Exhibit 2.1

 

ASSET PURCHASE AGREEMENT

 

THIS ASSET PURCHASE AGREEMENT (this “Agreement”), dated as of January 13, 2004, is made by and among SPARHAWK LABORATORIES, INC. , a Missouri corporation (“Sparhawk” or “Buyer”), POLYDEX PHARMACEUTICALS LIMITED , a Bahamian corporation (“Polydex”), CHEMDEX, INC. , a Kansas corporation (“Chemdex”), and VETERINARY LABORATORIES, INC. , a Kansas corporation (“Vet Labs”).  Polydex, Chemdex and Vet Labs are collectively referred to herein as “Sellers.”

 

RECITALS

 

A.                                    Sparhawk and Vet Labs are the only general partners or other equity holders of that certain Kansas general partnership known as the Veterinary Laboratories, Inc. – Sparhawk Laboratories, Inc. Joint Venture (the “Joint Venture”).

 

B.                                      Sparhawk, Polydex, Chemdex, Vet Labs and two shareholder of Sparhawk, E. Bert Hughes (“Hughes”) and John Bascom (“Bascom”), are parties to that certain litigation in the County of Johnson, State of Kansas, Case No. 02CV07426, captioned Sparhawk Laboratories, Inc. v. Veterinary Laboratories, Inc., et al ., (the “Joint Venture Litigation”).

 

C.                                      Sparhawk, Hughes, Bascom and Sellers now desire to resolve and settle their differences without resorting to time-consuming and costly litigation through the sale of substantially all of the assets of Vet Labs, including, but not limited to, its ownership interest in the Joint Venture, to Sparhawk, on the terms and conditions set forth herein.

 

D.                                     Vet Labs is a wholly-owned subsidiary of Chemdex, and Chemdex is a wholly-owned subsidiary of Polydex, and each of Chemdex and Polydex will derive significant benefit from the consummation of the transactions contemplated hereby.

 

AGREEMENT

 

ACCORDINGLY , in consideration of the premises, the mutual covenants and agreements set forth herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

 

ARTICLE I — PURCHASE OF ASSETS

 

Section 1.1.                                    Sale of Assets .

 

(a)                                   Subject to the terms and conditions of this Agreement, at the Closing (as hereinafter defined), Vet Labs shall sell, assign, convey, transfer and deliver to the Buyer, and the Buyer shall purchase and acquire from Vet Labs, free and clear of all liens, claims and encumbrances, except for liens, claims and encumbrances (i) created to secure the current indebtedness of the Joint Venture to Commerce Bank, N.A., or (ii) arising out of the business or operations of the Joint Venture (collectively, the “Permitted

 

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Liens”), all of Vet Labs’ right, title, and interest in and to all of Vet Labs’ real and personal property and assets, tangible and intangible, of every kind and description, wherever located, which are owned by Vet Labs as of November 6, 2003 or acquired thereafter, other than the Excluded Assets (as defined below), including, without limitation, the following:

 

(1)                                   all of Vet Labs’ ownership interest as a general partner in the Joint Venture (including, but not limited to, all of Vet Labs’ indirect ownership interest in the assets of the Joint Venture);

 

(2)                                   all accounts receivable of Vet Labs;

 

(3)                                   all inventories;

 

(4)                                   all equipment and other tangible personal property, including without limitation those items described in Schedule 1.1(a)(4) hereto;

 

(5)                                   all contracts;

 

(6)                                   all transferable NADAs, ANADAs, JINADs that are owned directly by Vet Labs, all transferable NADAs, ANADAs and JINADs that are sponsored by Vet Labs on behalf of the Joint Venture and all other transferable governmental authorizations, approvals and licenses and pending applications, approvals and licenses, including without limitation those listed in Schedule 1.1(a)(6) hereto as transferable (the “Governmental Authorizations”); excluding , however , those authorizations, approvals and licenses that, by law, cannot be assigned or transferred by Vet Labs, which are listed in Schedule 1-1(a)(6) hereto as nontransferable (the “Nontransferable Licenses”);

 

(7)                                   that certain real property owned by Vet Labs located in the County of Johnson, State of Kansas, commonly known as 12340 Santa Fe Trail Drive, Lenexa, KS 66215 (the “Real Estate”), the legal description of which is set forth in Schedule 1.1(a)(7) hereto.

