<PAGE>
EXECUTION VERSION
REDACTED - AS FILED
[PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT]
Brackets "[ ]" ARE USED TO INDICATE WHERE A PORTION OF THIS EXHIBIT
HAS BEEN
OMITTED. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED
PORTIONS. A COMPLETE COPY OF THIS EXHIBIT, CONTAINING ALL OF THE
OMITTED
PORTIONS, HAS BEEN SEPARATELY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION
TOGETHER WITH THE REQUEST FOR CONFIDENTIAL TREATMENT.
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
MOTT'S LLP
AND
PACIFICHEALTH LABORATORIES, INC.
DATED AS OF FEBRUARY 22, 2006
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TABLE OF CONTENTS
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ARTICLE I PURCHASE AND
SALE............................................................................1
SECTION 1.1.
Purchase and
Sale..............................................................1
SECTION 1.2.
No Assumption of
Liabilities...................................................3
SECTION 1.3.
Purchase Price;
Payment........................................................4
SECTION 1.4.
Royalty
Payments...............................................................4
ARTICLE II CLOSING AND CLOSING
DATE....................................................................7
SECTION 2.1.
Closing and Closing
Date.......................................................7
SECTION 2.2.
Deliveries at
Closing..........................................................7
SECTION 2.3.
Certain
Actions................................................................8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF
SELLER...................................................9
SECTION 3.1.
Existence; Authority;
Qualification............................................9
SECTION 3.2.
Authority; Binding
Effect......................................................9
SECTION 3.3.
Absence of
Conflicts...........................................................9
SECTION 3.4.
Governmental Consents and
Filings.............................................10
SECTION 3.5.
Subsidiaries..................................................................10
SECTION 3.6.
Financial Statements and SEC
Reports..........................................10
SECTION 3.7.
Absence of Undisclosed
Liabilities............................................11
SECTION 3.8.
Absence of Certain Changes or
Events..........................................12
SECTION 3.9.
Title, Sufficiency and Condition of
Assets....................................13
SECTION 3.10.
Contracts.....................................................................13
SECTION 3.11.
Permits.......................................................................14
SECTION 3.12.
Transactions with
Affiliates..................................................14
SECTION 3.13.
Litigation....................................................................14
SECTION 3.14.
Compliance With Laws and Other
Requirements...................................15
SECTION 3.15.
Intellectual
Property.........................................................15
SECTION 3.16.
Taxes.........................................................................17
SECTION 3.17.
Disclosure....................................................................18
SECTION 3.18.
Fees and
Commissions..........................................................18
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF
BUYER....................................................19
SECTION 4.1.
Existence; Authority; Good
Standing...........................................19
SECTION 4.2.
Authority; Binding
Effect.....................................................19
SECTION 4.3.
Absence of
Conflicts..........................................................19
SECTION 4.4.
Governmental Consents and
Filings.............................................19
SECTION 4.5.
Fees and
Commissions..........................................................20
SECTION 4.6.
Acknowledgement of Due
Diligence..............................................20
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ARTICLE V
COVENANTS...................................................................................20
SECTION 5.1.
General.......................................................................20
SECTION 5.2.
Restrictions on Certain
Actions...............................................21
SECTION 5.3.
Exclusivity...................................................................21
SECTION 5.4.
Tax
Matters...................................................................22
SECTION 5.5.
Third Party
Consents..........................................................23
SECTION 5.6.
Further
Assurances............................................................23
SECTION 5.7.
Notification of Certain
Matters...............................................24
SECTION 5.8.
Amendment of Disclosure
Schedule..............................................24
SECTION 5.9.
Competitive
Activities........................................................24
SECTION 5.10.
Right of First
Negotiation....................................................26
SECTION 5.11.
Use of
Assets.................................................................27
SECTION 5.12.
Bulk
Sales
Laws...............................................................27
SECTION 5.13.
Access to Books and Records after
Closing.....................................27
SECTION 5.14.
Audit Rights and Certificates of
Compliance...................................27
SECTION 5.15.
Certain
Licenses..............................................................28
SECTION 5.16.
Cooperation...................................................................28
SECTION 5.17.
Certain Other
Covenants.......................................................29
ARTICLE VI CONDITIONS TO OBLIGATIONS OF
SELLER........................................................30
SECTION 6.1.
No
Order......................................................................30
SECTION 6.2.
Accuracy of Representations and
Warranties....................................30
SECTION 6.3.
Covenants and Agreements
Performed............................................30
SECTION 6.4.
Closing
Deliveries............................................................30
ARTICLE VII CONDITIONS TO OBLIGATIONS OF
BUYER........................................................31
SECTION 7.1.
No
Order......................................................................31
SECTION 7.2.
Accuracy of Representations and
Warranties....................................31
SECTION 7.3.
Covenants and Agreements
Performed............................................31
SECTION 7.4.
Portman Consulting, License and Noncompetition
Agreement......................31
SECTION 7.5.
Closing
Deliveries............................................................31
SECTION 7.6.
Consents......................................................................32
SECTION 7.7.
No Material Adverse
Change....................................................32
ARTICLE VIII
TERMINATION..............................................................................32
SECTION 8.1.
Termination...................................................................32
SECTION 8.2.
Effect of
Termination.........................................................33
ARTICLE IX
INDEMNIFICATION............................................................................33
SECTION 9.1.
Survival of Representations and
Warranties....................................33
SECTION 9.2.
Indemnification of
Buyer......................................................34
SECTION 9.3.
Indemnification of
Seller.....................................................35
SECTION 9.4.
Third Party
Claims............................................................36
SECTION 9.5.
Indemnification Without Regard to Negligence or other
Fault...................37
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ARTICLE X
MISCELLANEOUS...............................................................................37
SECTION 10.1.
Access to Information;
Confidentiality........................................37
SECTION 10.2.
