Exhibit 2.1
ASSET PURCHASE AGREEMENT
by and between
BALCHEM CORPORATION,
as Purchaser
and
LODERS CROKLAAN USA, LLC,
as Seller
Dated June 30, 2005
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
----
ARTICLE 1 Defined
Terms......................................................1
1.1
Definitions........................................................1
1.2
Interpretation.....................................................5
ARTICLE 2 Purchase and Sale of
Acquired Assets...............................5
2.1 Agreement
to Sell and Purchase.....................................5
2.2 Excluded
Assets....................................................6
2.3 Assumed
Liabilities................................................6
2.4 Excluded
Liabilities...............................................6
2.5
Closing............................................................7
2.6
Post-Closing
Audit.................................................8
ARTICLE 3 Consideration and Payment
Terms....................................8
3.1 Amount of
Purchase Price...........................................8
3.2
Earnout............................................................8
3.3 Allocation
of Purchase Price.......................................9
3.4 Payment of
Closing Date Purchase Price.............................9
ARTICLE 4 Representations and
Warranties of Seller..........................10
4.1
Organization and
Standing.........................................10
4.2
Noncontravention..................................................10
4.3
Authorization; Binding
Effect.....................................10
4.4 Financial
Information.............................................10
4.5 Events
Subsequent to December 31, 2004............................11
4.6 Absence of
Undisclosed Liabilities................................11
4.7 Compliance
with Law...............................................11
4.8 Title to
Acquired Assets; Condition of Assets.....................12
4.9 Facility;
Improvements............................................12
4.10 Environmental,
Health and Safety Matters..........................12
4.11
Litigation........................................................13
4.12 Governmental
Consents.............................................13
4.13 Assigned
Agreements...............................................13
4.14 Intellectual
Property.............................................14
4.15 Certain
Payments..................................................14
4.16 Licenses and
Permits..............................................14
4.17
Insurance.........................................................15
4.18 Product
Warranties................................................15
4.19 Transactions
with Certain Persons.................................15
4.20 Brokers and
Finders...............................................15
4.21
Inventories.......................................................15
4.22 Customers and
Vendors.............................................15
4.23
Employees.........................................................16
4.24 Labor
Relations...................................................16
4.25 Absence of
Questionable Payments..................................16
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PAGE
----
4.26 Information
Disclosed to Toller...................................16
4.27
Disclosure........................................................16
ARTICLE 5 Representations and
Warranties of Purchaser.......................17
5.1
Organization, Standing and Corporate
Authority....................17
5.2 Brokers
and Finders...............................................17
5.3 Binding
Effect; Governmental Consents.............................17
5.4
Noncontravention..................................................17
ARTICLE 6 Covenants of
Seller...............................................18
6.1 Conduct of
Business...............................................18
6.2
Confidentiality...................................................18
6.3 Access Pending
Closing............................................18
6.4 Consents
of Third Parties.........................................19
6.5 Closing
Documents.................................................19
6.6 Employees,
Employee Benefits and Labor Relations..................19
6.7
Post-Closing Collection of Accounts
Receivable....................19
6.8
Noncompetition....................................................19
6.9 Payment of
Certain Fees...........................................20
6.10 Environmental
Permits.............................................20
6.11 Regulatory
Matters................................................20
ARTICLE 7 Covenants of
Purchaser............................................20
7.1 Payment of
Certain Fees...........................................20
7.2 Consents
of Third Parties.........................................21
7.3
Confidentiality...................................................21
7.4 Closing
Documents.................................................21
7.5 Collection
of Accounts Receivable.................................21
7.6 Employees,
Employee Benefits and Labor Relations..................21
7.7
Environmental
Permits.............................................21
7.8 Regulatory
Matters................................................21
ARTICLE 8 Conditions to Purchaser's
Obligation to Close.....................22
8.1 Accuracy
of Representations and Warranties........................22
8.2
Performance.......................................................22
8.3 Closing
Documents.................................................22
8.4
Certificate of
Seller.............................................23
ARTICLE 9 Conditions to Seller's
Obligation to Close........................23
9.1 Accuracy
of Representations and Warranties........................23
9.2
Performance of
Agreements.........................................23
9.3 Closing
Documents.................................................23
9.4
Certificate of
Purchaser..........................................24
ARTICLE 10
Termination.......................................................24
10.1
Termination.......................................................24
10.2 Effect of
Termination.............................................25
ARTICLE 11 Indemnification and
Survival......................................25
11.1 Indemnification
of Purchaser......................................25
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PAGE
----
11.2 Indemnification
of Seller.........................................26
11.3 Procedure for
Indemnification.....................................26
11.4
Survival..........................................................28
11.5 Interest Upon
Damages.............................................28
11.6 Minimum
Threshold; Maximum Liability..............................28
11.7 Exceptions to
the Cap.............................................28
11.8 Exclusive
Remedy..................................................28
ARTICLE 12
Miscellaneous.....................................................29
12.1 Written
Agreement to Govern.......................................29
12.2
Severability......................................................29
12.3 Notices and
Other Communications..................................29
12.4
Counterparts......................................................30
12.5 Law to
Govern.....................................................30
12.6 Successors and
Assigns; Assignment................................31
12.7 Further
Assurances................................................31
12.8 Disclosure
Schedule...............................................31
12.9
Modification......................................................31
12.10 Waiver of
Provisions..............................................31
12.11
Expenses..........................................................31
12.12 Public
Statements.................................................31
12.13 Dispute
Resolution................................................31
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ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET
PURCHASE AGREEMENT
("Agreement") is made and entered into this
---------
30th day of June, 2005, by and among
BALCHEM CORPORATION, a Maryland corporation
("Purchaser") and LODERS CROKLAAN USA, LLC, an Illinois limited liability
---------
company ("Seller").
