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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
- - --- Act of 1934
For the quarterly period ended: March 31, 1996
--------------
___ 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 0-19410
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HEMASURE INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 04-3216862
-------- ----------
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Organization or Incorporation)
140 LOCKE DRIVE, MARLBOROUGH, MASSACHUSETTS 01752
-------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(508) 485-6850
--------------
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
----- -----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock, par value $.01 per share 8,057,347
-------------------------------------- ---------
Class Outstanding at May 3, 1996
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HemaSure Inc.
<TABLE>
INDEX
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<CAPTION>
PAGE
----
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets as of March 31, 1996 and December 31, 1995 3
Statements of Operations for the Three Month Periods Ended March 31, 1996
and 1995 4
Statements of Cash Flows for the Periods Ended March 31, 1996 and 1995 5
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations 8
PART II OTHER INFORMATION 10
SIGNATURES 11
</TABLE>
2
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HemaSure Inc.
<TABLE>
Condensed Balance Sheets
(Unaudited)
<CAPTION>
(In thousands) March 31, December 31,
1996 1995
--------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 14,467 $ 23,028
Marketable securities 30,557 24,813
Accounts receivable 55 82
Inventory 737 756
Prepaid expenses 260 150
-------- --------
Total current assets 46,076 48,829
Property and equipment, net 1,725 1,286
Other assets 99 97
-------- --------
Total assets $ 47,900 $ 50,212
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,136 $ 1,208
Payable to related parties 30 87
Accrued expenses 784 522
Capital lease obligations-current portion 123 107
-------- --------
Total current liabilities 2,073 1,924
Capital lease obligations 263 286
-------- --------
Total liabilities 2,336 2,210
-------- --------
Stockholders' equity:
Common stock 81 80
Additional paid-in capital 60,425 60,372
Unearned compensation (546) (595)
Unrealized holding loss of available for sale marketable securities (11)
Accumulated deficit (14,385) (11,855)
-------- --------
Total stockholders' equity 45,564 48,002
-------- --------
Total liabilities and stockholders' equity $ 47,900 $ 50,212
======== ========
</TABLE>
The accompanying notes are an integral part
of the financial statements.
3
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HemaSure Inc.
<TABLE>
Statements of Operations
For The Three-Month Periods Ended
March 31, 1996 and 1995
(Unaudited)
<CAPTION>
Three-month periods
(In thousands, except per share amounts) ended march 31,
-----------------------
1996 1995
---- ----
<S> <C> <C>
Revenues:
Product sales $ 22 $ 3
Product sales to related parties 14 371
Collaborative research and development 46
------- -------
Total revenues 82 374
------- -------
Costs and expenses:
Cost of products sold 390 105
Cost of products sold to related parties 13 278
Research & development 1,577 910
Selling, general and administrative 1,216 730
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Total costs and expenses 3,196 2,023
------- -------
Loss from operations (3,114) (1,649)
Interest income, (net) 584 147
------- -------
Net loss $(2,530) $(1,502)
======= =======
Net loss per share $ (0.31) $ (0.27)
Weighted average number of common and
common equivalent shares outstanding 8,041 5,501
</TABLE>
The accompanying notes are an integral part
of the financial statements.
4
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HemaSure Inc.
<TABLE>
Statements of Cash Flows
( Unaudited )
<CAPTION>
(In thousands) Three-month periods ended
March 31,
--------------------------
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (2,530) $ (1,502)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation and amortization 139 104
Accretion of marketable securities discount (164)
Changes in operating assets and liabilities:
Accounts receivable 27 2
Inventories 19 219
Other current assets (110) 49
Accounts payable and accrued expenses 133 (479)
-------- --------
Net cash (used in) operating activities (2,486) (1,607)
Cash flows from investing activities:
Purchases of available for sale marketable securities (71,788)
Maturities of available for sale marketable securities 66,208
Unrealized holding loss of available for sale marketable securities (11)
Additions to property and equipment (529) (69)
(Increase) decrease in other assets (2) --
-------- --------
Net cash used in investing activities (6,122) (69)
Cash flows from financing activites:
Net proceeds from issuance of common stock 54
Borrowings under capital lease arrangements 58
Repayments of capital lease obligations (65) (5)
-------- --------
Net cash provided by (used in) financing activities 47 (5)
Net decrease in cash (8,561) (1,681)
Cash at beginning of period 23,028 11,704
-------- --------
Cash at end of period $ 14,467 $ 10,023
======== ========
</TABLE>
The accompanying notes are an integral part
of the financial statements.
5
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HemaSure Inc.
Notes To Condensed Financial Statements
1. Basis of Presentation
The accompanying financial statements are unaudited and have been
prepared on a basis substantially consistent with the audited financial
statements.
Certain information and footnote disclosures normally included in the
Company's annual statements have been condensed or omitted. The
condensed interim financial statements, in the opinion of management,
reflect all adjustments (including normal recurring accruals) necessary
for a fair statement of the results for the interim periods ended March
31, 1996 and 1995.
The results of operations for the interim periods are not necessarily
indicative of the results of operations to be expected for the fiscal
year. These interim financial statements should be read in conjunction
with the audited financial statements for the year ended December 31,
1995, which are contained in the Company's Form 10K (File No. 0-19410),
filed with the Securities and Exchange Commission on April 1, 1996.
<TABLE>
2. Inventories
Inventories consist of the following:
<CAPTION>
March 31, 1996 December 31, 1995
-------------- -----------------
<S> <C> <C>
Raw Materials $429 $492
Work in progress 7 6
Finished goods 301 258
---- ----
$737 $756
==== ====
</TABLE>
<TABLE>
3. Property and Equipment
Property and equipment consists of the following:
<CAPTION>
March 31, 1996 December 31, 1995
-------------- -----------------
<S> <C> <C>
Property and equipment $ 4,156 $ 3,733
Less accumulated depreciation and amortization (2,740) (2,650)
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1,416 1,083
Construction in progress 309 203
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$ 1,725 $ 1,286
======= =======
</TABLE>
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4. Net loss per share
The net loss per share is based on the weighted average number of
common and common equivalent shares outstanding during the period.
Common equivalent shares are not included in the per share calculation
where the effect of their inclusion would be antidilutive.
5. Litigation
In February 1996, Pall Corporation ("Pall") filed a complaint against
the Company in the United States District Court for the Eastern
District of New York. The Complaint alleges that the Company has
infringed and is infringing a certain U.S. patent assigned to Pall (the
"Pall Patent") by making, using and selling the Company's LeukoNet
System. The Company has received an opinion of its patent counsel to
the effect that a properly informed court would conclude the Company
does not infringe any valid enforceable claims of the Pall Patent.
However, there can be no assurance that HemaSure will prevail in the
pending litigation, and an adverse outcome in the patent infringement
action would have a material adverse effect on the Company's future
business and operations.
6. Subsequent Event
In May 1996, the Company completed the acquisition of certain assets of
the plasma products unit of Novo Nordisk A/S, a Danish company. The
plasma products unit processes blood plasma into plasma pharmaceutical
products. The purchase price is comprised of three portions. The first
portion of $1,800,000 is payable in 1998 in cash or common stock of
HemaSure or a subsidiary of HemaSure, at the Company's option. The
second portion of approximately $13,000,000 is payable in cash from
time to time upon sale of acquired inventory (valued at approximately
$13,000,000) but no later than 1998, provided that up to $4,000,000 of
this portion may be forgiven in certain circumstances. The third
portion of the purchase price of approximately $8,000,000 is payable in
1998 in cash or common stock of HemaSure or a subsidiary of HemaSure,
at the Company's option, provided that all of this portion may be
forgiven in certain circumstances. This acquisition will be accounted
for as a purchase in accordance with purchase method accounting.
7
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Overview
HemaSure was established in December 1993 as a wholly-owned subsidiary of
Sepracor Inc. ("Sepracor"). Prior to that date, its business was conducted as
part of Sepracor's bioprocessing division. Effective as of January 1, 1994, in
exchange for 3,000,000 shares of Common Stock, Sepracor transferred to HemaSure
its technology relating to the manufacture, use and sale of medical devices.
The Company is utilizing its proprietary filtration and pathogen inactivation
technologies to develop products to increase the safety of donated blood and to
improve certain blood transfusion procedures. The Company's products are
designed for use in blood centers and hospital blood banks worldwide. From
inception through fiscal 1995, HemaSure has sold non-blood related filter
products primarily to Sepracor, a related party, for use in chemical processing
applications. As the Company continues to focus its efforts in the medical
device sector, it does not expect sales of its non-blood related products to
continue in any material respect. The Company's collaborative research and
development efforts have been with the U.S. Department of the Army for blood
filtration related practices.
The Company is subject to risks common to companies in the medical technology
industry, including, but not limited to, development by the Company or its
competitors of new technological innovations, dependence on key personnel,
protection of proprietary technology and compliance with FDA regulations.
Three months ended March 31, 1996 and 1995
Revenues were $82,000 for the quarter ended March 31, 1996 compared to $374,000
in the same period in 1995. Revenues in the first quarter 1995 include product
sales to Sepracor of $368,000 which were not repeated in the first quarter 1996.
Revenues in the first quarter 1996 include medical device product sales of
$22,000 and collaborative research and development revenues of $46,000 related
to the Company's Phase II SBIR grant which began in March 1995.
Total cost of products sold exceeded total product sales in all periods due to
the start-up costs of new product introduction and the high costs associated
with low volume production.
Research and development expenses were $1,577,000 in the first quarter of 1996
compared to $910,000 in the first quarter of 1995. The increase in the three
month period is primarily attributable to a higher level of spending associated
with the Company's SteriPath Blood Pathogen Inactivation System and preparation
for commercialization of the Company's LeukoNet Pre-Storage Leukoreduction
System ( the "LeukoNet System"), which received marketing clearance from the
United States Food and Drug Administration in June 1995.
Selling, general and administrative expenses were $1,216,000 in the three months
ended March 31, 1996 compared to $730,000 in the three months ended March 31,
1995. The increase in the three month period is primarily attributable to
expenses associated with preparation for commercialization of the LeukoNet
System and increased costs related to the hiring of management with specific
industry experience.
Interest income, net for the quarter ended March 31, 1996 of $584,000 increased
compared to the quarter ended March 31, 1995 of $147,000 due to higher average
cash and marketable securities balances
8
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available for investment offset by higher interest expense related to the
Company's capital lease obligations.
LIQUIDITY AND CAPITAL RESOURCES
The net decrease in cash and cash equivalents for the three months ended March
31, 1996 was $8,561,000. This decrease is attributable primarily to net cash
used in investing activities of $6,122,000, $5,591,000 of which relates to
available-for-sale marketable securities investing activities and net cash used
in operating activities of $2,486,000. Net cash used in operating activities is
primarily attributable to the net loss of $2,530,000.
In June 1994, the Company executed an agreement with a third party to license
certain technology. The Company agrees to pay to the third party, pursuant to
the terms of the agreement, license fees of $1,200,000 payable in four equal
annual installments, and royalties for commercial sale of any product
incorporating this technology.
To date the Company has paid $600,000 under this agreement.
In May 1996, the Company completed the acquisition of certain assets of the
plasma products unit of Novo Nordisk A/S, a Danish company. The plasma products
unit processes blood plasma into plasma pharmaceutical products. The purchase
price is comprised of three portions. The first portion of $1,800,000 is payable
in 1998 in cash or common stock of HemaSure or a subsidiary of HemaSure, at the
Company's option. The second portion of approximately $13,000,000 is payable in
cash from time to time upon sale of acquired inventory (valued at approximately
$13,000,000) but no later than 1998, provided that up to $4,000,000 of this
portion may be forgiven in certain circumstances. The third portion of the
purchase price of approximately $8,000,000 is payable in 1998 in cash or common
stock of HemaSure or a subsidiary of HemaSure, at the Company's option, provided
that all of this portion may be forgiven in certain circumstances. In addition ,
the agreement required the Company to provide minimum equity financing of
$4,000,000 at closing and an additional $4,000,000 of equity financing at a
future date as defined in the agreement.