Expenses......................................................................38
SECTION 10.3.
Public
Announcements..........................................................38
SECTION 10.4.
Notices.......................................................................38
SECTION 10.5.
Assignment....................................................................38
SECTION 10.6.
Complete
Agreement............................................................39
SECTION 10.7.
Governing
Law.................................................................39
SECTION 10.8.
Cure of Invalid
Provisions....................................................39
SECTION 10.9.
Amendment;
Waivers............................................................39
SECTION 10.10.
Specific
Performance..........................................................40
SECTION 10.11.
Interpretation................................................................40
SECTION 10.12.
Counterparts..................................................................40
SECTION 10.13.
Force
Majeure.................................................................40
SECTION 10.14.
Rights
Reserved...............................................................41
ARTICLE XI
DEFINITIONS................................................................................41
SECTION 11.1.
Certain
Definitions...........................................................41
SECTION 11.2.
Other Defined
Terms...........................................................46
DISCLOSURE SCHEDULE
Schedule 1.1(a)(i) --
Trademarks
Schedule 1.1(a)(ii) --
Patents
Schedule 1.1(a)(iv) --
Copyrights
Schedule 1.1(a)(v) --
Web Sites
Schedule 2.2(a)(iv) --
Certain
Consents
Schedule 5.9(a)
-- Covered
Products and Territory
Schedule 5.17(d)
-- Identified
Buyer Affiliates
Schedule 11.1
--
Qualifying Net
Sales
Exhibit A
-- Form of
License Agreement
Exhibit B
-- Portman
Consulting, License and Noncompetition Agreement
Exhibit C
-- Form of Bill
of Sale and Assignment
Exhibit D
--
Confidentiality Agreement
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (together with all Exhibits and
Schedules
hereto, this "Agreement") is entered into as of February 22, 2006,
by and
between Mott's LLP, a Delaware limited liability partnership
("Buyer"), and
PacificHealth Laboratories, Inc., a Delaware corporation
("Seller").
WHEREAS, Seller is engaged in, among other things, the
research,
development, testing, production, manufacture, marketing, sale and
distribution
of products marketed under the "ACCELERADE"(R) and "ENDUROX"(R)
brand names
(together with any variations, extensions or derivatives of such
brand names,
the "Brand Names");
WHEREAS, Seller desires to sell and Buyer desires to purchase
certain
intellectual property and other assets for the consideration and
upon the terms
and subject to the conditions set forth in this Agreement;
WHEREAS, Seller
desires to obtain from Buyer, and Buyer desires to
grant to Seller, a license under certain of the Assets (as
hereinafter defined)
acquired by Buyer pursuant to this Agreement upon the terms, for
the duration,
and subject to the conditions specified in a license agreement
substantially in
the form attached hereto as Exhibit A (the "License
Agreement");
WHEREAS, contemporaneously with the execution of this Agreement,
and as
an integral component of the transactions contemplated by this
Agreement, Dr.
Robert Portman ("Portman"), an Affiliate of Seller, is entering
into a
Consulting, License and Noncompetition Agreement, substantially in
the form
attached hereto as Exhibit B (the "Portman Consulting, License
and
Noncompetition Agreement"); and
WHEREAS, Buyer and Seller desire to establish certain arrangements
and
agreements for future interaction and cooperation;
NOW, THEREFORE, in consideration of the premises and the provisions
and
respective covenants and agreements set forth in this Agreement,
the Parties
hereby agree as follows:
ARTICLE I
PURCHASE AND SALE
SECTION 1.1. Purchase and Sale. Upon the terms and subject to
the
conditions set forth herein and in reliance upon the
representations and
warranties made herein by each of the parties to the other, at the
Closing,
Seller shall irrevocably and absolutely (subject to the provisions
of Section
1.4(b)) sell, grant, convey, assign, transfer and deliver to Buyer,
free and
clear of all Encumbrances (other than Permitted Encumbrances), and
Buyer shall
irrevocably and absolutely (subject to the provisions of Section
1.4(b))
purchase and acquire from Seller, the following assets and
properties of Seller
(wherever located) used, held or controlled by Seller (such assets
and
properties of Seller to be sold, granted, conveyed, transferred,
assigned and
delivered to Buyer hereunder being hereinafter collectively
referred to as the
"Assets"):
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(a) all rights, title and interest of Seller, whether now in
existence
or developed or acquired in the future, in and to the following, in
each case to
the extent known, used, held or controlled by Seller directly or
primarily
related to the research, development, testing, production,
manufacture,
marketing, sale or distribution of products that are currently
being or have
previously been marketed by Seller under the Brand Names or
products under the
Brand Names that are currently in development by Seller (the
"Acquired
Intellectual Property"):
(i) all trademarks and service marks registered or
unregistered (including those identified in Schedule 1.1(a)(i)),
trade
dress
(including the trade dress of various packaging currently,
previously or proposed to be used in conjunction with the Brand
Names),
trade names and other marks and slogans embodying business or
product
goodwill or indications of origin, all or that part of any
applications
or registrations in any jurisdiction pertaining to the foregoing
and
all goodwill associated therewith;
(ii) all inventions, whether patented or unpatented,
patentable or
unpatentable, including all issued patents and pending
applications in any jurisdiction (including those identified in
Schedule 1.1(a)(ii)) and all provisionals, reissues,
reexaminations,
continuations, divisions, continuations-in-part, renewals or
extensions
thereof (the "Patent Properties"), and any existing or future
filed
patents and applications that receive priority from or provide
priority
to any of the Patent Properties;
(iii) all trade secrets and other confidential information,
and the right in any jurisdiction to limit the use or
disclosure
thereof, and any other inventions, discoveries, improvements,
ideas,
know-how, formulae, product ingredient information, product
formulas,
product details, methodologies, processes, technology concepts,
technical data, memoranda, notes, reports, financial and
technical
information, proprietary information, proprietary processes,
clinical
data and studies, consumer or market-based research, books,
records,
instruments and other information (whether now existing or, to
the
extent directly or primarily related to Covered Products or
other
products that are currently being or have previously been marketed
by
Seller under the Brand Names or products under the Brand Names that
are
currently in development by Seller, developed in the future);
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(iv) all copyrights (registered and unregistered) in writings,
designs, mask works or other works (including those identified
in
Schedule 1.1(a)(iv)), and applications or registrations in any
jurisdiction for the foregoing;
(v) all Internet web sites, domain names and registrations or
applications for registration thereof identified in Schedule
1.1(a)(v)
and Seller's rights in all software code underlying such web sites
and
related documentation, user manuals and training materials; and
(vi) all licenses, immunities, covenants not to sue and the
like relating to any of the foregoing.