 

(8)                                   all data and records related to the operations of Vet Labs and the Joint Venture, including client and customer lists and records, referral sources, research and development reports and records, production reports and records, service and warranty records, equipment logs, operating guides and manuals, financial and accounting records, creative materials, advertising materials, promotional materials, studies, reports, correspondence and other similar documents and records and, copies of all personnel records;

 

(9)                                   all intangible rights and property of Vet Labs, including trademarks, patents, and other intellectual property rights, the trademark and tradenames “Veterinary Laboratories, Inc.” and “Vet Labs”, and the

 

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local telephone number “913-888-7500” (including all associated rollover numbers), the toll free telephone number “800-255-6368”, the facsimile telephone number “913-888-6741”, and the internet domain name registration for “Sparhawk-VetLabs.com”;

 

(10)                             all insurance benefits (net of any deductibles and co-payments) that are assignable to the Buyer, including rights and proceeds, arising from or relating to the Assets or the Assumed Liabilities (as defined below) prior to the Closing Date (as defined below);

 

(11)                             all warranty and other claims of Vet Labs against third parties relating to the Assets, whether choate or inchoate, known or unknown, contingent or noncontingent; and

 

(12)                             all rights of Vet Labs relating to deposits and prepaid expenses, claims for refunds and rights to offset in respect thereof.

 

All of the property and assets to be transferred to Buyer hereunder are herein referred to collectively as the “Assets.”  Except for the NADAs, ANADAs and JINADs that are sponsored by Vet Labs, on behalf of the Joint Venture, which are being transferred from Vet Labs to Sparhawk, the defined term “Assets” shall be deemed to refer to assets directly owned by Vet Labs, not the assets owned by the Joint Venture.  One half of the assets of the Joint Venture, which are indirectly owned by Vet Labs by virtue of its ownership of a general partner interest in the Joint Venture, will be effectively transferred to Buyer through the sale of Vet Labs’ interest in the Joint Venture, as described in item 1 above.

 

(b)                                  The Assets being purchased by Sparhawk do not include:

 

(1)                                   the rights of Vet Labs pursuant to or under this Agreement and the other agreements Vet Labs is required to deliver to the Buyer pursuant to the terms hereof;

 

(2)                                   any rights of Vet Labs in connection with the Polydex website;

 

(3)                                   any refunds or claims for refunds of Vet Labs with respect to any federal, state or local income and other taxes, and all tax returns and related work papers, records and documents of Vet Labs related thereto;

 

(4)                                   except as provided in Section 1(a)(9) above, all telephone numbers, telecopy numbers and e-mail addresses of Vet Labs;

 

(5)                                   minute books, stock books and shareholder records of Vet Labs; and

 

(6)                                   the Nontransferable Licenses.

 

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all of which are being retained by Vet Labs (collectively, the “Excluded Assets”).

 

(c)                                   Notwithstanding anything to the contrary herein, in no event shall Sparhawk acquire ownership of any real property, tangible personal property or intangible personal property or intellectual property of, or assume any liability or obligation of, Chemdex or Polydex.

 

Section 1.2.                                    Assumption of Liabilities .

 

(a)                                   Subject to the terms and conditions of this Agreement, on the Closing Date, Vet Labs shall assign and Buyer shall assume and agree to pay, perform or otherwise discharge, in accordance with their respective terms and subject to the respective conditions thereof, (i) all obligations and liabilities with respect to the indebtedness of the Joint Venture to Commerce Bank, N.A. secured by the Permitted Liens, (ii) all obligations and liabilities in connection with or arising out of the use or ownership of the Assets by the Joint Venture, the Buyer or any successor to the business of the Joint Venture following the Closing Date, and (iii) all obligations and liabilities arising out of the business or operations of the Joint Venture (collectively, the “Assumed Liabilities”), and no others.  Other than the Assumed Liabilities, the Buyer assumes no obligations and liabilities of Vet Labs, whether related to the Assets or otherwise.

