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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
MARCH 5, 1996
T CELL SCIENCES, INC.
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(Exact name of registrant as specified in charter)
DELAWARE 0-15006 13-3191702
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(State or other (Commission file number) (IRS employer
jurisdiction of incorporation) identification no.)
115 FOURTH AVENUE, NEEDHAM, MA 02194
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (617) 433-0771
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Item 2 - Acquisition or Disposition of Assets
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On March 5, 1996, T Cell Sciences, Inc. (the "Registrant") sold to
Endogen, Inc. ("Endogen"), the research products and operations of its
wholly-owned subsidiary T Cell Diagnostics, Inc. ("TCD") for a purchase price
of approximately $2.9 million. The sale did not include the Registrant's TRAx
(registered trademark) product franchise and all assets relating thereto. The
purchase price was paid in the form of (i) a convertible subordinated note (the
"Convertible Note") in the principal amount of $1.9 million, payable in
semi-annual installments over a period of five years and (ii) a combination of
cash and a short-term note used to repay approximately $1.0 million of the
Registrant's obligations under a facility and equipment lease relating to TCD's
operations. The Registrant will also receive from Edogen royalty payments for
two years following the sale, based on sales generated by certain of the TCD
assets sold. In addition, Endogen assumed all of TCD's liabilities other than
certain excluded liabilites. The Convertible Note is convertible at any time at
the option of the Registrant into shares of common stock of Endogen. Endogen
has agreed to file a registration statement under the Securities Act of 1933,
as amended, with respect to shares of its common stock issuable upon conversion
of the Convertible Note.
Item 7 - Financial Statements, Pro Forma Financial Information and Exhibits
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(B) PRO FORMA FINANCIAL INFORMATION. The following pro forma
financial statements of the Registrant are filed as Exhibit 99.1 hereto:
(i) Unaudited Pro Forma Statement of Operations of the
Registrant for the year ended December 31, 1994;
(ii) Unaudited Pro Forma Balance Sheet of the Registrant as of
September 30, 1995;
(iii) Unaudited Pro Forma Statement of Operations of the Registrant
for the nine month period ended September 30, 1995; and
(iv) Notes to Unaudited Pro Forma Financial Statements.
(C) EXHIBITS
2.1 Asset Purchase Agreement dated as of March 4, 1996 (excluding
schedules)
99.1 Unaudited Pro Forma Financial Statements of the Registrant
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
T CELL SCIENCES, INC.
Date: March 20, 1996 By: /s/ Alan W. Tuck
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Alan W. Tuck, President
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EXHIBIT INDEX
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Exhibit Name
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2.1 Asset Purchase Agreement dated as of March 4, 1996
(excluding exhibits and schedules)*
99.1 Unaudited Pro Forma Financial Statements of the Registrant
* A list of exhibits and schedules to the Asset Purchase Agreement appears
on page (iii) of the Asset Purchase Agreement. The Registrant agrees to furnish
supplementally a copy of any omitted exhibit or schedule to the Commission upon
request.
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ASSET PURCHASE AGREEMENT
BETWEEN
ENDOGEN, INC.
AND
T CELL DIAGNOSTICS, INC.
AND
T CELL SCIENCES, INC.
DATED AS OF MARCH 4, 1996
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TABLE OF CONTENTS
PAGE
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ARTICLE I -- DEFINITIONS..........................................................................................1
1.01. DEFINITIONS.............................................................................................1
ARTICLE II -- PURCHASE AND SALE...................................................................................7
2.01. PURCHASE AND SALE......................................................................................10
2.07. CLOSING................................................................................................10
2.08. CLOSING BALANCE SHEET..................................................................................11
2.09. ADJUSTMENT OF PURCHASE PRICE...........................................................................12
2.10. ADDITIONAL PAYMENTS....................................................................................13
ARTICLE III -- REPRESENTATIONS AND WARRANTIES OF SELLERS.........................................................14
3.01. CORPORATE EXISTENCE AND POWER..........................................................................14
3.02. CORPORATE AUTHORIZATION................................................................................14
3.03. GOVERNMENTAL AUTHORIZATION; CONSENTS...................................................................14
3.04. NON-CONTRAVENTION......................................................................................14
3.05. SUBSIDIARIES...........................................................................................15
3.06. [INTENTIONALLY OMITTED]................................................................................15
3.07. UNAUDITED FINANCIAL STATEMENTS.........................................................................15
3.08. ABSENCE OF CERTAIN CHANGES.............................................................................15
3.09. TITLE TO PURCHASED ASSETS..............................................................................16
3.10. NO UNDISCLOSED MATERIAL LIABILITIES....................................................................17
3.11. LITIGATION.............................................................................................17
3.12. MATERIAL CONTRACTS.....................................................................................17
3.13. INSURANCE..............................................................................................18
3.14. COMPLIANCE WITH LAWS; PERMITS; NO DEFAULTS.............................................................18
3.15. FINDERS' FEES..........................................................................................19
3.16. INTELLECTUAL PROPERTY..................................................................................19
3.17. INVENTORIES............................................................................................20
3.18. RECEIVABLES............................................................................................20
3.19. TAXES..................................................................................................20
3.20. EMPLOYEES; LABOR MATTERS...............................................................................21
3.21. PRODUCTS...............................................................................................22
3.22. ENVIRONMENTAL COMPLIANCE...............................................................................22
3.23. CUSTOMERS AND SUPPLIERS................................................................................25
3.24. TRANSACTIONS WITH AFFILIATES; INTERSELLER ARRANGEMENTS.................................................25
3.25. OTHER INFORMATION......................................................................................25
3.26. [INTENTIONALLY OMITTED]................................................................................25
3.27. EMPLOYEE BENEFITS PLANS................................................................................26
3.28. LEASED EQUIPMENT.......................................................................................28
3.29. RETAINED ASSETS AND RETAINED LIABILITIES; PURCHASED ASSETS COMPLETE....................................28
3.30. SECURITIES ACT MATTERS.................................................................................28
3.31. POWERS OF ATTORNEY.....................................................................................30
3.32. CERTAIN ACTIONS........................................................................................30
ARTICLE IV -- REPRESENTATIONS AND WARRANTIES OF BUYER............................................................30
4.01. ORGANIZATION AND EXISTENCE.............................................................................30
4.02. CORPORATE AUTHORIZATION................................................................................31
4.03. GOVERNMENTAL AUTHORIZATION; CONSENTS...................................................................31
4.04. NON-CONTRAVENTION......................................................................................31
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4.05. FINDERS' FEES..........................................................................................31
4.06. COMPLIANCE WITH LAWS; PERMITS; NO DEFAULTS.............................................................31
4.07. LITIGATION.............................................................................................32
4.08. CAPITALIZATION.........................................................................................32
4.09. SEC MATERIAL...........................................................................................32
4.10 ABSENCE OF CERTAIN CHANGES.............................................................................32
4.11 NO UNDISCLOSED MATERIAL LIABILITIES....................................................................33
4.12 COMPLIANCE WITH LAWS; PERMITS; NO DEFAULTS.............................................................33
ARTICLE V -- COVENANTS OF SELLERS................................................................................33
5.01. AUDITED FINANCIAL STATEMENTS...........................................................................33
5.02. ACCESS TO INFORMATION; ASSISTANCE WITH FORM 8-K........................................................34
5.03. NOTICES OF CERTAIN EVENTS..............................................................................34
5.04. [INTENTIONALLY OMITTED]................................................................................34
5.05. NONCOMPETITION.........................................................................................35
5.06. CONFIDENTIALITY........................................................................................35