The Company believes that its available cash balances together with its current
operating plan will be sufficient to fund the Company's operations into 1997.
The Company's cash requirements may vary materially from those now planned
because of factors such as successful development of products, results of
product testing, approval process at the FDA and similar foreign agencies,
commercial acceptance of new products, patent developments, the acquisition or
investment in complementary businesses or products and the introduction of
competitive products.
9
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PART II.
OTHER INFORMATION
Items 1. Legal Proceedings
-----------------
In February 1996, Pall Corporation ("Pall") filed a complaint
against the Company in the United States District Court for
the Eastern District of New York. The Complaint alleges that
the Company has infringed and is infringing a certain U.S.
patent assigned to Pall (the "Pall Patent") by making, using
and selling the Company's LeukoNet System. The Company has
received an opinion of its patent counsel to the effect that a
properly informed court would conclude the Company does not
infringe any valid enforceable claims of the Pall Patent.
However, there can be no assurance that HemaSure will prevail
in the pending litigation, and an adverse outcome in the
patent infringement action would have a material adverse
effect on the Company's future business and operations.
Items 2 - 5. None
----
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
a) Exhibits
10.1 Asset Purchase Agreement between and among
the Company, HemaPharm Inc. and HemaPharm A/S and
Novo Nordisk A/S, dated as of May 2, 1996.
27.1 Financial Data Schedule
b) Reports on Form 8-K
None
10
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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.
HEMASURE INC.
Date: May 15, 1995 /s/ Eugene J. Zurlo
------------------------------
Eugene J. Zurlo
Chairman, President, and
Chief Executive Officer
(Principal Executive Officer)
Date: May 15, 1995 /s/ Steven H. Rouhandeh
------------------------------
Steven H. Rouhandeh
Executive Vice President and Chief
Financial Officer
(Principal Financial Officer)
Date: May 15, 1995 /s/ James B. Murphy
------------------------------
James B. Murphy
Vice President and Controller
(Principal Accounting Officer)
12
<PAGE> 1
ASSET PURCHASE AGREEMENT
Between and Among
HemaSure Inc., HemaPharm Inc., HemaPharm A/S
and
Novo Nordisk A/S
May 2, 1996
<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE I - THE PURCHASE..................................
1.1 Purchase and Sale of Assets.................
1.2 Assumption of Liabilities...................
1.3 Purchase Price..............................
1.4 The Closing.................................
1.5 Allocation..................................
1.6 Further Assurances..........................
ARTICLE II - REPRESENTATIONS AND WARRANTIES
OF THE SELLER..........................
2.1 Organization, Qualification and
Corporate Power...........................
2.2 Authority...................................
2.3 Noncontravention............................
2.4 Financial Statements........................
2.5 Absence of Certain Changes..................
2.6 Undisclosed Liabilities.....................
2.7 Ownership and Condition of Assets...........
2.8 Owned Real Property.........................
2.9 Intellectual Property.......................
2.10 Inventory...................................
2.11 Real Property Leases........................
2.12 Contracts...................................
2.13 Insurance...................................
2.14 Litigation..................................
2.15 Product Warranty............................
2.16 Employees...................................
2.17 Employee Benefits...........................
2.18 Environmental Matters.......................
2.19 Legal Compliance............................
2.20 Permits and Regulatory Approvals............
2.21 Certain Business Relationships
With Affiliates.............................
2.22 Books and Records...........................
2.23 Customers...................................
2.24 Government Contracts........................
2.25 Disclosure..................................
ARTICLE III - EMPLOYEES...................................
3.1 Buyer's Succession..........................
3.2 Division of Obligations and Liabilities.....
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3.3 Employees whose Employment has Terminated...
3.4 Employee Benefits to be provided by
Seller after Closing......................
3.5 Salary Reduction............................
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF THE BUYER,
HEMASURE AND HEMAPHARM...................
4.1 Organization................................
4.2 Authorization of Transaction................
4.3 Noncontravention............................
4.4 Securities and Exchange Commission Filings..
4.5 Registration with VAT Authorities...........
ARTICLE V - TRANSFER STATEMENT............................
5.1 Preparation of Transfer Statement...........
5.2 Payment of the Balance of the Transfer
Statement.................................
5.3 Disputes....................................
ARTICLE VI - CONDITIONS TO CLOSING........................
6.1 Conditions to Obligations of the Buyer......
6.2 Conditions to Obligations of the Seller.....
ARTICLE VII - POST-CLOSING COVENANTS......................
7.1 Proprietary Information.....................
7.2 Solicitation and Hiring.....................
7.3 Non-Competition.............................
7.4 Sharing of Data.............................
7.5 Audit ......................................
7.6 Use of Names................................
7.7 Permits.....................................
7.8 Addition Capitalization.....................
7.9 Secondary Names.............................
7.10 Consents....................................
7.11 Affiliate Services..........................
7.12 Recall or Withdrawal of Products............
7.13 VAT Notification............................
ARTICLE VIII - INDEMNIFICATION............................
8.1 Indemnification.............................
8.2 Method of Asserting Claims..................
8.3 Survival....................................
8.4 Limitations.................................
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ARTICLE IX - RIGHT OF FIRST OFFER.........................
ARTICLE X - DEFINITIONS...................................
ARTICLE XI - MISCELLANEOUS................................
11.1 Press Releases and Announcements............
11.2 Arbitration.................................
11.3 No Third Party Beneficiaries................
11.4 Entire Agreement............................
11.5 Succession and Assignment...................
11.6 Counterparts................................
11.7 Headings....................................
11.8 Notices.....................................
11.9 Governing Law...............................
11.10 Amendments and Waivers......................
11.11 Severability................................
11.12 Expenses....................................
11.13 Incorporation of Exhibits and Schedules.....
Exhibit A - Form of Raw Materials Convertible Promissory Note
Exhibit B - Form of Work-in-Process Promissory Note
Exhibit C - Form of Technical and Administrative Service
Agreement
Exhibit D - Form of Sales Services Agreement
Exhibit E - Form of Sublease Agreement for Premises
Exhibit F - Form of Sublease Agreement for Warehouse
Exhibit G-1 - HemaSure Registration Rights Agreement
Exhibit G-2 - HemaPharm Registration Rights Agreement
Exhibit H - Form of Opinion of Counsel to the Seller
Exhibit I - Form of Opinion of Counsel to the Buyer
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ASSET PURCHASE AGREEMENT
Agreement entered into as of May 2, 1996 between and among HemaSure Inc., a
Delaware corporation with its principal place of business at 33 Locke Drive,
Marlborough, MA, 01752 USA ("HemaSure"), HemaPharm Inc., a Delaware corporation
and a wholly owned subsidiary of HemaSure (the "Buyer"), HemaPharm A/S, a
corporation organized under the laws of Denmark and a wholly owned subsidiary of
the Buyer ("HemaPharm"), and Novo Nordisk A/S, a corporation organized under the
laws of Denmark with its principal place of business at Novo Alle, DK-2880,
Bagsvard, Denmark (the "Seller"). The Buyer, the Seller, HemaSure and HemaPharm
are referred to collectively herein as the "Parties."
This Agreement contemplates a transaction in which the Buyer desires to
purchase, and the Seller desires to sell, the business and assets comprising the
Seller's Plasma Product Unit (the "Business") for the consideration set forth
below and the assumption of certain of the Seller's liabilities relating to the
Business set forth below, subject to the terms and conditions of this Agreement.
Now, therefore, in consideration of the representations, warranties and
covenants herein contained, the Parties agree as follows.
ARTICLE I
THE PURCHASE
1.1 PURCHASE AND SALE OF ASSETS. Upon and subject to the terms and
conditions of this Agreement, including without limitation Section 1.3(c)
herein, the Buyer shall purchase from the Seller, and the Seller shall sell,
transfer, convey, assign and deliver to the Buyer, at the Closing (as defined in
Section 1.4(a)) and effective as of March 1, 1996 (the "Transfer Date"), for the
consideration specified below in this Article I, all right, title and interest
in and to all of the assets identified below (collectively, the "Acquired
Assets"):
(a) all inventories of raw materials consisting of the frozen, unprocessed,
uncut plasma in cold storage (the "Raw Materials"), work-in-process and finished
goods, supplies, packaging materials and similar items (collectively, the
"Work-in- Process") identified on SCHEDULE 1.1(a) (the Raw Materials, Work-
in-Process and such other inventories identified on SCHEDULE 1.1(a) being
referred to, collectively, as the "Inventory");
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(b) all machinery, equipment, furniture, fixtures and leasehold
improvements located at Sauntesvej 13, Gentofte Denmark (the "Premises") and in
the area set aside for the Business at Kanalholmen 25-29, Hvidovre, Denmark (the
"Warehouse") on the Transfer Date (collectively, the "Fixed Assets");
(c) all Intellectual Property identified on SCHEDULE 1.1(c) (for purposes
of this Agreement "Intellectual Property" shall mean (A) patents, patent
applications, patent disclosures and all related continuation,
continuation-in-part, divisional, reissue, re-examination, utility, model,
certificate of invention and design patents, patent applications, registrations
and applications for registrations, (B) trademarks, service marks, trade drafts,
logos, trade names and corporate names and registrations and applications for
registration thereof, (C) copyrights and registrations and applications for
registration thereof, (D) mask works and registrations and applications for
registration thereof, (E) computer software, data and documentation, (F) trade
secrets and confidential business information, whether patentable or
nonpatentable and whether or not reduced to practice, know-how, manufacturing
and product processes and techniques, research and development information,
copyrightable works, financial, marketing and business data, pricing and cost
information, business and marketing plans and customer and supplier lists and
information, (G) other proprietary rights relating to any of the foregoing
(including without limitation remedies against infringements thereof and rights
of protection of interest therein under the laws of all jurisdictions) and (H)
copies and tangible embodiments thereof);
(d) all rights of the Seller under the contracts, agreements, licenses or
instruments identified on SCHEDULE 1.1(d) (collectively, the "Assigned
Contracts"; Schedule 1.1(d) shall specify those Assigned Contracts that require
a consent, those that are assignable without consent and those for which a
consent has been obtained);
(e) all claims, prepayments, refunds, causes of action, choses in action,
rights of recovery, rights of setoff and rights of recoupment related to the
Acquired Assets and all rights under warranties related to the Acquired Assets;
(f) all permits, licenses, registrations, certificates, orders, approvals,
franchises, variances and similar rights related to the Business (the "Permits")
issued by or obtained from any governmental, regulatory or administrative
authority or agency, court or arbitrational tribunal (a "Governmental Entity");
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(g) all books, records, accounts, ledgers, files, documents,
correspondence, lists, specifications, employment records, manufacturing and
procedural manuals, advertising and promotional materials, studies, reports and
other printed or written materials (collectively, the "Records") of the
Business; and
(h) all assets listed on Schedule 1.1(h) hereto.
1.2 Assumption of Liabilities.
--------------------------
(a) At the Closing, the Buyer shall assume and agree to perform, pay and
discharge all obligations and liabilities of the Seller that are specifically
set forth in SCHEDULE 1.2 attached hereto (collectively, the "Assumed
Liabilities").