 

(b)                                  ALL OBLIGATIONS AND LIABILITIES OF VET LABS, WHETHER ACCRUED OR CONTINGENT, OR DUE OR NOT DUE, WHICH ARE NOT SPECIFICALLY ASSUMED HEREIN, SHALL BE AND REMAIN THE SOLE OBLIGATIONS AND LIABILITIES OF VET LABS, AND BUYER SHALL HAVE ABSOLUTELY NO OBLIGATION OR LIABILITY WITH RESPECT THERETO.

 

Section 1.3.                                    Purchase Price .

 

(a)                                   The purchase price for the Assets and the Non-competition Agreement (the “Purchase Price”) shall be an amount equal to $5,500,000.00, which shall be payable to Vet Labs on the Closing Date by wire transfer of immediately available funds to an account designated by Vet Labs prior thereto.

 

(b)                                  The Purchase Price shall be allocated among the Assets and the Non-competition Agreement as set forth on Schedule 1.3(b) hereto.

 

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Section 1.4.                                    Supply Contract .  At the Closing, Sparhawk and Chemdex shall execute and deliver a ten-year exclusive supply contract, substantially in the form attached hereto as Exhibit A (the “Supply Contract”).

 

Section 1.5.                                    Non-competition Agreement .  At the Closing, Polydex, Chemdex and Vet Labs shall enter into a 5-year non-competition agreement with Sparhawk, substantially in the form attached hereto as Exhibit B (the “Non-competition Agreement”).

 

Section 1.6.                                    Settlement Agreement and Joint Venture Litigation .

 

(a)                                   At the Closing, Sellers and Buyer shall execute and deliver, and Sparhawk shall cause Hughes and Bascom to execute and deliver, a Settlement Agreement substantially in the form attached hereto as Exhibit C (the “Settlement Agreement”).

 

(b)                                  On the Closing Date, the parties hereto shall dismiss, and Sparhawk shall cause Hughes and Bascom to dismiss, all claims they asserted in the Joint Venture Litigation with prejudice pursuant to a Motion of Approval of Settlement and Stipulation of Dismissal With Prejudice substantially in the form attached hereto as Exhibit D (the “Motion to Dismiss”), and each party to bear its own costs related thereto.

 

(c)                                   On the Closing Date, Sellers and Buyer shall obtain any required approval of the Settlement Agreement by the court appointed receiver, each party to bear its own fees and costs related thereto; provided , however , all fees incurred for the receiver’s services in the Joint Venture Litigation shall be borne by the Joint Venture.

 

Section 1.7.                                    Additional Affirmative Undertakings and Covenants .

 

(a)                                   Polydex, Chemdex and Vet Labs shall use all reasonable commercial efforts to obtain all third party consents, approvals and agreements necessary to effectuate the assignment, transfer or sale of any of the Assets, and to consummate the transactions contemplated by this Agreement, and Sparhawk and its employees shall cooperate with and assist Seller in obtaining such consents.  Each of the Sellers and Buyer shall pay their own legal fees and expenses incurred in obtaining such consents.

 

(b)                                  Contemporaneous with the Closing Date, Vet Labs shall change its corporate name and make all necessary and proper filings evidencing such change.

 

Section 1.8.                                    Acknowledgement Regarding Transfer of Joint Venture Interest .  Sellers acknowledge and agree that the sale of Vet Labs’ partnership interest in the Joint Venture to Sparhawk transfers all of Vet Labs’ right, title and interest in the Joint Venture and all claims related thereto.

 

Section 1.9.                                    Personal Property Taxes .  All personal property taxes assessed against or in respect of the Assets purchased by the Buyer for calendar year 2004 (the “Taxable Period”) shall be prorated between Vet Labs and Buyer as of the Closing Date.  The Buyer shall pay all of the property taxes on the Assets for the Taxable Period when due.  Following the Buyer’s payment of such property taxes, the Buyer shall then forward

 

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copies of the property tax assessments for the Taxable Period to Vet Labs, which amount Vet Labs shall promptly reimburse Buyer for the pro rata amounts due thereunder.