(b) all right and interest in (x) any claim arising from or related
to
any infringement, impairment, dilution or misappropriation of the
Acquired
Intellectual Property, including all unasserted claims of Seller
and other
pre-existing or accrued claims relating to inventions, patent
applications,
patents, copyrights, trademarks, trade secrets, trade dress,
Internet domain
names and confidential information, that Seller now has or may have
against any
Person and (y) all rights to causes of action, lawsuits, judgments,
claims and
demands of any nature available to or being pursued by Seller to
the extent
pertaining primarily to the ownership, use, function or value of
any Assets,
including Seller's right to either damages or injunctive relief, or
both,
whether arising by way of counterclaim or otherwise, except to the
extent that
any of the foregoing are not legally assignable;
(c) to the extent transferable, all franchises, licenses,
permits,
approvals and other authorizations issued or granted by any
governmental
authority and all permit applications and license and permit
amendment
applications submitted to any such governmental authority related
to the
ownership, use, function or value of the Assets; and
(d) all claims against third parties, whether or not asserted
and
whether now existing or hereafter arising (including all claims
based on any
indemnities or warranties in favor of Seller) relating to any of
the Assets.
SECTION 1.2. No Assumption of Liabilities. Notwithstanding any
other
provision of this Agreement, Buyer is not assuming, and shall not
be deemed to
have assumed or be in any way liable for or subject to or have any
obligation
for or with respect to, any debts, liabilities or obligations of
Seller of any
kind, nature or description whatsoever (whether absolute or
contingent, known or
unknown, asserted or unasserted).
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SECTION 1.3. Purchase Price; Payment. Upon the terms and subject to
the
conditions set forth herein, in reliance upon the representations,
warranties,
covenants and agreements of Seller contained herein, and in
exchange for the
sale, grant, conveyance, assignment, transfer and delivery of the
Assets, Buyer
agrees to pay to Seller the sum of (i) Four Million Dollars
($4,000,000) (the
"Closing Payment") plus (ii) the Royalty Payments provided for in
Section 1.4
(collectively, the "Purchase Price").
SECTION 1.4. Royalty Payments.
(a) Within 30 days after the end of each quarter (for purposes of
this
Agreement, quarters shall be deemed to end on March 31, June 30,
September 30
and December 31 of each year (each three month period ending on
such date, a
"Fiscal Quarter")), during the [REDACTED - CONFIDENTIAL
TREATMENT
REQUESTED]*period commencing on the Product Launch Date and ending
on the
[REDACTED - CONFIDENTIAL TREATMENT REQUESTED]*of the Product Launch
Date (the
"Royalty Payment Period"), Buyer shall prepare and deliver to
Seller a statement
(a "Royalty Payment Statement") setting forth its calculation of
the amount of
Qualifying Net Sales for the quarterly period then ended (a
"Royalty Payment
Quarter"), together with a reasonably detailed statement of gross
sales and any
deductions made from gross sales during such quarter as permitted
by the
definition of Qualifying Net Sales. No later than the 45th day
following the end
of each Royalty Payment Quarter during the Royalty Payment Period
(and within 45
days after the last day of the Royalty Payment Period), Buyer shall
pay to
Seller an amount equal to [REDACTED - CONFIDENTIAL TREATMENT
REQUESTED]*of
Qualifying Net Sales for such Royalty Payment Quarter, subject to a
limit of
[REDACTED - CONFIDENTIAL TREATMENT REQUESTED]*for each [REDACTED -
CONFIDENTIAL
TREATMENT REQUESTED]*period [REDACTED - CONFIDENTIAL TREATMENT
REQUESTED]*
during the Royalty Payment Period (the "Royalty Payment"). Seller
and its
representatives shall have the right, during normal business hours
and upon
reasonable advance request, to review relevant work papers and
procedures used
to prepare the Royalty Payment Statement and to have reasonable
access to
Buyer's financial employees involved in the preparation thereof and
shall have
the right to perform reasonable procedures necessary to confirm the
accuracy
thereof at its own expense. If Seller disagrees with the amount of
a Royalty
Payment for the previous Royalty Payment Quarter, Seller shall give
written
notice thereof to Buyer not later than 45 days after receipt of the
Royalty
Payment Statement therefor (it being understood and agreed that if
Seller shall
not have given written notice within such 45-day period, Seller
shall be deemed
to have irrevocably agreed to such Royalty Payment amount), and
Buyer and Seller
shall attempt in good faith to resolve such disagreement. If after
30 days Buyer
and Seller have not reached agreement, the matter shall be referred
to an
Arbitrator who shall be instructed to use every reasonable effort
to make a
determination of the Royalty Payment amount within 30 days of
appointment. Buyer
shall give the Arbitrator during normal business hours access to
all financial
records of Buyer relevant to a determination of such Royalty
Payment amount and
to appropriate financial employees. The Arbitrator's determination
shall be
final and binding on Buyer and Seller with no right of appeal and
enforceable by
any court of competent jurisdiction. If the determination of such
Royalty
Payment amount shows that Buyer has overpaid such amount, then
Seller shall
promptly pay the amount of such overpayment to Buyer. If the
determination shows
an underpayment, then Buyer shall promptly pay the amount of such
underpayment
to Seller.