(b) The Buyer shall not assume or become responsible for, and the Seller
shall remain liable for, any and all liabilities or obligations (whether known
or unknown, whether absolute or contingent, whether liquidated or unliquidated,
whether due or to become due, and whether claims with respect thereto are
asserted before or after the Closing) of the Seller which are not Assumed
Liabilities (collectively, the "Retained Liabilities"). Unless otherwise set
forth on Schedule 1.2, the Retained Liabilities shall include, without
limitation, the following:
(i) all liabilities of the Seller for income, transfer, sales, use or other
taxes arising in connection with the consummation of the transactions
contemplated by this Agreement;
(ii) all liabilities of the Seller for costs and expenses incurred in
connection with this Agreement or the consummation of the transactions
contemplated by this Agreement;
(iii) all liabilities or obligations of the Seller under this Agreement or
the Ancillary Agreements;
(iv) all liabilities of the Seller for any taxes incurred prior to the
Transfer Date or relating to periods prior to the Transfer Date;
(v) all liabilities and obligations of the Seller under any agreements,
contracts, leases or licenses which are not Assigned Contracts;
(vi) all obligations and liabilities of the Seller arising prior to the
Transfer Date under the Assigned Contracts;
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(vii) all obligations of the Seller for repair, replacement or return of
products manufactured or sold prior to the Transfer Date, except to the extent
set forth in Schedule 1.2;
(viii) all liabilities and obligations of the Seller arising out of events,
conduct or conditions existing or occurring prior to the Transfer Date,
including without limitation product liability claims, whether or not such
events, conduct or conditions constitute violation of or non-compliance with any
law, rule or regulation (including without limitation Environmental Laws (as
defined in Section 2.18), judgment, decree or order of any Governmental Entity,
or Permit;
(ix) all liabilities of the Seller for injury to or death of persons or
damage to or destruction of property occurring prior to the Transfer Date
(including without limitation any workers compensation claim);
(x) all liabilities not relating to the Business;
and
(xi) all liabilities and obligations of the Buyer incurred in the event
that the Buyer determines that it is in its best interest to withdraw or recall
products based on or developed from plasma intake prior to the Transfer Date as
a result of a "look back" (as further described on Schedule 2.15 of the
Disclosure Schedule) or similar event whether or not such withdrawal or recall
is required by law.
1.3 PURCHASE PRICE. Subject to the terms of this Agreement, the purchase
price to be paid by the Buyer for the Acquired Assets is as described in this
Section 1.3.
(a) At the Closing, the Buyer shall deliver to the Seller a convertible
promissory note (the "Raw Materials Promissory Note"), substantially in the form
of EXHIBIT A hereto, in an amount equal to U.S. $1,513,950. The Raw Materials
Promissory Note shall be guaranteed by HemaSure, provide that the amounts due
thereunder shall not bear interest for a period of six months after the Closing
and shall bear interest at a rate of 7.0% per annum, compounded annually,
thereafter. Any outstanding principal amount of the Raw Materials Promissory
Note, together with unpaid interest thereon, shall on March 31, 1998, convert
into shares of common stock, $.01 par value per share of HemaSure (the "HemaSure
Common Stock"), at a price per share of $18.50, PROVIDED THAT
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(i) the Buyer shall have the right at its election and in its sole
discretion at any time prior to March 31, 1998 to pay to the Seller in cash all
outstanding principal and interest on the Raw Materials Promissory Note; and
(ii) in the event that the closing of an initial public offering of common
stock, $.01 par value per share, of the Buyer (the "HemaPharm Common Stock")
occurs prior to March 31, 1998, and if the Buyer shall not have elected to pay
in cash all outstanding principal and interest on the Raw Materials Promissory
Note by such date, then on the closing date of the initial public offering of
HemaPharm Common Stock (the "HemaPharm IPO Date"), all amounts outstanding
thereunder shall, in lieu of converting into HemaSure Common Stock,
automatically convert into shares of HemaPharm Common Stock at the initial
public offering price of the HemaPharm Common Stock (the "HemaPharm IPO Price").
(b) Subject to the second paragraph of this subsection (b), the Seller
shall be entitled to receive on March 31, 1998 an amount equal to U.S.
$8,486,050 (the "Raw Materials Differential"), which amount shall be paid in
either, at the election of the Buyer, (i) cash, or (ii) shares of HemaSure
Common Stock, valued at $18.50 per share, PROVIDED that no shares of HemaPharm
Common Stock shall be issued to Seller pursuant to this Section 1.3(b) (and no
consideration shall be received by Seller for the Raw Materials Differential in
lieu thereof) in the event that before March 31, 1998, the manufacturing
facility in Denmark for the Business shall have been shut down and at least 75%
of the employees of the Business in Denmark shall have been terminated (the
"Business Shut Down") which Business Shut Down shall be at the sole discretion
of the Buyer.
Notwithstanding the foregoing, in the event that the Business Shut Down
does not occur before March 31, 1998, and if prior to March 31, 1998 there shall
have occurred an initial public offering of HemaPharm Common Stock then on March
31, 1998, the Seller shall receive an amount equal to the Raw Materials
Differential which amount shall be paid in either, at the election of the Buyer,
(i) cash, or (ii) shares of HemaPharm Common Stock valued at the HemaPharm IPO
Price.
(c) At the Closing, the Work-in-Process shall be transferred from the
Seller to HemaPharm and HemaPharm shall deliver to the Seller a promissory note
(the "Work-in-Process Promissory Note"), substantially in the form of EXHIBIT C
hereto, in an amount equal to the value of the Work-in-Process as determined by
the Parties according to the price formulas set forth on Schedule A. The
Work-in-Process Promissory Note shall not bear interest. The principal amount of
the Work-in-Process
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Promissory Note shall be repaid quarterly from the sale by HemaPharm of
Work-in-Process (sold as finished goods). The repayment amounts shall be based
on the value of the Work-in- Process sold by HemaPharm, which value is set forth
on Schedule A. Notwithstanding the foregoing, the obligation to repay amounts
due under the Work-in-Process Promissory Note shall be suspended when the unpaid
principal outstanding under such Note has reached an amount equal to the
projected costs of terminating employment with HemaPharm of the Employees (as
defined in Section 3.1) (which amount is set forth on SCHEDULE 1.3(c) hereto).
In the event that the Business Shut Down has occurred prior to March 31, 1998
(which Business Shut Down shall be at the sole discretion of the Buyer), the
outstanding principal amount of the Work-in-Process Promissory Note shall be
reduced by the amount set forth on SCHEDULE 1.3(c) and the balance, if any, then
outstanding shall be paid by HemaPharm on the earlier of (a) March 31, 1998 or
(b) the date on which HemaPharm is declared bankrupt pursuant to the Danish
Bankruptcy Act. In the event such a termination shall not have occurred prior to
March 31, 1998, the outstanding principal under the Work-in-Process Promissory
Note shall be repaid by HemaPharm on March 31, 1998.
(d) "Net Sales", if any, from the sale by HemaPharm of "Old Bulk," as
described on Schedule A hereto, shall be divided equally between HemaPharm and
the Seller. HemaPharm shall pay Seller amounts owed pursuant to this Section
1.3(d) within 30 days of HemaPharm's receipt thereof. Net Sales means revenues
received by HemaPharm from the sale of Old Bulk less (i) reasonable credits or
allowances, if any, actually granted on account of price adjustments, recalls,
rejection or return of items previously sold, (ii) government charges, sales or
excise taxes, transportation insurance charges, and (iii) customs duties, if
any.
(e) The Parties estimate that the stamp duties arising in connection with
this transaction will be as set forth on SCHEDULE 1.3(e). Notwithstanding the
foregoing, the stamp duties arising in connection with this Agreement and the
transactions contemplated thereby will be divided equally between HemaPharm and
the Seller.
(f) Shares of common stock of HemaPharm or HemaSure issued to the Seller
pursuant to this Section 1.3 shall be entitled to the rights and subject to the
obligations set forth in the Registration Rights Agreements in the forms of
EXHIBIT G-1 and EXHIBIT G-2 hereto.
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1.4 The Closing.
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(a) The closing of the transactions contemplated by this Agreement (the
"Closing") shall take place in Malmo, Sweden on May 2, 1996; provided that if
all of the conditions to the obligations of the Parties to consummate the
transactions contemplated hereby have not been satisfied or waived by such date,
on such mutually agreeable later date as soon as practicable after the
satisfaction or waiver of all conditions to the obligations of the Parties to
consummate the transactions contemplated hereby (the "Closing Date").
(b) At the Closing:
(i) the Seller shall deliver to the Buyer the various certificates,
instruments and documents referred to in Section 6.1;
(ii) the Buyer shall deliver to the Seller the various certificates,
instruments and documents referred to in Section 6.2;
(iii) the Seller shall execute and deliver to the Buyer such instruments of
conveyance (e.g., trademark and patent assignments) as the Buyer may reasonably
request in order to effect the sale, transfer, conveyance and assignment to the
Buyer of valid ownership of the Acquired Assets;
(iv) the Buyer shall execute and deliver to the Seller such instruments as
the Seller may reasonably request in order to effect the assumption by the Buyer
of the Assumed Liabilities;
(v) the Buyer shall deliver to the Seller the Raw Materials Promissory
Note;
(vi) HemaPharm shall deliver to the Seller the Work-in-Process Promissory
Note;
(vii) the Seller and HemaPharm shall each execute and deliver to the other
a Technical and Administrative Service Agreement and a Sales Services Agreement
and the Seller and the Buyer shall each execute and deliver to the other a
Sublease Agreement covering the Premises, a Sublease Agreement covering the
Warehouse, a Registration Rights Agreement for the HemaSure Common Stock (the
"HemaSure Registration Rights Agreement") and a Registration Rights Agreement
for the Buyer Common Stock (the "HemaPharm Registration Rights Agreement"; the
HemaSure Registration Rights Agreement and the HemaPharm Registration Rights
Agreement are collectively referred to herein as the
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"Registration Rights Agreements"), in the forms attached hereto as EXHIBIT C,
EXHIBIT D, EXHIBIT E, EXHIBIT F, EXHIBIT G-1 and EXHIBIT G-2 (The Raw Materials
Promissory Note, the Work-in- Process Promissory Note and each of the agreements
identified in this subparagraph (vii) are collectively referred to herein as the
"Ancillary Agreements");
(viii) the Seller shall deliver to the Buyer, or otherwise put the Buyer in
possession and control of, all of the Acquired Assets of a tangible nature; and
(ix) the Buyer and the Seller shall execute and deliver to each other a
cross-receipt evidencing the transactions referred to above.
1.5 ALLOCATION. The Buyer and the Seller agree to allocate the Purchase
Price (and all other capitalizable costs) among the Acquired Assets for all
purposes (including financial accounting and tax purposes and allocation of
stamp duties) in accordance with the allocation schedule attached hereto as
SCHEDULE 1.5.
1.6 FURTHER ASSURANCES. At any time and from time to time after the
Closing, at the request of the Buyer and without further consideration, the
Seller shall execute and deliver such other instruments of sale, transfer,
conveyance and assignment and take such action as may be reasonably necessary to
transfer, convey and assign to the Buyer, and to confirm Buyer's rights to,
title in and ownership of, the Acquired Assets on and as of the Transfer Date
and to place the Buyer in actual possession and operating control thereof.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to Buyer, HemaSure and HemaPharm that
the statements contained in this Article II are true and correct on and as of
the date hereof and were true and correct on the Transfer Date, in each case
except as set forth in the disclosure schedule attached hereto (the "Disclosure
Schedule"). The Disclosure Schedule shall be initialed by the Seller and shall
be arranged in paragraphs corresponding to the numbered and lettered paragraphs
contained in this Article II, and the disclosures in any paragraph of the
Disclosure Schedule shall qualify only the corresponding paragraph in this
Article II.
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2.1 ORGANIZATION, QUALIFICATION AND CORPORATE POWER. The Seller is a
corporation duly organized and validly existing under the laws of the
jurisdiction of its incorporation. The Seller is duly qualified to conduct
business under the laws of each jurisdiction in which the nature of its
businesses or the ownership or leasing of its properties requires such
qualification. The Seller has all requisite corporate power and authority to
carry on the businesses in which it is engaged and to own and use the properties
owned and used by it. The Seller has furnished to the Buyer true and complete
copies of its Articles of Association together with a transcript from the Danish
Commerce and Companies Agency, each as amended and as in effect on the date
hereof. The Seller is not in default under or in violation of any provision of
its Articles of Association.