 

Section 1.10.                              Real Estate Property Taxes; Prorations .  The Joint Venture shall pay on behalf of Vet Labs all general real estate taxes levied and assessed against the Real Estate, and all installments of special assessments for the years prior to the calendar year of Closing.  Buyer shall assume and pay all such taxes and installments of special assessment accruing or payable after the Closing.  Notwithstanding the foregoing, Buyer shall be liable for any expenses or interest with respect to the Real Estate in connection with or arising out of the indebtedness of the Joint Venture to Commerce Bank, N.A.

 

Section 1.11.                              Title Insurance .  Vet Labs shall deliver and pay for an owner’s ALTA title insurance policy (the “Title Policy”) insuring marketable fee simple title in Buyer in the amount allocated to the Real Estate pursuant to Section 1.3(b) hereof, subject only to the Permitted Exceptions defined below.  Vet Labs shall, as promptly as practicable after the date of this Agreement, cause to be furnished to Buyer a current commitment to issue the policy (the “Title Commitment”), issued through Chicago Title Insurance Company (the “Title Company”), and copies of all recorded documents listed in the Title Commitment as exceptions to title, other than such documents in connection with or arising out of the indebtedness of the Joint Venture to Commerce Bank, N.A.  Buyer shall have ten (10) days after receipt of the Title Commitment and copies of all such recorded documents (the “Review Period”) in which to notify Vet Labs in writing of any objections Buyer has to any matters shown or referred to in the Title Commitment.  Any matters which are set forth in the Title Commitment and to which Buyer does not object within the Review Period shall be deemed to be permitted exceptions to the status of Vet Labs’ title (the “Permitted Exceptions”); provided , however , that on or prior to the Closing Date, Vet Labs shall pay off the indebtedness to, and obtain a release of lien from, Continental Grain Company; provided , further , that if Vet Labs fails to do so, Buyer may deduct from the Purchase Price the pay-off amount owed to Continental Grain Company and, in such event, shall promptly pay over such amount directly to Continental Grain Company to obtain a release of its lien on the Real Estate.  With regard to other items to which Buyer reasonably objects within the Review Period, Vet Labs shall have until Closing to correct such other matters to Buyer’s reasonable satisfaction.  If Vet Labs fails to correct such other matters to Buyer’s reasonable satisfaction on or prior to the date of Closing, Buyer shall have the right to terminate this Agreement by written notice given to the Sellers on or prior to the Closing Date, in which event no party shall have any further liability under this Agreement.

 

Section 1.12.                              Survey .  Vet Labs, at its sole cost and expense, shall provide to Buyer as promptly as practicable after the date of this Agreement, a current survey of the Real Estate and all buildings and improvements thereon, prepared and certified to Buyer and, if applicable, Buyer’s lender by a surveyor licensed in the State of Kansas.  Such survey shall contain a legal description of the Real Estate and identify the boundaries of the Real Estate, the dimensions thereof, the location and dimensions of any improvements on the Real Estate, the location and dimensions of all recorded easements on the Real Estate, the location and dimensions of all easements, rights-of-way, driveways, roads, power lines, fences and encroachments on the Real Estate which are observable from a

 

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visual inspection of the Real Estate, and shall otherwise be sufficient to permit the Title Company to issue the Title Policy without standard survey exceptions.  If upon receipt of the certificate of survey, Buyer has any objection to a matter shown therein which affects or could affect the Real Estate or Buyer’s use of the Real Estate, Buyer shall promptly notify Vet Labs of said objection(s) in writing and Vet Labs shall have until Closing to correct such matters to Buyer’s reasonable satisfaction.  If Vet Labs fails to correct such matters to Buyer’s reasonable satisfaction on or prior to the date of Closing, Buyer shall have the right to terminate this Agreement by written notice given to Seller on or prior to the date of Closing, in which event no party shall have any further liability under this Agreement.