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(b) In the event that the Product Launch Date has not occurred on
or
before [REDACTED - CONFIDENTIAL TREATMENT REQUESTED]* (the
"Repurchase Option
Date"), Seller shall have the right (the "Repurchase Option") (but
not the
obligation) to repurchase the Assets from Buyer for an amount to be
mutually
agreed by the parties, which amount shall not exceed [REDACTED -
CONFIDENTIAL
TREATMENT REQUESTED]*(the "Repurchase Price"). Buyer shall deliver
to Seller
written notice no later than 30 days after the Repurchase Option
Date, which
notice shall set forth the cumulative number of Cases or Case
Equivalents sold
by Buyer as of the Repurchase Option Date. If such notice indicates
that Buyer
has not achieved a Product Launch Date, then Seller shall have 60
days from the
date of Buyer's written notice to exercise the Repurchase Option by
written
notice to Buyer. If Buyer achieves a Product Launch Date prior to
the Repurchase
Option Date, Buyer shall notify Seller of this fact within 30 days
and no
further notice shall be due to Seller pursuant to this provision.
Within 60 days
after receipt of Seller's written notice exercising the Repurchase
Option, (i)
Buyer shall convey back to Seller, free of Encumbrances (other than
Permitted
Encumbrances), all right, title and interest in the Assets, and
(ii) Seller
shall pay Buyer the Repurchase Price by wire transfer of
immediately available
funds. Upon any such conveyance, Buyer shall not be obligated to
make any future
Royalty Payment to Seller.
(c) Seller agrees that nothing in this Agreement, or in any
other
agreement between Buyer and Seller, imposes any contractual,
fiduciary or other
obligation on Buyer at any time to market or sell any Developed
Product or
otherwise to maximize the amount of any Royalty Payment. Seller
understands that
Buyer may at any time (i) discontinue developing, testing,
marketing, selling
and distributing any Developed Product and/or (ii) market and sell
products
under names or marks other than ACCELERADE(R) or ENDUROX(R).
(d) If in 2006 or any calendar year thereafter and prior to the
first
anniversary of the Product Launch Date (i) Seller's aggregate
annual sales for
its powder and gel product lines under the Brand Names are less
than [REDACTED -
CONFIDENTIAL TREATMENT REQUESTED]* (such actual sales for any year,
as a
percentage of [REDACTED - CONFIDENTIAL TREATMENT REQUESTED]*, the
"Annual Sales
Percentage") and (ii) Buyer has expended (in cash, cash equivalents
or
advertising equivalents) an aggregate of at least $[REDACTED -
CONFIDENTIAL
TREATMENT REQUESTED]* for such calendar year (or prorated for any
partial
calendar year) to support the Brand Names (each such calendar year
a "Royalty
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Reduction Year"), then each Royalty Payment otherwise payable with
respect to
the first year of the Royalty Payment Period (each a "Standard
Royalty Payment")
will be reduced to an amount (a "Reduced Royalty Payment") equal to
[REDACTED -
CONFIDENTIAL TREATMENT REQUESTED]*. If more than one Royalty
Reduction Year has
occurred, then a similar calculation will apply for Royalty
Payments with
respect to each year after the first year of the Royalty Payment
Period (until
the number of years with Reduced Royalty Payments equals the number
of Royalty
Reduction Years), employing the Annual Sales Percentage applicable
to the second
Royalty Reduction Year to calculate the Reduced Royalty Payments in
the second
year of the Royalty Payment Period, and so on (if applicable).
(e) The obligation of Buyer to make Royalty Payments pursuant to
this
Agreement shall terminate immediately upon the first occurrence of
any of the
following events:
(i) if prior to the second anniversary of the Product Launch
Date, Portman shall cease (other than as of the result of his death
or
disability which renders him unable to perform substantial
functions of
his position) to act on behalf of Seller on a full-time basis,
in
either an employee or independent contractor capacity or to have
made
other arrangements reasonably satisfactory to Buyer to continue
activities relevant to the Licensed Products (as defined in the
License
Agreement);
(ii) upon 30 days' written notice by Buyer, if Seller breaches
any of the covenants or agreements in this Agreement or in the
License
Agreement and such breach could materially and adversely affect
Buyer's
rights in the Assets, or the value or reasonably expected benefit
to
Buyer of the Assets, and Seller fails, within such 30 days, to
cure
such breach and the effect thereof;
(iii) upon 30 days' written notice by Buyer, if (A) Portman
breaches any of the covenants in the Portman Consulting, License
and
Noncompetition Agreement that address restrictions on
competition,
non-disparagement or confidentiality, or materially breaches
his
service obligations thereunder (considered in the aggregate),
(B)
Portman fails, within 30 days after notice to Portman and Seller,
to
cure such breach and the effect thereof and (C) Portman admits
such
fault or is finally determined through the mediation and
arbitration
provisions of such agreement to have so breached such covenants
or
obligations and failed to have timely cured such breach and the
effect
thereof; or
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(iv) Seller or Portman takes any action that has a detrimental
effect on the Brand Names or the Acquired Intellectual Property,
and
such action (and the effect thereof) is not cured by Seller or
Portman
(as applicable) within 30 days after receiving written notice
from
Buyer.