2.2 AUTHORITY. The Seller has all requisite power and authority to execute
and deliver this Agreement and the Ancillary Agreements and to perform its
obligations hereunder and thereunder. The execution and delivery of this
Agreement and the performance by the Seller of this Agreement and the Ancillary
Agreements and the consummation by the Seller of the transactions contemplated
hereby and thereby have been duly and validly authorized by all necessary
corporate action on the part of the Seller. This Agreement has been duly and
validly executed and delivered by the Seller and constitutes a valid and binding
obligation of the Seller, enforceable against the Seller in accordance with its
terms.
2.3 NONCONTRAVENTION. Neither the execution and delivery of this Agreement
or the Ancillary Agreements by the Seller, nor the consummation by the Seller of
the transactions contemplated hereby or thereby, will (a) conflict with or
violate any provision of the Articles of Association of the Seller, (b) require
on the part of the Seller or any corporation with respect to which the Seller,
directly or indirectly, has the power to vote or direct the voting of sufficient
securities to elect a majority of the directors (a "Subsidiary") any filing
with, or any permit, authorization, consent or approval of, any Governmental
Entity, (c) result in a breach of, constitute (with or without due notice or
lapse of time or both) a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify or cancel, any contract,
lease, sublease, license, sublicense, franchise, permit, indenture, agreement or
mortgage for borrowed money, instrument of indebtedness, Security Interest (as
defined below) or other arrangement to which the Seller is a party or by which
the Seller is bound or to which any of its assets is subject, except such
breaches, defaults or accelerations that would not have a material adverse
effect on the financial condition, earnings, assets or properties of the
Business, (d) result in the
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imposition of any Security Interest upon any assets of the Seller or (e) violate
any order, writ, injunction, decree, statute, rule or regulation applicable to
the Seller or any of its properties or assets. For purposes of this Agreement,
"Security Interest" means any mortgage, pledge, security interest, encumbrance,
charge, or other lien (whether arising by contract or by operation of law).
2.4 FINANCIAL STATEMENTS. The Seller has provided to the Buyer unaudited
statements of income for each of the last three fiscal years. These financial
statements (collectively, the "Financial Statements") have been prepared in
accordance with United States Generally Accepted Accounting Principles ("GAAP")
applied on a consistent basis throughout the periods covered thereby, fairly
present results of operations of the Business for the periods referred to
therein and are consistent with the books and records of the Seller and the
Business.
2.5 ABSENCE OF CERTAIN CHANGES. Since December 31, 1995, there has not been
any material adverse change in the assets, business, financial condition or
results of operations of the Seller or the Business, nor has there occurred any
event or development which could reasonably be foreseen to result in such a
material adverse change in the future.
2.6 UNDISCLOSED LIABILITIES. The Business has no liability (whether known
or unknown, whether absolute or contingent, whether liquidated or unliquidated
and whether due or to become due), except for (a) liabilities set forth on
Schedule 2.6, (b) liabilities which have arisen after December 31, 1995 in the
ordinary course of business consistent with past custom and practice (including
with respect to frequency and amount) (the "Ordinary Course of Business") and
which are not in the aggregate material and (c) contractual liabilities incurred
in the Ordinary Course of Business which are not in the aggregate material. All
liabilities covered by subsections (a) through (c) herein shall be considered
Retained Liabilities unless such liabilities are expressly assumed in Schedule
1.2 hereof.
2.7 Ownership and Condition of Assets.
----------------------------------
(a) The Seller is the true and lawful owner, and has good title to, all of
the Acquired Assets, free and clear of all Security Interests, except as set
forth in Section 2.7 of the Disclosure Schedule. Upon execution and delivery by
the Seller to the Buyer of the instruments of conveyance referred to in Section
1.4(b)(iii), if any, the Buyer will, effective as of March 1, 1996, become the
true and lawful owner of, and will receive good title to, the Acquired Assets,
free and clear of all Security
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Interests other than those set forth in Section 2.7 of the Disclosure Schedule.
(b) The Acquired Assets constitute all of the assets required for the
conduct of the Business as presently conducted. Each tangible Acquired Asset is
free from material defects, has been maintained in accordance with normal
industry practice, is in good operating condition and repair (subject to normal
wear and tear) and is suitable for the purposes for which it presently is used.
(c) Section 2.7 of the Disclosure Schedule lists all Acquired Assets which
are fixed assets, indicating the cost, accumulated book depreciation (if any)
and the net book value of each such fixed asset as of December 31, 1995.
2.8 OWNED REAL PROPERTY. The Seller has no real property that relates to or
is used in the Business.
2.9 Intellectual Property.
----------------------
(a) The Seller owns or has the right to use all Intellectual Property used
in the operation of the Business or necessary for the operation of the Business
as presently proposed to be conducted. Upon execution and delivery by the Buyer
to the Seller of the instruments of conveyance referred to in Section
1.4(b)(iii), each item of Intellectual Property owned by or used in the
operation of the Business at any time during the period covered by the Financial
Statements will be owned or available for use by the Buyer on identical terms
and conditions immediately following the Closing. The Seller has procedures in
place (including procedures to enforce and monitor such procedures) reasonably
necessary to protect the proprietary nature of each such item of Intellectual
Property, and to maintain in confidence all trade secrets and confidential
information, that it owns or uses. To the knowledge of the Seller, no other
person or entity has any rights to any of the Intellectual Property of the
Business (except pursuant to agreements or licenses specified in Section 2.9(c)
or 2.9(d) of the Disclosure Schedule), and no other person or entity is
infringing, violating or misappropriating any of the Intellectual Property of
the Business.
(b) (i) None of the activities of the Business presently conducted or
conducted at any time within the two years prior to the date of this Agreement,
infringes or violates, or constitutes a misappropriation of, any Intellectual
Property rights of any other person or entity, and (ii) the Seller has received
no complaint, claim, notice or letter alleging any such infringement, violation
or misappropriation.
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(c) Section 2.9(c) of the Disclosure Schedule identifies each patent or
registration which has been issued to the Seller with respect to any of the
Intellectual Property used in the operation of the Business, identifies each
pending patent application or application for registration which the Seller has
made with respect to any of the Intellectual Property used in the operation of
the Business, and identifies each license or other agreement pursuant to which
the Seller has granted any rights to any third party with respect to any of the
Intellectual Property used in the operation of the Business. The Seller has
delivered to the Buyer correct and complete copies of all such patents,
registrations, applications, licenses and agreements (as amended to date) and
has made available to the Buyer correct and complete copies of all other written
documentation evidencing ownership of, and any claims or disputes relating to,
each such item. Except as set forth in Section 2.9(c) of the Disclosure
Schedule, with respect to each item of Intellectual Property that the Seller
owns and that is used in the operation of the Business:
(i) the Seller possesses all right, title and interest in and to such item;
(ii) such item is not subject to any outstanding judgment, order, decree,
stipulation or injunction;
(iii) such item is being transferred to the Buyer on the Closing Date as
part of the Acquired Assets; and
(iv) the Seller has not agreed to indemnify any person or entity for or
against any infringement, misappropriation or other conflict with respect to
such item.
(d) Section 2.9(d) of the Disclosure Schedule identifies each item of
Intellectual Property used in the operation of the Business at any time during
the period covered by the Financial Statements that is owned by a party other
than the Seller. The Seller has supplied the Buyer with correct and complete
copies of all licenses, sublicenses or other agreements (as amended to date)
pursuant to which the Seller uses such Intellectual Property, all of which are
listed on Section 2.9(d) of the Disclosure Schedule. Except as set forth in
Section 2.9(d) of the Disclosure Schedule, with respect to each such item of
Intellectual Property:
(i) the license, sublicense or other agreement, covering such item is
legal, valid, binding, enforceable and in full force and effect;
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(ii) such license, sublicense or other agreement is assignable by the
Seller to the Buyer without the consent or approval of any party and such
license, sublicense or other agreement, is being assigned to the Buyer at the
Closing and will continue to be legal, valid, binding, enforceable and in full
force and effect immediately following the Closing in accordance with the terms
thereof as in effect prior to the Closing;
(iii) no party to such license, sublicense or other agreement is in breach
or default, and no event has occurred which with notice or lapse of time would
constitute a breach or default or permit termination, modification or
acceleration thereunder;
(iv) the underlying item of Intellectual Property is not subject to any
outstanding judgment, order, decree, stipulation or injunction; and
(v) the Seller has not agreed to indemnify any person or entity for or
against any interference, infringement, misappropriation or other conflict with
respect to such item.
2.10 INVENTORY. The inventory of the Business consists of a quality and
quantity usable and saleable in the Ordinary Course of Business without
restrictions as to price or other terms of sale, except for obsolete items and
items of below-standard quality (such as "Old Bulk"), all of which obsolete and
below standard quality items are specified on Schedule 2.10.
2.11 REAL PROPERTY LEASES. Section 2.11 of the Disclosure Schedule
describes briefly the real property leased or subleased to the Seller that is
used by the Business (collectively the "Leases") and lists the term of such
Leases, any extension and expansion options, and the rent payable thereunder.
The Seller has delivered to the Buyer correct and complete copies of the Leases
(as amended to date) listed in Section 2.11 of the Disclosure Schedule. With
respect to each Lease listed in Section 2.11 of the Disclosure Schedule:
(a) the Lease is legal, valid, binding, enforceable and in full force and
effect;
(b) the Lease is subleasable by the Seller to the Buyer without the consent
or approval of any party (except as set forth in Section 2.11 of the Disclosure
Schedule) and the Lease will continue to be legal, valid, binding, enforceable
and in full force and effect immediately following the Closing in accordance
with the terms thereof as in effect prior to the Closing;
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(c) no party to the Lease is in breach or default, and no event has
occurred which, with notice or lapse of time, would constitute a breach or
default or permit termination, modification, or acceleration thereunder;
(d) there are no disputes, oral agreements or forbearance programs in
effect as to the Lease or sublease;
(e) the Seller has not assigned, transferred, conveyed, mortgaged, deeded
in trust or encumbered any interest in the Leasehold;
(f) all facilities leased thereunder are supplied with utilities and other
services necessary for the operation of said facilities; and
(g) to the knowledge of the Seller, the owner of the facility leased has
good and clear record and marketable title to the parcel of real property, free
and clear of any Security Interest, easement, covenant or other restriction,
except for recorded easements, covenants, and other restrictions which do not
impair the Intended Uses, occupancy or value of the property subject thereto.
2.12 CONTRACTS. Section 2.12 of the Disclosure Schedule contains a true,
correct and complete list and description of all of the Assigned Contracts. With
respect to each such Assigned Contract: (i) it is legal, valid, binding and
enforceable and in full force and effect; (ii) any written arrangement has been
assigned by the Seller to the Buyer with the consent or approval of all third
parties (except as set forth in Section 2.12 of the Disclosure Schedule) and
will continue to be legal, valid, binding and enforceable and in full force and
effect immediately following the Closing in accordance with the terms thereof as
in effect prior to the Closing; and (iii) no party is in breach or default, and
no event has occurred which with notice or lapse of time would constitute a
breach or default or permit termination, modification, or acceleration, under
the written arrangement. Each such Assigned Contract involving any affiliate (as
hereinafter defined) is clearly identified. For purposes of this Agreement,
"Affiliate" shall mean direct or indirect ownership of at least fifty percent
(50%) of the outstanding equity voting stock or voting rights (or such lesser
percentage that is the maximum allowed to be owned by a foreign corporation in a
particular jurisdiction) of a Party or other entity or the ability to direct or
cause the direction of the management and policies of such Party or other
entity.