ARTICLE VI -- COVENANTS OF BUYER.................................................................................36
6.01. CONFIDENTIALITY........................................................................................36
6.02. ACCESS.................................................................................................37
6.03. SEC SUPPLEMENTS........................................................................................37
6.04. NON-SOLICIT OF EMPLOYEES...............................................................................37
6.05. MAINTENANCE OF MANUFACTURING FACILITY..................................................................37
ARTICLE VII -- COVENANTS OF ALL PARTIES..........................................................................37
7.01. BEST EFFORTS...........................................................................................37
7.02. CERTAIN FILINGS........................................................................................38
7.03. PUBLIC ANNOUNCEMENTS...................................................................................38
7.04. ACCESS TO THE SELLERS' BUSINESS RECORDS................................................................38
7.05. USE OF TRAX TECHNOLOGY.................................................................................38
7.06. ALLOCATION OF EMPLOYEE PLAN RESPONSIBILITIES...........................................................39
7.07. EMPLOYEES..............................................................................................39
7.08. TAX CONSEQUENCES.......................................................................................39
7.09. CHANGE OF NAME.........................................................................................40
7.10. RIGHT OF FIRST REFUSAL ON NEW TRAX PRODUCTS............................................................41
7.11. MANUFACTURE AND SUPPLY AGREEMENT.......................................................................41
ARTICLE VIII -- CONDITIONS TO CLOSING............................................................................41
8.01. CONDITIONS TO THE OBLIGATIONS OF EACH PARTY............................................................41
8.02. CONDITIONS TO OBLIGATION OF BUYER......................................................................42
8.03. CONDITIONS TO OBLIGATION OF PARENT.....................................................................43
ARTICLE IX -- SURVIVAL; INDEMNIFICATION..........................................................................43
9.01. SURVIVAL...............................................................................................43
9.02. INDEMNIFICATION........................................................................................44
9.03. PROCEDURES; NO WAIVER..................................................................................45
ARTICLE X -- MISCELLANEOUS.......................................................................................45
10.01. NOTICES...............................................................................................45
10.02. AMENDMENTS; NO WAIVERS................................................................................46
10.03. EXPENSES..............................................................................................46
10.04. SUCCESSORS AND ASSIGNS................................................................................47
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10.05. FURTHER ASSURANCES....................................................................................47
10.06. GOVERNING LAW.........................................................................................47
10.07. COUNTERPARTS; EFFECTIVENESS...........................................................................47
10.08. ENTIRE AGREEMENT......................................................................................47
10.09. CAPTIONS..............................................................................................47
10.10. JURISDICTION..........................................................................................47
Exhibits
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Exhibit A Form of Convertible Note
Exhibit B Form of Equipment Note
Exhibit C [Intentionally Omitted]
Exhibit D Form of Registration Rights Agreement
Exhibit E Form of Security Agreement
Exhibit F Form of Opinion of Sellers' Counsel
Exhibit G Form of Opinion of Buyer's Counsel
Schedules
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SCHEDULE 2.01 Parent Assets
SCHEDULE 3.07 Financial Statements
SCHEDULE 3.08 Changes in the Business of TCD
SCHEDULE 3.09 Liens on Property and Equipment
SCHEDULE 3.10 Material Liabilities
SCHEDULE 3.11 Litigation
SCHEDULE 3.12 Material Contracts
SCHEDULE 3.13 Insurance Policies
SCHEDULE 3.14 Permits
SCHEDULE 3.16 Intellectual Property
SCHEDULE 3.17-1 Inventory Policy
SCHEDULE 3.17-2 Inventory on Balance Sheet Date
SCHEDULE 3.18 Accounts Receivable Aging
SCHEDULE 3.19 Tax Sharing Arrangements; Exceptions to Filing of Tax Returns
SCHEDULE 3.20 Employees
SCHEDULE 3.21-1 Products by Net Sales
SCHEDULE 3.21-2 SCHEDULE of Biokine and TRAx Products
SCHEDULE 3.22 Environmental Matters
SCHEDULE 3.23 Customers
SCHEDULE 3.24 Transactions with Affiliates
SCHEDULE 3.25 TCD's 1995 Sales History
SCHEDULE 3.27 Employee Plans; Employees to Receive Buyer Employment Offer
SCHEDULE 3.28 Leased Equipment
SCHEDULE 3.29 Retained Assets
SCHEDULE 3.31 Powers of Attorney
SCHEDULE 5.05 Employees to be employed by Parent
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ASSET PURCHASE AGREEMENT
AGREEMENT dated as of March 4, 1996 by and among (i) ENDOGEN, INC., a
Massachusetts corporation ("Buyer"), (ii) T CELL DIAGNOSTICS, INC., a Delaware
corporation ("TCD") and (iii) T CELL SCIENCES, INC., a Delaware corporation (the
"Parent" and collectively with TCD, the "Sellers").
W I T N E S S E T H :
WHEREAS, the Parent is the record and beneficial owner of 100% of the
issued and outstanding capital stock of TCD;
WHEREAS, Buyer desires to buy and TCD desires to sell substantially all
of the assets currently owned by TCD and used in TCD's business, specifically
excluding certain assets relating to TRAx products; and
WHEREAS, Buyer desires to buy and the Parent desires to sell certain of
its assets currently owned by the Parent and used in TCD's business.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein set forth, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.01. DEFINITIONS. (a) The following terms, as used herein, have the
following meanings:
"ACCOUNTS RECEIVABLE" means all rights of TCD to payment for
goods sold, leased or otherwise marketed in the ordinary course of business and
all rights of TCD to payment for services rendered in the ordinary course of
business and all sums of money or other proceeds due thereon pursuant to
transactions with account debtors recorded on books of account in accordance
with GAAP, other than rights with respect to the Retained Assets.
"ADDITIONAL PAYMENTS" means the payments to which TCD may be
entitled after the Closing in accordance with Section 2.10. Such payments shall
be deemed to be additional consideration payable by the Buyer for the Purchased
Assets.
"ADDITIONAL PERIOD" means the period beginning on the first day
after the Base Year and ending two years thereafter.
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"ADDITIONAL PRODUCTS" means all products manufactured and sold by
TCD prior to the Closing, a list of which is set forth on SCHEDULE 3.21-1
attached hereto, except for Biokine Products and TRAx Products.
"ADDITIONAL YEAR" means each of the two twelve month periods
beginning (i) on the first day after the Base Year or (ii) the first anniversary
of the first day after the Base Year, and, in each case, ending one year
thereafter during the Additional Period.
"AFFILIATE" means, with respect to any Person, any Person
directly or indirectly controlling, controlled by, or under common control with
such Person.
"AFFILIATED GROUP" means any affiliated group within the meaning
of Section 1504 of the Code (or any similar group defined under similar
provisions of state, local, or foreign law).
"ANCILLARY AGREEMENTS" means the Convertible Note, the Equipment
Note, the Registration Rights Agreement and the Security Agreement.
"AVERAGE MARKET VALUE" means, with respect to the applicable
trading days, the average of each such day's last reported sales price of a
share of Buyer Stock on the Nasdaq Small Cap Market or such other market on
which the Buyer Stock may then be trading.
"BALANCE SHEET" means the unaudited balance sheet of TCD as of
December 31, 1995, referred to in Section 3.07.
"BALANCE SHEET DATE" means December 31, 1995.
"BASE STOCKHOLDERS' EQUITY" means $1,329,297.
"BASE YEAR" means the twelve month period ending on the last day
of the last complete calendar month prior to the Closing.
"BASE YEAR NET SALES" means the Net Sales of the Additional
Products for the Base Year as set forth in SCHEDULE 3.21-1.
"BIOKINE PRODUCTS" means the products set forth in SCHEDULE
3.21-2 under the heading "Biokine Products."
"BUYER'S COUNSEL" means the law firm of Testa, Hurwitz &
Thibeault, Boston, Massachusetts.
"BUYER STOCK" means the common stock, $.01 par value per share,
of Buyer.
"CLOSING BALANCE SHEET" means an unaudited balance sheet of TCD
as at the close of business on February 29, 1996 without giving effect to the
transactions contemplated pursuant
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to this Agreement, which (i) shall exclude the Retained Assets and Retained
Liabilities, and (ii) shall be prepared in conformance with GAAP (except for
the absence of footnotes and schedules); PROVIDED, HOWEVER, that stockholders'
equity shall not include any deferred tax assets or deferred tax liabilities
set forth on the balance sheet of TCD as of such date.
"CLOSING STOCKHOLDERS' EQUITY" means the stockholders' equity of
TCD as at the close of business on February 29, 1996 without giving effect to
the transactions contemplated pursuant to this Agreement, which shall exclude
the Retained Assets and Retained Liabilities, prepared in conformance with GAAP
(except for the absence of footnotes and schedules) and (a) shall include items
substantially consistent with those in the Balance Sheet and (b) be prepared in
accordance with accounting policies and practices consistent with those used in
the preparation of the Balance Sheet; PROVIDED, HOWEVER, that stockholders'
equity shall not include any deferred tax assets or deferred tax liabilities set
forth on the balance sheet of TCD as of such date.
"CODE" means the Internal Revenue code of 1986, as amended.