------
RECITALS:
WHEREAS,
Seller is engaged
in, among other things, the business of
fluidized bed encapsulation and fluidized bed granulation of food and
pharmaceutical products (the "Business");
and
--------
WHEREAS,
subject to the terms
and conditions
set forth herein, Seller
desires to sell to Purchaser, and Purchaser desires to purchase from
Seller,
substantially all of the assets of Seller
relating to the Business; and
NOW,
THEREFORE, in consideration of the mutual covenants and agreements
of
the parties and other good and valuable consideration, the receipt and
sufficiency of which are hereby
acknowledged, and intending to be legally bound,
the parties hereto do hereby agree as
follows:
ARTICLE 1
---------
Defined Terms
-------------
1.1
Definitions. In
addition to the terms defined specifically elsewhere
-----------
herein (including the Recitals) the following terms shall have the following
meanings:
"Accounts
Receivable" means all
accounts receivable
owed to Seller as of
--------------------
the close of business on the day
immediately
prior to the
Closing Date, and
which are no older than sixty (60) days,
with respect to the
Products sold by
Seller prior to the Closing Date.
"Affiliate"
means, with
respect to any Person, any other Person
---------
controlling, controlled by or under common
control with such first Person. For
purposes of this definition and the Agreement, the term "control" (and
correlative terms) means (a) the ownership
of 50% or more of the equity interest
in a Person, or (b) the power, whether by contract, equity ownership or
otherwise, to direct or cause the
direction of the
policies or management of a
Person.
"Assignment and Assumption Agreement" means the Assignment
and Assumption
------------------------------------
Agreement executed in connection
herewith.
"Bill of
Sale" means the Bill of Sale executed in connection herewith.
------------
"Business
Day" means any day other than Saturday, Sunday and any day
which
------------
is a legal holiday under the laws of the State of
Illinois or a day on which
banking institutions in such state are
authorized by law or other governmental
action to close.
<PAGE>
"Claim"
means a written demand, claim, complaint, cross-demand,
-----
cross-claim, counterclaim, cross-complaint,
summons, notice of violation,
arbitration notice, or other written
notice, communication or action pursuant to
which a Person (including a Governmental
Authority) (a)
notifies another Person
that the first Person has suffered or incurred Losses for which the second
Person may be liable or responsible; (b) alleges that such second Person has
violated a Law or is otherwise liable or responsible for Losses
arising under a
Law; (c) asserts legal, equitable, contractual or other rights or remedies
against such second Person; (d) institutes or commences a
Proceeding against
such second Person; (e) otherwise makes any demand or claim on such
second
Person; or (f) threatens to do any of the
foregoing.
"Code"
means the Internal Revenue Code of 1986, as amended.
----
"Confidentiality
Agreement" means that certain Confidentiality Agreement
--------------------------
made by and between Purchaser and Seller
dated as of March 18, 2005.
"Consent"
means any consents or approval of any Governmental Authority or
-------
any other Person.
"Disclosure
Schedule" means
the Disclosure Schedule delivered in
---------------------
connection herewith.
"Environmental Costs
or Liabilities" means any losses, liabilities,
-------------------------------------
obligations, damages, fines, penalties,
judgments, settlements, actions, claims,
demands, costs and expenses (including
costs relating to personal injury, death
or property damage, reasonable fees, disbursements and expenses of legal
counsel, experts, engineers and consultants,
and the costs of
investigation or
feasibility studies and performance of remedial or removal
actions and cleanup
and monitoring activities) arising from, under or in connection
with (a) any
violation of or liability under any Environmental Laws, (b) any remedial
obligation under or relating to any
Environmental
Laws or (c) any
liability or
claim relating to the release of,
presence of, or
exposure to, any
Hazardous
Substance.
