall constitute obligations of the
Company.
ARTICLE VI.
ACCOUNTING; TAX MATTERS
Section 6.1. BOOKS; FISCAL YEAR. The Company shall maintain complete
and accurate books of account of the Company's affairs at the Company's
principal place of business. Such books shall be kept in accordance with GAAP.
The Company's accounting period and fiscal year for tax and accounting purposes
shall be the Fiscal Year.
Section 6.2. REPORTS. The Company shall close the books of account
after the close of each Fiscal Year quarter. The Company shall prepare and
distribute to each Member a quarterly statement of such Member's distributive
share of income and expense for income tax reporting purposes, as well as a
report on sales, income, expenses and other reports as are normally prepared for
SKW and in sufficient detail to permit NeXstar to
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report its share of income, expense and such other GAAP items as NXSUB may
request, in order for NeXstar to promptly file any reports required by
applicable law including the filing of Forms 10-K and 10-Q under the Securities
Exchange Act of 1934, as amended. Such information shall be made available to
each Member no later than 10 days after the end of each fiscal quarter in
respect of such fiscal quarter and no later than February 10 of each fiscal year
in respect of the prior fiscal year. After the end of each fiscal year, the
Company shall send to each Member a report indicating such information with
respect to the Member as is necessary for purposes of reporting such amounts for
federal, state and local income tax purposes. Such information shall be
furnished not later than 45 days after the close of the Fiscal Year.
Section 6.3. COMPANY INFORMATION. Upon reasonable request, the Company
shall supply to any Member information regarding the Company or its activities.
For any purpose reasonably related to its Membership Interest, each Member and
his representatives shall have free access during normal business hours to
discuss the operations and business of the Company with employees or agents, of
the Company, and to inspect, audit or make copies of all books, records and
other information relative to the operations and business of the Company at
their own expense; provided, however, that each Member shall preserve the
confidentiality of such information.
Section 6.4. RECORDS. The Company shall keep or cause to be kept
appropriate books and records in accordance with the LLCL with respect to the
Company's business, which books and records shall at all times be kept at the
principal office of the Company. Without limiting the foregoing, the Company
shall keep at its principal office the following:
(a) a current list of the full name and the last known
street address of each Manager and Member;
(b) a copy of the Certificate of Formation and this
Agreement and all amendments thereto;
(c) copies of the Company's federal, state and local
income tax returns and reports, if any, for the three
most recent Fiscal Years;
(d) copies of any financial statements, if any, of the
Company for the three most recent Fiscal Years; and
(e) such other documents with respect to the Company's
business as may reasonably be required from time to
time by Board resolution or by any Member.
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Section 6.5. TAX CHARACTERIZATION. It is intended that the Company be
characterized and treated as a partnership for, and solely for, U.S. federal,
state and local income tax purposes. For such purpose, (i) the Company shall be
subject to all the provisions of Subchapter K of Chapter 1 of Subtitle A of the
Code, and (ii) all references to a "Partner," to "Partners" and to the
"Partnership" in the provisions of the Code and Treasury Regulations cited in
this Agreement shall be deemed to refer to a Member, Members and the Company,
respectively.
Section 6.6. TAX RETURNS. The Members shall provide each other with
copies of all correspondence or summaries of other communication with the U.S.
Internal Revenue Service or U.S. Department of the Treasury regarding any aspect
of items of Company income, gain, loss or deduction and no Member shall enter
into settlement negotiations with the Internal Revenue Service or Department of
the Treasury with respect to the federal income tax treatment of any Company
item of income, gain, loss or deduction without first giving reasonable advance
notice of such intended action to the other Members.
Section 6.7. TAX MATTERS PARTNER. Pursuant to Code Section
6231(a)(7)(A), SKW is hereby designated as the "Tax Matters Partner" of the
Company for all purposes of the Code and any corresponding state or local
statute. Each Member consents to such designation and agrees to take such
further action as may be required, by regulation or otherwise, or as may be
requested by either Member, to effectuate such designation. The Tax Matters
Partner shall cooperate with the other Member and shall promptly provide the
other Member with copies of notices or other materials from, and inform the
other Member of discussions engaged in with, the Internal Revenue Service and
shall provide the other Member with notice of all scheduled administrative
proceedings, including meetings with Internal Revenue Service agents, technical
advice conferences and appellate hearings, as soon as possible after receiving
notice of the scheduling of such proceedings. The Tax Matters Partner will
schedule such proceedings only after consulting the other Member with a view to
accommodating the reasonable convenience of both the Tax Matters Partner and the
other Member. The Tax Matters Partner shall not agree to extend the period of
limitations for assessments; file a petition or complaint in any court; file a
request for an administrative adjustment of partnership items after any return
has been filed; or enter into any settlement agreement with the Internal Revenue
Service or Department of the Treasury with respect to Company items of income,
gain, loss or deduction except at the direction of the Board. The Tax Matters
Partner may request extensions to file any tax return or statement without the
written consent of, but shall so inform, the Board. The provisions of this
Agreement regarding the Company's tax returns shall survive the termination of
the Company and the transfer of either Member's interest in the Company and
shall remain in effect for the period of time necessary to resolve any
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and all matters regarding the federal income taxation of the Company and items
of Company income, gain, loss and deduction.
Section 6.8. TAX ELECTIONS. The Board shall determine in accordance
with Section 3.11(b) whether to make any available tax election.
ARTICLE VII.
TRANSFERS
Section 7.1. PROHIBITED TRANSFERS. Except as expressly permitted in
this Agreement, no Member shall, directly or indirectly, Transfer any of the
right, title or interest in its Membership Interest. Any Transfer in violation
of this Agreement shall be void and of no force and effect.
Section 7.2. TRANSFERS TO AFFILIATES. Notwithstanding anything in this
Agreement to the contrary, each Member may Transfer all (but not less than all)
of the Membership Interests owned by it and its rights under this Agreement
under any of the following circumstances:
(a) Each of SKW and NXSUB may Transfer all (but not less than
all) of the Membership Interests owned by it together with its rights under this
Agreement to any transferee which is an Affiliate of the transferring Member;
(b) Each of SKW and NXSUB (or any permitted transferee under
clause (a) above) may Transfer all (but not less than all) of the Membership
Interests owned by it together with its rights under this Agreement if such
Transfer is part of the Transfer of all (or substantially all) of the business
of NeXstar or the ultimate parent of SKW or NXSUB or in the event of the merger
or consolidation of any such Person with or into another Person. For purposes of
this Section 7.2, a Transfer of SKW or NXSUB to an Affiliate or a merger or
consolidation of such Member with one of its Affiliates shall not be deemed an
indirect Transfer of a Membership Interest hereunder, but a Transfer of either
such Member to one or more Persons who are not then Affiliates of such Member or
a Merger or consolidation of such Member with a Person that is not then its
Affiliate shall be deemed a Transfer of the underlying Membership Interest of
such Member.
(c) In the event of any such Transfer, a transferee (or
subsequent transferee) shall be entitled to the rights and privileges set forth
in this Agreement and shall be bound and obligated by the provisions of this
Agreement. As a condition to such Transfer permitted pursuant to this Section
7.2, each transferee shall, prior to such transfer, agree in writing to be bound
by all of the provisions of this Agreement and no such transferee shall be
permitted to make any Transfer which the original transferor was not permitted
to make. In connection with any Transfer pursuant to this Section 7.2, the
transferee
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shall execute and deliver to the non-transferring Member and the Company such
documents as may reasonably be requested by the non-transferring Member or the
Company to evidence the same.
Section 7.3. TRANSFER OF NXSUB MEMBERSHIP INTEREST.
(a) Except with respect to Transfers permitted pursuant to
Section 7.2 or Article VIII hereof, if on or after the fifth anniversary after
the date hereof, NXSUB wishes to sell its Membership Interest, it shall give SKW
notice (the "Transfer Notice"). Upon receipt of the Transfer Notice, SKW shall
have the option to purchase all (but not less than all) of NXSUB's Membership
Interest for a cash purchase price (the "Call Purchase Price") equal to the fair
market value thereof as determined in accordance with the procedures set forth
in Section 7.3(b) below (the "Market Value").
(b) Within 15 days following SKW's receipt of the Transfer
Notice, each Member shall promptly appoint as an appraiser a nationally
recognized investment banking firm. Each appraiser shall, within thirty (30)
days of appointment, separately investigate the value of the NXSUB Membership
Interest as of the proposed sale date and shall submit a notice of an appraisal
of that value to each party. If the appraised values of such Membership Interest
(the "Earlier Appraisals") vary by less than ten percent (10%), the average of
the two appraisals on a per Membership Interest basis shall be controlling as
the Market Value. If the appraised values vary by more than ten percent (10%),
the appraisers, within ten (10) days of the submission of the last appraisal,
shall appoint a third appraiser which shall be a nationally recognized
investment banking firm. The third appraiser shall, within thirty (30) days of
its appointment, appraise the value of the NXSUB Membership Interest as of the
proposed sale date and submit notice of its appraisal to each party. The value
determined by the third appraiser shall be controlling as the Market Value
unless the value is greater than the two Earlier Appraisals, in which case the
higher of the two Earlier Appraisals will control, and unless that value is
lower than the two Earlier Appraisals, in which case the lower of the two
Earlier Appraisals will control. If any party fails to appoint an appraiser or
if one of the two initial appraisers fails after appointment to submit its
appraisal within the required period, the appraisal submitted by the remaining
appraiser shall be controlling. Market Value shall be determined on the basis of
an assumed sale of the Company as a whole and shall not give effect to any
discount for lack of liquidity, minority stake or the fact that the Company has
no class of securities registered under the Securities Exchange Act of 1934.
Each party shall bear the cost of its respective appointed appraiser. The cost
of the third appraisal shall be shared equally among the parties.
(c) Upon receipt of the final determination of Market Value (the
"Determination Date"), SKW shall have thirty (30) days
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to exercise its option to purchase NXSUB's Membership Interest. If SKW does not
elect to purchase NXSUB's Membership Interest or SKW makes no election at all or
if the closing of the purchase and sale does not occur within 45 days of the
Determination Date (other than as a result of actions taken or failed to be
taken by NXSUB), NXSUB shall have the right, for one year thereafter, to sell
its Membership Interest in accordance with the provisions of Section 7.4 hereof.