"CONVERTIBLE NOTE" means the Subordinated Convertible Note of
Buyer in favor of TCD in the principal amount set forth in Section 2.07(a)
hereof in substantially the form of Exhibit A attached hereto, as amended or
substituted from time to time.
"CUMMINGS" means Cummings Properties Management, Inc.
"EQUIPMENT NOTE" means the Promissory Note of Buyer in favor of
Parent in the principal amount set forth in Section 2.07(b) in the form of
EXHIBIT B attached hereto.
"FINAL STOCKHOLDERS' EQUITY " means the Closing Stockholders'
Equity (i) as shown in the Sellers' calculation delivered pursuant to Section
2.08(a) if no notice of disagreement with respect thereto is duly delivered
pursuant to Section 2.08(b) or (ii) if such a notice of disagreement is duly
delivered, (A) as agreed by the parties pursuant to Section 2.08(c) or (B) in
the absence of such agreement, as shown in the independent accountant's
calculation delivered pursuant to Section 2.08(c); PROVIDED that the Final
Stockholders' Equity shall not in any event be more than the Sellers'
calculation of the Closing Stockholders' Equity delivered pursuant to Section
2.08(a) nor less than Buyer's calculation of the Closing Stockholders' Equity
delivered pursuant to Section 2.08(b).
"FLEET" means Fleet Credit Corp.
"GAAP" means generally accepted accounting principles which are
applied on a basis consistent with prior periods.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"INTELLECTUAL PROPERTY RIGHT" means all (A) utility and design
patents, patent applications and patent disclosures, including all continuation,
continuation-in-part, divisional,
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reissue and re-examination patents, patent applications and patent disclosures;
all models; certificates and registrations of invention and applications
for certificates and registrations of invention; and all licenses, exclusive
or otherwise, for the use, manufacture, sale or offering for sale thereunto;
(B) trademarks, service marks, trade dress, logos, tradenames, service
names and corporate names and registrations and applications for registration
thereof; and all licenses, exclusive or otherwise, for the use and reproduction
thereof; (C) copyrights and registrations and applications for registration
thereof; and all licenses, exclusive or otherwise, for the use and reproduction
thereof; (D) mask works and registrations and applications for registration
thereof; (E) computer software, data and documentation; (F) trade secrets and
confidential business information, whether patentable or unpatentable and
whether or not reduced to practice; know-how, manufacturing and product
processes and techniques; research and development information and materials
including laboratory notebooks, models and prototypes; copyrightable works;
financial, marketing and business data; pricing and cost information; business
and marketing plans and customer and supplier lists and information; (G) other
proprietary rights relating to any of the foregoing (including without
limitation associated goodwill and remedies against infringements thereof and
rights of protection of an interest therein under the laws of all
jurisdictions); and (H) copies and tangible embodiments thereof, in each case
which is owned or licensed by TCD and used or held for use by TCD; provided,
that the foregoing shall not include the Retained Assets.
"INVENTORY" means all inventories of raw materials, work in
progress and finished goods and similar items of TCD recorded on its books of
account in accordance with GAAP.
"LIEN" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest, restriction, encumbrance or adverse claim of
any kind in respect of such asset. For purposes of this Agreement, a Person
shall be deemed to own subject to a Lien, any asset which it has acquired or
holds subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement relating to such
asset.
"MARKET VALUE DETERMINATION PERIOD" means the sixth through
twentieth trading days immediately preceding the date on which the applicable
Additional Payment is made; provided, however, that to the extent that no shares
of Buyer Stock traded on such day, such period shall include such other
immediately preceding trading days (beginning with the twenty first trading day
immediately preceding the end of the applicable Additional Year) as necessary to
obtain fifteen days in which Buyer Stock was traded.
"MATERIAL ADVERSE CHANGE" means, with respect to any Person, a
material adverse change in the business, assets, condition (financial or
otherwise) or results of operations of such Person.
"MATERIAL ADVERSE EFFECT" means, with respect to any Person, a
material adverse effect on the business, assets, condition (financial or
otherwise) or results or operations of such Person.
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"NET SALES" means sales calculated in the same manner as
calculated in the preparation of the audited financial statements of the Buyer
or TCD, as the case may be, net of actual discounts, returns, sales taxes (to
the extent the sales figure includes the same) and shipping costs (to the extent
the sales figure includes the same).
"1934 ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"PARENT ASSETS" means the equipment set forth on SCHEDULE 2.01.
"PERSON" means an individual, corporation, partnership, limited
liability company, limited liability partnership, association, joint venture,
trust, or unincorporated organization, or other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"POST-CLOSING TAX PERIOD" means any Tax period (or portion
thereof) ending after the close of business on the Closing Date.
"PRE-CLOSING TAX PERIOD" means any Tax period (or portion
thereof) ending on or before the close of business on the Closing Date.
"PRODUCTS" means all products manufactured and sold by TCD prior
to the Closing, a list of which is set forth on SCHEDULE 3.21-1 attached hereto,
except for TRAx Products.
"PURCHASED ASSETS" means the TCD Assets collectively with the
Parent Assets.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement between the Buyer and Parent in substantially the form of EXHIBIT C
attached hereto.
"RETAINED ASSETS " means those assets relating to the TRAx
Products set forth on SCHEDULE 3.29 attached hereto.
"RETAINED LIABILITIES" means those liabilities relating to the
TRAx Products.
"SECURITIES ACT" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"SECURITY AGREEMENT" means the Security Agreement by and among
Buyer, the Parent and TCD in the form attached hereto as EXHIBIT E.
"SELLERS' COUNSEL" means the law firm of Goodwin, Procter & Hoar,
LLP, Boston, Massachusetts.
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"SUBSIDIARY" means any entity of which securities or other
ownership interests having ordinary voting power to elect a majority of the
board of directors or other persons performing similar functions are owned
directly or indirectly by TCD.
"TAX" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code ss.59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"TAX RETURN" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"TRAx PRODUCTS" means the products set forth in SCHEDULE 3.29
under the heading "TRAx Products."
"WOBURN LEASE" means that certain lease dated October 13, 1994
between TCD and Cummings regarding the property at Gill Street, Woburn,
Massachusetts.
(b) Each of the following terms is defined in the Section
set forth opposite such term:
Term Section
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Assumed Liabilities 2.03
Audited Financial Statements 5.01
Business 5.05
Benefit Arrangement 3.27
Buyer Securities 3.30
CERCLA 3.22
Closing 2.07
Closing Date 2.07
Conveyance Documents 2.07
Damages 9.02
Employee Plans 3.27
Environmental Laws 3.22
Environmental Liabilities 3.22
ERISA 3.27
ERISA Affiliate 3.27
Evaluation Period 7.10
Excluded Assets 2.02
Excluded Liabilities 2.03
Facility Improvements 2.07
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FDA 3.03
Financial Statements 3.07
Group 3.33
Hazardous Substance 3.22
Indemnified Party 9.02
Indemnifying Party 9.02
Liability Issue 7.08
Multiemployer Plan 3.27
New TRAx Products 7.10
Permit 3.14
Preferred Stock 3.05
Purchase Price 2.01
Purchase Price Adjustment 2.09
PW 2.08
Release 3.22
Regulated Activity 3.22
Right of Refusal 7.10
SEC 3.30
SEC Material 3.30
Staff 3.30
TCD Assets 2.01
Transferred Employees 3.27
TRAx Technology 7.10
Unaudited Financial Statements 3.07
ARTICLE II
PURCHASE AND SALE
2.01. PURCHASE AND SALE. (a) Upon the terms and subject to the
conditions of this Agreement, Buyer agrees to purchase from TCD and TCD agrees
to sell, transfer, assign and deliver, or cause to be sold, transferred,
assigned and delivered, to Buyer at Closing, free and clear of all Liens other
than Liens set forth on SCHEDULE 3.09, all of the assets, properties and
business, other than the Excluded Assets, of every kind and description,
wherever located, real, personal or mixed, tangible or intangible, owned, held
or used in the conduct of the business by TCD as the same shall exist on the
Closing Date, including all assets shown on the Balance Sheet and not disposed
of in the ordinary course of business (the "TCD ASSETS"), and including, without
limitation, all right, title and interest of TCD and its Affiliates in, to and
under such of the foregoing as are more specifically described below:
(i) all real property and leases of, and other interests in,
real property, in each case together with all buildings, fixtures, and
improvements erected thereon;
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(ii) all personal property and interests therein, including
machinery, equipment, furniture, office equipment, communications
equipment, vehicles, storage tanks, spare and replacement parts, fuel
and other tangible property
(iii) all Inventory as of the Closing Date;
(iv) all rights under all contracts, agreements, leases,
licenses, commitments, sales and purchase orders and other instruments,
including without limitation the items listed on SCHEDULE 3.12
(collectively, the "CONTRACTS");
(v) all accounts, notes and other receivables;
(vi) all prepaid expenses and deposits including without
limitation ad valorem taxes, leases and rentals;
(vii) all of Sellers' rights, claims, credits, causes of action
or rights of set-off against third parties relating to the Purchased
Assets, including, without limitation, unliquidated rights under
manufacturers' and vendors' warranties;
(viii) all Intellectual Property Rights, including without
limitation the items listed on SCHEDULE 3.16;
(ix) all transferable licenses, permits or other governmental
authorizations affecting, or relating in any way to, the Business,
including without limitation the items listed on SCHEDULE 3.14;
(x) all books, records, files and papers, whether in hard copy
or computer format, including, without limitation, engineering
information, sales and promotional literature, manuals and data, sales
and purchase correspondence, lists of present and former suppliers,
lists of present and former customers, personnel and employment records,
and any information relating to Tax imposed on the Purchased Assets; and
(xi) all goodwill associated with the business of TCD or the
Purchased Assets, together with the right to represent to third parties
that Buyer is the successor to the business of TCD.