 

ARTICLE II — CLOSING

 

Section 2.1.                                    Closing .  The closing of the transactions provided for hereunder (the “Closing”) shall take place at 10:00 a.m. at the offices of Stinson Morrison Hecker LLP as soon as possible after the date hereof, but no later than January 30, 2004 (the “Closing Date”), or on such other date, time and place as may be mutually agreed to by the parties hereto.

 

Section 2.2.                                    Termination .  This Agreement may be terminated at any time before the Closing (a) by the mutual consent of the Buyer and the Sellers, or (b) by either Buyer, on the one hand, or the Sellers, on the other hand, by written notice to the other party, if the Closing has not occurred by January 30, 2004, by reason of the failure of any condition precedent to such terminating party’s obligation under Article V hereof, unless the failure results primarily from such terminating party’s material breach of any representation, warranty, covenant or agreement contained in this Agreement.  Each party’s right of termination under this Section 2.2 is in addition to any other rights it may have under this Agreement, and the exercise of such right of termination will not be an election of remedies.  If this Agreement is terminated pursuant to this Section 2.2, all obligations of the parties under this Agreement will terminate, except that the obligations of the parties in this Section 2.2 and VII will survive, provided , however , that, if this Agreement is terminated because of a breach of this Agreement by the nonterminating party or because one or more of the conditions to the terminating party’s obligations under this Agreement is not satisfied as a result of the nonterminating party’s failure to comply with its obligations under this Agreement, the terminating party’s right to pursue all legal remedies will survive such termination unimpaired.

 

Section 2.3.                                    Conveyance Documents .  On the Closing Date, Polydex, Chemdex and Vet Labs shall execute and deliver to Sparhawk such bills of sale, general warranty deed, assignments and other conveyance documents as Sparhawk shall reasonably request to sell, assign, transfer and convey the Assets to Sparhawk, free and clear of all liens, claims and encumbrances, excepting for the Permitted Liens and, with respect to the Real Estate, the Permitted Exceptions, and Buyer shall execute such assumption agreements as Vet Labs shall reasonably request in order to assume the Assumed Liabilities.

 

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Section 2.4.                                    Payment and Execution of Closing Documents .

 

(a)                                   On the Closing Date:

 

(1)                                   Sparhawk shall deliver the Purchase Price to Vet Labs by wire transfer of immediately available funds;

 

(2)                                   Polydex, Chemdex, Vet Labs and Sparhawk shall execute and deliver the Non-competition Agreement and the Settlement Agreement;

 

(3)                                   Chemdex and Sparhawk shall execute and deliver the Supply Contract;

 

(4)                                   The parties hereto shall cause, and Sparhawk shall cause Hughes and Bascom to cause, their respective counsel to execute and file the Motion to Dismiss,

 

(5)                                   Vet Labs shall deliver a General Warranty Deed properly executed and conveying the Real Estate free and clear of all liens, encumbrances, easements, restrictions, leases, reservations and burdens whatsoever, except as for the Permitted Exceptions, shall execute and deliver an affidavit in form satisfactory to the Title Company to permit the Title Company to delete any mechanic’s lien exceptions from the Title Policy, and shall execute and deliver to Buyer a Non-Foreign Person Affidavit; and

 

(6)                                   Vet Labs shall pay the title premium for the Title Policy and shall provide the Title Company all other documentation required to permit the Title Company to issue to Buyer, and shall cause the Title Company to issue to Buyer, the Title Policy following Closing and recording of the deed to Buyer.

 

(b)                                  Both Sellers and Buyer agree to execute and deliver such other documents on the Closing Date as may be reasonably required to consummate the transaction contemplated hereby.

 

ARTICLE III — REPRESENTATIONS AND WARRANTIES

 

Section 3.1.                                    Representations and Warranties of Sellers .  Polydex, Vet Labs and Chemdex hereby jointly and severally represent and warrant to Buyer that as of the date hereof and as of the Closing Date:

 

(a)                                   Polydex is a limited company organized and existing in good standing under the laws of the Commonwealth of the Bahamas.  Each of Chemdex and Vet Labs is a corporation duly organized, validly existing and in good standing under the laws of the State of Kansas.  Each of Polydex, Chemdex and Vet Labs have the company power to execut