(d) If SKW exercises its option to purchase the NXSUB Membership
Interest pursuant to Section 7.3(a), it shall do so by written notice to NXSUB
which notice shall constitute a binding irrevocable agreement to purchase all of
the NXSUB Membership Interest and the closing of the purchase shall take place
at the office of the Company or such other location and time as shall be
mutually agreeable on or within 45 days of the Determination Date. At the
closing, SKW shall pay NXSUB the Call Purchase Price in cash by wire transfer in
immediately available funds and NXSUB shall deliver to the purchaser the
certificates evidencing the Membership Interest to be conveyed, duly endorsed
and in negotiable form as well as the following:
(i) A duly executed "Deed of Transfer of Interests"
in the Company conveying to the purchaser the Membership Interests being
purchased by the transferee, free and clear of all Encumbrances; and
(ii) A statement from NXSUB that, except as set forth
therein, NXSUB has no claim against the Company for unpaid dividends,
compensation, bonuses, profit-sharing or rights or other claims of whatsoever
kind, nature or description and that all amounts due and payable by the Company
to the Offeror have been paid.
Section 7.4. RIGHTS OF FIRST REFUSAL.
(a) Except with respect to Transfers permitted pursuant to
Sections 7.2, 7.3 or Article VIII hereof, if on or after the fifth anniversary
after the date hereof, a Member desires to transfer all (but not less than all)
of its Membership Interests to any other Person in a bona fide transaction
solely for cash consideration, such Member (the "Offeror") shall be entitled to
do so provided that (x) such Offeror first offers to sell such Membership
Interests to the other Member at the same price and, subject to Section 7.4(c)
below, upon the same terms and conditions as the Offeror would receive from such
other Person and (y) in the case of a Transfer by NXSUB, NXSUB first complies
with the provisions of Section 7.3. The Offeror shall submit to the Company and
the other Member a written notice (the "Offer Notice") stating in reasonable
detail such price and such
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terms and conditions and identifying the Person proposing to purchase the
Membership Interests. The other Member shall have a period of thirty (30) days
after the receipt of the Offer Notice in which to accept or reject such offer.
If the other Member elects to accept such offer, which acceptance must be for
all and not part of the Membership Interests offered for sale, it shall so
indicate within such thirty (30) day period by notice to the Offeror. The notice
required to be given by the other Member (the "Purchaser") shall specify a date
for the closing of the purchase which, subject to the expiration or early
termination of any waiting period required by any Governmental Body and the
receipt of any required approvals of any Governmental Body, shall not be more
than thirty (30) days after the date of the giving of such notice.
(b) If the other Member does not exercise its right to purchase
all the Membership Interests offered for sale pursuant to the provisions of this
Section 7.4, the Offeror of such Membership Interests shall have the right to
sell, subject to the provisions of Section 7.5 hereof, all of such Membership
Interests on the same terms and conditions including the per Membership Interest
price as specified in the Offer Notice, free from the restrictions of Section
7.1 of this Agreement in a bona fide transaction, for a period of ninety (90)
days from the date that the Offer expires hereunder, provided that any such
purchaser shall prior to such transfer, agree in writing to be bound by all of
the provisions of this Agreement. At the end of such ninety (90) day period, the
Offeror shall notify the Company and the other Member in writing whether its
Membership Interests have been sold in a bona fide transaction during such
period. To the extent not sold during such ninety (90) day period, all of such
Membership Interests shall again become subject to all of the restrictions and
provisions hereof.
(c) The purchase price per share for the Membership Interests
shall be the price per share offered to be paid by the prospective transferee
described in the Offer Notice, which price shall be paid in cash; provided,
however, that to the extent that NXSUB or any permitted transferee thereof under
Section 7.2 is the Purchaser, NXSUB or such permitted transferee shall have the
right to pay the purchase price for the Membership Interests in the form of a
Note payable in 2 equal annual installments of principal, bearing interest at
the Prime Rate irrespective of the terms of the offer triggering the right of
first refusal set forth in this Section 7.4 and secured by the Membership
Interest being purchased therewith.
(d) The closing of the purchase shall take place at the office of
the Company or such other location as shall be mutually agreeable and the
purchase price shall be paid at the closing by wire transfer of immediately
available funds. At the closing, the Offeror shall deliver to the Purchaser the
certificates evidencing the Membership Interests to be conveyed, duly endorsed
and in negotiable form as well as the following:
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(i) A duly executed "Deed of Transfer of Interests"
in the Company conveying to the Purchaser the Membership Interests being
purchased by the transferee, free and clear of all Encumbrances; and
(ii) A statement from the Offeror that, except as set
forth therein, the Offeror has no claim against the Company for unpaid
dividends, compensation, bonuses, profit-sharing or rights or other claims of
whatsoever kind, nature or description and that all amounts due and payable by
the Company to the Offeror have been paid.
(e) The provisions of this Section 7.3 shall not apply to sales
by a Tag-Along Investor (as defined below) pursuant to Section 7.4 hereof.
Section 7.5. NXSUB TAG-ALONG RIGHTS. In the event that SKW intends to
Transfer any of its Membership Interests (other than pursuant to Section 7.2 or
to the Company) and such Transfer would be permitted under Section 7.4(b), SKW
shall notify NXSUB, in writing, of such proposed Transfer and its terms and
conditions. Within thirty(30) days of the date of such notice, the NXSUB shall
notify the SKW if it elects to participate in such Transfer. If NXSUB fails to
notify SKW within such thirty(30) day period it shall be deemed to have waived
its rights hereunder. If the NXSUB so notifies SKW, it shall have the right to
sell, at the same price and on the same terms and conditions as SKW, all of its
Membership Interests to the third party and the sale of interests of SKW will be
proportionally reduced to accommodate the sale by NXSUB. SKW shall not sell any
of its Membership Interests to such third party unless such third party agrees
to purchase all of NXSUB's Membership Interests.
ARTICLE VIII.
SKW PURCHASE OPTIONS
Section 8.1. SKW PURCHASE OPTIONS. (a) If (i) at any time after the
fifth anniversary of the date hereof, the Board is unable to resolve any
material matter subject to approval under Section 3.11(b), the matter shall be
referred to the Chief Executive Officers of NeXstar and SKW for resolution, and
if the two Chief Executive Officers are unable to resolve such matter and as a
result the Company is unable to function effectively for a period of 60 days or
for such lesser period as the Members may agree, (ii) there is a NXSUB Change of
Control or (iii) NeXstar materially breaches the Supply Agreement, which breach
is not cured within fifteen (15) days after notice thereof is given to NeXstar
by the Company, SKW may deliver to NXSUB within thirty (30) days after the
occurrence of any of the events specified in clauses (i) through (iii) above, an
offer in writing stating that it will purchase all, but not less than all, of
the Membership Interest owned by NXSUB for cash at a purchase price equal to the
Market Value of NXSUB's Membership Interest determined in
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<PAGE> 31
accordance with Section 7.3(b) above (such offer hereinafter referred to as a
"Purchase Offer"); provided, however, that to the extent SKW makes a Purchase
Offer pursuant to clause (a)(ii) of this Section 8.1 hereto prior to August 15,
2000 (a "Change of Control Purchase Offer"), the purchase price in respect
thereof shall be as set forth on Schedule 8.1 hereto rather than the Market
Value of NXSUB's Membership Interest. The Purchase Offer shall be irrevocable
and constitute a binding agreement to purchase all of NXSUB's Membership
Interest.
(b) No later than the later of (x) 30 business days after the
delivery of the Purchase Offer or (y) three business days after the expiration
of the applicable waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act and the receipt of other required regulatory approvals, if any,
on a date mutually acceptable to the Members (the "Offer Effective Date"), NXSUB
shall sell (or cause to be sold) the Membership Interest owned by it to SKW in
accordance with the terms hereof at the applicable purchase price. On the Offer
Effective Date, SKW shall pay to NXSUB such purchase price by wire transfer in
immediately available funds to an account designated by NXSUB in exchange for
delivery of an executed assignment of the Membership Interest to SKW; provided,
however, that in the case of a Change of Control Purchase Offer, the purchase
price shall be payable on the dates and in the amounts specified in Schedule 8.1
hereto.
(c) From and after the Offer Effective Date in respect of a
Change of Control Purchase Offer (the "COC Closing"):
(i) SKW shall deliver an audited financial statement
to NXSUB within sixty (60) days after the end of each calendar year (up to and
including the calendar year ending December 31, 2003), prepared in accordance
with GAAP applied on a consistent basis, together with a certificate of its
Chief Financial Officer setting forth the calculation of EBITDA (as defined in
the Purchase Agreement) as derived from such financial statement and calculated
in accordance with the Purchase Agreement and the initial Business Plan for the
Company attached as Schedule 5.9(b) to this Agreement.
(ii) NXSUB shall have the right, annually, to have
independent certified public accountants of its choosing audit the books and
records of the Company to determine the extent to which the financial
statements, the calculations of EBITDA and the payments required by Schedule 8.1
are consistent with the provisions of this Agreement. SKW shall cause the
Company to cooperate fully with NXSUB and its auditors in connection with any
such audit and shall grant NXSUB full access to the books and records of the
Company including the workpapers of the Company's auditors used in preparing the
financial statements delivered pursuant to clause (c)(i) above. Unless NXSUB
shall notify SKW within sixty (60) days of the receipt of financial statements
referred to in clause (c)(i) above that it disagrees with the calculation of
EBITDA, NXSUB shall be deemed
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<PAGE> 32
to have accepted and agreed to the calculation of EBITDA. If NXSUB so notifies
SKW of any objections to the calculation of EBITDA, the parties shall, within 20
days (or such longer period as the parties may mutually agree) following such
notice (the "Resolution Period"), attempt to resolve their differences arising
from such objections and any resolution by them as to any disputed amounts or
methods, principles, practices or policies employed in the preparation thereof
shall be final, binding and conclusive. Any amounts or methods, principles,
practices or policies employed in the calculation of EBITDA remaining in dispute
at the conclusion of the Resolution Period ("Unresolved Changes") shall be
submitted to such firm of United States independent certified public accountants
as NXSUB and SKW may agree, such firm to be a firm of nationally recognized
public accountants. If they cannot so agree within five (5) days after the end
of the Resolution Period, they shall each select one such firm within ten (10)
days after the end of the Resolution Period and the two (2) firms so chosen
shall select a third firm of United States independent certified public
accountants, such firm to be a firm of nationally recognized public accountants
to which such dispute shall be submitted (the firm ultimately selected pursuant
to this Section being the "Neutral Auditors"). All Unresolved Changes shall be
submitted to the Neutral Auditors no later than ten (10) days after the same is
designated. Each Party agrees to execute, if requested by the Neutral Auditors,
a reasonable engagement letter. All fees and expenses relating to the work, if
any, to be performed by the Neutral Auditors shall be borne pro rata by SKW and
NXSUB in proportion to the allocation of the dollar amount of the Unresolved
Changes between SKW and NXSUB made by the Neutral Auditors such that the
prevailing party pays a lesser proportion of the fees and expenses. The Neutral
Auditors shall act as an arbitrator to determine only the Unresolved Changes.