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2.13 INSURANCE. The insurance policies maintained by the Seller (including
fire, theft, casualty, general liability, business interruption, workers
compensation, environmental, product liability and automobile) are in full force
and effect and are in amounts of a nature which are adequate and customary for
the business of the Company and its subsidiaries.
2.14 LITIGATION. Section 2.14 of the Disclosure Schedule identifies, and
contains a brief description of, (a) any unsatisfied judgement, order, decree,
stipulation or injunction and (b) any claim, complaint, action, suit,
proceeding, hearing or investigation of or in any Governmental Entity or before
any arbitrator which relates to the Business and to which the Seller is a party
or, to the best knowledge of the Seller, is threatened to be made a party. None
of the complaints, actions, suits, proceedings, hearings, and investigations set
forth in Section 2.14 of the Disclosure Schedule could result in the imposition
of any liability on the Buyer or is reasonably likely to have a material adverse
effect on the assets, business, financial condition or results of operations of
the Business.
2.15 PRODUCT WARRANTY. No product manufactured, sold, leased or delivered
by the Seller which relates to the Business or the Assets is subject to any
guaranty, warranty, right of return or other indemnity beyond the applicable
standard terms and conditions of sale or lease, which are set forth in Section
2.15 of the Disclosure Schedule. Aggregate expenses incurred by the Seller in
fulfilling its obligations under their guaranty, warranty, right of return and
indemnity provisions with respect to any product manufactured, sold, leased or
delivered by the Seller which relates to the Business during each of the fiscal
years and the interim period covered by the Financial Statements have not
exceeded 2.0% of total revenues of the Business; and the Seller knows of no
reason why such expenses should significantly increase as a percentage of sales
in the future.
2.16 EMPLOYEES. Section 2.17 of the Disclosure Schedule contains a list of
all employees of the Seller associated with the Business, along with the
position and the annual rate of compensation of each such person. Each such
employee has entered into a confidentiality assignment of inventions agreement
with the Seller, the forms of which has previously been delivered to the Buyer.
No such employee has given notice of resignation or has been given notice of
termination of employment. The consummation of the transactions contemplated
herein will not constitute a change of terms and conditions of employment that
allows the Employees (as defined in Article III) to terminate their employment
pursuant to Section 3, Subsection 2, of the Danish Act on the Legal Position of
Employees in connection with Business
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<PAGE> 20
Acquisitions ("lov om lonmodtageres retsstilling ved virksomhedsoverdragelse").
To the knowledge of the Seller, no key employee or group of employees has any
plans to terminate employment with the Seller (other than for the purpose of
accepting employment with the Buyer following the Closing). With respect to the
Business, the Seller is not a party to or bound by any collective bargaining
agreement, nor has any of them experienced any strikes, grievances, claims of
unfair labor practices or other collective bargaining disputes. With respect to
the Business, the Seller has no knowledge of any organizational effort presently
being made or threatened by or on behalf of any labor union with respect to
employees of the Seller.
2.17 EMPLOYEE BENEFITS. Section 2.17 of the Disclosure Schedule contains in
respect of any and all Employees (as defined in Article III) a complete and
accurate list of all severance pay or similar termination indemnities and all
other benefits granted to such Employees in excess of the rights pursuant to the
Danish Salaried Employees Act ("funktionaerloven") (or in the event that the
Seller has disclosed the existence of an applicable collective bargaining
agreement, in excess of the rights following from such collective bargaining
agreement). Except as disclosed in Section 2.17 of the Disclosure Schedule, no
Employee is entitled to severance pay or similar termination indemnities nor has
been granted a longer period of notice or other rights more favorable to the
Employee than the rights following from the Danish Salaried Employees Act (or,
as the case may be, from any applicable collective bargaining agreement). There
is no scheme in operation by the Seller in relation to the Business under which
any employee or other person is entitled to a commission or remuneration of any
sort calculated by reference to the whole or part of the turnover, profits or
sales of the Business nor is there any scheme in operation by the Seller in
relation to the Business under which any employee or other person has been
granted stock options or deferred compensation.
2.18 ENVIRONMENTAL MATTERS. Except as set forth in Section 2.18 of the
Disclosure Schedule, the Seller has complied with all applicable Environmental
Laws (as defined below) which relate to the Business or the property used or
operated by the Business There is no pending or, to the knowledge of the Seller,
threatened civil or criminal litigation, written notice of violation, formal
administrative proceeding, or investigation, inquiry or information request by
any Governmental Entity, relating to any Environmental Law involving the Seller.
For purposes of this Agreement, "Environmental Law" means any law, statute, rule
or regulation of any Governmental Entity or the common law relating to the
environment or occupational health and safety, including without limitation any
statute, regulation or
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order pertaining to (i) treatment, storage, disposal, generation and
transportation of industrial, toxic or hazardous substances or solid or
hazardous waste; (ii) air, water and noise pollution; (iii) groundwater and soil
contamination; (iv) the release or threatened release into the environment of
industrial, toxic or hazardous substances, or solid or hazardous waste,
including without limitation emissions, discharges, injections, spills, escapes
or dumping of pollutants, contaminants or chemicals; (v) the protection of wild
life, marine sanctuaries and wetlands, including without limitation all
endangered and threatened species; (vi) storage tanks, vessels and containers;
(vii) underground and other storage tanks or vessels, abandoned, disposed or
discarded barrels, containers and other closed receptacles; (viii) health and
safety of employees and other persons; and (ix) manufacture, processing, use,
distribution, treatment, storage, disposal, transportation or handling of
pollutants, contaminants, chemicals or industrial, toxic or hazardous substances
or oil or petroleum products or solid or hazardous waste.
2.19 LEGAL COMPLIANCE. The Seller and the conduct and operations of the
Business, are in compliance with each law (including rules and regulations
thereunder) of any government or Governmental Entity, which (a) affects or
relates to this Agreement or the transactions contemplated hereby or (b) is
applicable to the Seller or the Business, except for any violation of or default
under a law referred to in clause (b) above which reasonably may be expected not
to have a material adverse effect on the assets, business, financial condition,
results of operations of the Business.
2.20 PERMITS AND REGULATORY APPROVALS. Section 2.20 of the Disclosure
Schedule sets forth a list of all (a) Permits (including without limitation
those issued or required under Environmental Laws and those relating to the
occupancy or use of owned or leased real property) issued to or held by the
Seller that are required for the Seller to conduct the Business as presently
conducted, except for those the absence of which would not have any material
adverse effect on the assets, business, financial condition, results of
operations of the Business and (b) regulatory approvals to market the products
identified in Section 2.20 in the countries indicated on Section 2.20. Except
with respect to Denmark, the Permits and regulatory approvals represent all
Permits and regulatory approvals required to market and sell products in each
jurisdiction where such products are currently marketed or sold. Each such
Permit and regulatory approval is in full force and effect and, to the best of
the knowledge of the Seller, no suspension or cancellation of such Permit or
regulatory approval is threatened and there is no basis
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for believing that such Permit or regulatory approval will not be renewable upon
expiration. Except as set forth in Section 2.20 of the Disclosure Schedule, each
such Permit and regulatory approval is assignable by the Seller to the Buyer
without the consent or approval of any party and will continue in full force and
effect following the Closing. To the extent that any such Permit or regulatory
approval is not assignable, to Seller's knowledge a new Permit or regulatory
approval can be obtained by the Buyer on unchanged terms and conditions, except
such changes which would not be material to the operation of the Business,
within one year from the Buyer's application therefor and Seller will provide
Buyer reasonable assistance in obtaining such new Permits or regulatory
approvals.
2.21 CERTAIN BUSINESS RELATIONSHIPS WITH AFFILIATES. No Affiliate of the
Seller (a) owns any property or right, tangible or intangible, which is used in
the Business (b) has any claim or cause of action against the Seller with
respect to the Business, or (c) owes any money to the Business.
2.22 BOOKS AND RECORDS. The books, records, accounts, ledgers and files of
the Seller which relate to the Business are accurate and complete in all
material respects and have been maintained in accordance with good business and
bookkeeping practices.
2.23 CUSTOMERS. Schedule 2.23 hereto lists the top ten customers for the
Business for the fiscal year ended December 31, 1995.
2.24 GOVERNMENT CONTRACTS. With respect to the Business, the Seller has not
been suspended or debarred from bidding on contracts or subcontracts with any
Governmental Entity; no such suspension or debarment has been threatened or
initiated; and the consummation of the transactions contemplated by this
Agreement will not result in any such suspension or debarment of the Seller, or
the Buyer (assuming that no such suspension or debarment will result solely from
the identity of the Buyer).
2.25 DISCLOSURE. No representation or warranty by the Seller contained in
this Agreement, and no statement contained in the Disclosure Schedule or any
other document, certificate or other instrument delivered to or to be delivered
by or on behalf of the Seller pursuant to this Agreement contains or will
contain any untrue statement of a material fact or omit or will omit to state
any material fact necessary, in light of the circumstances under which it was or
will be made, in order to make the statements herein or therein not misleading.
The Seller has disclosed to the
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Buyer all material information relating to the Business or the transactions
contemplated by this Agreement.
ARTICLE III
EMPLOYEES
3.1 BUYER'S SUCCESSION. The Seller and the Buyer acknowledge and agree that
under Danish Act on the Legal Position of Employees in connection with Business
Acquisitions the contracts of employment between the Seller and the employees of
the Seller associated with the Business (the "Employees") will have effect after
the Closing Date as if originally made between the Buyer and Employees.
3.2 Division of Obligations and Liabilities.
----------------------------------------
(a) The Seller shall perform and discharge all obligations in respect of
all of the Employees for its own account up to and including the Transfer Date
(including, without limitation, discharging all remuneration and other costs)
and shall indemnify the Buyer against all liabilities arising from the Seller's
failure so to discharge.
(b) The Buyer shall on and from the Transfer Date perform and discharge the
obligation of the employer in respect of the Employees (including, without
limitation, discharging all remuneration and other costs) for its own account
and shall indemnify the Seller against all liabilities from the Buyer's failure
so to discharge.
(c) The aggregate liability vis-a-vis the Employees in respect of salary,
overtime payments, holiday pay, weekend payments and any and all other
remuneration and other costs earned or incurred in the period up to and
including the Transfer Date, but not due at the Transfer Date, shall be
reimbursed by the Seller to the Buyer. The aggregate liability shall be computed
by the auditors of the Buyer and the Seller, jointly, and shall be payable in
cash to the Buyer within 30 days after the Closing Date. In the event that the
auditors of the Parties fail to agree on the aggregate liability, such liability
shall be determined finally and binding upon the Parties by an independent
auditor appointed by the Danish Association of Chartered Accountants (Foreningen
af Statsautoriserede Revisorer) at the request of any Party.
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3.3 EMPLOYEES WHOSE EMPLOYMENT HAS TERMINATED. The Seller shall remain
solely responsible for and shall indemnify and hold the Buyer harmless against
any and all liabilities relating to employees who have retired, resigned or have
been given notice prior to the Transfer Date.
3.4 EMPLOYEE BENEFITS TO BE PROVIDED BY THE SELLER AFTER CLOSING. At the
request of any Employee, the Seller agrees, at the written request of the Buyer,
to provide to such Employee any of the benefits set forth in SCHEDULE 3.4 until
March 31, 1998. Any costs in connection with providing such benefits shall be
borne by the Seller.