(b) Upon the terms and subject to the conditions of this
Agreement, Buyer agrees to purchase from Parent and Parent agrees to sell,
transfer, assign and deliver, or cause to be sold, transferred, assigned and
delivered, to Buyer at Closing, free and clear of all Liens other than Liens set
forth on SCHEDULE 3.09, all of the Parent Assets, including, without limitation,
all right, title and interest of Parent and its Affiliates in, to and under such
assets.
2.02. EXCLUDED ASSETS. Buyer expressly understands and agrees that the
following assets and properties of Seller (the "EXCLUDED ASSETS") shall be
excluded from the Purchased Assets:
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(i) all of Sellers' cash and cash equivalents on hand and in
banks; and
(ii) the Retained Assets.
2.03. ASSUMPTION OF LIABILITIES. Upon the terms and subject to the
conditions of this Agreement, Buyer agrees, effective at the time of
Closing, to assume all liabilities of TCD other than the Excluded Liabilities
(the "ASSUMED LIABILITIES").
2.04. EXCLUDED LIABILITIES. Notwithstanding any provision in this
Agreement or any other writing to the contrary, Buyer is assuming only the
Assumed Liabilities and is not assuming the following liabilities and
obligations (all such liabilities and obligations not being assumed being herein
referred to as the "EXCLUDED LIABILITIES"):
(i) any obligation or liability for Tax arising from or with
respect to the Purchased Assets or the operation of the business of TCD
which is incurred in or attributable to any Pre-Closing Tax Period;
(ii) any liabilities or obligations relating to employee
benefits or compensation arrangements existing as of the end of the day
on the Closing Date, including, without limitation, any liabilities or
obligations under any of TCD's employee benefit agreements, plans or
other arrangements listed on SCHEDULE 3.27;
(iii) any liabilities or obligations relating to or arising out
of the Sellers' former facilities at Sidney Street, Cambridge,
Massachusetts, whether now existing or hereafter arising including,
without limitation, the following:
(A) all liabilities and obligations relating to the
litigation matter set forth on SCHEDULE 3.11; and
(B) all health problems of current or former employees
of TCD relating to any air quality problems at
such Cambridge, Massachusetts facilities.
(iv) any liability or obligation relating to an Excluded Asset.
2.05. ASSIGNMENT OF CONTRACTS AND RIGHTS. Anything in this Agreement to
the contrary notwithstanding, this Agreement shall not constitute an agreement
to assign any Purchased Asset or any claim or right or any benefit arising
thereunder or resulting therefrom if an attempted assignment thereof, without
consent of a third party thereto, would constitute a breach or other
contravention thereof or in any way adversely affect the rights of Buyer or
Sellers thereunder. Sellers and Buyer will use their commercially reasonable
efforts to obtain the consent of the other parties to any such Purchased Asset
or claim or right or any benefit arising thereunder for the assignment thereof
to Buyer as Buyer may request. If such consent is not obtained, or if an
attempted assignment thereof would be ineffective or would adversely affect the
rights of Sellers
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thereunder so that Buyer would not in fact receive all such rights, Sellers
and Buyer will cooperate in a mutually agreeable arrangement under which Buyer
would obtain the benefits and assume the obligations thereunder in accordance
with this Agreement, including subcontracting, sub-licensing, or subleasing to
Buyer, or under which Sellers would enforce for the benefit of Buyer, with
Buyer assuming Sellers' obligations, any and all rights of Sellers against a
third party thereto. Sellers will promptly pay to Buyer when received all
monies received by Sellers under any Purchased Asset or any claim or right or
any benefit arising thereunder, except to the extent the same represents an
Excluded Asset.
2.06. PURCHASE PRICE. Upon the terms and subject to the conditions of
this Agreement, the Sellers shall sell to Buyer, and Buyer shall purchase from
the Sellers, the Purchased Assets at the Closing. The aggregate purchase price
for the Purchased Assets is (i) $2,880,494.32 evidenced by the Convertible Note,
the Equipment Note and cash in the amount of $528,341.00 to be used for the
repayment of certain lease obligations of Parent to Fleet in respect of the
Facility Improvements, plus (ii) Additional Payments, if any, (the "Purchase
Price"). The Purchase Price shall be paid as provided in Section 2.07.
2.07. CLOSING. The closing (the "Closing") of the purchase and sale of
the Purchased Assets hereunder shall take place at the offices of Testa, Hurwitz
& Thibeault in Boston, Massachusetts at 4:00 p.m. Eastern Standard Time on March
4, 1996 or at such other time or place as Buyer and the Sellers may agree. The
Closing shall be effective as of the close of business on the date of Closing
(the "Closing Date"). At the Closing,
(a) Buyer shall deliver to TCD the Convertible Note in the
principal amount of $1,900,000, made payable to the order of TCD.
(b) Buyer shall deliver to Parent the Equipment Note in the
principal amount of $452,153.32, made payable to the order of Parent.
(c) Buyer shall pay by wire transfer to Fleet $528,341.
(d) The appropriate parties shall enter into and deliver the
Ancillary Agreements.
(e) Buyer shall enter into an Assumption Agreement in form and
substance satisfactory to the parties hereto, and Seller shall deliver to Buyer
such deeds, bills of sale, endorsements, consents, assignments and other good
and sufficient instruments of conveyance and assignment (the "CONVEYANCE
DOCUMENTS") as the parties and their respective counsel shall deem reasonably
necessary or appropriate to vest in Buyer all right, title and interest in, to
and under the Purchased Assets.
(f) Cummings shall execute and deliver a consent to the
assignment of the Woburn Lease.
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(g) TCD shall execute and deliver a bill of sale in connection
with the purchase by Buyer of the TCD Assets.
(h) Parent shall execute and deliver a bill of sale in
connection with the purchase by Buyer of certain facility improvements from
Parent (the "Facility Improvements") and Parent shall have been released from
its obligations with respect to such Facility Improvements.
(i) TCD shall execute and deliver an assignment of the Woburn
Lease.
(j) The parties shall execute and deliver any other instruments,
documents and certificates that are required to be delivered pursuant to this
Agreement or as may be reasonably requested by any party in order to consummate
the transactions contemplated by this Agreement.
2.08. CLOSING BALANCE SHEET
(a) Within 90 days after the Closing Date has occurred, the
Sellers shall prepare and deliver (i) TCD's Closing Balance Sheet as of the
close of business on the Closing Date immediately prior to giving effect to the
Closing and (ii) a certificate of the Parent's chief executive officer as to
such Closing Balance Sheet as of the close of business on the Closing Date. The
Closing Balance Sheet shall (A) fairly present the financial position of TCD as
at the close of business on the Closing Date in accordance with GAAP applied on
a basis consistent with those used in the preparation of the Balance Sheet and
(B) include line items substantially consistent with those in the Balance Sheet.