The Neutral Auditors' determination of the Unresolved Changes shall be made
within forty-five (45) days of the submission of the Unresolved Changes thereto,
shall be set forth in a written statement delivered to SKW and NXSUB and shall
be final, binding and conclusive. The purchase price payments required to be
made by SKW pursuant to Schedule 8.1 shall be adjusted to reflect any
adjustments required to be made to EBITDA pursuant to this Section and shall be
paid by wire transfer of immediately available funds to the account specified by
the party to which such payment is owed and such payment shall be made within
five (5) business days after the date such adjustment is determined pursuant to
this Section.
(d) From and after a COC Closing and prior to the completion of
the Fiscal Year ended December 31, 2003, the Company shall not take any of the
following actions without the prior written consent of NXSUB unless prior to
taking any such action SKW shall have paid (x) to NXSUB all of the then
remaining payments contemplated by Schedule 8.1 hereto and (y) to NeXstar all of
the then remaining payments of purchase price under the Purchase Agreement as
set forth in Section 2.2 and Schedule 2.2 thereto, which, in each case, shall
become immediately due and
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<PAGE> 33
payable upon the taking of any such action without regard to whether or not the
EBITDA targets set forth in Schedule 8.1 hereto or in the Purchase Agreement
shall have been reached:
(i) The termination by the Company of the Supply
Agreement in violation of the terms thereof;
(ii) Entering into any line of business other than
the Business;
(iii) The acquisition by the Company of any interest
in another entity (other than short-term money market investments);
(iv) The extension of any guarantee by the Company of
the obligations of any Person or otherwise becoming contingently liable for the
obligations of any Person;
(v) The merger, consolidation or business combination
of the Company with any other Person, or the sale of a material amount of the
assets or business of the Company and its subsidiaries to any Person, or any
transaction having the same effect;
(vi) The occurrence of a sale, transfer or
disposition of SKW or the Membership Interests held thereby to any Person other
than an Affiliate;
(vii) Other than the transactions contemplated by the
Purchase Agreement, the Company's entering into any transaction or series of
transactions with any Affiliate of SKW other than on arms' length terms; or
(viii) A change in the fiscal year of the Company.
To the extent that following the COC Closing, (1) the Company is
liquidated or dissolved or files a petition under Chapter 11 of the Bankruptcy
Code or comparable state or foreign bankruptcy or insolvency laws or takes
similar action resulting in an event of bankruptcy with respect to the Company
and (2) SKW or an Affiliate thereof succeeds to the business of the Company
within two years after any such event, SKW shall in good faith make provision
for the payment of any then unpaid payments contemplated by Schedule 8.1 hereto
or Section 2.2 of the Purchase Agreement, including cooperating in good faith
with NXSUB and NeXstar to determine an appropriate basis upon which any such
payments should be made, it being the intention of the parties to approximate as
closely as possible the amounts, conditions and timing of the payments set forth
in Schedule 8.1 hereto and Section 2.2 of the Purchase Agreement. SKW shall not
take any action designed to avoid the payment of the amounts set forth on
Schedule 8.1 hereto or in Section 2.2 of the Purchase Agreement.
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<PAGE> 34
Section 8.2. CLOSING DELIVERIES. The transferor of the Membership
Interests at a closing under this Article VIII shall deliver to the transferee
of such interests in the Company the following:
(i) A duly executed "Deed of Transfer of Membership
Interests" in the Company conveying to the transferee the Membership Interests
being purchased by the transferee, free and clear of any Encumbrances.
(ii) A statement from the transferor that, except as
set forth therein, the transferor has no claim as against the Company for unpaid
dividends, compensation, bonuses, profit-sharing or rights or other claims of
whatsoever kind, nature or description and that all amounts due and payable by
the Company to the transferor have been paid.
ARTICLE IX.
LIMITED LIABILITY; INDEMNIFICATION
Section 9.1. LIMITED LIABILITY. Except as otherwise provided under the
LLCL, the debts, obligations and liabilities of the Company, whether arising in
contract, tort or otherwise, shall be solely the debts, obligations and
liabilities of the Company and neither any Member nor Manager shall be obligated
or liable for any such debt, obligation or liability of the Company. Except as
otherwise provided by the laws of the State of Delaware, the debts, obligations
and liabilities of any Member, whether arising in contract, tort or otherwise,
shall be solely the debts, obligations and liability of such Member and neither
any Member, Manager nor the Company shall be obligated or liable for any such
debt, obligation or liability of such Member.
Section 9.2. INDEMNIFICATION.
(a) The Company shall indemnify any Member, Manager or other
person, who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Company) by reason of the fact that he, she or it is or was a
Member, Manager, employee or agent of the Company, or is or was serving at the
request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees and expenses), judgments, fines and amounts
paid in settlement actually and reasonably incurred by such person in connection
with such action, suit or proceeding if such person acted in good faith and in a
manner such person reasonably believed to be in, or not opposed to, the best
interests of the Company, and, with respect to any criminal sanction or
proceeding, had no reasonable cause to believe that his, her or its conduct was
unlawful. The termination of any action, suit or
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<PAGE> 35
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which he, she or it
reasonably believed to be in, or not opposed to, the best interests of the
Company, and, with respect to any criminal action or proceeding, had reasonable
cause to believe that his, her or its conduct was unlawful.
(b) Expenses incurred in defending a civil or criminal action,
suit or proceeding shall be paid by the Company in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of the Member, Manager, employee or agent to repay such amount if
it shall be ultimately determined by a court of competent jurisdiction from
which no further appeal may be taken or the time for appeal has lapsed that such
person is not entitled to be indemnified by the Company pursuant to the terms
and conditions of this Section 9.2.
(c) The Company may maintain insurance on behalf of any person
who is or was a Member, Manager, employee or agent, or is or was serving at the
request of the Company as a Manager, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against and incurred by such person in any such capacity, or arising
out of such person's status as such, whether or not the Company would have the
power to indemnify such person against such liability under this Section 9.2.
(d) The indemnification and advancement of expenses provided by,
or granted pursuant to this Section 9.2 shall continue as to a person who has
ceased to be a Member, Manager, employee or agent and shall inure to the benefit
of the heirs, executors, administrators and other legal successors of such
person.
(e) The indemnification provided by this Section 9.2 shall not be
deemed exclusive of any other rights to indemnification to which those seeking
indemnification may be entitled under any agreement, determination of Members or
otherwise.
(f) Any indemnification hereunder shall be satisfied only out of
the assets of the Company (including insurance and any agreements pursuant to
which the Company and indemnified persons are entitled to indemnification), and
the Members shall not, in such capacity, be subject to personal liability by
reason of these indemnification provisions.
(g) No Person shall be denied indemnification in whole or in part
under this Section 9.2 because the such Person had an interest in the
transaction with respect to which the indemnification applies if the transaction
was otherwise permitted by the terms of this Agreement.
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ARTICLE X.
DISSOLUTION; LIQUIDATION
Section 10.1. DISSOLUTION. The Company shall be dissolved and its
affairs wound up, upon the first to occur of any of the following events (each
of which shall constitute a "Dissolution Event"):
(a) The expiration of the term set forth in Section 2.5 hereof
unless the Company is continued with the consent of all Members;
(b) The written consent of all Members;
(c) The entry of a decree of judicial dissolution with respect to
the Company;
(d) Any event which makes it unlawful for the business of the
Company to be carried on by the Members;
(e) Any other event not inconsistent with any provision hereof
causing a dissolution of a limited liability company under the LLCL; or
(f) The Bankruptcy of any Member; provided, however, that upon
any such event, the Company shall be deemed dissolved, but such dissolution
shall not cause the termination of the Company, it being understood and agreed
that, upon any such dissolution, the remaining Member may elect to continue to
carry on the Company business pursuant to, and subject to, all of the terms and
provisions of this Agreement.
Section 10.2. WITHDRAWAL OF MEMBERS. No Member shall have the right to
voluntarily withdraw as a Member of the Company other than following the sale of
such Member's entire Membership Interest under Article VII or VIII. Prior to the
fifth anniversary of the date hereof, no Member shall seek a decree of judicial
dissolution with respect to the Company.
Section 10.3. DISTRIBUTION UPON DISSOLUTION. Upon dissolution, the
Company shall not be terminated and shall continue until the winding up of the
affairs of the Company is completed and a certificate of cancellation has been
issued by the Secretary of State of Delaware. Upon the winding up of the
Company, the Board, or any other person designated by the Board (the
"Liquidation Agent"), shall take full account of the assets and liabilities of
the Company and shall, unless the Members agree otherwise, liquidate the assets
of the Company as promptly as is consistent with obtaining the fair value
thereof. The proceeds of any liquidation shall be applied and distributed in the
following order:
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(a) First, to the payment of debts and liabilities of the Company
(including, but not limited to, payment of all indebtedness to Members and/or
their Affiliates) and the expenses of liquidation;
(b) Second, to the establishment of any reserve which the
Liquidation Agent shall deem reasonably necessary for any contingent or
unforeseen liabilities or obligations of the Company ("Contingencies"). Such
reserve may be paid over by the Liquidation Agent to any attorney-at-law, or
acceptable party, as escrow agent, to be held for disbursement in payment of any
Contingencies and, at the expiration of such period as shall be deemed advisable
by the Liquidation Agent for distribution of the balance in the manner
hereinafter provided in this Section 10.3; and
(c) Third, to the Members in accordance with their positive
Capital Account balances after allocating and crediting to the Capital Accounts
any unrealized gain or loss to the Members with respect to any in-kind
distributions as if such gain or loss had been recognized and allocated pursuant
to Section 5.5 hereof.