ARTICLE II
CLOSING AND CLOSING DATE
SECTION 2.1. Closing and Closing Date. The closing of the purchase
and
sale of the Assets (the "Closing") shall take place at the offices
of Baker
Botts L.L.P., 2001 Ross Avenue, Dallas, Texas 75201 at 10:00 a.m.,
Dallas, Texas
time, on the second business day after each of the conditions to
the obligations
of the parties set forth in Articles VI and VII (other than any
condition
relating to the making of payments or delivery of instruments or
other documents
at the Closing) have been satisfied or waived, or on such other
date and at such
other time as Buyer and Seller may mutually agree (the "Closing
Date").
SECTION 2.2. Deliveries at Closing. At the Closing:
(a) Seller shall deliver, or cause to be delivered, to Buyer:
(i) the Bill of Sale and Assignment, duly executed by Seller;
(ii) instruments of assignment of the United States and
foreign letters patent, patents, patent applications,
trademarks,
service marks, trademark and service mark registrations and
applications, copyrights and copyright registrations and
applications
included in the Assets, in each case duly executed and acknowledged
by
the appropriate parties;
(iii) a counterpart of the License Agreement, duly executed by
Seller;
(iv) copies of all approvals, consents and waivers of third
parties that are necessary to consummate the transactions
contemplated
by this Agreement, including those set forth in Schedule
2.2(a)(iv);
(v) a copy of the resolutions of the board of directors of
Seller authorizing the execution and delivery by Seller of this
Agreement and the performance by Seller of the transactions
contemplated hereby, certified by the secretary of Seller;
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(vi) evidence reasonably acceptable to Buyer that all liens,
security interests and other Encumbrances on the Assets (other
than
Permitted Encumbrances) have been released and discharged;
(vii) a legal opinion by counsel reasonably acceptable to
Buyer as to the due authorization of the transactions
contemplated
hereby by all requisite corporate action on the part of Seller,
including that no vote or consent of the stockholders of Seller
(except
as previously obtained) is necessary for the execution and delivery
by
the Seller of this Agreement or the consummation of the
transactions
contemplated hereby or evidence reasonably acceptable to Buyer that
all
such action has been taken (including that the vote or consent of
the
stockholders of Seller has been obtained);
(viii) such other bills of sale, deeds, general conveyances,
endorsements, assignments and other good and sufficient instruments
of
sale, conveyance, transfer, assignment and delivery as Buyer
may
reasonably request in order more effectively to vest in Buyer
all
right, title and interest in and to the Assets, in each case
duly
executed and acknowledged by Seller; and
(ix) such other certificates, instruments and documents as may
be reasonably requested by Buyer to carry out the intent and
purposes
of this Agreement.
(b) Buyer shall deliver, or cause to be delivered, to Seller:
(i) the Closing Payment, by wire transfer to such account as
Seller shall have designated at least two business days prior to
the
Closing Date;
(ii) a counterpart of the License Agreement, duly executed by
Buyer; and
(iii) such other certificates, instruments and documents as
may be reasonably requested by Seller to carry out the intent
and
purposes of this Agreement.
SECTION 2.3. Certain
Actions. At the Closing, Seller shall deliver to
Buyer copies of all Acquired Intellectual Property that is
available in readable
format (including hardcopy and electronic versions) or other
tangible form and
including (i) all patent prosecution and trademark files relating
to the
Acquired Intellectual Property currently in possession of Seller's
intellectual
property counsel, and (ii) all product ingredient information,
product formulas,
product details and other product information, and shall take such
additional
actions as are necessary or appropriate to put Buyer in actual
possession and
operating control of the Assets.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows:
SECTION 3.1. Existence; Authority; Qualification. Seller is a
corporation duly organized, validly existing and in good standing
under the laws
of the State of Delaware. Seller has all requisite corporate power
and authority
to own, operate and lease its properties and assets and to carry on
its business
as presently conducted. Seller is duly qualified to transact
business and is in
good standing as a foreign corporation in all jurisdictions where
it is required
to be so qualified, except where the failure to be so qualified
would not have a
Material Adverse Affect.
SECTION 3.2. Authority; Binding Effect. Seller has all
requisite
corporate power and authority, to execute and deliver this
Agreement, to perform
its obligations hereunder and to consummate the transactions
contemplated
hereby, and no further corporate proceedings on the part of or with
respect to
Seller, its board of directors or stockholders are necessary to
approve and
authorize the execution and delivery of this Agreement, the
performance by
Seller of its obligations hereunder or the consummation of the
transactions
contemplated hereby. This Agreement has been duly executed and
delivered by
Seller and constitutes a valid and binding agreement of Seller,
enforceable
against Seller in accordance with its terms.
SECTION 3.3. Absence of Conflicts. Except as set forth in Item 3.3
of
the Disclosure Schedule, none of the execution and delivery by
Seller of this
Agreement, the performance by Seller of its obligations hereunder
or the
consummation of the transactions contemplated hereby will (i)
conflict with or
result in a violation or breach of any provision of the certificate
of
incorporation or bylaws of Seller; (ii) conflict with or result in
a violation
of any law, rule or regulation applicable to Seller or any of the
Assets or
conflict with or result in a violation of any order, writ,
injunction, decree,
judgment or ruling of any Governmental Entity applicable to Seller
or, to the
extent Seller has Knowledge thereof, to any of the Assets; (iii)
conflict with,
result in the breach or violation of, constitute a default under,
or otherwise
adversely affect any of the terms, conditions or provisions of, any
note, bond,
mortgage, indenture, deed of trust, license, franchise, permit,
Contract, or
other instrument or document to which Seller is a party or by which
any of the
Assets may be bound; (iv) require any consent or approval of, or
notice to, or
filing or registration with, any Person, except for those consents,
approvals,
notices, filings or registrations which have been obtained, given
or made, as
the case may be, and which are unconditional and in full force and
effect or (v)
result in the creation of, or impose on any Seller the obligation
to create, any
Encumbrance, other than Permitted Encumbrances, upon any of the
Assets.