"Environmental Laws"
means all Laws and rules of common law pertaining to
-------------------
the environment, health and safety, including the Comprehensive
Environmental
Response, Compensation and Liability Act of 1980 (42 U.S.C ss. 9601 et
seq.)
("CERCLA"), the Emergency Planning and Community Right to Know Act and the
Superfund Amendments and Reauthorization Act of 1986, the
Solid Waste Disposal
Act (42 U.S.C. ss. 6901 et seq.), the
Resource Conservation
and Recovery Act of
1976, the Hazardous and Solid Waste
Amendments
Act of 1984, the Clean
Air Act
(42 U.S.C ss. 7401 et seq.), the Clean Water Act (33 U.S.C.
ss. 1251 et seq.),
the Federal Water Pollution Control Act, the Toxic
Substances
Control Act (15
U.S.C. ss. 2601 et seq.), the Safe Drinking Water Act, the
Occupational
Safety
and Health Act of 1970 (42 U.S.C.
ss. 11001 et seq.),
the Oil Pollution Act
of
1990, the Hazardous Materials Transportation Act (49 U.S.C. ss.
1801 et seq.),
and any similar or analogous statutes, regulations and decisional law of any
Governmental Authority, as each of the foregoing may have been amended or
supplemented.
"Escrow"
shall mean the escrow
account established
with Chicago Title
&
------
Trust Company pursuant to the Option
Agreement.
2
<PAGE>
"Facility"
means that
portion of Seller's
facility located at 24708 W.
--------
Durkee Road, Channahon, Illinois, which is primarily used for
operation of the
Business and which is the subject of the
Lease.
"FDA" means the
U.S. Food and Drug Administration.
---
"Governmental
Authority" means any governmental department, commission,
-----------------------
board, bureau, agency, court or other
instrumentality of any
country, state,
province, county, parish or municipality, jurisdiction, or other political
subdivision thereof, or any similar body exercising executive, legislative,
judicial, regulatory or administrative
authority or functions.
"Hazardous
Substances"
means (A) any hazardous materials, hazardous
---------------------
wastes, hazardous substances, toxic wastes, solid wastes, and
toxic substances
as those or similar terms are defined under any Environmental Laws; (B) any
asbestos or asbestos-containing material; (C) polychlorinated biphenyls
("PCBs"), or PCB-containing materials, or fluids; (D) any
petroleum,
petroleum
----
hydrocarbons, petroleum products, crude oil and any fractions or
derivatives
thereof; and (E) any substance that, whether by its nature or its use, is
subject to regulation under any
Environmental Laws or
with respect to which any
Environmental Laws or Governmental Authority requires environmental
investigation, monitoring or
remediation.
"IRS"
means the Internal Revenue Service.
---
"Knowledge" means, with respect to Seller, the actual knowledge,
after due
---------
inquiry, of Donald C. Grubba (with respect to all matters), Tom Cain (with
respect to environmental, safety and health matters only),
Linda McLaren
(with
respect to product quality and compliance
matters only),
Manuel Laborde
(with
respect to customer matters only), Steve Flentge (with respect to financial
matters only) and Claudia Sedath (with
respect to production
capability matters
only.)
"Law"
means any applicable
constitutional
provision, statute,
act, code
---
(including the Code), law, regulation,
rule, ordinance, order, decree, ruling
proclamation, resolution, judgment, decision,
declaration, or interpretative or
advisory opinion or letter, of a Governmental Authority having valid
jurisdiction.
"Lease"
means the industrial building lease to be entered into by and
-----
between Seller (as lessor) and Purchaser
(as lessee) in connection herewith, in
the form as mutually agreed by Seller and
Purchaser.
"Lien"
means all burdens, encumbrances and defects affecting the
ownership
----
of an asset, including (a) liens, security
interests, mortgages, deeds of trust,
pledges, conditional sale or trust receipt
arrangement,
consignment or bailment
for security purposes, finance lease, or other encumbrances of any nature
whatsoever securing any obligation, whether such interest is based on common
law, statute or contract; (b) any rights of first refusal or
any restriction on
use, voting, transfer, receipt of income or exercise of
any other attribute of
ownership; and (c) any other reservations,
exceptions,
covenants,
conditions,
restrictions, leases, subleases, licenses, easements, servitudes, occupancy
agreements, equities, charges, assessments, defects in title, liabilities,
claims, agreements, obligations, encroachments and other burdens, and other
title exceptions and encumbrances affecting property of any nature,
whether
accrued or unaccrued, absolute or contingent, legal or equitable, real or
personal, or otherwise.