Section 10.4. TIME FOR LIQUIDATION. A reasonable amount of time shall
be allowed for the orderly liquidation of the assets of the Company and the
discharge of liabilities to creditors so as to enable the Liquidation Agent to
minimize the losses attendant upon such liquidation.
Section 10.5. WINDING UP AND FILING ARTICLES OF CANCELLATION. Upon the
commencement of the winding up of the Company, articles of cancellation shall be
delivered by the Company to the Secretary of State of Delaware for filing. The
articles of cancellation shall set forth the information required by the LLCL.
The winding up of the Company shall be completed when all debts, liabilities,
and obligations of the Company have been paid and discharged or reasonably
adequate provision therefor has been made and all the remaining assets of the
Company has been distributed to the Members.
ARTICLE XI.
MEMBERSHIP INTERESTS; CERTIFICATES
Section 11.1. CERTIFICATES. A Membership Interest of the Company shall
be represented by a certificate or certificates, setting forth upon the face
thereof that the Company is a limited liability company formed under the laws of
the State of Delaware, the name of the Member to which it is issued and the
initial Percentage Interest which such certificate represents. Such certificates
shall be entered in the books of the Company as they are issued, and shall be
signed by the Chief Executive Officer and may be sealed with the Company's seal
or a facsimile thereof. Upon any Transfer permitted under this Agreement, NXSUB
and SKW
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<PAGE> 38
shall surrender to the Company and the Company shall issue to NXSUB and SKW
certificates representing the Membership Interests taking into account such
Transfer. All certificates representing Membership Interests (unless registered
under the Securities Act of 1933, as amended (the "Securities Act")), shall bear
the following legend:
THE MEMBERSHIP INTERESTS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE,
AND MAY NOT BE SOLD, ASSIGNED, PLEDGED, ENCUMBERED, TRANSFERRED,
GRANTED AN OPTION WITH RESPECT TO OR OTHERWISE DISPOSED OF, (I) UNLESS
AND UNTIL THEY HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OR SUCH
SALE, ASSIGNMENT, PLEDGE, ENCUMBRANCE, TRANSFER, OPTION GRANT OR OTHER
DISPOSITION IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT AND
(II) EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF THE OPERATING
AGREEMENT OF THE COMPANY, A COPY OF WHICH IS AVAILABLE FOR INSPECTION
AT THE OFFICES OF THE COMPANY.
Section 11.2. LOST OR DESTROYED CERTIFICATES. The Company may issue a
new certificate for Membership Interests in place of any certificate or
certificates therefore issued by it, alleged to have been lost or destroyed,
upon the making of an affidavit of that fact by the person claiming the
certificate to be lost or destroyed.
Section 11.3. TRANSFER OF MEMBERSHIP INTERESTS. Except for Transfers
duly made in accordance with Article VII or VIII, no Transfer of Membership
Interests shall be valid as against the Company except upon surrender to and
cancellation of the certificate therefor, accompanied by an assignment or
transfer by the Member, subject to any restrictions on Transfer contained in
this Agreement.
Section 11.4. REGULATIONS. The Board may make such additional rules and
regulations, not inconsistent with this Agreement, as it may deem expedient with
respect to the issue, transfer and recordation of certificates for the
Membership Interests.
Section 11.5. REGISTERED MEMBERS. The Company shall be entitled to
recognize the exclusive right of a person registered on its records as the owner
of the Membership Interests to receive distributions and to vote as owner of
Membership Interests and shall not be bound to recognize any equitable or other
claim to or interest in such Membership Interest(s) on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise provided by the LLCL.
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ARTICLE XII.
MISCELLANEOUS
Section 12.1. SEVERABILITY. The terms, conditions, and provisions of
this Agreement are fully severable, and the decision or judgment of any court of
competent jurisdiction rendering void or unenforceable any one or more of such
terms, conditions or provisions shall not render void or unenforceable any of
the other terms, conditions or provisions hereof and such void or unenforceable
term shall be replaced with a valid and enforceable term which would to the
greatest degree possible reflect the original economic intentions of the parties
hereunder.
Section 12.2. NOTICES. All notices and other communications hereunder
shall be in writing and shall be given and delivered by messenger, transmitted
by telecopy or telegram (in either case followed by first class mail sent the
same day), or mailed by certified mail, postage prepaid, return receipt
requested, to the parties at the following addresses (or such other address as
shall be specified by such party by like notice), and shall be deemed given on
the date on which so delivered by messenger, on the next business day following
the date on which so transmitted by telecopy or telegram or on the third
business day following the date on which mailed by certified mail:
If to the Company, to:
Proligo L.L.C.
2830 Wilderness Place
Boulder, CO 80301
Attn.: Chief Executive Officer
Fax: (303) 448-1420
If to NXSUB or NXSUB representatives on the Board, to:
NeXstar Pharmaceuticals, Inc.
2860 Wilderness Place
Boulder, CO 80301
Attn.: General Counsel
Fax: (303) 546-7831
with a copy to:
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019
Attn.: Peter H. Jakes, Esq.
Fax: (212) 728-8111
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If to SKW, to:
SKW Americas, Inc.
23700 Chagrin Boulevard
Cleveland, OH 44122-5554
Attn: President
Fax: (216) 831-4802
with a copy to:
Walter, Conston, Alexander & Green, P.C.
90 Park Avenue
New York, New York 10016
Attn.: Aydin S. Caginalp, Esq.
Fax: (212) 210-9444
Section 12.3. CAPTIONS. The captions at the heading of each article or
section of this Agreement are for convenience of reference only, and are not to
be deemed a part of the Agreement itself.
Section 12.4. ENTIRE AGREEMENT. This Agreement, including the exhibits
hereto and the other agreements and documents referenced herein or contemplated
hereby, constitutes the entire agreement and understanding of the parties hereto
with respect to the matters herein set forth, and all prior negotiations and
understandings relating to the subject matter of this Agreement are merged
herein and are superseded and canceled by this Agreement.
Section 12.5. COUNTERPARTS. This Agreement may be executed and
delivered in one or more counterparts, each of which shall be deemed an
original, and all of which shall be deemed to constitute one and the same
agreement.
Section 12.6. AMENDMENTS; WAIVER. Amendments to this Agreement may be
made from time to time, provided, however, that no amendment, modification or
waiver of this Agreement or any provision hereof shall be valid or effective
unless in writing and signed by each and every Member. No consent to, or waiver,
discharge or release (each, a "Waiver") of, any provision of or breach under
this Agreement shall be valid or effective unless in writing and signed by the
party giving such Waiver, and no specific Waiver shall constitute a Waiver with
respect to any other provision or breach, whether or not of similar nature.
Failure on the part of any party hereto to insist in any instance upon strict,
complete and timely performance by another party hereto of any provision of or
obligation under this Agreement shall not constitute a Waiver by such party of
any of its rights under this Agreement or otherwise.
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Section 12.7. FURTHER ASSURANCES. Each party shall perform all other
acts and execute and deliver all other documents as may be necessary or
appropriate to carry out the purposes and intent of this Agreement.
Section 12.8. GOVERNING LAW. This Agreement shall in all respects be
governed by and construed in accordance with the laws of the State of Delaware
without giving effect to its rules on conflicts of laws.
Section 12.9. THIRD PARTY BENEFICIARY. Nothing set forth in the
Agreement shall be construed to confer any benefit to any third party who is not
a party to this Agreement.
Section 12.10. ASSIGNMENT. This Agreement is personal to the parties
hereto and neither party may (except as set forth in Article VII) assign or
Transfer the rights accruing hereunder nor may performance of any duties by
either party hereunder be delegated or assumed by any other person or legal
entity without the prior written consent of the other parties hereto.
Section 12.11. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the respective successors and permitted assigns
of each party hereto; provided, that no party hereto may Transfer (or cause or
permit to be created or existing any lien on) or assign his Membership Interest
(or any portion thereof or any beneficial interest therein) or this Agreement or
his rights, interests or obligations hereunder except in accordance with the
terms of this Agreement.
Section 12.12. RELATIONSHIP. This Agreement does not constitute any
Member, Manager, or any employee or agent of the Company as the agent or legal
manager of any Member for any purpose whatsoever and no Member, Manager, or any
employee or agent of the Company is granted hereby any right or authority to
assume or to create any obligation or responsibility, express or implied, on
behalf of or in the name of any Member or to bind any Member in any manner or
thing whatsoever.
Section 12.13. CONSENT TO JURISDICTION. The exclusive jurisdiction and
venue for any disputes arising out of or in connection with this Agreement will
be any state or federal court located in New York County, New York, and each
party hereby consents to personal jurisdiction in such court and consents to
service of process by means of certified or registered mail, return receipt
requested.
Section 12.14. EQUITABLE REMEDIES. Each party acknowledges that no
adequate remedy of law would be available for a breach of Sections 3.11 and 4.6
and Articles VII and VIII of this Agreement, and that a breach of any of such
Sections of this Agreement by one party would irreparably injure the other and
accordingly agrees that in the event of a breach of any of
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<PAGE> 42
such Sections of this Agreement, the respective rights and obligations of the
parties hereunder shall be enforceable by specific performance, injunction or
other equitable remedy (without bond or security being required), and each party
waives the defense in any action and/or proceeding brought to enforce this
Agreement that there exists an adequate remedy or that the other party is not
irreparably injured. Nothing in this Section 12.14 is intended to exclude the
possibility of equitable remedies with respect to breaches of other sections of
this Agreement.
Section 12.15. FEES AND EXPENSES. Except as specifically set forth
herein, each party shall be responsible for any legal and other fees and
expenses incurred by such party in connection with the negotiation and
preparation of this Agreement and the transactions contemplated hereby.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the date first above written.
MEMBERS:
SKW AMERICAS, INC.