Sellers shall consult with Buyer in connection with the preparation of the
Closing Balance Sheet, and shall permit Buyer's accountants, Price Waterhouse
LLP ("PW") at the earliest practicable date to review all work papers, schedules
and calculations used in the preparation thereof and to make copies of all
non-proprietary work papers, schedules and calculations used in the preparation
thereof.
(b) If Buyer disagrees with the Sellers' calculation of Closing
Stockholders' Equity delivered pursuant to Section 2.08(a), Buyer may, within
thirty (30) days after delivery of the documents referred to in Section 2.08(a),
deliver a notice to the Parent disagreeing with such calculation and setting
forth Buyer's calculation of such amount. Any such notice of disagreement shall
specify those items or amounts as to which Buyer disagrees, and Buyer shall be
deemed to have agreed with all other items and amounts contained in the Closing
Balance Sheet and the calculation of Closing Stockholders' Equity delivered
pursuant to Section 2.08(a).
(c) If a notice of disagreement shall be duly delivered pursuant
to Section 2.08(b), the parties shall, during the thirty (30) days following
such delivery, use their best efforts to reach agreement on the disputed items
or amounts in order to determine, as may be required, the amount of Closing
Stockholders' Equity, which amount shall not be more than the amount thereof
shown in Sellers' calculations delivered pursuant to Section 2.08(a) nor less
than the amount thereof shown in Buyer's calculation delivered pursuant to
Section 2.08(b). If, during such period, the parties are unable to reach such
agreement, they shall promptly thereafter
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cause other independent accountants of nationally recognized standing
reasonably satisfactory to Parent and Buyer (who shall not have any material
relationship with Parent or Buyer), promptly to review this Agreement and the
disputed items or amounts for the purpose of calculating Closing Stockholders'
Equity. In making such calculation, such independent accountants shall consider
only those items or amounts in the Closing Balance Sheet or Sellers' calculation
of Closing Stockholders' Equity as to which Buyer has disagreed. Such
independent accountants shall deliver to Parent and Buyer, as promptly as
practicable, a report setting forth such calculation. Such report shall be final
and binding upon the parties hereto. The cost of such review and report shall be
borne (i) by Sellers if the difference between the Final Stockholders' Equity
and Closing Stockholders' Equity as set forth in Sellers' calculation of Closing
Stockholders' Equity delivered pursuant to Section 2.08(a) is greater than the
difference between Final Stockholders' Equity and Closing Stockholders' Equity
as set forth in Buyer's calculation of Closing Stockholders' Equity delivered
pursuant to Section 2.08(b), (ii) by Buyer if the first such difference is less
than the second such difference and (iii) otherwise equally by Parent and Buyer;
provided, however, that if the difference between Final Stockholders' Equity and
the Sellers' calculation of Closing Stockholders' Equity delivered pursuant to
Section 2.08(a) is less than 5% of the Sellers' calculation of Closing
Stockholders' Equity delivered pursuant to Section 2.08(a), then the cost of
such review and report shall be borne by Buyer.
(d) The parties hereto agree that they will, and agree to cause
their respective independent accountants to, cooperate and assist in the
preparation of the Closing Balance Sheet and the calculation of Closing
Stockholders' Equity and in the conduct of the audits and reviews referred to in
this Section 2.08, including without limitation the making available to the
extent necessary of books, records, work papers and personnel.
2.09. ADJUSTMENT OF PURCHASE PRICE. An adjustment to the Purchase
Price ("Purchase Price Adjustment") shall be made in each of the following
circumstances:
(a) If Base Stockholders' Equity exceeds Final Stockholders'
Equity, (i) Buyer shall first offset amounts due to TCD pursuant to the
Convertible Note (on a dollar for dollar basis) in the manner provided in
Section 2.09(c) and to the extent the Purchase Price Adjustment amount has not
then been satisfied, (ii) Parent shall cause TCD to pay Buyer by wire of
immediately available funds, any remaining amount of the Purchase Price
Adjustment not then paid or satisfied. Any such Purchase Price Adjustment
pursuant to this Section 2.09(a) shall be made after Buyer's delivery of the
documents referred to in Section 2.08(a) if no notice of disagreement with
respect to Closing Stockholders' Equity is duly delivered pursuant to Section
2.08(b) or (ii) if a notice of disagreement with respect to Closing
Stockholders' Equity is duly delivered pursuant to Section 2.08(b) then as soon
as practicable after the earlier of (A) agreement between the parties pursuant
to Section 2.08(c) with respect to Closing Stockholders' Equity and (B) delivery
of the calculation of Final Stockholders' Equity referred to in Section 2.08(c).
(b) If Final Stockholders' Equity exceeds Base Stockholders'
Equity, Buyer shall (i) increase the amount of the Convertible Note or to the
extent such Convertible Note has been converted issue a new Convertible Note for
the applicable amount which is otherwise
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identical to the original Convertible Note (on a dollar for dollar basis),
in the manner provided in Section 2.09(c). Any such Purchase Price Adjustment
pursuant to this Section 2.09(b) shall be made after Sellers' delivery of
the documents referred to in Section 2.08(a) if no notice of disagreement with
respect to Closing Stockholders' Equity is duly delivered pursuant to Section
2.08(b) or (ii) if a notice of disagreement with respect to Closing
Stockholders' Equity is duly delivered pursuant to Section 2.08(b) then as
soon as practicable after the earlier of (A) agreement between the parties
pursuant to Section 2.08(c) with respect to Closing Stockholders' Equity and (B)
delivery of the calculation of Final Stockholders' Equity referred to in Section
2.08(c).
(c) The amount of any Purchase Price Adjustment to be made
pursuant to this Section 2.09 which is accomplished through the reduction or
increase of principal in the Convertible Note or the issuance of a new
Convertible Note, shall be evidenced by the cancellation of the Convertible Note
(if it has not been converted) for the principal amount then due and the
reissuance of a replacement Convertible Note or the issuance of a new
Convertible Note, as (i) if not a new Convertible Note, reflecting a reduction
or increase in principal for such amount and any interest accrued or paid or
that would have accrued on such amount, as the case may be, and (ii) dated as of
the original Convertible Note.
(d) Notwithstanding anything in this section 2.09 to the
contrary, there shall be no Purchase Price Adjustment pursuant to this Section
2.09 to the extent the amount of such proposed adjustment is equal to or less
than $25,000.
2.10. ADDITIONAL PAYMENTS. After the Closing, Buyer shall make the
Additional Payments to TCD in accordance with the following terms and
conditions:
(a) Within 45 days after the completion of each Additional Year,
Buyer shall pay to TCD an amount equal to (i) 0.25 multiplied by (ii) Net Sales
of the Additional Products for such Additional Year, minus Base Year Net Sales.
(b) Buyer, in its sole discretion, shall pay the amount
calculated in accordance with Section 2.10(a), in whole or in part, in any of
the following forms:
(i) cash; or
(ii) Buyer Stock.
(c) The number of shares of Buyer Stock issued in connection
with this Section 2.10 shall be determined by dividing the applicable amount to
be issued as Buyer Stock by the Average Market Value during the Market Value
Determination Period.
(d) Buyer shall grant TCD and PW reasonable access, upon
reasonable notice, during normal business hours, to all of Buyer's books,
records and workpapers used to calculate the Additional Payments.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS
Each of the Sellers jointly and severally represents and warrants to
Buyer as of the date hereof and as of the Closing Date that:
3.01. CORPORATE EXISTENCE AND POWER. Each of the Parent and TCD is a
corporation duly incorporated, validly existing and in good standing under the
laws of its jurisdiction of incorporation, and has all corporate power and
corporate authority required to carry on its business as now conducted. TCD is
duly qualified to do business as a foreign corporation and is in good standing
in each jurisdiction where the character of the property owned or leased by it
or the nature of its activities make such qualification necessary, except for
those jurisdictions where failure to be so qualified would not, individually or
in the aggregate, have a Material Adverse Effect. Parent has heretofore
delivered to Buyer true and complete copies of the corporate charter and bylaws
of Parent and TCD as currently in effect.
3.02. CORPORATE AUTHORIZATION. The execution, delivery and performance
by Sellers of this Agreement and each of the Ancillary Agreements to which they
are a party and the consummation by Sellers of the transactions contemplated
hereby are within the Sellers' corporate powers and have been duly authorized by
all necessary corporate action on the part of Sellers. This Agreement and each
of the Ancillary Agreements to which the Sellers are a party constitute valid
and binding agreements of the Sellers enforceable in accordance with their
terms.