3
<PAGE>
"Losses"
means losses, liabilities, assessments, cleanup, removal,
------
remediation and restoration obligations, judgments, awards, damages, natural
resource damages, contribution, cost-recovery and compensation obligations,
fines, fees, penalties, and costs and expenses (including
litigation costs and
attorneys' and experts' fees and
expenses).
"Offer"
means any outstanding, unaccepted offer.
-----
"Option
Agreement"
means that certain
Option and Exclusivity
Agreement
-----------------
dated as of May 20, 2005 and as amended June 15, 2005, made by and between
Purchaser and Seller.
"PACE"
means Paper, Allied-Industrial, Chemical and Energy Workers
----
International Union, AFL-CIO on behalf of
its Local #6-865
"PACE
Agreement" means the Collective Bargaining Agreement between
Seller
--------------
and PACE, effective December 2, 2002
through December 2, 2007, and all contracts
or successor agreements thereto.
"Permitted
Encumbrances" mean,
collectively,
(a) minor
imperfections of
-----------------------
title, if any, none of which is substantial in amount, singly or in the
aggregate, or detracts from the value or impairs the use of any such asset
subject thereto, (b) lessor's, materialmen's, mechanics', warehousemen's,
carriers', repairmen's or other like liens arising in the ordinary
course of
business for amounts not yet due, (c) liens
for current taxes,
assessments
or
other governmental charges not yet due and payable or
being contested in
good
faith by appropriate proceedings,
(d) statutory liens
incurred or deposits made
in the ordinary course of business in connection
with workers' compensation,
unemployment insurance and other types of social security, or to secure the
performance of tenders, statutory obligations, surety and appeal bonds, bids,
leases, government contracts, performance
and return-of-money bonds, and similar
obligations which are not yet delinquent,
and (e) liens or
encumbrances created
by Purchaser.
"Person"
means an individual, corporation, partnership, limited liability
------
company, association, trust, unincorporated
organization, or other entity.
"Proceeding" means a
judicial, administrative or arbitral proceeding
----------
(including a lawsuit or an investigation by a Governmental Authority),
commencing with the institution of such
proceeding through the issuance, service
or delivery of the applicable Claim or
other applicable event.
"Products"
means the products listed on Section 1.1 of the Disclosure
--------
Schedule.
"Supply
Agreement" means the
Supply Agreement
setting forth terms of
an
-----------------
arrangement between Purchaser (as Buyer) and Seller
(as Supplier) under
which
Seller would also supply various operational services and utilities to
Purchaser, in the form as mutually agreed
by Seller and Purchaser.
"Tax
Return" means any return, statement information return or other
-----------
document (including amendments thereto and supporting
information)
filed or
required to be filed with any Governmental Authority in connection with the
determination, assessment, collection or administration of any Taxes or the
administration of any Laws relating to any
Taxes.
4
<PAGE>
"Tax" or
"Taxes" means any taxes, assessments, fees and other
governmental
---
-----
charges imposed by any Governmental Authority, including profits, gross
receipts, net proceeds, alternative or add-on minimum, ad
valorem, value added,
turnover, sales, use, property, personal property (tangible and intangible),
environmental, stamp, leasing, lease, user, excise, duty,
franchise,
capital
stock, transfer, registration, license, withholding, social security (or
similar), unemployment, disability, payroll, employment,
fuel, excess profits,
occupational, premium, windfall profit,
severance,
estimated, or other
tax of
any kind whatsoever, including any interest, penalty, or addition thereto,
whether disputed or not.
"UCC"
means the Uniform Commercial Code as in effect in the relevant
---
jurisdiction.
1.2
Interpretation.
Bold print or
capitalized references
herein to any
--------------
"Section" shall refer to a Section of this Agreement, unless expressly
indicating otherwise. The headings preceding the text of
Articles and Sections
included in this Agreement and the
Disclosure Schedule
are for convenience only
and shall not be deemed part of this Agreement or be given any effect in
interpreting this Agreement. The use of the
masculine, feminine or neuter gender
herein shall not limit any provision of this Agreement. The use of the terms
"including" or "include" shall in all cases
herein (unless otherwise specified)
mean "including, without limitation" or "include, without limitation,"
respectively. A breach of or inaccuracy in any representation, warranty or
covenant shall not be affected by the fact
that any more general or less general
representation, warranty or covenant was
not also breached or inaccurate. In any
case where the concept of materiality is applied more than once to
qualify any
provision of this Agreement (whether by cross referencing or incorporation or
otherwise), such provision shall be
interpreted as if only one such materiality
qualification applied to it.