By: /s/ W.F. Sullivan
Name: W.F. Sullivan
Title: Vice President, Finance
NEXSTAR PHARMACEUTICALS
INTERNATIONAL, INC.
By: /s/ Patrick Mahaffy
Name: Patrick Mahaffy
Title:
WITHDRAWING MEMBER:
NEXSTAR PHARMACEUTICALS, INC.
By: /s/ Patrick Mahaffy
Name: Patrick Mahaffy
Title: President
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SCHEDULE I
----------
<TABLE>
<S> <C>
1. Members Percentage Interest
------- -------------------
NeXstar Pharmaceuticals International, Inc. 49%
("NXSUB")
SKW Americas, Inc. ("SKW") 51%
2. Initial Capital Contributions
-----------------------------
NXSUB SKW
----- ---
(i) $4.9 million in cash (i) $5.1 million in cash
(ii) 49% of the assets heretofore (ii) 51% of the fair market value of the
contributed to the Company by NeXstar Proligo Assets.
pursuant to the Purchase Agreement (the
"Proligo Assets").
(iii) To the extent that the acquisition of (iii) To the extent the acquisition
PerSeptive BioSystems by SKW or an PerSeptive BioSystems by SKW or an
Affiliate thereof is consummated, 49% Affiliate thereof is consummated, 51%
of the ownership interests in Proligo of the ownership interests in Proligo
Holdings L.L.C. which the parties Holdings L.L.C. which the parties
agree have a fair market value as agree have a fair market value as
determined below. determined below.
</TABLE>
As soon as practicable, but in no event later than August 31, 1998, the parties
shall in good faith mutually determine the fair market value of the Proligo
Assets and the ownership interests in Proligo Holdings L.L.C. and shall provide
a supplemental Schedule setting forth such fair market values which shall be
deemed a part of this Schedule as of the closing.
<PAGE> 1
EXHIBIT 10.2
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is entered
into as of May 1, 1998, by and between NEXSTAR PHARMACEUTICALS, INC., a Delaware
corporation ("Borrower"), and WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank").
RECITALS
WHEREAS, Borrower is currently indebted to Bank pursuant to the terms and
conditions of that certain Credit Agreement between Borrower and Bank dated as
of September 1, 1997, as amended from time to time ("Credit Agreement").
WHEREAS, Bank and Borrower have agreed to certain changes in the terms and
conditions set forth in the Credit Agreement and have agreed to amend the
Credit Agreement to reflect said changes.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree that the Credit
Agreement shall be amended as follows:
1. Section 1.2(a) is hereby amended by deleting Thirty-five Million
United States Dollars (US$35,000,000.00) as the maximum amount of all
outstanding foreign exchange contracts under the Foreign Exchange Facility, and
by substituting for said amount Fifty Million United States Dollars
(US$50,000,000.00) and by deleting Seven Million United States Dollars
(US$7,000,000.00) as the maximum Delivery Limit under the Foreign Exchange
Facility, and by substituting for said amount Ten Million United States Dollars
(US$10,000,000.00).
2. The following is hereby added to the Credit Agreement as Section 4.11:
"4.11. YEAR 2000 COMPLIANCE. Perform all acts reasonably necessary to
ensure that (a) Borrower and any business in which Borrower holds a
substantial interest, and (b) all customers, suppliers and vendors
that are material to Borrower's business, become Year 2000 Compliant
in a timely manner. Such acts shall include, without limitation,
performing a comprehensive review and assessment of all of Borrower's
systems and adopting a detailed plan, with itemized budget, for the
remediation, monitoring and testing of such systems. As used herein,
"Year 2000 Compliant" shall mean, in regard to any
<PAGE> 2
entity, that all software, hardware, firmware, equipment, goods or
systems utilized by or material to the business operations or
financial condition of such entity, will properly perform date
sensitive functions before, during and after the year 2000. Borrower
shall, immediately upon request, provide to Bank such certifications
or other evidence of Borrower's compliance with the terms hereof as
Bank may from time to time require."
3. Except as specifically provided herein, all terms and conditions of
the Credit Agreement remain in full force and effect, without waiver or
modification. All terms defined in the Credit Agreement shall have the same
meaning when used in this Amendment. This Amendment and the Credit Agreement
shall be read together, as one document.
4. Borrower hereby remakes all representations and warranties contained
in the Credit Agreement and reaffirms all covenants set forth therein. Borrower
further certifies that as of the date of this Amendment there exists no Event
of Default as defined in the Credit Agreement, nor any condition, act or event
which with the giving of notice or the passage of time or both would constitute
any such Event of Default.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the day and year first written above.
WELLS FARGO BANK,
NEXSTAR PHARMACEUTICALS, INC. NATIONAL ASSOCIATION
By: /s/ PATRICK J. MAHAFFY By: /s/ TRACEY HANSON
----------------------- ----------------------
Patrick J. Mahaffy Tracey Hanson
President and Vice President
Chief Executive Officer
By: /s/ MICHAEL E. HART
-------------------------
Michael E. Hart
Vice President and
Chief Financial Officer
<PAGE> 1
EXHIBIT 10.3
[WELLS FARGO BANK LETTERHEAD]
September 1, 1998
NeXstar Pharmaceuticals, Inc.
2860 Wilderness Place
Boulder, CO 80301
Gentlemen:
This letter is to confirm that Wells Fargo Bank, National Association
("Bank") has agreed to extend the maturity date of that certain credit
accommodation granted by Bank to NeXstar Pharmaceuticals, Inc. ("Borrower") in
the maximum principal amount of Ten Million Dollars ($10,000,000.00) pursuant
to the terms and conditions of that certain Credit Agreement between Bank and
Borrower dated as of September 1, 1997, as amended from time to time (the
"Agreement").
The maturity date of said credit accommodation is hereby extended until
November 1, 1998. Until such date, all terms and conditions of the Agreement
which pertain to said credit accommodation shall remain in full force and
effect, except as expressly modified hereby. The promissory note dated as of
September 1, 1997, executed by Borrower and payable to the order of Bank which
evidences said credit accommodation, a copy of which is attached hereto as
Exhibit A (the "Note"), shall be deemed modified as of the date this letter is
acknowledged by Borrower to reflect the new maturity date set forth above. All
other terms and conditions of the Note remain in full force and effect, without
waiver or modification.
Borrower acknowledges that Bank has not committed to make any renewal or
further extension of the maturity date of the above-described credit
accommodation beyond the new maturity date specified herein, and that any such
renewal or further extension remains in the sole discretion of Bank. This
letter constitutes the entire agreement between Bank and Borrower with respect
to the maturity date extension for the above-described credit accommodation,
and supersedes all prior negotiations, discussions and correspondence concerning
said extension.
<PAGE> 2
NeXstar Pharmaceuticals, Inc.
September 1, 1998
Page 2
Please acknowledge your acceptance of the terms and conditions contained
herein by dating and signing one copy below and returning it to my attention at
the above address on or before September 18, 1998.
Very truly yours,
WELLS FARGO BANK,
NATIONAL ASSOCIATION
By: /s/ TRACEY HANSON
----------------------------------
Tracey Hanson
Vice President
Acknowledged and accepted as of :
--------------
NEXSTAR PHARMACEUTICALS, INC.
By:
-----------------------------------
Patrick J. Mahaffy
President and Chief Executive Officer
By: /s/ Michael E. Hart
-----------------------------------
Michael E. Hart
Vice President and Chief Financial Officer
<PAGE> 3
EXHIBIT A
REVOLVING LINE OF CREDIT NOTE
$10,000,000.00 Denver, Colorado
September 1, 1997
FOR VALUE RECEIVED, the undersigned NEXSTAR PHARMACEUTICALS, INC.
("Borrower") promises to pay to the order of WELLS FARGO BANK, NATIONAL
ASSOCIATION ("Bank") at its office at Colorado RCBO, 633 17th Street, Denver,
Colorado, or at such other place as the holder hereof may designate, in lawful
money of the United States of America and in immediately available funds, the
principal sum of Ten Million Dollars ($10,000,000.00), or so much thereof as
may be advanced and be outstanding, with interest thereon, to be computed on
each advance from the date of its disbursement as set forth herein.
DEFINITIONS:
As used herein, the following terms shall have the meanings set forth
after each, and any other term defined in this Note shall have the meaning set
forth at the place defined:
(a) "Business Day" means any day except a Saturday, Sunday or any other
day on which commercial banks in Colorado are authorized or required by law to
close.
(b) "Fixed Rate Term" means a period commencing on a Business Day and
continuing for one (1), two (2), three (3) or six (6) months, as designated by
Borrower, during which all or a portion of the outstanding principal balance of
this Note bears interest determined in relation to LIBOR; provided however,
that no Fixed Rate Term may be selected for a principal amount less than Two
Hundred Fifty Thousand Dollars ($250,000.00); and provided further, that no
Fixed Rate Term shall extend beyond the scheduled maturity date hereof. If any
Fixed Rate Term would end on a day which is not a Business Day, then such Fixed
Rate Term shall be extended to the next succeeding Business Day.
(c) "LIBOR" means the rate per annum (rounded upward, if necessary, to
the nearest whole 1/8 of 1%) and determined pursuant to the following formula:
Base LIBOR
LIBOR = ----------------------
100% - LIBOR Reserve Percentage
(i) "Base LIBOR" means the rate per annum for United States dollar
deposits quoted by Bank as the London Inter-Bank Market Offered Rate, with the
understanding that such rate is quoted by Bank for the purpose of calculating
effective rates of interest for loans making reference thereto, on the first
day of a Fixed Rate Term for delivery of funds on said date for a period of
time approximately equal to the number of days in such Fixed Rate Term and in
an amount approximately equal to the principal amount to which such Fixed Rate
Term applies. Borrower understands and agrees that Bank may base its quotation
of the London Inter-Bank Market Offered Rate upon such offers or other market
indicators of the London Inter-Bank Market as Bank in its discretion deems
appropriate.