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SECTION 3.4. Governmental Consents and Filings. Except for the
filing
of any lien releases with the applicable Governmental Entities
(which shall be
effected by Seller prior to or on the Closing Date) and the filing
of
assignments of patents, registered trademarks and copyrights (which
shall be
effected by Buyer upon the Closing), there is no requirement
applicable to
Seller to obtain any consent of, or to make or effect any
declaration, filing or
registration with, any Governmental Entity for the valid execution
and delivery
of this Agreement, the due performance by Seller of its obligations
hereunder or
the lawful consummation of the transactions contemplated
hereby.
SECTION 3.5. Subsidiaries. Except as set forth in Item 3.5 of
the
Disclosure Schedule, Seller does not have any subsidiaries, nor
does Seller own,
directly or indirectly, any capital stock, partnership interests,
limited
liability company interests, equity securities or other ownership
interests of
or in any corporation, partnership, limited liability company or
other Person.
SECTION 3.6. Financial Statements and SEC Reports.
(a) The unaudited balance sheet of Seller as of September 30, 2005
(the
"Latest Balance Sheet") and the statement of income of Seller for
the nine
months then ended and the audited balance sheets of Seller as of
December 31,
2004, 2003 and 2002 and the audited statements of income of Seller
for the years
then ended (collectively the "Financial Statements") are contained
in Seller's
SEC Reports available on the SEC's EDGAR website. Except as
described in Item
3.6(a) of the Disclosure Schedule, the Financial Statements have
been prepared
in accordance with generally accepted accounting principles, are
accurately
based on the books and records of Seller, are true and correct in
all material
respects, and fairly present the financial condition of Seller,
including the
Assets, at the dates thereof and its results of operations for the
periods
covered thereby.
(b) Since December 31, 2003, Seller has timely filed or furnished
all
material forms, reports, registration statements, certifications
and documents
required to be filed or furnished by it with the Securities and
Exchange
Commission (the "SEC") (the "SEC Reports"), all of which complied
as of their
respective filing dates in all material respects will all
applicable
requirements of the Exchange Act and the Securities Act, as
applicable. True,
correct and complete copies of all such SEC Reports have been
delivered to Buyer
or made available on the SEC's Internet website. None of the SEC
Reports,
including the Financial Statements included or incorporated by
reference
therein, at the time filed, contained any untrue statement of a
material fact or
omitted to state a material fact required to be stated therein or
necessary in
order to make the statements therein, in light of the circumstances
in which
they were made, not misleading. No executive officer of Seller has
failed in any
respect to make the certifications required of him or her under
Sections 302 or
906 of the Sarbanes-Oxley Act of 2002 with respect to any SEC
Report.
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(c) Seller maintains disclosure controls and procedures required
by
Rule 13a-15 or 15d-15 under the Exchange Act and has delivered to
Buyer a
correct and complete description of such disclosure controls and
procedures to
the extent related to the Business. Such disclosure controls and
procedures are
effective to ensure that all material information concerning Seller
and its
Subsidiaries is made known on a timely basis to the individuals
responsible for
the preparation of Seller's filings with the SEC and other public
disclosure
documents. Seller has disclosed to its auditors and the audit
committee of
Seller's board of directors (i) any significant deficiencies in the
design or
operation of internal controls which could adversely affect in any
material
respect Seller's ability to record, process, summarize and report
financial data
and has identified for Seller's auditors any material weaknesses in
internal
controls and (ii) any fraud, whether or not material, that involves
management
or other employees who have a significant role in Seller's internal
controls.
Except as disclosed in Item 3.6(c) of the Disclosure Schedule, no
disclosure
described in the preceding sentence relating to the Business or the
Assets has
been made since December 31, 2003. Since December 31, 2003, no
former or current
employee of Seller or any of its Subsidiaries has engaged in
questionable
accounting or auditing practices. No attorney representing Seller
or any of its
Subsidiaries, whether or not employed by Seller or any of its
Subsidiaries, has
reported evidence of a violation of any securities Legal
Requirements, breach of
fiduciary duty or similar violation by Seller or any of its
officers, directors,
employees or agents to Seller's board of directors or any committee
thereof or
to any director or officer of Seller or any of its
Subsidiaries.
SECTION 3.7. Absence of Undisclosed Liabilities. Except as
disclosed in
Item 3.7 of the Disclosure Schedule, Seller does not have any
debts, liabilities
or obligations, whether accrued, absolute, contingent or otherwise,
other than
(i) liabilities or obligations fully reflected or specifically
reserved against
in the Latest Balance Sheet or disclosed in the notes thereto or
(ii) current
liabilities incurred in the ordinary course of business after the
date of the
Latest Balance Sheet. Except as set forth in Item 3.7 of the
Disclosure
Schedule, Seller is current in the payment and performance of all
of its debts,
liabilities and obligations.
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SECTION 3.8. Absence of Certain Changes or Events. Since the date
of
the Latest Balance Sheet, except as set forth in Item 3.8 of the
Disclosure
Schedule, the business of Seller has been conducted in the ordinary
course and
consistent with past practice and none of the following has
occurred:
(a) any actual or reasonably foreseeable prospective change in
the
operations, assets, properties, liabilities, results of operations
or financial
condition of Seller, whether or not in the ordinary course of
business, which
has resulted in a Material Adverse Effect, or any event, occurrence
or
development that will result in or could reasonably be expected to
result in a
Material Adverse Effect;
(b) any material damage, destruction or loss (whether or not
insured)
affecting the physical condition of the Assets, or the other assets
or
properties of Seller or the availability thereof in connection with
the conduct
of Seller's business;
(c) except as set forth in Item 3.8 of the Disclosure Schedule
and
except for sales to customers in the ordinary course of business,
any sale,
assignment or transfer of material tangible or intangible
Assets;
(d) any mortgage, pledge, security interest or imposition of
any
Encumbrance, other than Permitted Encumbrances, on any Assets;
(e) any material adverse change in the relationships between Seller
on
the one hand and any suppliers, licensors, licensees, lessors,
insurers, joint
venture partners or other Persons with whom Seller has material
business
relationships;
(f) any revocation or termination, or any notice of any
threatened
revocation or termination, of any material consents, approvals,
licenses,
permits, franchises or other authorizations owned by or issued to
Seller that
relate to or affect the Assets;
(g) any action or omission on the part of Seller that, if taken
or
omitted to be taken after the date hereof, would cause a breach or
violation of
the covenants contained in Section 5.1 or 5.2; or
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(h) any agreement or commitment to do any of the foregoing.