3.5 SALARY REDUCTION. Prior to March 1, 1997, the Buyer shall not reduce
the salary of any Employee below the level received by such Employee as of
December 31, 1995.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE BUYER, HEMASURE AND HEMAPHARM
The Buyer, HemaSure and HemaPharm represent and warrant to the Seller as
follows:
4.1 ORGANIZATION. HemaPharm is a corporation duly organized and validly
existing under the laws of Denmark. HemaSure and the Buyer are each corporations
duly organized, validly existing and in good standing under the state of
Delaware. Each of HemaSure, HemaPharm and the Buyer is duly qualified to conduct
business and each of HemaSure and the Buyer is in corporate and tax good
standing under the laws of each jurisdiction in which the nature of its
businesses or the ownership or leasing of its properties requires such
qualification. Each of HemaPharm, HemaSure and the Buyer has all requisite
corporate power and authority to carry on the businesses in which it is engaged
and to own and use the properties owned and used by it. Each of HemaSure,
HemaPharm and the Buyer has furnished to the Buyer true and complete copies of
its charter documents, each as amended and as in effect on the date hereof. None
of HemaSure, HemaPharm or the Seller is in violation of any provision of its
charter documents.
4.2 AUTHORIZATION OF TRANSACTION. Each of the Buyer, HemaSure and HemaPharm
has all requisite power and authority to execute and deliver this Agreement and
the Ancillary Agreements and to perform its respective obligations hereunder and
thereunder. The execution and delivery of this Agreement and the Ancillary
Agreements by each of the Buyer, HemaSure and HemaPharm
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and the performance of this Agreement and the consummation of the transactions
contemplated hereby and thereby by each of the Buyer, HemaSure and HemaPharm
have been duly and validly authorized by all necessary corporate action on the
part of each of the Buyer, HemaSure and HemaPharm, respectively. This Agreement
has been duly and validly executed and delivered by each of the Buyer, HemaSure
and HemaPharm, and constitutes a valid and binding obligation of the Buyer,
HemaSure and HemaPharm, enforceable against each such Party in accordance with
its terms.
4.3 NONCONTRAVENTION. Neither the execution and delivery of this Agreement
or the Ancillary Agreements by the Buyer, HemaSure or HemaPharm, nor the
consummation by the Buyer, HemaSure and HemaPharm, of the transactions
contemplated hereby or thereby, will (a) conflict or violate any provision of
the charter or Bylaws of the Buyer, HemaSure or HemaPharm, (b) require on the
part of the Buyer, HemaSure or HemaPharm, any filing with, or permit,
authorization, consent or approval of, any Governmental Entity, (c) conflict
with, result in breach of, constitute (with or without due notice or lapse of
time or both) a default under, result in the acceleration of, create in any
party any right to accelerate, terminate, modify or cancel, or require any
notice, consent or waiver under, any contract, lease, sublease, license,
sublicense, franchise, permit, indenture, agreement or mortgage for borrowed
money, instrument of indebtedness, Security Interest or other arrangement to
which the Buyer, HemaSure or HemaPharm, is a party or by which any such Party is
bound or to which any of their respective assets is subject, except such
conflicts, breaches, defaults or accelerations that would not have a material
adverse effect on the financial condition, earnings, assets or properties of the
Business, or (d) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to the Buyer, HemaSure or HemaPharm or any of their
respective properties or assets.
4.4 SECURITIES AND EXCHANGE COMMISSION FILINGS. All reports required to be
filed by HemaSure pursuant to Section 12(g) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), (i) at the time filed, complied in all
material respects with the applicable requirements of the Exchange Act, (ii) did
not at the time they were filed (or if amended or superceded by a filing prior
to the date of this Agreement, then on the date of such filing) contain any
untrue statement of a material fact or omit to state a material fact required to
be stated in such report or necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading.
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4.5 REGISTRATION WITH VAT AUTHORITIES. The Buyer will register with the VAT
authorities in Denmark to operate the Business. The transfer of the Business
from the Seller to the Buyer is not subject to any VAT tax in accordance with
the provisions of paragraph 8, subparagraph 1 of the Danish VAT Act.
ARTICLE V
5.1 PREPARATION OF TRANSFER STATEMENT. Prior to May 31, 1996, the auditors
of the Buyer and the Seller shall, jointly, prepare a Transfer Statement (the
"Transfer Statement") according to which the Buyer and the Seller shall account
for and make appropriate adjustments to reflect the transfer of the Business as
of the Transfer Date. This accounting shall provide without limitation that (a)
the Seller shall reimburse the Buyer for (i) any profits or return on the
Acquired Assets or any incoming payments related to the Acquired Assets,
including without limitation revenues from the sale of products, for the period
commencing on the Transfer Date and (ii) any liabilities, obligations or costs
performed, paid or discharged by the Buyer which under the terms of this
Agreement were to have been paid by the Seller, and (b) the Buyer shall
reimburse the Seller for (x) any profits or return on the Acquired Assets or any
incoming payments related to the Acquired Assets received by the Buyer for the
period prior to the Transfer Date and (y) any liabilities, obligations or costs
performed, paid or discharged by the Seller which under the terms of this
Agreement were to have been paid by the Buyer. The Transfer Statement shall
include, without limitation, the aggregate liability vis-a-vis the Employees
computed in accordance with Section 3.2(c).
5.2 PAYMENT OF THE BALANCE OF THE TRANSFER STATEMENT. Any balance according
to the Transfer Statement in Seller's favor shall be paid by the Buyer in cash
on July 31, 1996, except that the balance corresponding to any accounts
receivable included in the Transfer Statement that have not been paid by July
31, 1996 shall be paid by the Buyer within 30 days of the Seller's receipt of
such payment on Buyer's behalf. Any balance according to the Transfer Statement
in the Buyer's favor shall be paid by the Seller in cash on July 31, 1996.
5.3 DISPUTES. In the event that the auditors of the Parties fail to agree
on the Transfer Statement, any disputes with respect thereto shall be determined
finally and binding upon the Parties by an independent auditor appointed by the
Danish Association of Chartered Accountants (Foreningen af Statsautoriserede
Revisorer) at the request of any Party.
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ARTICLE VI
CONDITIONS TO CLOSING
6.1 CONDITIONS TO OBLIGATIONS OF THE BUYER. The obligation of the Buyer to
consummate the transactions to be performed by it in connection with the Closing
is subject to the satisfaction of the following conditions:
(a) the Seller shall have obtained all of the waivers, permits, consents,
approvals or other authorizations, and effected all of the registrations,
filings and notices from third parties and Governmental Entities, identified on
Schedule 6.1(a);
(b) the Seller shall have performed or complied with in all material
respects its agreements and covenants required to be performed or complied with
under this Agreement as of or prior to the Closing;
(c) no action, suit or proceeding shall be pending or threatened before any
Governmental Entity wherein an unfavorable judgment, order, decree, stipulation
or injunction would (i) prevent consummation of any of the transactions
contemplated by this Agreement, (ii) cause any of the transactions contemplated
by this Agreement to be rescinded following consummation or (iii) affect
adversely the right of the Buyer to own, operate or control any of the Acquired
Assets following the Closing, and no such judgment, order, decree, stipulation
or injunction shall be in effect;
(d) the Seller shall have delivered to the Buyer a certificate (without
qualification as to knowledge or materiality or otherwise) to the effect that
each of the conditions specified in clauses (a) through (c) of this Section 6.1
is satisfied in all respects;
(e) the Buyer shall have received from counsel to the Seller an opinion
with respect to the matters set forth in EXHIBIT H attached hereto, addressed to
the Buyer and dated as of the Closing Date;
(f) the Buyer and the Seller shall have entered into a Technical and
Administrative Service Agreement, in the form of EXHIBIT C attached hereto;
(g) the Buyer and the Seller shall have entered into a Sales Services
Agreement, in the form of EXHIBIT D attached hereto; and
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(h) the Buyer and the Seller shall have entered into a Sublease Agreement
covering the Premises and a Sublease Agreement covering the Warehouse, in the
forms of EXHIBIT E and EXHIBIT F attached hereto, respectively.
6.2 CONDITIONS TO OBLIGATIONS OF THE SELLER. The obligation of the Seller
to consummate the transactions to be performed by it in connection with the
Closing is subject to the satisfaction of the following conditions:
(a) the Buyer shall have performed or complied in all material respects
with its agreements and covenants required to be performed or complied with
under this Agreement as of or prior to the Closing;
(b) the Buyer shall have delivered to the Seller a certificate (without
qualification as to knowledge or materiality or otherwise) to the effect that
each of the conditions specified in clause (a) of this Section 6.2 is satisfied
in all respects;
(c) the Buyer and HemaSure shall have delivered to the Seller the Raw
Materials Promissory Note in the form of EXHIBIT A;
(d) HemaPharm shall have delivered to the Seller the Work-in-Process
Promissory Note in the form of EXHIBIT B;
(e) the Buyer shall have delivered to the Seller the Technical and
Administrative Service Agreement in the form of EXHIBIT C;
(f) the Buyer shall have delivered to the Seller the Sales Service
Agreement in the form of EXHIBIT D;
(g) the Buyer shall have delivered to the Seller the Sublease Agreement for
the Premises in the form of EXHIBIT E; and
(h) the Buyer shall have delivered to the Seller the Sublease Agreement for
the Warehouse in the form of EXHIBIT F.
(i) the Buyer shall have delivered to the Seller the Registration Rights
Agreements in the forms of EXHIBIT G-1 and EXHIBIT G-2 hereto;
(j) the Seller shall have received an opinion from counsel to the Buyer
with respect to the matters set forth in EXHIBIT I attached hereto, addressed to
the Seller and dated as of the Closing Date;
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(k) the Seller shall have received a certificate to the effect that the
Buyer has invested an amount equal to $4,000,000 in equity capital of HemaPharm
on or before the Closing Date;
ARTICLE VII
POST-CLOSING COVENANTS
7.1 PROPRIETARY INFORMATION. From and after the Closing, the Seller, on the
one hand, and HemaSure, HemaPharm and the Buyer, on the other hand, shall hold
in confidence, and shall use their respective best efforts to have all of their
respective Affiliates hold in confidence, all knowledge, information and
documents of a confidential nature or not generally known to the public with
respect to the Seller, on the one hand, or HemaSure, HemaPharm or the Buyer, on
the other hand, or their respective businesses (including without limitation the
financial information, technical information or data relating to products and
names of customers) and shall not disclose or make use of the same without the
written consent of the other Party, except to the extent that such knowledge,
information or documents shall have become public knowledge other than through a
breach of this Agreement.
7.2 SOLICITATION AND HIRING. For a period of three years after the Closing
Date, the Seller shall not, either directly or indirectly as a stockholder,
investor, partner, director, officer, employee or otherwise, (a) solicit or
attempt to induce any Restricted Employee (as defined below) to terminate his
employment with the Buyer or (b) hire or attempt to hire any Restricted
Employee. For purposes of this Agreement, a "Restricted Employee" shall mean any
person who either (i) was an employee of the Buyer on either the date of this
Agreement or the Closing Date or (ii) was an employee of the Seller on either
the date of this Agreement or the Closing Date and received an employment offer
from the Buyer within five business days following the Closing Date.
7.3 Non-Competition.
----------------
(a) For a period of five years after the Closing Date, the Seller shall not
in any country, state or region, either directly or indirectly as a stockholder
(other than as a stockholder of HemaSure or HemaPharm or as a holder or up to
15% of the outstanding stock of publicly traded company or up to 5% of the
outstanding stock of a privately held company), investor, partner, director,
officer, employee, consultant or otherwise,
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develop, manufacture, market or sell any human plasma derived product that is
competitive with any product sold by the Business prior to the Closing Date (a
"Competitive Product"). Without limiting the foregoing, the provisions of this
Section 7.3(a) shall not apply to (i) any services provided by the Seller to the
Buyer as contemplated by this Agreement, (ii) the Seller if all or substantially
all the business of the Seller is acquired by a third party through merger, sale
of assets or otherwise, (iii) any business acquired by the Seller provided that
less than 50% of the revenues of such acquired business are derived from one or
more Competitive Products.
(b) The Seller agrees that the duration and geographic scope of the
non-competition provision set forth in this Section 7.3 are reasonable. In the
event that any court determines that the duration or the geographic scope, or
both, are unreasonable and that such provision is to that extent unenforceable,
the Parties agree that the provision shall remain in full force and effect for
the greatest time period and in the greatest area that would not render it
unenforceable. The Parties intend that this non-competition provision shall be
deemed to be a series of separate covenants, one for each and every county of
each and every state of the United States of America and each and every
political subdivision of each and every country outside the United States of
America where this provision is intended to be effective.