<PAGE> 4
(ii) "LIBOR Margin" means a percentage per annum as shown below
determined in accordance with the following:
<TABLE>
<CAPTION>
<S> <C>
Borrower's Quick Ratio LIBOR Margin
---------------------- ------------
Less than 2.5 to 1.0 1.75%
Equal or greater than 2.5
to 1.0 or less than or equal to 1.50%
3.0 to 1.0
Greater than 3.0
to 1.0 1.50%
</TABLE>
For the purpose of determining the LIBOR Margin hereunder in accordance
with the foregoing, Borrower's Quick Ratio as defined in the Credit Agreement
between Borrower and Bank dated September 1, 1997, as amended from time to time
("Credit Agreement"), shall be determined by Bank as of the end of each fiscal
quarter (each, a "Calculation Date") based upon Borrower's financial statement
delivered to Bank for such Calculation Date in accordance with the Credit
Agreement. The adjustment to the LIBOR Margin in accordance with the foregoing
shall be made by Bank on the first day of the next Fixed Rate Term thereafter
(the "Margin Adjustment Date"). If Borrower fails to provide Bank with any
financial statement required by the Credit Agreement for the Calculation Date,
or from and after the maturity date or the occurrence of any Event of Default
under this Note, the LIBOR Margin shall be deemed to be one and three-quarters
percent (1.75%). The foregoing is not intended to limit in any way Bank's
default rights and remedies in connection with any failure by Borrower to
provide Bank with any financial statement required by the Credit Agreement or
any failure by Borrower to maintain its Quick Ratio in such a manner as may be
required by the Credit Agreement, including without limitation Bank's right to
impose a default rate of interest as set forth herein.
(iii) "LIBOR Reserve Percentage" means the reserve percentage prescribed
by the Board of Governors of the Federal Reserve System (or any successor) for
"Eurocurrency Liabilities" (as defined in Regulation D of the Federal Reserve
Board, as amended), adjusted by Bank for expected changes in such reserve
percentage during the applicable Fixed Rate Term.
(d) "Prime Rate" means at any time the rate of interest most
recently announced within Bank at its principal office as its Prime Rate, with
the understanding that the Prime Rate is one of Bank's base rates and serves as
the basis upon which effective rates of interest are calculated for those loans
making reference thereto, and is evidenced by the recording thereof after its
announcement in such internal publication or publications as Bank may designate.
INTEREST:
(a) Interest. The outstanding principal balance of this Note
shall bear interest (computed on the basis of a 360-day year, actual days
elapsed) either (i) at a fluctuating rate per annum one-quarter percent (.25%)
below the Prime Rate in effect from time to time as to all non-LIBOR
selections, or (ii) at a fixed rate per annum determined by Bank to be LIBOR in
effect on the first day of the applicable Fixed Rate Term plus the LIBOR Margin.
When interest is determined in relation to the Prime Rate, each change in the
rate of interest hereunder shall become effective on the date each Prime Rate
change is announced within Bank. With respect to each LIBOR selection
hereunder, Bank is hereby authorized to note the date,
-2-
<PAGE> 5
principal amount, interest rate and Fixed Rate Term applicable thereto and any
payments made thereon on Bank's books and records (either manually or by
electronic entry) and/or on any schedule attached to this Note, which notations
shall be prima facie evidence of the accuracy of the information noted.
(b) Selection of Interest Rate Options. At any time any portion of this
Note bears interest determined in relation to LIBOR, it may be continued by
Borrower at the end of the Fixed Rate Term applicable thereto so that all or a
portion thereof bears interest determined in relation to the Prime Rate or to
LIBOR for a new Fixed Rate Term designated by Borrower. At any time any portion
of this Note bears interest determined in relation to the Prime Rate, Borrower
may convert all or a portion thereof so that it bears interest determined in
relation to LIBOR for a Fixed Rate Term designated by Borrower. At such time as
Borrower requests an advance hereunder or wishes to select a LIBOR option for
all or a portion of the outstanding principal balance hereof, and at the end of
each Fixed Rate Term, Borrower shall give Bank notice specifying: (i) the
interest rate option selected by Borrower; (ii) the principal amount subject
thereto; and (iii) for each LIBOR selection, the length of the applicable Fixed
Rate Term. Any such notice may be given by telephone so long as, with respect to
each LIBOR selection, (A) Bank receives written confirmation from Borrower not
later than three (3) Business Days after such telephone notice is given, and (B)
such notice is given to Bank prior to 10:00 a.m., California time, on the first
day of the Fixed Rate Term. For each LIBOR option requested hereunder, Bank will
quote the applicable fixed rate to Borrower at approximately 10:00 a.m.,
California time, on the first day of the Fixed Rate Term. If Borrower does not
immediately accept the rate quoted by Bank, any subsequent acceptance by
Borrower shall be subject to a redetermination by Bank of the applicable fixed
rate; provided however, that if Borrower fails to accept any such rate by 11:00
a.m., California time, on the Business Day such quotation is given, then the
quoted rate shall expire and Bank shall have no obligation to permit a LIBOR
option to be selected on such day. If no specific designation of interest is
made at the time any advance is requested hereunder or at the end of any Fixed
Rate Term, Borrower shall be deemed to have made a Prime Rate interest selection
for such advance or the principal amount to which such Fixed Rate Term applied.
(c) Additional LIBOR Provisions.
(i) If Bank at any time shall determine that for any reason adequate and
reasonable means do not exist for ascertaining LIBOR, then Bank shall promptly
give notice thereof to Borrower. If such notice is given and until such notice
has been withdrawn by Bank, the (A) no new LIBOR option may be selected by
Borrower, and (B) any portion of the outstanding principal balance hereof which
bears interest determined in relation to LIBOR, subsequent to the end of the
Fixed Rate Term applicable thereto, shall bear interest determined in relation
to the Prime Rate.
(ii) If any law, treaty, rule, regulation or determination of a court or
governmental authority or any change therein or in the interpretation or
application thereof (each, a "Change in Law") shall make it unlawful for Bank
(A) to make LIBOR options available hereunder, or (B) to maintain interest
rates based on LIBOR, then in the former event, any obligation of Bank to make
available such unlawful LIBOR options shall immediately be cancelled, and in
the latter event, any such unlawful LIBOR-based interest rates then outstanding
shall be converted, at Bank's option, so that interest on the portion of the
outstanding principal balance subject thereto is determined in relation to the
Prime Rate and no longer subject to any applicable Fixed Rate Term; provided
however, that if any such Change in Law shall permit any LIBOR-based interest
rates to remain in effect until the expiration of the Fixed Rate Term
applicable thereto, then such permitted LIBOR-based interest rates shall
continue in effect until the expiration of such Fixed Rate Term. Upon the
occurrence of any of the foregoing events, Borrower shall pay to Bank
immediately upon
-3-
<PAGE> 6
demand such amounts as may be necessary to compensate Bank for any fines, fees,
charges, penalties or other costs incurred or payable by Bank as a result
thereof and which are attributable to any LIBOR options made available to
Borrower hereunder, and any reasonable allocation made by Bank among its
operations shall be conclusive and binding upon Borrower.
(iii) If any Change in Law or compliance by Bank with any request or
directive (whether or not having the force of law) from any central bank or
other governmental authority shall:
(A) subject Bank to any tax, duty or other charge with respect to any
LIBOR options, or change the basis of taxation of payments to Bank of principal,
interest, fees or any other amount payable hereunder (except for changes in the
rate of tax on the overall net income of Bank); or
(B) impose, modify or hold applicable any reserve, special deposit,
compulsory loan or similar requirement against assets held by, deposits or other
liabilities in or for the account of, advances or loans by, or any other
acquisition of funds by any office of Bank; or
(C) impose on Bank any other condition;
and the result of any of the foregoing is to increase the cost to Bank of
making, renewing or maintaining any LIBOR options hereunder and/or to reduce any
amount receivable by Bank in connection therewith, then in any such case,
Borrower shall pay to Bank immediately upon demand such amounts as may be
necessary to compensate Bank for any additional costs incurred by Bank and/or
reductions in amounts received by Bank which are attributable to such LIBOR
options. In determining which costs incurred by Bank and/or reductions in
amounts received by Bank are attributable to any LIBOR options made available to
Borrower hereunder, any reasonable allocation made by Bank among its operations
shall be conclusive and binding upon Borrower.
(d) Payment of Interest. Interest accrued on this Note shall be
payable on the first business day of each month, commencing October 1, 1997.
(e) Default Interest. From and after the maturity date of this Note, or
such earlier date as all principal owing hereunder becomes due and payable by
acceleration or otherwise, the outstanding principal balance of this Note shall
bear interest until paid in full at an increased rate per annum (computed on the
basis of a 360-day year, actual days elapsed) equal to two percent (2%) above
the rate of interest from time to time applicable to this Note.
BORROWING AND REPAYMENT:
(a) Borrowing and Repayment. Borrower may from time to time during
the term of this Note borrow, partially or wholly repay its outstanding
borrowings, and reborrow, subject to all the limitations, terms and conditions
of this Note and of any document executed in connection with or governing this
Note; provided however, that the total outstanding borrowings under this Note
shall not at any time exceed the principal amount stated above. The unpaid
principal balance of this obligation at any time shall be the total amounts
advanced hereunder by the holder hereof less the amount of principal payments
made hereon by or for Borrower, which balance may be endorsed hereon from time
to time by the holder. The outstanding principal balance of this Note shall be
due and payable in full on September 1, 1998.
(b) Advances. Advances hereunder, to the total amount of the
principal sum stated above, may be made by the holder at the oral or written
request of (i) Michael E. Hart or Lauri R.
-4-
<PAGE> 7
Harker, any one acting alone, who are authorized to request advances and direct
the disposition of any advances until written notice of the revocation of such
authority is received by the holder at the office designated above, or (ii) any
person, with respect to advances deposited to the credit of any account of
Borrower with the holder, which advances, when so deposited, shall be
conclusively presumed to have been made to or for the benefit of Borrower
regardless of the fact that persons other than those authorized to request
advances may have authority to draw against such account. The holder shall have
no obligation to determine whether any person requesting an advance is or has
been authorized by Borrower.
(c) Application of Payments. Each payment made on this Note shall
be credited first, to any interest then due and second, to the outstanding
principal balance hereof. All payments credited to principal shall be applied
first, to the outstanding principal balance of this Note which bears interest
determined in relation to the Prime Rate, if any, and second, to the
outstanding principal balance of this Note which bears interest determined in
relation to LIBOR, with such payments applied to the oldest Fixed Rate Term
first.