SECTION 3.9. Title, Sufficiency and Condition of Assets. Seller has
all
right, title and interest in and to all of the Assets owned by it,
free and
clear of all Encumbrances, other than Permitted Encumbrances. Upon
the sale,
conveyance, transfer, assignment and delivery of the Assets in
accordance with
this Agreement, Buyer will acquire all right title and interest in
and to the
Assets, free and clear of all Encumbrances, liabilities, charges,
levies or
assessments of any kind or character, except for Permitted
Encumbrances. Without
limiting the generality of the foregoing, all Encumbrances on the
Assets that
secure any Indebtedness of Seller or its Affiliates have been
released and
discharged or will be released and discharged before or
simultaneously with the
Closing. The Assets include all Intellectual Property Rights used
by Seller or
its Affiliates or contractors in or necessary in connection with
the research,
development, testing, production, manufacture, marketing, sale or
distribution
by Seller or its Affiliates or contractors of Seller's products
under the Brand
Names. The items of tangible personal property included in the
Assets (including
all documents, studies and records) are complete and in good
condition, do not
have any defects that could reasonably be expected to interfere in
any material
respect with their use in connection with the Business, and are in
the
possession of Seller or under its control. Except as included in
the Acquired
Intellectual Property pursuant to Section 1.1(a)(v), there are no
computer
software programs or software development tools, databases or
compilations,
documentation, user manuals or training materials, relating to or
necessary for
the operation, use or exploitation of any of the Assets.
SECTION 3.10. Contracts. Item 3.10 of the Disclosure Schedule lists
all
Contracts to which Seller is a party or by which it is bound (i)
that relate to
the Assets; (ii) that relate to the development, license,
sublicense,
manufacture, use, sale, disclosure, distribution, reproduction,
display,
performance, duplication, preparation of derivative works of,
modification, or
other exploitation (collectively, "Exploitation") thereof; (iii) by
which the
Assets are bound; or (iv) that are used or held for use in the
Exploitation by
Seller of the Assets. Complete and correct copies of all such
Contracts
(including all exhibits, schedules, amendments or modifications
thereto) have
been provided to Buyer. All such Contracts are valid and in full
force and
effect, have not been modified (except as set forth in Item 3.10 of
the
Disclosure Schedule) and constitute the legal, valid and binding
obligations of
Seller and, to the knowledge of Seller, the other parties thereto.
Except as set
forth in Item 3.10 of the Disclosure Schedule, Seller is not in
default, and no
written notice of alleged default has been received by Seller under
any such
Contract, and, to the knowledge of Seller, no other party thereto
is in default
or alleged to be in default thereunder. Except as set forth in Item
3.10 of the
Disclosure Schedule, to the extent that any such Contract is
included in the
Assets, the assignment of the Assets to Buyer will not affect the
continued
validity or effectiveness or alter the terms and conditions of any
such
Contract.
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SECTION 3.11. Permits. Item 3.11 of the Disclosure Schedule Seller
sets
forth all licenses, franchises, permits, approvals, authorizations,
exemptions,
classifications, certificates, registrations and similar documents
or
instruments (collectively, "Permits") that are material to the
conduct of the
business operated utilizing the Assets. Seller owns or validly
holds all Permits
included in the Assets and all such Permits are valid and in full
force and
effect. No proceeding is pending or, to the knowledge of Seller,
threatened
which could result in the revocation or termination of any such
Permits, and
Seller does not know of any basis on which any such proceeding
could be
commenced. The consummation of the transactions contemplated by
this Agreement
will not affect the continued validity or effectiveness or alter
the terms and
conditions of any such Permits.
SECTION 3.12. Transactions with Affiliates. Except as set forth in
Item
3.12 of the Disclosure Schedule, with respect to the Assets or the
Business
conducted by Seller utilizing the Assets, since December 31, 2000,
Seller has
not purchased, acquired or leased any property or services from, or
sold,
transferred or leased any property or services to, or loaned or
advanced any
money to, or borrowed any money from, or guaranteed or otherwise
become liable
for any Indebtedness or other obligations of, or acquired any
equity,
obligations or securities of, or entered into any management,
consulting or
similar fee arrangement with, or entered into or consummated any
other material
transaction, agreement or arrangement with or for the benefit of,
any of its
Affiliates or any of their respective directors, officers or
employees. None of
the Affiliates of Seller has any ownership or other interest in the
Assets.
SECTION 3.13. Litigation. There are no Proceedings pending or, to
the
knowledge of Seller, currently threatened against Seller. Except as
set forth in
Item 3.13 of the Disclosure Schedule, since January 1, 2001, there
has been no
such Proceeding involving or relating to the Assets. To the
knowledge of Seller,
there is no presently existing factual basis that is reasonably
likely to result
in any such Proceeding. Seller is not subject to any judgment,
order, writ,
injunction or decree of any Governmental Entity. There are no
Proceedings
pending or, to the knowledge of Seller, threatened seeking to
restrain, prohibit
or obtain damages in connection with this Agreement or the
transactions
contemplated hereby.