ARTICLE 2
---------
Purchase and Sale of Acquired Assets
------------------------------------
2.1 Agreement to Sell and Purchase. Upon the terms and subject to the
--------------------------------
conditions set forth herein, and in reliance on the respective
representations
and warranties of the parties, Seller shall sell the Acquired Assets to
Purchaser, and Purchaser shall purchase
such Acquired Assets from Seller, on the
Closing Date and at the time and place of
Closing referred
to in Section
2.5
below, for the price and in accordance with
the provisions
specified in Article
3 hereof, free and clear of all Liens other
than Permitted
Encumbrances.
The
Acquired Assets shall be deemed to include
all of Seller's
right, title and
interest in and to solely the following
assets:
(a) All finished
goods, work in process
and raw materials for
the
Products
(including
finished goods,
work in process,
raw materials and
packaging
and shipping materials
in transit identified
in Section 2.1(a)
of the
Disclosure Schedule) (collectively, the "Inventory");
---------
(b) The trademarks
identified in Section
4.14(a) of the Disclosure
Schedule
(the "Trademarks") and all trade dress, trade names, brand
names,
----------
service
marks, logos,
logotypes and symbols dedicated exclusively to the
Products,
together
with
the goodwill
5
<PAGE>
associated
therewith, any
registrations
associated therewith,
including
any
applications, renewals, modifications or extensions;
(c) The patents
and patent applications identified in Section
4.14(c) of
the Disclosure
Schedule (the "Patents") and all improvements,
-------
inventions
and discoveries
whether patentable or
unpatentable
relating
exclusively to the Business;
(d) The equipment,
machinery, and
personal property
identified in
Section
2.1(d) of the Disclosure Schedule (the "Equipment");
---------
(e) All marketing
materials to the extent dedicated exclusively to
the
promotion, marketing and advertisement of the Products;
(f) All existing lists of the vendors, customers and distributors
of
the
Products, including those identified in Section 4.22 of the
Disclosure
Schedule;
(g) All know-how, trade secrets, copyrights in product
documentation
(including
formulae, batch
sheets, raw and finished goods specifications,
quality
control test methods and validation procedures) and other
confidential or
proprietary
information
relating exclusively to the
Business,
including those described in Section 2.1(g) of the
Disclosure
Schedule
(the "Trade Secrets");
-------------
(h) All rights under the agreements set forth in Section 2.1(h) of
the Disclosure
Schedule and all
purchase orders entered into with respect
to the
Business to which the Seller is a party
(each such agreement
or
purchase
order an "Assigned
Agreement" and,
collectively, the
"Assigned
-------------------
--------
Agreements"); and
----------
(i) The Accounts
Receivable, as set
forth in Section 2.1(i) of the
Disclosure
Schedule.
2.2
Excluded Assets. All assets of Seller which are not specifically
----------------
listed as described in Section 2.1 are expressly excluded from the Acquired
Assets being acquired by Purchaser
hereunder, including any interest in the real
property upon which the Facility is located
except as specifically
contemplated
by the Lease.
2.3
Assumed Liabilities. At the Closing on the Closing Date, Purchaser,
as
-------------------
additional consideration for the Acquired Assets, shall assume and agree to
discharge, pay and perform when and as due the obligations relating to the
Acquired Assets, including those obligations under the Assigned Agreements,
arising during the period after the Closing (collectively, the "Assumed
-------
Liabilities").
-----------
2.4
Excluded Liabilities.