PREPAYMENT:
(a) Prime Rate. Borrower may prepay principal on any portion of
this Note which bears interest determined in relation to the Prime Rate at any
time, in any amount and without penalty.
(b) LIBOR. Borrower may prepay principal on any portion of this
Note which bears interest determined in relation to LIBOR at any time and in
the minimum amount of Two Hundred Fifty Thousand Dollars ($250,000.00);
provided however, that if the outstanding principal balance of such portion of
this Note is less than said amount, the minimum prepayment amount shall be the
entire outstanding principal balance thereof. In consideration of Bank
providing this prepayment option to Borrower, or if any such portion of this
Note shall become due and payable at any time prior to the last day of the
Fixed Rate Term applicable thereto by acceleration or otherwise, Borrower shall
pay to Bank immediately upon demand a fee which is the sum of the discounted
monthly differences for each month from the month of prepayment through the
month in which such Fixed Rate Term matures, calculated as follows for each
such month;
(i) Determine the amount of interest which would have accrued each
month on the amount prepaid at the interest rate applicable to
such amount had it remained outstanding until the last day of
the Fixed Rate Term applicable thereto.
(ii) Subtract from the amount determined in (i) above the amount of
interest which would have accrued for the same month on the
amount prepaid for the remaining term of such Fixed Rate Term at
an interest rate equal to (a) LIBOR in effect on the date of
prepayment for new loans made for such term and in a principal
amount equal to the amount prepaid, plus (b) the LIBOR Margin
applicable to such amount prepaid had it remained outstanding
until the last day of the Fixed Rate Term applicable thereto.
(iii) If the result obtained in (ii) for any month is greater than
zero, discount that difference by LIBOR used in (ii) above.
Borrower acknowledges that prepayment of such amount may result in Bank
incurring additional costs, expenses and/or liabilities, and that it is
difficult to ascertain the full extent of such costs, expenses and/or
liabilities. Borrower, therefore, agrees to pay the above-described prepayment
fee and agrees that said amount represents a reasonable estimate of the
prepayment costs,
-5-
<PAGE> 8
expenses and/or liabilities of Bank. If Borrower fails to pay any prepayment
fee when due, the amount of such prepayment fee shall thereafter bear interest
until paid at a rate per annum two percent (2.0%) above the Prime Rate in
effect from time to time (computed on the basis of a 360-day year, actual days
elapsed). Each change in the rate of interest on any such past due prepayment
fee shall become effective on the date each Prime Rate change is announced
within Bank.
EVENTS OF DEFAULT:
This Note is made pursuant to and is subject to the terms and conditions
of the Credit Agreement. Any default in the payment or performance of any
obligation under this Note, or any defined event of default under the Credit
Agreement, shall constitute an "Event of Default" under this Note.
MISCELLANEOUS:
(a) Remedies. Upon the occurrence of any Event of Default, the holder of
this Note, at the holder's option, may declare all sums of principal and
interest outstanding hereunder to be immediately due and payable without
presentment, demand, notice of nonperformance, notice of protest, protest or
notice of dishonor, all of which are expressly waived by Borrower, and the
obligation, if any, of the holder to extend any further credit hereunder shall
immediately cease and terminate. Borrower shall pay to the holder immediately
upon demand the full amount of all payments, advances, charges, costs and
expenses, including reasonable attorneys' fees (to include outside counsel fees
and all allocated costs of the holder's in-house counsel), expended or incurred
by the holder in connection with the enforcement of the holder's rights and/or
the collection of any amounts which become due to the holder under this Note,
and the prosecution or defense of any action in any way related to this Note,
including without limitation, any action for declaratory relief, whether
incurred at the trial or appellate level, in an arbitration proceeding or
otherwise, and including any of the foregoing incurred in connection with any
bankruptcy proceeding (including without limitation, any adversary proceeding,
contested matter or motion brought by Bank or any other person) relating to
Borrower or any other person or entity.
(b) Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of Colorado.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the date
first written above.
NEXSTAR PHARMACEUTICALS, INC.
By: /s/ PATRICK J. MAHAFFY
-----------------------
Title: President
---------------------
By: /s/ MICHAEL E. HART
------------------------
Title: VP and C.F.O.
---------------------
Agreed: Wells Fargo Bank, N.A.
Name: /s/ TRACEY HANSON TITLE: VP
---------------------- ----------------------
-6-
<PAGE> 9
[WELLS FARGO BANK LOGO]
Commercial Banking
633 Seventeenth Street
Denver, CO 80270
September 1, 1998
NeXstar Pharmaceuticals, Inc.
2860 Wilderness Place
Boulder, CO 80301
Gentlemen:
This letter is to confirm that Wells Fargo Bank, National Association
("Bank") has agreed to extend the maturity date of that certain credit
accommodation granted by Bank to NeXstar Pharmaceuticals, Inc. ("Borrower") in
the maximum amount of Fifty Million Dollars ($50,000,000.00) pursuant to the
terms and conditions of that certain Credit Agreement between Bank and Borrower
dated as of September 1, 1997, as amended from time to time (the "Agreement").
The last day on which Bank will make available foreign exchange
contracts, as described in the Agreement, is hereby extended until November 1,
1998. Until such date, all terms and conditions of the Agreement which pertain
to said credit accommodation shall remain in full force and effect, except as
expressly modified hereby. All other terms and conditions of the Note remain in
full force and effect, without waiver or modification.
Borrower acknowledges that Bank has not committed to make any renewal or
further extension of the maturity date of the above-described credit
accommodation beyond the new maturity date specified herein, and that any such
renewal or further extension remains in the sole discretion of Bank. This letter
constitutes the entire agreement between Bank and Borrower with respect to the
maturity date extension for the above-described credit accommodation, and
supersedes all prior negotiations, discussions and correspondence concerning
said extension.
<PAGE> 10
NeXstar Pharmaceuticals, Inc.
September 1, 1998
Page 2
Please acknowledge your acceptance of the terms and conditions contained
herein by dating and signing one copy below and returning it to my attention at
the above address on or before September 18, 1998.
Very truly yours,
WELLS FARGO BANK,
NATIONAL ASSOCIATION
By: /s/ TRACEY HANSON
------------------------
Tracey Hanson
Vice President
Acknowledged and accepted as of :
-------------------------
NEXSTAR PHARMACEUTICALS, INC.
By:
-------------------------------------
Patrick J. Mahaffy
President and Chief Executive Officer
By: /s/ MICHAEL E. HART
--------------------------------------
Michael E. Hart
Vice President and Chief Financial Officer
<PAGE> 1
EXHIBIT 10.4
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is entered
into as of November 1, 1998, by and between NEXSTAR PHARMACEUTICALS, INC., a
Delaware corporation ("Borrower"), and WELLS FARGO BANK, NATIONAL ASSOCIATION
("Bank").
RECITALS
WHEREAS, Borrower is currently indebted to Bank pursuant to the terms and
conditions of that certain Credit Agreement between Borrower and Bank dated as
of September 1, 1997, as amended from time to time ("Credit Agreement").
WHEREAS, Bank and Borrower have agreed to certain changes in the terms
and conditions set forth in the Credit Agreement and have agreed to amend the
Credit Agreement to reflect said changes.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree that the Credit
Agreement shall be amended as follows:
1. Section 1.1.(a) is hereby amended by deleting "November 1, 1998" as
the last day on which Bank will make advances under the Line of Credit, and by
substituting for said date "November 1, 1999," with such change to be effective
upon the execution and delivery to Bank of a promissory note substantially in
the form of Exhibit A attached hereto (which promissory note shall replace and
be deemed the Line of Credit Note defined in and made pursuant to the Credit
Agreement) and all other contracts, instruments and documents required by Bank
to evidence such change.
2. Section 1.2.(a) is hereby amended (a) by deleting "September 1, 1998"
as the last day on which the Bank will enter into foreign exchange contracts
for the account of Borrower, and by substituting for said date "November 1,
1999," (b) by deleting "November 1, 1998" as the last day any foreign exchange
contract may expire, and by substituting for said date "January 1, 2000", (c)
by deleting "Fifty Million United States Dollars (US$50,000,000.00)" as the
maximum amount of all outstanding foreign exchange contracts under the Foreign
Exchange Facility, and by substituting for said amount "Sixty-five Million
United States Dollars (US$65,000,000.00) and (d) by deleting "Ten Million
United States Dollars (US$10,000,000.00) as the maximum Delivery Limit under
the Foreign Exchange Facility, and by substituting for said amount "Thirteen
Million United States Dollars (US$13,000,000.00)."
<PAGE> 2
3. Borrower shall pay to Bank a non-refundable commitment fee for the
Line or Credit equal to $5,200.00, which fee shall be due and payable in full
upon execution of this amendment.
4. Except as specifically provided herein, all terms and conditions of
the Credit Agreement remain in full force and effect, without waiver or
modification. All terms defined in the Credit Agreement shall have the same
meaning when used in this Amendment. This Amendment and the Credit Agreement
shall be read together, as one document.
5. Borrower hereby remakes all representations and warranties contained
in the Credit Agreement and reaffirms all covenants set forth therein. Borrower
further certifies that as of the date of this Amendment there exists no Event
of Default as defined in the Credit Agreement, nor any condition, act or event
which with the giving of notice or the passage of time or both would constitute
any such Event of Default.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the day and year first written above.
WELLS FARGO BANK,
NEXSTAR PHARMACEUTICALS, INC. NATIONAL ASSOCIATION
By: /s/ MICHAEL E. HART By: /s/ TRACEY HANSON
-------------------------- -----------------------
Michael E. Hart Tracey Hanson
Vice President
Title: VP/CFO
-----------------------
By:
--------------------------
Title:
-----------------------
<PAGE> 3
REVOLVING LINE OF CREDIT NOTE
$10,000,000.00 Denver, Colorado
November 1, 1998
FOR VALUE RECEIVED, the undersigned NEXSTAR PHARMACEUTICALS, INC.