SECTION 3.14. Compliance With Laws and Other Requirements. Seller
is
not in violation of or in default under (i) any applicable law,
ordinance,
statute, rule or regulation of any Governmental Entity or (ii) any
order, writ,
injunction, judgment or decree of any arbitrator or Governmental
Entity
applicable to Seller or, to the extent Seller has Knowledge of such
order, writ,
injunction, judgment or decree, to any of the Assets, except, with
respect only
to such matters that do not involve or relate to the Assets, for
any violation
or default which has not had, and could not reasonably be expected
to have, a
Material Adverse Effect. Seller is not subject to any order, writ,
injunction,
judgment or decree of any arbitrator or Governmental Entity
involving or
relating to the Assets. No claim is pending or, to the knowledge of
Seller,
threatened with respect to any such violation or default.
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SECTION 3.15. Intellectual Property.
(a) Item 3.15(a) of the Disclosure Schedule is a complete and
correct
list of all patents and patent applications, registered trademarks,
registered
trade names, registered service marks and registered copyrights,
and all
applications for any of the foregoing, and all material
unregistered copyrights,
trademarks, trade names and service marks owned or claimed by
Seller. Each item
listed in Item 3.15(a) of the Disclosure Schedule is subsisting and
in full
force and effect. Each issued patent, registered trademark,
registered trade
name, registered service mark and registered copyright listed in
Item 3.15(a) of
the Disclosure Schedule has been duly issued by or registered with
the
applicable federal, state, foreign or local agency, which agency is
noted in
Item 3.15(a) of the Disclosure Schedule, with respect to any
particular item
(based on certificates or other written documents that the Seller
has received
from such agency), and has not been canceled, expired or
affirmatively abandoned
except as disclosed in Item 3.15(a) of the Disclosure Schedule.
Except as
otherwise set forth in Item 3.15(a), Seller is the sole and
exclusive owner of
the Intellectual Property listed in Item 3.15(a) of the Disclosure
Schedule.
Except as set forth in Item 3.15(a) of the Disclosure Schedule, to
the Sellers'
knowledge, Seller is currently listed in the records of the
appropriate federal,
foreign, state or local agency, which agency is noted in Item
3.15(a) of the
Disclosure Schedule, with respect to any particular item as the
sole owner of
record of each application and registration listed thereon.
(b) There is no existing or, to Seller's knowledge, threatened
opposition, interference, cancellation proceeding (stayed or
otherwise) or,
except as set forth in Item 3.15(b) of the Disclosure Schedule,
other legal or
governmental proceeding before any court or registration authority
in any
jurisdiction against the items listed in Item 3.15(a) of the
Disclosure
Schedule, or to Seller's knowledge, any of the Intellectual
Property Rights to
be transferred to Buyer pursuant to this Agreement.
(c) Item 3.15(c) of the Disclosure Schedule sets forth a complete
and
accurate list of all material Contracts pertaining to the use of or
granting any
right to use or practice any rights under any of the Acquired
Intellectual
Property, whether Seller is the licensee or licensor thereunder,
and any written
settlements or assignments relating to any of the Intellectual
Property. The
consummation of the transactions contemplated hereby will not cause
a breach,
termination or forfeiture of any such material Contracts. Seller
has not granted
any sublicense or similar right with respect to any of the Acquired
Intellectual
Property.
(d) No trade secret or confidential information or know-how that
is
material to the Business or the Assets has been disclosed or
authorized to be
disclosed to any third party other than pursuant to a
non-disclosure agreement
that uses reasonable efforts to protect Seller's proprietary
interests in and to
such trade secrets and confidential information and know-how.
(e) Except as set forth in Item 3.15(e)(i) of the Disclosure
Schedule,
the conduct of the Business by Seller does not interfere with,
infringe upon or
misappropriate any Intellectual Property Right owned or controlled
by any third
party, nor will Buyer, to Seller's knowledge, interfere with,
infringe upon or
misappropriate any Intellectual Property Right owned or controlled
by any third
party as a result of the continued operation of the Assets or the
Business. To
Seller's knowledge, and except as disclosed in Item 3.15(e)(ii) of
the
Disclosure Schedule, no third party is interfering with, infringing
upon or
misappropriating any of the Acquired Intellectual Property and no
such claims
have been made against a third party by Seller. Except as disclosed
in Item
3.15(e)(iii) of the Disclosure Schedule, there are no claims or
suits pending
or, to Seller's knowledge, threatened, and, Seller has not received
any written
notice of a third-party demand, claim or suit, alleging that
Seller's activities
or the conduct of the Seller infringes or infringed upon or
constitutes or
constituted the unauthorized use of the proprietary rights of any
third party or
challenging the ownership, use, validity or enforceability of any
of the
Intellectual Property.
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(f) Except as set forth in Item 3.15(f)(i) of the Disclosure
Schedule,
all present and former employees, officers, directors and
consultants of Seller
with responsibility for developing or implementing the Acquired
Intellectual
Property have executed and delivered to Seller an agreement
assigning to Seller
their entire right, title and interest in and to any Intellectual
Property
Rights arising from services performed for Seller by such persons.
The
agreements signed by the present and former employees, officers,
directors and
consultants of Seller with responsibility for developing or
implementing the
Acquired Intellectual Property are substantially identical to the
form of
agreement included in Item 3.15(f)(ii) of the Seller Disclosure
Schedule. Except
as set forth in Item 3.15(f)(iii) of the Disclosure Schedule, no
present or
former officer, director, employee or consultant of Seller has any
right, title
or interest, directly or indirectly, in whole or in part, in or to
any of the
Acquired Intellectual Property.
(g) Except as set forth in Item 3.15(g) of the Disclosure Schedule
of
the Disclosure Schedule, after the Closing, all Acquired
Intellectual Property
will be fully transferable, alienable, improvable, licensable and
otherwise
explo