Other than (i) the Assumed Liabilities and (ii)
--------------------
those liabilities and obligations to be
assumed by Purchaser in accordance with
the respective terms of the Lease, the Services Agreement and the Supply
Agreement, Purchaser shall not assume,
take subject to, or in
any other manner
be responsible for any liabilities or obligations whatsoever of Seller,
including liabilities and obligations with
respect to the following:
(a) accounts or trade payables and accrued expenses;
6
<PAGE>
(b) inter-company
or other transactions between Seller and any
Affiliate
of Seller;
(c) Seller's current
or former employees,
agents, consultants or
other
independent
contractors, whether
nor not such Persons are employed
by
Purchaser after the Closing, relating to services performed, benefit
accruals
or claims accrued or incurred prior to the Closing, or with
respect to
employee benefit plans, at any time on or after the
Closing
Date,
including obligations under any employment agreement or
arrangement,
compensation,
incentives, deferred compensation, accrued payroll, accrued
vacation
pay, sick leave, severance, worker's compensation,
unemployment
compensation, employee
welfare or retirement benefits, continuing health
coverage,
liabilities
under
the Worker Adjustment and Retraining
Notification Act, and
obligations
or agreements to give preferential
treatment
to laid-off or terminated employees;
(d) Taxes assessed
to Seller for periods
up to and including
the
Closing
Date and any income,
sales, use or similar
taxes resulting
from
the
transactions contemplated by this Agreement;
(e) any violation on or prior to the Closing Date of any
Environmental Law by
Seller or any Person acting on behalf of Seller, or
by the
Person from or through which Seller acquired title to the Facility
(including, without
limitation, any
failure to obtain or comply with any
permit,
license or other
operating
authorization under provisions of any
Environmental Law);
(f) any and all liabilities under any Environmental Law
arising out
of or
otherwise in respect of any act,
omission, event, condition or
circumstance occurring
or existing in connection with the Business or the
Acquired
Assets on or prior to
the Closing Date,
including liabilities
relating
to (X) removal, remediation, containment, cleanup or abatement
of
the
presence of any Hazardous Substance, whether on-site or off-site,
and
(Y) any
claim by any third
party, including
tort suits for
personal or
bodily
injury, property damage or injunctive relief; and
(g) any Proceeding by or before any Governmental Authority related
to the
Business and arising out of events, transactions, facts, acts or
omissions
which occurred prior to or on the Closing Date;
((a) through (g) collectively, the
"Excluded Liabilities").
--------------------
2.5
Closing. The consummation of the purchase and sale of the
Acquired
-------
Assets (the "Closing") shall take place at
the offices of DLA Piper Rudnick Gray
-------
Cary US LLP, 203 North LaSalle Street, Chicago, Illinois commencing at 10:00
a.m. local time on June 30, 2005, or at such earlier time or place as the
parties may mutually agree (hereinafter the "Closing Date"). Except as
-------------
contemplated by the Supply Agreement,
possession of the Acquired Assets shall be
delivered by Seller to Purchaser immediately following the Closing on the
Closing Date. All costs and expenses
incurred by Seller or Purchaser relating to
the transport of the Acquired Assets to Purchaser at any time
shall be borne
exclusively by Purchaser, including freight and insurance charges. Further,
Purchaser shall be solely responsible for the disassembly and
7
<PAGE>
removal of the Equipment from Seller's
premises, including any and all repairs
(and costs thereof) necessary to restore Seller's premises to a clean and
reasonable condition following such
disassembly and removal.
2.6
Post-Closing
Audit. The Purchaser may, at its own cost
and expense,
-------------------
cause an audit of the Equipment to be
performed by Purchaser's accountants, or
such other parties as the Purchaser may
choose, so as to
confirm receipt of the
Equipment set forth in Section 2.1(d) of
the Disclosure Schedule, provided that
any such audit shall be completed within ninety (90) days after the Closing
Date.
ARTICLE 3
---------
Consideration and Payment Terms
-------------------------------
3.1 Amount
of Purchase Price. The
consideration
to be paid to Seller
by
------------------------
Purchaser for the Acquired Assets shall be
the aggregate amount
of Nine Million
Eight Hundred Fifty Thousand Dollars
($9,850,000)
plus (i) the total
amount of
the Inventory, as reflected on Section 2.1(a) of
the Disclosure Schedule, (ii)
the total amount of the Accounts
Receivable,
as reflected on
Section 2.1(i) of
the Disclosure Schedule, and (iii) such additional amounts,
if any, determined
pursuant to Section 3.2 below (collectively
the "Purchase Price"). The amount of
--------------------------------
Purchase Price payable by Purchaser to Seller at
Closing shall be the Purchase
Price less (x) the amount actually received by Seller pursuant to the Escrow
(including applicable interest pursuant thereto),
and (y) the Earn Out
Amount
(as defined below) (the "Closing Date
Purchase Price").
---------------------------
3.2
Earnout.
-------
(a) Purchaser shall
pay Seller, as
additional Purchase
Price. an
earnout
(if any) calculated
based on the sales by
Purchaser of
Modified
Calcium
58B ("Sales") as follows: (i) two and one-half cents ($.025) per
pound on
Sales during the period commencing immediately after the Closing
Date and
ending on the first
anniversary of the Closing Date which exceed
1,386,415
pounds ("Year One Earn Out");
(ii) three and
one-half cents
-----------------
($.035)
per pound on Sales
during the period commencing on the first
anniversary of the
Closing Date and ending on the second anniversary of
the
Closing Date which exceed 1,455,736 pounds ("Year Two Earn
Out"); and
-----------------
(iii) five
cents ($.05) per pound
on Sales during the
period commencing
the
second anniversary of the Closing Date and ending on the third
anniversary of the Closing Date which exceed 1,528,523 pounds
("Year Three
----------
Earn Out",
collectively, the "Earn Out Amount"), each such one-year period
--------
---------------
constituting an
"Earn Out Period". Within thirty (30) days after the close
---------------
of each
Earn Out Period as provided in the preceding sentence, Purchaser
shall
provide Seller with a written statement setting forth the sales
volume
of Modified Calcium 58B for such Earn Out Period and the
calculation of the respective Earn Out Amount (the "Earn Out
Statement")
-------------------
and shall
permit Seller reasonable access to its records to verify
the
accuracy
of Purchaser's
calculation
of the Earn Out Amount
set forth in
such Earn
Out Statement.