3.03. GOVERNMENTAL AUTHORIZATION; CONSENTS. The execution, delivery and
performance by the Sellers of this Agreement and each of the Ancillary
Agreements to which they are a party require no action by or in respect of, or
any declaration, filing or registration with, any governmental body, agency,
official or authority other than (i) compliance with any applicable requirements
of the HSR Act; (ii) compliance with any applicable requirements of the 1934
Act; and (iii) compliance with any applicable requirements of the United States
Food and Drug Administration ("FDA").
3.04. NON-CONTRAVENTION. Other than instances that would not have a
Material Adverse Effect, the execution, delivery and performance by the Sellers
of this Agreement and each of the Ancillary Agreements to which they are a party
and the consummation of the transactions contemplated hereby do not and will not
(i) contravene or conflict with the corporate charter or bylaws of Parent or
TCD, (ii) assuming compliance with the matters referred to in Section 3.03(a),
contravene or conflict with or constitute a violation of any provision of any
law, regulation, judgment, injunction, order or decree binding upon or
applicable to Parent or TCD, (iii) constitute a default under or give rise to
any right of termination, cancellation or acceleration of any right or
obligation of TCD or to a loss of any benefit to which TCD is entitled under any
provision of any agreement, contract or other instrument binding upon TCD or any
license, franchise, permit or other similar authorization held by Parent or TCD,
or (iv) assuming the receipt of all required consents, result in the creation or
imposition of any Lien on any of the Purchased Assets.
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3.05. SUBSIDIARIES. TCD does not have and never has had any Subsidiaries
or any ownership or equity interest in or control of (direct or indirect) any
other Person.
3.06. [INTENTIONALLY OMITTED]
3.07. UNAUDITED FINANCIAL STATEMENTS. Attached as SCHEDULE 3.07 are true
and complete copies of the Balance Sheet and the related unaudited statements of
operations and cash flows of TCD for the fiscal year then ended, except that
each of such financial statements shall exclude revenues and cost of goods sold
derived from the Retained Assets (collectively, the "Unaudited Financial
Statements"). Except as set forth on SCHEDULE 3.07, (i) each of such financial
statements was prepared in accordance with GAAP (except for the absence of
footnotes and schedules); (ii) the Balance Sheet fairly presents, in all
material respects, the financial condition of TCD as of its date; and (iii) each
of such statements of operations and cash flows fairly presents, in all material
respects, the results of operations and cash flows of TCD for the period covered
thereby.
3.08. ABSENCE OF CERTAIN CHANGES. Except with respect to the Retained
Assets and the Retained Liabilities and the transfer of the same as contemplated
by this Agreement and except as set forth on SCHEDULE 3.08, since the Balance
Sheet Date, the business of TCD has been conducted in the ordinary course
consistent with past practices and there has not been:
(a) any Material Adverse Change or any event, occurrence,
development or state of circumstances or facts which could reasonably be
expected to result in a Material Adverse Change;
(b) any declaration, setting aside or payment of any dividend or
other distribution with respect to any securities of TCD or any repurchase,
redemption or other acquisition by TCD of any outstanding shares of capital
stock or other securities of, or other ownership interests in, TCD other than
distributions of amounts collected from sales of TCD's products in the ordinary
course of business consistent with past practice;
(c) any amendment of any term of any outstanding security of
TCD;
(d) any incurrence, assumption or guarantee by TCD of any
indebtedness for borrowed money other than in the ordinary course of business
and in amounts and on terms consistent with past practices, but in any event not
exceeding $10,000 individually or $40,000 in the aggregate;
(e) any creation or assumption by TCD of any Lien on any asset;
(f) any making of any loan, advance or capital contributions to
or investment in any Person other than loans, advances or capital contributions
to or investments in wholly-owned Subsidiaries made in the ordinary course of
business consistent with past practices;
20
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(g) any damage, destruction or other casualty loss (whether or
not covered by insurance) affecting the business or assets of TCD which,
individually or in the aggregate, has had or would reasonably be expected to
have a Material Adverse Effect;
(h) any transaction or commitment made, or any contract or
agreement entered into, by TCD relating to its assets or business (including the
acquisition or disposition of any assets) or any relinquishment by TCD of any
contract or other right, other than transactions and commitments in the ordinary
course of business consistent with past practices and those contemplated by this
Agreement;
(i) any change in any method of accounting or accounting
practice by TCD;
(j) any (i) grant of any severance or termination pay to any
director, officer or employee of TCD, (ii) entering into of any employment,
deferred compensation or other similar agreement (or any amendment to any such
existing agreement) with any director, officer or employee of TCD, (iii) change
in benefits payable under existing severance or termination pay policies or
employment agreements or (iv) change in compensation, bonus or other benefits
payable to directors, officers or employees of TCD; or
(k) any labor dispute, other than routine individual grievances,
or any activity or proceeding by a labor union or representation thereof to
organize any employees of TCD, which employees were not subject to a collective
bargaining agreement at the Balance Sheet Date, or any lockouts, strikes,
slowdowns, work stoppages or threats thereof by or with respect to any employees
of TCD.
3.09. TITLE TO PURCHASED ASSETS. (a) Except as set forth on SCHEDULE
3.09, the Sellers have good and marketable title to or, in the case of leased
property, has valid leasehold interests in, all Purchased Assets. None of such
Purchased Assets is subject to any Liens, except:
(i) Liens disclosed on the Balance Sheet;
(ii) Liens for Taxes not yet due or being contested in good
faith (and for which adequate accruals or reserves have been
established on the Balance Sheet); or
(iii) Liens which do not materially detract from the value of
such property or assets as now used, or materially interfere with any
present or intended use of such property or assets.
3.10. NO UNDISCLOSED MATERIAL LIABILITIES. Except as set forth in
SCHEDULE 3.10, there are no material liabilities of TCD of any kind whatsoever,
whether accrued, contingent, absolute, determined, determinable or otherwise,
and there is no existing condition, situation or set of circumstances which
could reasonably be expected to result in such a material liability, other than:
(i) liabilities disclosed or provided for in the Balance Sheet;
21
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(ii) liabilities incurred in the ordinary course of business
consistent with past practice since the Balance Sheet Date, which in the
aggregate are not material to TCD; and
(iii) liabilities for contract obligations incurred under the
agreements set forth in SCHEDULE 3.12.
3.11. LITIGATION. Except as set forth on SCHEDULE 3.11 attached hereto,
there is no action, suit, investigation or proceeding (or any basis therefor)
pending against, or to the knowledge of Parent threatened against or affecting,
TCD or any of its properties or the transactions contemplated hereby before any
court or arbitrator or any governmental body, agency, official or authority.
3.12. MATERIAL CONTRACTS. (a) Except for agreements, contracts,
plans, leases, arrangements or commitments disclosed in SCHEDULE 3.12 or any
other schedule to this Agreement, TCD is not a party to or subject to:
(i) any lease providing for annual rentals of $10,000 or more;
(ii) any contract for the purchase of materials, supplies,
goods, services, equipment or other assets providing for annual
payments by TCD of $10,000 or more;
(iii) any sales, distribution or other similar agreement
providing for the sale by TCD of materials, supplies, goods, services,
equipment or other assets providing for annual payments to TCD of
$10,000 or more;
(iv) any partnership, joint venture or other similar contract
arrangement or agreement;
(v) any contract relating to indebtedness for borrowed money
or the deferred purchase price of property (whether incurred, assumed,
guaranteed or secured by any asset), except contracts relating to
indebtedness incurred in the ordinary course of business in an amount
not exceeding $10,000 individually or $40,000 in the aggregate;
(vi) any license agreement, franchise agreement or agreement
in respect of similar rights granted to or held by TCD;
(vii) any agency, dealer, sales representative or other similar
agreement;
(viii) any contract or other document that limits the freedom of
TCD to compete in any line of business or with any Person or in any area
or which would so limit the freedom of TCD after the Closing Date; or
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(ix) any other contract or commitment not made in the ordinary
course of business that is material to TCD.