(c) In the event of a breach by Seller of this Section 7.3, the Buyer shall
have the right to seek specific performance and injunctive relief.
7.4 Sharing of Data.
----------------
(a) The Seller shall have the right for a period of seven years following
the Closing Date to have reasonable access to such books, records and accounts,
including financial and tax information, correspondence, production records,
employment records and other records that are transferred to the Buyer pursuant
to the terms of this Agreement for the limited purposes of concluding its
involvement in the business conducted by the Seller prior to the Closing Date
and for complying with its obligations under applicable securities, tax,
environmental, employment or other laws and regulations. The Buyer shall have
the right for a period of seven years following the Closing Date to have
reasonable access to those books, records and accounts, including financial and
tax information, correspondence, production records, employment records and
other records that are retained by the Seller pursuant to the terms of this
Agreement to the extent that any of the foregoing is needed by the Buyer in
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order to comply with its obligations under applicable securities, tax,
environmental, employment or other laws and regulations. Neither the Buyer nor
the Seller shall destroy any such books, records or accounts retained by it
without first providing the other Party with the opportunity to obtain or copy
such books, records, or accounts.
(b) Promptly upon request by the Buyer made at any time during the
three-year period following the Closing Date, the Seller shall authorize the
release to the Buyer of all files pertaining to the Acquired Assets or the
Business or its operations held by any governmental authorities, agencies or
instrumentalities.
7.5 AUDIT. The Seller agrees that it shall, at the request of the Buyer,
cooperate with Buyer in the preparation under GAAP of audited balance sheets and
statements of income, changes in stockholders' equity and cash flows for each of
the last three fiscal years of the Business. All reasonable costs and expenses
incurred by the independent accountants in connection with such audit shall be
borne by the Buyer.
7.6 USE OF NAMES. The Seller agrees that from and after the Closing Date,
the Buyer shall have the right to use the name "Novo Nordisk" (the "Name") in
each jurisdiction in which products of the Business are marketed by the Seller
(the "Products"). The Buyer's right to use the Name shall be for the sole
purpose of (i) marketing the Products in each jurisdiction in which such
Products are currently marketed and (ii) informing customers that the Buyer has
purchased the Business from the Seller. The right to use the Name in a
jurisdiction shall terminate at the earlier of (i) such time that all necessary
registrations and approvals required to market the Products in such jurisdiction
shall have been transferred to the Buyer, and (ii) December 31, 2000. Buyer
agrees to use commercially reasonable best efforts to transfer the registrations
and approvals promptly after the Closing.
7.7 PERMITS. The Seller agrees to use its commercially reasonable best
efforts after the Closing Date to assist the Buyer (i) in obtaining a new
environmental permit pursuant to Chapter 5 of the Danish Environmental Act
necessary to enable the Buyer to increase the annual consumption of raw
materials to 300 tonnes and/or replace, modify or add production equipment, and
(ii) in obtaining a permit encompassing an increase in the volume of waste that
may be disposed of by the Buyer beyond the level allowed under the current
permits.
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7.8 ADDITIONAL CAPITALIZATION. Prior to the earlier of March 31, 1998, or
the date of termination of the business operations of the Buyer, (a) HemaSure or
the Buyer agrees to provide equity capital to HemaPharm in the amount of
$4,000,000 (in addition to the equity capital investment made pursuant to
Section 4.7 herein), and (b) not to reduce the total capitalization of HemaPharm
below $4,000,000. The Buyer agrees to provide to the Seller a Certificate of an
officer of the Buyer certifying as to such undertakings.
7.9 SECONDARY NAMES. To the extent that the Seller pursuant to its Articles
of Association has registered secondary names with the Danish Commerce and
Companies Agency relating to the Business, then this Section will provide that
after the Closing the Seller will refrain from using such secondary names and
will undertake to deregister such names following Seller's first shareholder
meeting after the Closing.
7.10 CONSENTS. If (i) any of the Assigned Contracts or other assets or
rights constituting Acquired Assets may not be assigned and transferred by the
Seller to the Buyer (as a result of either the provisions thereof or applicable
law) without the consent or approval of a third party, (ii) the Seller, after
using its commercially reasonable best efforts, is unable to obtain such consent
prior to the Closing and (iii) the Closing occurs nevertheless, then (w) such
Assigned Contracts shall not be assigned and transferred by the Seller to the
Buyer at the Closing and the Buyer shall not assume vis a vis any third party
the Seller's liabilities or obligations with respect thereto at the Closing, (x)
the Seller shall continue to use its best efforts to obtain the necessary
consent or approval as soon as practicable after the Closing, (y) until such
Assigned Contracts are assigned or transferred, the Seller shall continue such
Assigned Contracts in the name of the Seller, but shall act only as the Buyer's
agent in relation to any such Assigned Contract and the Buyer shall, as the
Seller's subcontractor, obtain all benefits and rights and perform all
obligations of the Seller thereunder and shall indemnify the Seller against all
actions, proceedings, costs, damages, claims and demands in respect of any
failure on the part of the Buyer to perform those obligations, and until such
Assigned Contracts are assigned or transferred the Seller will give all
reasonable assistance to the Buyer, at the Buyer's request, to enable the Buyer
to enforce its benefits and rights under such Assigned Contracts, and (z) upon
the obtaining of such consent or approval, the Buyer and the Seller shall
execute such further instruments of conveyance (in the form executed at the
Closing) as may be necessary to assign and transfer such Assigned Contracts (and
the associated liabilities and obligations of the Seller) to the Buyer.
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7.11 ADDITIONAL TECHNICAL SERVICES. For a period of one year (with an
option by the Buyer to extend such term for an additional one year period) after
the Closing Date, the Seller agrees to provide to the Buyer on commercially
reasonable terms any services currently not covered by the Technical and
Administrative Services Agreement and provided by the Seller, or any Affiliate
of the Seller, to the Business at any time since January 1, 1995, PROVIDED that
the Buyer has used commercially reasonable efforts to obtain such services from
a third party.
7.12 RECALL OR WITHDRAWAL OF PRODUCTS. In any withdrawal or recall of
Products pursuant to Section 1.2(b)(xi) herein, Buyer agrees to implement such
withdrawal or recall in a commercially reasonable manner.
7.13 VAT NOTIFICATION. The Seller shall inform the Danish VAT authorities
of its acquisition of the Business pursuant to paragraph 8, subparagraph 1 of
the Danish VAT Act. The Seller shall inform the Danish VAT authorities on the
Buyer's assumption of the VAT adjustment obligation
("momsreguleringsforpligtelse") specified in Schedule 1.2 hereto.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification.
----------------
(a) The Seller shall indemnify the Buyer in respect of, and hold the Buyer
harmless against, any and all debts, obligations and other liabilities (whether
absolute, accrued, contingent, fixed or otherwise, or whether known or unknown,
or due or to become due or otherwise), monetary damages, fines, fees, penalties,
interest obligations, deficiencies, losses and expenses (including without
limitation amounts paid in settlement, interest, court costs, costs of
investigators, fees and expenses of attorneys, accountants, financial advisors
and other experts, and other expenses of litigation) ("Damages") incurred or
suffered by the Buyer or any Affiliate thereof:
(i) resulting from, relating to or constituting any misrepresentation,
breach of warranty or failure to perform any covenant or agreement of the Seller
contained in this Agreement;
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(ii) resulting from, relating to or constituting any Retained Liabilities
(including without limitation Damages arising out of the ownership or operation
of the Business prior to the Closing Date);
(iii) arising out of or in connection with the obligations of the Seller
vis-a-vis the Employees pursuant to the job change policy adopted by the Seller
as set forth under Section 3) a) in the Memorandum of April 7, 1995 (as such job
change policy has been extended or amended by the Seller prior to the Closing),
provided that the Seller shall not indemnify the Buyer with respect to the
salary of any Employee during the notice period required under the Danish
Salaried Employees Act or any applicable collective bargaining agreement; and
(iv) any severance pay or other termination benefit in excess of that to
which an Employee would be entitled under the Danish Salaried Employees Act or
any applicable collective bargaining agreement.
(b) The Buyer shall indemnify the Seller for Damages incurred or suffered
by Seller or any Affiliate resulting from, relating to or arising out of
operation of the Business after the Closing Date (other than those Damages
resulting from or relating to (i) any breach of any representation or warranty
made by the Seller in the Agreement, (ii) breach of any term of the Agreement by
the Seller or (iii) fraud or misrepresentation by the Seller).
(c) The Buyer shall indemnify the Seller for any VAT claims resulting from
the transfer of the Business to the Buyer, provided that the Seller has informed
the Danish VAT authorities of the Buyer's assumption of the VAT adjustment
obligation within the time period required by law. The Seller shall indemnify
the Buyer for any claims resulting from the failure of the Seller to notify the
Danish VAT authorities of the Buyer's assumption of the VAT adjustment
obligation.
8.2 Method of Asserting Claims.
---------------------------
(a) All claims for indemnification by a party seeking indemnification (an
"Indemnified Person") pursuant to this Article VII shall be made in accordance
with the provisions herein.
(b) Third Party Claims.
-------------------
(i) If a third party asserts that an Indemnified Person is liable to such
third party for a monetary or other obligation which may constitute or result in
Damages for which such Indemnified Person may be entitled to indemnification
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<PAGE> 35
pursuant to this Article VIII, then (a) such Indemnified Person shall be
entitled to satisfy such obligation, with the prior consent from the party from
whom the indemnification is sought (the "Indemnifying Person"), which consent
shall not be unreasonably withheld, (b) such Indemnified Person may make a claim
for indemnification pursuant to this Article VIII in accordance with the
provisions of Section 8.2(c) of this Agreement, and (c) such Indemnified Person
shall be reimbursed, in accordance with the provisions of Section 8.2(c) of this
Agreement, for any such Damages for which it is entitled to indemnification
pursuant to this Article VIII (subject to the right of the Indemnifying Party to
dispute the Indemnified Person's entitlement to indemnification under the terms
of this Article VIII).
(ii) The Indemnified Person shall give prompt written notification to the
Indemnifying Person of the commencement of any action, suit or proceeding
relating to a third party claim for which indemnification pursuant to this
Article VIII may be sought; PROVIDED, HOWEVER, that no delay on the part of the
Indemnified Person in notifying the Indemnifying Person shall relieve the
Indemnifying Person of any liability or obligation hereunder except to the
extent of any damage or liability caused by or arising out of such failure.
Within 20 days after delivery of such notification, the Indemnifying Person may,
upon written notice thereof to the Indemnified Person, assume control of the
defense of such action, suit or proceeding with counsel reasonably satisfactory
to the Indemnified Person. If the Indemnifying Person does not so assume control
of such defense, the Indemnified Person shall control such defense. The party
not controlling such defense may participate therein at its own expense;
provided that if the Indemnifying Person assumes control of such defense and the
Indemnified Person reasonably concludes that the Indemnifying Person and the
Indemnified Person have conflicting interests or different defenses available
with respect to such action, suit or proceeding, the reasonable fees and
expenses of counsel to the Indemnified Person shall be considered "Damages" for
purposes of this Agreement. The party controlling such defense shall keep the
other party advised of the status of such action, suit or proceeding and the
defense thereof and shall consider in good faith recommendations made by the
other party with respect thereto. The Indemnified Person shall not agree to any
settlement of such action, suit or proceeding without the prior written consent
of the Indemnifying Person, which shall not be unreasonably withheld. The
Indemnifying Person shall not agree to any settlement of such action, suit or
proceeding without the prior written consent of the Indemnified Person, which
shall not be unreasonably withheld.