For purposes of this Section 3.2, a sale of
Modified Calcium 58B shall be deemed to have
occurred on the
earlier of
(x) when
an order of Modified
Calcium 58B is actually shipped to such
customer,
or (y) when it should have been shipped pursuant to the terms
of
the
respective agreement or purchase order.
8
<PAGE>
(b) Seller may dispute any element of the Earn Out Statement or any
calculation provided therewith by providing written notice to
Purchaser of
said
disagreement,
setting forth in detail the particulars of such
disagreement, within
ten (10) Business Days after Seller's receipt of the
Earn Out
Statement (the "Dispute Period"). In the event that Seller does
---------------
not
provide such a notice of disagreement prior to the expiration of the
Dispute
Period, Seller shall be deemed to have accepted the Earn Out
Statement
and any calculation provided thereunder, which shall thereafter
be
final, binding, nonappealable and conclusive for all purposes
hereunder.
In the event any such notice of disagreement is timely
provided,
Purchaser and Seller
shall use their
reasonable efforts for
a
period of
fifteen (15) Business
Days (or such longer period as they shall
mutually
agree) to resolve any disagreements with respect to the Earn Out
Statement
and any calculation
provided therewith.
If, at the end of such
period,
they are unable to resolve such disagreements, then an
independent
accounting
firm of recognized national standing as may be mutually
accepted
by Purchaser and Seller (the "Independent CPA") shall resolve
any
---------------
remaining
disagreements.
The fees and
expenses of the
Independent
CPA
shall be
paid one-half by each of Purchaser and Seller. The determination
of the
Independent
CPA shall be
final, conclusive, nonappealable and
binding on
the parties.
(c) Any additional
Purchase Price due to Seller pursuant to this
Section
3.2 shall by paid by Purchaser within five (5) Business Days of
the
resolution of any dispute with respect to the Earn Out Statement or
if
there is
no such dispute,
within five (5) business days of the end of the
Dispute
Period. Any payment
required under this Section 3.2 shall be made
by wire
transfer of immediately available funds to an account
designated
by
Seller.
3.3
Allocation of Purchase
Price. The Purchase Price shall be
allocated
-----------------------------
among the Acquired Assets in the manner set forth in Section 3.3 of the
Disclosure Schedule. After the Closing, the
parties shall make consistent use of
such allocation for all tax purposes and in all filings, declarations and
reports with the Internal Revenue Services (the "IRS") in respect
thereof,
including the reports required to be filed under
Section 1060 of the
Internal
Revenue Code. Purchaser shall prepare and deliver IRS Form
8594 to the Seller
within thirty (30) days after the Closing
Date to be filed with the IRS. In any
proceeding related to the determination of
any tax, neither Purchaser nor Seller
shall contend or represent that such
allocation is not a correct allocation.
3.4
Payment of Closing Date Purchase Price. At the Closing on the
Closing
---------------------------------------
Date, in consideration of the sale, assignment and transfer of the Acquired
Assets to Purchaser by Seller, Purchaser
shall (i) pay the Closing Date Purchase
Price to Seller in immediately available United States funds, by wire
transfer
to an account designated to Purchaser by Seller at least
two (2) Business Days
prior to the Closing Date, and (ii) assume the Assumed Liabilities, in
accordance with the terms of the Assignment
and Assumption Agreement.
9
<PAGE>
ARTICLE 4
---------
Representations and Warranties of Seller
----------------------------------------
Seller
hereby represents and
warrants to Purchaser on the date hereof and
as of the Closing Date, as follows:
4.1
Organization and Standing. Seller is a limited liability company
which
-------------------------
is duly organized, validly existing and in good standing
under the laws of the
State of Illinois. Seller has delivered to
Purchaser complete and correct copies
of the articles of organization and
operating agreement,
as amended, of Seller.
Seller has all necessary limited liability
company power and authority to engage
in the Business as it is presently being conducted in all applicable
jurisdictions, to own all property now owned by it in connection with the
Business, and to lease all of the property
used by it under lease in connection
with the Business.