(b) Each agreement, contract, plan, lease, arrangement and
commitment disclosed in any schedule to this Agreement or required to be
disclosed pursuant to Section 3.12(a) is a valid and binding agreement of TCD
and, assuming due authorization, execution and delivery by the other parties
thereto and assuming that such agreements constitute the legal, valid and
binding agreements of each of the other parties thereto, which assumption is
based upon the Sellers' knowledge without independent investigation, each such
agreement is in full force and effect, and TCD is not, nor is, to the knowledge
of Parent, any other party thereto, in default in any material respect under the
terms of any such agreement, contract, plan, lease, arrangement or commitment.
3.13. INSURANCE. (a) Parent has furnished to Buyer a list of summaries
of all insurance policies and fidelity bonds covering the assets, business,
equipment, properties, operations, employees, officers and directors of TCD.
Except as previously disclosed to Buyer in writing, (i) there is no claim by TCD
pending under any of such policies or bonds as to which coverage has been
questioned, denied or disputed by the underwriters of such policies or bonds,
(ii) all premiums payable under all such policies and bonds have been paid and
TCD is otherwise in full compliance with the terms and conditions of all such
policies and bonds, and (iii) such policies of insurance and bonds (or other
policies and bonds providing substantially similar insurance coverage) have been
in effect since January 1, 1993 and remain in full force and effect. Parent does
not know of any threatened termination of, or premium increase with respect to,
any of such policies or bonds.
(b) SCHEDULE 3.13 sets forth the insurance policies in the name
of Parent and/or TCD and the location of such policies.
3.14. COMPLIANCE WITH LAWS; PERMITS; NO DEFAULTS. (a) TCD is not in
violation of, and has not since January 1, 1991 violated, any applicable
provisions of any laws, statutes, ordinances or regulations except for
violations that have not had and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
(b) TCD has all material governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted.
(c) SCHEDULE 3.14 sets forth each license and permit (a
"Permit") material to the business of TCD, together with the name of the
governmental agency or entity issuing such license or permit. Such licenses and
permits are valid and in full force and effect and none of such licenses or
permits will be terminated or impaired or become terminable as a result of the
transactions contemplated hereby.
(d) TCD is not in default under, and no condition exists that
with notice or lapse of time or both would constitute a default under, (i) any
mortgage, loan agreement, indenture or evidence of indebtedness for borrowed
money to which TCD is a party or by which
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TCD or any material amount of its assets is bound or (ii) any judgment, order
or injunction of any court, arbitrator or governmental body, agency, official
or authority, except, in each case, or in the aggregate, defaults which would
not have a Material Adverse Effect.
3.15. FINDERS' FEES. There is no investment banker, broker, finder or
other intermediary which has been retained by or is authorized to act on behalf
of Parent or TCD who might be entitled to any fee or commission from Buyer or
any of its Affiliates upon consummation of the transactions contemplated by this
Agreement.
3.16. INTELLECTUAL PROPERTY. (a) SCHEDULE 3.16 includes a list of all
Intellectual Property Rights specifying as to each, as applicable: (i) the
nature of such Intellectual Property Right; (ii) the owner and, where
applicable, licensor of such Intellectual Property Right; and (iii) licenses,
sublicenses and other agreements as to which TCD is a party and pursuant to
which any Person is authorized to use such Intellectual Property Right,
including the identity of all parties thereto, a description of the nature and
subject matter thereof, the applicable royalty and the term thereof.
(b)(i) TCD has not during the three years preceding the date of
this Agreement been sued or charged in writing with or been a defendant in any
claim, suit, action or proceeding relating to its business that has not been
finally terminated prior to the date hereof and that involves a claim of
infringement of any patent claims, trademarks, service marks or copyrights, or
that involves a breach of any license under any patent claims, trademarks,
service marks or copyrights; and (ii) Parent has no knowledge of any other claim
of infringement by TCD, and no knowledge of any continuing infringement by any
other Person of any Intellectual Property Rights. No Intellectual Property Right
is subject to any outstanding order, judgment, decree, stipulation or agreement
restricting the use thereof by TCD or restricting the licensing thereof by TCD
to any Person. TCD has not entered into any agreement to indemnify any other
Person against any charge of infringement of any patent claims, trademark,
service mark or copyright.
(c) None of the processes and formulae, research and development
results and other know-how of TCD, the value of which to TCD is contingent upon
maintenance of the confidentiality thereof, has to Parent's best knowledge been
disclosed by TCD to any Person other than Persons who are parties to
confidentiality agreements with TCD.
(d) To the knowledge of Parent, no third party has asserted any
claim, or has any reasonable basis to assert any valid claim, against TCD with
respect to (i) the continued employment by, or association with, TCD of any of
the present officers, employees of or consultants to TCD or (ii) the use by TCD
or any of such Persons in connection with their activities for or on behalf of
TCD of any information which TCD or any of such Persons would be prohibited from
using under any prior agreements or arrangements or any laws applicable to
unfair competition, trade secrets or proprietary information.
3.17. INVENTORIES. Since the Balance Sheet Date, the Inventory of TCD
has been maintained in the ordinary course of business. Except as set forth in
SCHEDULE 3.09, all such Inventory is owned free and clear of all Liens. All of
the Inventory recorded on the Balance Sheet, net of reserves, consists of, and
all Inventory on the Closing Date will consist of, items of
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a quality usable or salable in the ordinary course of business consistent with
past practice. SCHEDULE 3.17-1 sets forth TCD's written policy regarding the
valuing and carrying of costs of inventories. SCHEDULE 3.17-2 lists the number
of Inventory items for each of TCD's Products including a description thereof
as at the Balance Sheet Date.
3.18. RECEIVABLES. SCHEDULE 3.18 sets forth aging schedules of accounts,
notes and other receivables dated as of December 31, 1995 and February 29, 1996.
Parent has previously delivered to Buyer detailed worksheets supporting each of
such aging schedules.
3.19. TAXES. Except as set forth on SCHEDULE 3.19:
(i) TCD has timely filed all Tax Returns that it was required
to file. All such Tax Returns were correct and complete in all material
respects. All Taxes owed by TCD (whether or not shown on any Tax Return)
have been paid except Taxes which have not yet accrued or become due and
for which adequate provision has been made on the Balance Sheet. TCD
currently is not the beneficiary of any extension of time within which
to file any Tax Return. No claim has ever been made by an authority in a
jurisdiction where TCD does not file Tax Returns that TCD is or may be
subject to taxation by that jurisdiction.
(ii) TCD has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other third
party.
(iii) TCD has not received any assessment notice from any Tax
authority, nor does TCD have any reason to believe any authority will
assess, any additional Taxes against TCD. There is no dispute or claim
concerning any Tax of TCD, either (A) claimed or raised by any authority
in writing or (B) as to which TCD has personal knowledge based upon
personal contact with any agent of such authority nor does TCD have any
reason to believe any such dispute or claim will arise.
(iv) TCD has not waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(v) None of the Assumed Liabilities is an obligation to make a
payment that will not be deductible under Section 280G of the Code. TCD
has disclosed on its federal income Tax Returns all positions taken
therein that could give rise to a substantial understatement of federal
income Tax within the meaning of Section 6662 of the Code. TCD is not a
party to any Tax allocation or sharing agreement except for tax sharing
arrangements imposed by the rules of tax consolidation to which it is
subject. TCD does not have any liability for the Taxes of any Person
under Treas. Reg. ss.1.1502-6 (or any similar provision of state, local,
or foreign law), as a transferee or successor, by contract, or
otherwise. TCD has not been a member of an Affiliated Group filing a
consolidated federal income Tax Return, other than a group the common
parent of which is Parent.
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(vi) There are no Liens for Taxes (other than unpaid Taxes not
yet due and payable) upon the Purchased Assets. The unpaid Taxes of TCD
do not, as of the date of this Agreement exceed the reserve for Taxes
(other than any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) set forth on the face of the
Balance Sheet (other than in any notes thereto) and (B) the unpaid Taxes
of TCD for the period ending on the Closing Date shall not exceed the
reserve reflected on the Closing Balance Sheet.
(vii) None of the Purchased Assets is property required to be
treated as being owned by any other Person pursuant to the so-called
"safe harbor lease" provisions of former Section 168(f)(8) of the Code.
None of the Purchased Assets directly or indirectly secures any debt the
interest on which is tax exempt under Section 103(a) of the Code. None
of the Purchased Assets is "tax-exempt use property: within the meaning
of Section 168(h) of the Code.