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<PAGE> 36
(c) Claims Procedure.
-----------------
(i) If an Indemnified Person has incurred or suffered Damages for which it
is entitled to indemnification under this Article VIII, the Indemnified Person
shall, prior to the expiration of the representation, warranty, covenant or
agreement to which such claim relates as set forth in Section 7.3 of this
Agreement, give written notice of such claim (a "Claim Notice") to the
Indemnifying Person. Each Claim Notice shall state the amount of claimed Damages
(the "Claimed Amount") and the basis for such claim. The date on which all of
the representations, warranties, covenants and agreements of the Company expire
in accordance with Section 7.3 of this Agreement shall be referred to herein as
the "Termination Date".
(ii) Within 20 days after delivery of a Claim Notice, the Indemnifying
Person shall provide to the Indemnified Person, a written response (the
"Response Notice") in which the Indemnifying Person shall: (i) agree that all of
the Claimed Amount shall be paid to the Indemnified Person, (ii) agree that
part, but not all, of the Claimed Amount shall be paid to the Indemnified Person
or (iii) contest that any of the Claimed Amount shall be paid to the Indemnified
Person. The Indemnifying Person may contest the Claimed Amount only based upon a
good faith belief that all or such portion of the Claimed Amount does not
constitute Damages for which the Indemnified Person is entitled to
indemnification under this Article VIII. If no Response Notice is delivered by
the Indemnifying Person within such 20-day period, the Indemnifying Person shall
be deemed to have agreed that all of the Claimed Amount shall be paid to the
Indemnified Person.
(iii) If the Indemnifying Person in the Response Notice agrees (or is
deemed to have agreed) that all or a portion of the Claimed Amount shall be paid
to the Indemnified Person, the Indemnifying Person shall, promptly following the
earlier of the required delivery date for the Response Notice or the delivery of
the Response Notice pay the Claimed Amount or such portion thereof, as the case
may be, to the Indemnified Person.
(iv) If the Indemnifying Person in the Response Notice contests the release
of all or part of the Claimed Amount, the matter shall be settled by binding
arbitration in accordance with Section 11.2 of this Agreement.
8.3 SURVIVAL. The representations and warranties set forth in this
Agreement shall survive the Closing and the consummation of the transactions
contemplated hereby and continue until two years after the Closing Date
(provided that the representation and warranty set forth in Section 2.18 shall
continue until five years
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<PAGE> 37
after the Closing Date) and shall not be affected by any examination made for or
on behalf of the Party making such representations or warranties or the
knowledge of any of such person's officers, directors, stockholders, employees
or agents. Without limiting the foregoing, all liabilities of the Business that
are not Assumed Liabilities, including without limitation those identified in
Section 1.2(b), shall continue to be liabilities of the Seller from and after
the Closing Date in perpetuity.
8.4 Limitations.
------------
(a) Neither the Seller, on the one hand, nor the Buyer, HemaSure or
HemaPharm, on the other hand, shall be liable under this Article VIII unless and
until the aggregate Damages to be paid by the Seller, on the one hand, or the
Buyer, HemaSure or HemaPharm, on the other hand, exceed $25,000 (at which point
the Indemnifying Party shall become liable for the aggregate Damages, and not
just amounts in excess of $25,000).
(b) Amounts, if any, due hereunder from the Buyer, HemaSure or HemaPharm
shall be in addition to amounts owed pursuant to the Notes described in Section
1.3.
ARTICLE IX
RIGHT OF FIRST OFFER
In the event that the Seller receives an offer (an "Offer") from a third
party to license one or more patents in patent families 4220 or 3384, the Buyer
shall have a right of first offer to license such patent or patents in
accordance with the terms of this Article IX. Seller shall provide the Buyer
with a written description (the "Description") of the Offer and the Buyer shall
have 60 days from Buyer's receipt of such Description (the "Consideration
Period") to notify Seller of its intent to license the patent or patents on the
terms set forth in the Description. In the event that the Buyer so notifies
Seller within the Consideration Period that it intends to license such patent or
patents, then Seller agrees to license the patents to Buyer on the terms set
forth in the Description. If the Buyer notifies Seller that it does not intend
to license such patent or patents or if Buyer does not notify Seller within the
Consideration Period (the earlier of such dates being referred to as the "Offer
Termination Date"), then Seller shall have the right to license such patent or
patents on the terms set forth in the Description to the third party that had
made the Offer. In the event that such license is
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<PAGE> 38
not executed within 60 days after the Offer Termination Date, then the Seller
shall consider the Offer to be a new Offer and the provisions of this Article IX
shall apply.
ARTICLE X
DEFINITIONS
For purposes of this Agreement, each of the following defined terms is
defined in the Section of this Agreement indicated below.
Defined Term Section
------------ -------
Acquired Assets 1.1
Affiliate 2.12
Assigned Contracts 1.1(d)
Assumed Liabilities 1.2(a)
Business Introduction
Business Shut Down 1.3(b)
Buyer Introduction
Claim Notice 8.2(c)(i)
Claimed Amount 8.2(c)(i)
Closing 1.4(a)
Closing Date 1.4(a)
Competitive Product 7.3
Consideration Period Article IX
Contracts 2.12
Damages 8.1(a)
Description Article IX
Disclosure Schedule Article II
Employees 3.1
Environmental Law 2.18
Exchange Act 4.4
Financial Statements 2.4
Fixed Assets 1.1(b)
GAAP 2.4
Governmental Entity 1.1(f)
HemaPharm Introduction
HemaPharm Common Stock 1.3(a)
HemaPharm IPO Price 1.3(a)(ii)
HemaPharm Registration Rights Agreement 1.4
HemaSure Introduction
HemaSure Common Stock 1.3(a)
HemaSure Registration Rights Agreement 1.4
ICC 11.2
Indemnified Person 8.2(a)
Indemnifying Person 8.2(b)(i)
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<PAGE> 39
Intellectual Property 1.1(c)
Inventory 1.1(a)
Leases 2.11
Name 7.6
Net Sales 1.3(d)
Offer Article IX
Offer Termination Date Article IX
Old Bulk 2.10
Ordinary Course of Business 2.6
Parties Introduction
Permits 1.1(f)
Premises 1.1(b)
Products 7.6
Raw Materials 1.1(a)
Raw Materials Differential 1.3(b)
Raw Materials Promissory Note 1.3(a)
Records 1.1(g)
Response Notice 8.2(c)(ii)
Restricted Employee 7.2
Retained Liabilities 1.2(b)
Security Interest 2.3
Seller Introduction
Subsidiary 2.3
Termination Date 8.2(c)(i)
Transfer Date 1.1
Transfer Statement 5.1
Warehouse 1.1(b)
Work-in-Process 1.1(a)
Work-in-Process Promissory Note 1.3(d)
ARTICLE XI
MISCELLANEOUS
11.1 PRESS RELEASES AND ANNOUNCEMENTS. Neither Party shall issue any press
release or announcement relating to the subject matter of this Agreement without
the prior written approval of the other Party; PROVIDED, HOWEVER, that either
Party may make any public disclosure it believes in good faith is required by
law or regulation (in which case the disclosing Party shall advise the other
Party and provide it with a copy of the proposed disclosure prior to making the
disclosure). The Seller has notified the Employees on the sale of the Business
as contemplated herein in accordance with the Danish Act on the Legal Position
of Employees in connection with Business Acquisitions.
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<PAGE> 40
11.2 ARBITRATION. Any disputes, controversy or differences arising between
the Parties out of or in relation to or in connection with this Agreement or any
breach thereof which cannot be settled between the Parties shall be finally
settled by arbitration held in Bagsvard, Denmark and conducted in English
pursuant to the Rules of Conciliation and Arbitration of the International
Chamber of Commerce (the "ICC") by which each Party agrees to be bound. In any
arbitration pursuant to this Section the decision shall be rendered by three
independent arbitrators whose decision shall be binding. The Seller shall
appoint one of the arbitrators, the Buyer shall appoint a second arbitrator, and
the two, so selected shall select and designate the third arbitrator.
11.3 NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
11.4 ENTIRE AGREEMENT. This Agreement (including the documents referred to
herein) constitutes the entire agreement between the Parties and supersedes any
prior understandings, agreements, or representations by or between the Parties,
written or oral, that may have related in any way to the subject matter hereof.
11.5 SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. Neither Party may assign either this Agreement or any of
its rights, interests, or obligations hereunder without the prior written
approval of the other Party; provided that the Buyer may assign its rights,
interests and/or obligations hereunder to an Affiliate of the Buyer.
11.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
11.7 HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
11.8 NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly delivered two
business days after it is sent by registered or certified mail, return receipt
requested, postage prepaid, or one business day after it is sent via a reputable
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<PAGE> 41
nationwide overnight courier service, in each case to the intended recipient as
set forth below:
If to the Seller: Copy to:
----------------- --------
Novo Nordisk A/S Novo Nordisk A/S
Novo Alle, DK-2880 Novo Alle, DK-2880
Bagsvard, Denmark Bagsvard, Denmark
Attn: Attn: General Counsel
Fax: Fax:
Novo Nordisk of North America,
Inc.
405 Lexington Avenue
Suite 6400
New York, New York 10017
Attn: General Counsel
Fax: 212-867-0298
If to the Buyer: Copy to:
---------------- --------
HemaSure Inc. Hale and Dorr
33 Locke Drive 60 State Street
Marlborough, MA 02872 Boston, MA 02109
Attn: President Attn: Susan W. Murley, Esq.
Fax: (617) 526-5000
Either Party may give any notice, request, demand, claim, or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication shall be deemed to
have been duly given unless and until it actually is received by the individual
for whom it is intended. Either Party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Party notice in the manner herein set forth.
11.9 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the internal laws (and not the law of conflicts) of Denmark.
11.10 AMENDMENTS AND WAIVERS. The Parties may mutually amend any provision
of this Agreement at any time prior to the Closing with the prior authorization
of their respective Boards of Directors. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by each
of the Parties. No waiver by either Party of any default, misrepresentation, or
breach of warranty or covenant hereunder,
-37-
<PAGE> 42
whether intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
11.11 SEVERABILITY. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
11.12 EXPENSES. Each Party shall bear its own costs and expenses (including
legal fees and expenses) incurred in connection with this Agreement and the
transactions contemplated hereby. The Seller agrees that none of the costs and
expenses (including legal fees and expenses) incurred by it in connection with
this Agreement or the transactions contemplated hereby will be (a) borne by any
Subsidiary or (b) paid until after the Closing.
11.13 INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
HEMASURE INC.
By: /s/ Authorized Signatory
--------------------------------
Title:
-----------------------------
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<PAGE> 43
HEMAPHARM INC.
By: /s/ Authorized Signatory
--------------------------------
Title:
-----------------------------
HEMAPHARM A/S
By: /s/ Authorized Signatory
--------------------------------
Title:
-----------------------------
NOVO NORDISK A/S
By: /s/ Authorized Signatory
--------------------------------
Title:
-----------------------------
-39-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF HEMASURE, INC. FOR THE THREE MONTHS ENDED MARCH 31,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 14,467
<SECURITIES> 30,557
<RECEIVABLES> 55
<ALLOWANCES> 0
<INVENTORY> 737
<CURRENT-ASSETS> 46,076
<PP&E> 4,465
<DEPRECIATION> 2,740
<TOTAL-ASSETS> 47,900
<CURRENT-LIABILITIES> 2,073
<BONDS> 0
<COMMON> 81
0
0
<OTHER-SE> 45,483
<TOTAL-LIABILITY-AND-EQUITY> 47,900
<SALES> 36
<TOTAL-REVENUES> 82
<CGS> 403
<TOTAL-COSTS> 403
<OTHER-EXPENSES> 2,793
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,530)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,530)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,530)
<EPS-PRIMARY> (0.31)
<EPS-DILUTED> 0
</TABLE>