4.2
Noncontravention. Except as set forth in Section 4.2 of the
Disclosure
----------------
Schedule, the execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby and compliance with the
provisions hereof will not, with regards
solely to the Business and the Acquired
Assets: (a) violate any provision of Law applicable to Seller; (b) conflict
with, result in the breach or
termination of any
provision of, or constitute a
default under Seller's articles of organization or operating agreement; (c)
accelerate or permit the acceleration of any performance of any duty or
obligation or the payment of any
indebtedness required
of Seller; (d) result in
the creation of any Lien upon such property or assets of Seller which would
prevent Purchaser from realizing the
benefits otherwise presently attainable by
Seller in connection with the Business or
the Acquired Assets;
(e) violate any
order, ruling, writ, injunction, decree, license or permit of any
Governmental
Authority; or (f) be an event which would
permit any party
(other than Seller)
to terminate any Assigned Agreement.
4.3
Authorization;
Binding Effect.
This Agreement and
each document and
------------------------------
instrument required to be delivered in
connection herewith,
and consummation of
the transactions contemplated hereby and thereby have been duly
authorized and
approved by the Managers of Seller, and
have been duly executed and delivered on
behalf of Seller and are effective in all
respects as to Seller. This Agreement,
the other Closing Documents, and each document and instrument required to be
delivered by Seller to Purchaser in
connection herewith,
when duly executed and
delivered by all the parties hereto or
thereto, as the case
may be, will be the
legal, valid and binding obligations of Seller,
enforceable in
accordance with
their respective terms, except to the extent such
enforceability may be limited
by bankruptcy, insolvency or other similar laws affecting the rights of
creditors generally or general principals
of equity.
4.4
Financial Information. Attached hereto at Section 4.4 of the
----------------------
Disclosure Schedule is the following financial information relating to the
Business: (a) gross profit calculation for the Business
showing gross sales of
Products, costs of materials and packaging and Product gross profit for the
twelve (12) month period ending December 31, 2004, and the three (3) month
period ending March 31, 2005, (b) a fixed asset schedule as of March 31, 2005,
and (c) a schedule of monthly working capital for the calendar
years 2003 (July
through December only) and 2004 (full
year), and for the
year 2005 through May
(collectively, the "Financial
Information"). The Financial Information (i) is in
---------------------
accordance with the books and
10
<PAGE>
records of the Seller relating to the Business, and (ii) fairly presents the
sales and cost of sales of the Business for
the periods covered
thereby and has
been prepared in accordance with
International
Financial Reporting Standards
consistently applied.
4.5 Events
Subsequent to December 31, 2004. Except to the extent set forth
--------------------------------------
in Section 4.5 of the Disclosure
Schedule, since December 31, 2004, Seller
has
not done or suffered, as applicable, any of the following with regards
to the
Business or the Acquired Assets:
(a) transferred,
leased or otherwise
disposed of any of its assets
or
properties
other than in the
ordinary course of
business
consistent
with past
practices;
(b) cancelled or compromised any debt or claim;
(c) waived, released
or terminated
any material
rights, Claims,
contracts
or leases, as applicable;
(d) suffered any labor dispute, strike or other work stoppage;
(e) transferred or granted any rights under any patent application,
concession, lease,
license, agreement, letter of patent, invention,
trademark,
trade name or
copyright or with respect to know-how or any
other
asset similar to any of the foregoing;
(f) suffered any material damage, destruction or loss, whether or
not such
damage, destruction or loss shall have been insured against;
(g) suffered any material adverse change in the financial
condition,
properties
or business
not otherwise disclosed under subsection (f)
immediately above;
(h) made or entered
into any contract
or commitment to make any
capital
expenditure in excess of $50,000;
(i) changed any method of accounting or accounting practice;
(j) accelerated
the collection of, or changed the collection
policies
related to, its accounts receivable; or
(k) entered into any
transaction other than
in the ordinary course
of
business.
4.6
Absence of Undisclosed Liabilities. Except as set forth in Section
4.6
----------------------------------
of the Disclosure Schedule, Seller has no knowledge of any Claims made or
obligations incurred by Seller in
connection with the manufacture or sale of the
Products other than liabilities and
obligations incurred
in the ordinary course
of business or in accordance with the terms
of an Assigned Agreement.
4.7
Compliance
with Law. Except as disclosed in Section 4.7 of the
---------------------
Disclosure Schedule, Seller has complied in all
material respects with all Laws
(other than Environmental Laws) applicable
to the Business.
11
<PAGE>
4.8 Title
to A