("Borrower") promises to pay to the order of WELLS FARGO BANK, NATIONAL
ASSOCIATION ("Bank") at its office at Colorado RCBO, 633 17th Street, Denver,
Colorado, or at such other place as the holder hereof may designate, in lawful
money of the United States of America and in immediately available funds, the
principal sum of Ten Million Dollars ($10,000,000.00), or so much thereof as
may be advanced and be outstanding, with interest thereon, to be computed on
each advance from the date of its disbursement as set forth herein.
DEFINITIONS:
As used herein, the following terms shall have the meanings set forth
after each, and any other term defined in this Note shall have the meaning set
forth at the place defined:
(a) "Business Day" means any day except a Saturday, Sunday or any other
day on which commercial banks in Colorado are authorized or required by law to
close.
(b) "Fixed Rate Term" means a period commencing on a Business Day and
continuing for one (1), two (2), three (3) or six (6) months, as designated by
Borrower, during which all or a portion of the outstanding principal balance of
this Note bears interest determined in relation to LIBOR; provided however,
that no Fixed Rate Term may be selected for a principal amount less than Two
Hundred Fifty Thousand Dollars ($250,000.00); and provided further, that no
Fixed Rate Term shall extent beyond the scheduled maturity date hereof. If any
Fixed Rate Term would end on a day which is not a Business Day, then such Fixed
Rate Term shall be extended to the next succeeding Business Day.
(c) "LIBOR" means the rate per annum (rounded upward, if necessary, to
the nearest whole 1/8 of 1%) and determined pursuant to the following formula:
Base LIBOR
LIBOR = _______________________________
100% - LIBOR Reserve Percentage
(i) "Base LIBOR" means the rate per annum for United States dollar
deposits quoted by Bank as the Inter-Bank Market Offered Rate, with the
understanding that such rate is quoted by Bank for the purpose of calculating
effective rates of interest for loans making reference thereto, on the first
day of a Fixed Rate Term for delivery of funds on said date for a period of
time approximately equal to the number of days in such Fixed Rate Term
<PAGE> 4
the limitations, terms and conditions of this Note and of any document executed
in connection with or governing this Note; provided however, that the total
outstanding borrowings under this Note shall not at any time exceed the
principal amount stated above. The unpaid principal balance of this obligation
at any time shall be the total amounts advanced hereunder by the holder hereof
less the amount of principal payments made hereon by or for Borrower, which
balance may be endorsed hereon from time to time by the holder. The outstanding
principal balance of this Note shall be due and payable in full on November 1,
1999.
(b) Advances. Advances hereunder, to the total amount of the principal
sum stated above, may be made by the holder at the oral or written request of
(i) Michael E. Hart, any one acting alone, who are authorized to request
advances and direct the disposition of any advances until written notice of the
revocation of such authority is received by the holder at the office designated
above, or (ii) any person, with respect to advances deposited to the credit of
any account of Borrower with the holder, which advances, when so deposited,
shall be conclusively presumed to have been made to or for the benefit of
Borrower regardless of the fact that persons other than those authorized to
request advances may have authority to draw against such account. The holder
shall have no obligation to determine whether any person requesting an advance
is or has been authorized by Borrower.
(c) Application of Payments. Each payment made on this Note shall be
credited first, to any interest then due and second, to the outstanding
principal balance hereof. All payments credited to principal shall be applied
first, to the outstanding principal balance of this Note which bears interest
determined in relation to the Prime Rate, if any, and second, to the
outstanding principal balance of this Note which bears interest determined in
relation to LIBOR, with such payments applied to the oldest Fixed Rate Term
first.
PREPAYMENT:
(a) Prime Rate. Borrower may prepay principal on any portion of this Note
which bears interest determined in relation to the Prime Rate at any time, in
any amount and without penalty.
(b) LIBOR. Borrower may prepay principal on any portion of this Note
which bears interest determined in relation to LIBOR at any time and in the
minimum amount of Two Hundred Fifty Thousand Dollars ($250,000.00); provided
however, that if the outstanding principal balance of such portion of this Note
is less than said amount, the minimum prepayment amount shall be the entire
outstanding principal balance thereof. In consideration of Bank providing this
prepayment option to Borrower, or if any such portion of this Note shall become
due and payable at any time prior to the last day of the Fixed Rate Term
applicable thereto
<PAGE> 5
by acceleration or otherwise, Borrower shall pay to Bank immediately upon demand
a fee which is the sum of the discounted monthly differences for each month from
the month of prepayment through the month in which such Fixed Rate Term matures,
calculated as follows for each such month;
(i) Determine the amount of interest which would have accrued each
month on the amount prepaid at the interest rate applicable to such
amount had it remained outstanding until the last day of the Fixed
Rate Term applicable thereto.
(ii) Subtract from the amount determined in (i) above the amount of
interest which would have accrued for the same month on the amount
prepaid for the remaining term of such Fixed Rate Term at an
interest rate equal to (a) LIBOR in effect on the date of
prepayment for new loans made for such term and in a principal
amount equal to the amount prepaid, plus (b) the LIBOR Margin
applicable to such amount prepaid had it remained outstanding until
the last day of the Fixed Rate Term applicable thereto.
(iii) If the result obtained in (ii) for any month is greater than zero,
discount that difference by LIBOR used in (ii) above.
Borrower acknowledges that prepayment of such amount may result in Bank
incurring additional costs, expenses and/or liabilities, and that it is
difficult to ascertain the full extent of such costs, expenses and/or
liabilities. Borrower, therefore, agrees to pay the above-described prepayment
fee and agrees that said amount represents a reasonable estimate of the
prepayment costs, expenses and/or liabilities of Bank. If Borrower fails to pay
any prepayment fee when due, the amount of such prepayment fee shall thereafter
bear interest until paid at a rate per annum two percent (2.0%) above the Prime
Rate in effect from time to time (computed on the basis of a 360-day year,
actual days elapsed). Each change in the rate of interest on any such past due
prepayment fee shall become effective on the date each Prime Rate change is
announced within Bank.
EVENTS OF DEFAULT:
This Note is made pursuant to and is subject to the terms and conditions
of the Credit Agreement. Any default in the payment or performance of any
obligation under this Note, or any defined event of default under the Credit
Agreement, shall constitute an "Event of Default" under this Note.
<PAGE> 6
MISCELLANEOUS:
(a) Remedies. Upon the occurrence of any Event of Default, the
holder of this Note, at the holder's option, may declare all sums of principal
and interest outstanding hereunder to be immediately due and payable without
presentment, demand, notice of nonperformance, notice of protest, protest or
notice of dishonor, all of which are expressly waived by Borrower, and the
obligation, if any, of the holder to extend any further credit hereunder shall
immediately cease and terminate. Borrower shall pay to the holder immediately
upon demand the full amount of all payments, advances, charges, costs and
expenses, including reasonable attorneys' fees (to include outside counsel fees
and all allocated costs of the holder's in-house counsel), expended or incurred
by the holder in connection with the enforcement of the holder's rights and/or
the collection of any amounts which become due to the holder under this Note,
and the prosecution or defense of any action in any way related to this Note,
including without limitation, any action for declaratory relief, whether
incurred at the trial or appellate level, in an arbitration proceeding or
otherwise, and including any of the foregoing incurred in connection with any
bankruptcy proceeding (including without limitation, any adversary proceeding,
contested matter or motion brought by Bank or any other person) relating to
Borrower or any other person or entity.
(b) Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of Colorado.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the
date first written above.
NEXSTAR PHARMACEUTICALS, INC.
By: /s/ MICHAEL E. HART
---------------------------------
Title: VP/CEO
------------------------------
By:
----------------------------------
Title:
-------------------------------
<PAGE> 1
EXHIBIT 11.1
NEXSTAR PHARMACEUTICALS, INC.
COMPUTATION OF NET INCOME (LOSS) PER SHARE
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- --------------------------------
1998 1997 1998 1997
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
BASIC:
Net income (loss) $19,460,000 $(22,019,000) $13,527,000 $(40,003,000)
=========== ============ =========== ============
Weighted average shares outstanding
during the period 28,537,000 26,524,000 27,980,000 26,465,000
=========== ============ =========== ============
Net income (loss) per common share $ 0.68 $ (0.83) $ 0.48 $ (1.51)
=========== ============ =========== ============
DILUTED:
Unadjusted net income (loss) $19,460,000 $(22,019,000) $13,527,000 $(40,003,000)
Interest impact of assumed conversion of
convertible subordinated debentures,
net of taxes 1,225,000 -- -- --
----------- ------------ ----------- ------------
Net income (loss), as adjusted $20,685,000 $(22,019,000) $13,527,000 $(40,003,000)
=========== ============ =========== ============
Applicable common shares:
Weighted average shares outstanding
during the period 28,685,000 26,524,000 27,980,000 26,465,000
Shares assumed issued for stock options 564,000 -- 805,000 --
Shares assumed issued for warrants 68,000 -- 68,000 --
Less: treasury stock assumed purchased (421,000) -- (587,000) --
Shares assumed issued from conversion of
convertible subordinated debentures 4,741,000 -- -- --
----------- ------------ ----------- ------------
Total 33,489,000 26,524,000 28,266,000 26,465,000
=========== ============ =========== ============
Net income (loss) per common share $ 0.62 $ (0.83) $ 0.48 $ (1.51)
=========== ============ =========== ============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 66,282,000
<SECURITIES> 141,000
<RECEIVABLES> 45,465,000
<ALLOWANCES> 1,154,000
<INVENTORY> 12,830,000
<CURRENT-ASSETS> 127,631,000
<PP&E> 81,340,000
<DEPRECIATION> 39,599,000
<TOTAL-ASSETS> 189,940,000
<CURRENT-LIABILITIES> 22,156,000
<BONDS> 89,579,000
0
0
<COMMON> 285,000
<OTHER-SE> 69,836,000
<TOTAL-LIABILITY-AND-EQUITY> 189,940,000
<SALES> 77,061,000
<TOTAL-REVENUES> 87,413,000
<CGS> 15,516,000
<TOTAL-COSTS> 15,516,000
<OTHER-EXPENSES> 73,609,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,022,000
<INCOME-PRETAX> 14,746,000
<INCOME-TAX> 495,000
<INCOME-CONTINUING> 13,527,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,527,000
<EPS-PRIMARY> .48
<EPS-DILUTED> .48
</TABLE>