(viii) Neither Parent nor TCD is a Person other than a United
States Person within the meaning of the Code. The transactions
contemplated hereby are not subject to the tax withholding provisions of
the Code Section 3406, or of subchapter A of Chapter 3 of the Code or of
any other provision of law.
3.20. EMPLOYEES; LABOR MATTERS. (a) SCHEDULE 3.20 sets forth a true
and complete list of (i) the names, titles, annual salaries and other
compensations of all employees of TCD not set forth on SCHEDULE 5.05 and (ii)
the wage rates for all other employees of TCD (by classification).
(b) TCD is in compliance with all currently applicable laws
respecting employment and employment practices, terms and conditions of
employment and wages and hours, and is not engaged in any unfair labor practice,
failure to comply with which or engagement in which, as the case may be, would
reasonably be expected to have a Material Adverse Effect. There is no unfair
labor practice complaint pending or, to the knowledge of Parent, threatened
against TCD before the National Labor Relations Board. None of the employees of
TCD is covered by any union, collective bargaining or similar agreements. There
is no labor strike, dispute, slow down or stoppage actually pending or, to the
best knowledge of TCD, threatened against or involving or affecting TCD and no
NLRB representation questions exist respecting any of the employees of TCD. No
grievance or arbitration proceeding relating to the employees of TCD is pending
and no written claim therefor exists with respect to TCD. Other than lay-offs
which are not expected to have a Material Adverse Effect, TCD has not closed any
plant or facility, effectuated any lay-offs of employees or implemented any
early retirement or separation program at any time from or after January 1,
1992, nor has TCD planned or announced any such action or program for the future
with respect to which TCD expects to have any material liability.
3.21. PRODUCTS. (a) Each of the Products produced or sold by TCD is, and
at all times has been, in compliance in all material respects with all
applicable federal (including the FDA), state, local and foreign laws and
regulations. There is no known design defect with respect to any of such
Products and each of such Products contains adequate warnings, presented in a
26
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reasonably prominent manner, in accordance with applicable laws and current
industry practice with respect to its contents and use. TCD has no Products
placed with its customers under an understanding permitting their return to TCD
other than pursuant to a breach of warranty.
(b) SCHEDULE 3.21-1 sets forth a schedule of the Products by Net
Sales for the fiscal year ended December 31, 1995 and within 15 days after the
Closing Date TCD will deliver a schedule of the Products by Net Sales for the
Base Year.
(c) SCHEDULE 3.21-2 sets forth a schedule of all Biokine Products
and TRAx Products, each labeled as such, as of December 31, 1995, and as of the
date hereof.
(d) Buyer may, together with its accountants, at its option,
review the calculations of Net Sales for the Base Year and TCD's books, records
and workpapers used to determine such Net Sales. Parent shall grant Buyer
reasonable access, upon reasonable notice, during normal business hours to such
books, records and workpapers. If after Buyer's review, the parties hereto
disagree as to the Net Sales of the Products for the Base Year, the parties
hereto shall appoint independent accountants to review the same and determine
the Net Sales of the Products for the Base Year, which determination shall be
binding on the parties hereto. To the extent the determination of Net Sales of
the Products for the Base Year by such independent accountants exceeds Parent's
determination of the same by more than ten percent (10%), Parent shall pay all
costs incurred by the parties pursuant to this Section 3.21 after Parent's
initial delivery of the Base Year Net Sales of the Products. In all other
instances, the costs for such period shall be borne by Buyer.
3.22. ENVIRONMENTAL COMPLIANCE.
(a) ENVIRONMENTAL DEFINITIONS. The following terms, as used
herein, have the following meanings:
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended.
"ENVIRONMENT" means any and all environmental media, including
without limitation ambient air, surface water, ground water, drinking water
supply, land surface or subsurface strata.
"ENVIRONMENTAL LAWS" means any and all federal, state and local
statutes, laws (including common or case law), regulations, ordinances, rules,
judgments, judicial decisions, orders, decrees, codes, plans, injunctions,
permits, concessions, grants, franchises, licenses, agreements, or governmental
restrictions relating to human health, the Environment or to emissions,
discharges or Releases of any Hazardous Substance into the Environment or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of any Hazardous Substance or the
assessment, clean-up, removal or remediation thereof.
27
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"ENVIRONMENTAL LIABILITIES" means any and all liabilities of TCD,
whether vested or unvested, contingent or fixed, actual or potential, known or
unknown, which (i) arise under or relate to matters governed by Environmental
Laws or arise in connection with or relate to any matter disclosed or required
to be disclosed in SCHEDULE 3.22 and (ii) arise from or relate in any way to
actions occurring or conditions existing on or before the Closing Date.
"ENVIRONMENTAL PERMITS" means any and all governmental permits,
licenses, concessions, grants, franchises, agreements, authorizations,
registrations or other governmental approvals issued or required under any
Environmental Laws.
"HAZARDOUS SUBSTANCE" means any and all pollutants and
contaminants, and any and all toxic, caustic, radioactive, biohazardous or
otherwise hazardous materials, substances or wastes that are regulated under any
Environmental Laws, and includes, without limitation, medical waste, petroleum
and its derivatives and by-products, and any other hydrocarbon.
"RELEASE" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping, or
disposing into the Environment (including, without limitation, the abandonment
or discarding of barrels, containers and other closed receptacles containing any
Hazardous Substance).
(b) ENVIRONMENTAL REPRESENTATIONS. Except as disclosed on
SCHEDULE 3.22:
(i) TCD has complied in all material respects with all Environmental
Laws and has applied for and received all Environmental Permits required in
connection with its business and operations. SCHEDULE 3.22 sets forth a list of
all such Environmental Permits, each of which is in full force and effect. No
suspension or cancellation is threatened and the Parent and TCD have no
knowledge or information that any such Environmental Permit will not be
renewable upon expiration. Except as set forth on SCHEDULE 3.22, each such
Environmental Permit will continue to be in full force and effect immediately
following the Closing, and the consummation of the transactions contemplated
herein will not conflict with, result in a violation or breach of, or constitute
a default under any such Environmental Permit.
(ii) No notice, notification, demand, request for information,
citation, summons or order has been issued, no complaint has been filed, no
penalty has been assessed and to the knowledge of TCD and the Parent no
investigation or review is pending, or threatened by any governmental or other
entity with respect to any (A) alleged violation by TCD of any Environmental Law
or liability thereunder, (B) alleged failure by TCD to have any Environmental
Permit or other authorization required under any Environmental Law or (C) any
use, generation, treatment, storage, recycling or Release of any Hazardous
Substance.
(iii) (A) to the knowledge of each of the Sellers no polychlorinated
biphenyls or urea formaldehyde is or has been present at any property now or
previously owned or leased by TCD; (B) to the knowledge of each of the Sellers
no asbestos is or has been present at any property
28
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now or previously owned or leased by TCD; (C) to the knowledge of each of
the Sellers there are not underground storage tanks for Hazardous Substances,
active or abandoned, at any property now or previously owned or leased by TCD;
(D) to the knowledge of each of the Sellers no Hazardous Substance has been
Released at, on or under any property now or previously owned or leased by TCD
and (E) to the knowledge of each of the Sellers no Hazardous Substance has been
Released or is present, in a reportable or threshold planning quantity, where
such a quantity has been established by statute, ordinance, rule, regulation or
order, at, on or under any property now or previously owned by TCD.
(iv) TCD has not transported or arranged for the transportation
(directly or indirectly) of any Hazardous Substance to any location which is
listed or proposed for listing under CERCLA, or on any similar state list or
which is the subject of Federal, state or local enforcement actions or other
investigations which may lead to claims against Buyer for clean-up costs,
assessments, remedial work, damages to natural resources or for personal injury
claims, including, but not limited to, claims under CERCLA.
(v) No oral or written notification of a Release of a Hazardous
Substance has been filed by or on behalf of TCD and no property now or
previously owned or leased by TCD is listed or, to TCD's or a Parent's
knowledge, proposed for listing, on the National Priorities List promulgated
pursuant to CERCLA or on any similar state list of sites requiring investigation
or clean-up.
(vi) There are no environmental Liens on any of TCD's assets, and to
the knowledge of each of the Sellers no governmental actions have been taken or
are in process that could subject any of such assets to such Liens. TCD would
not be required to place any notice or restriction relating to the presence of
Hazardous Substances at any property used in connection with the operation of
its business in any deed to such property.
(vii) There has been no environmental investigation, study, audit,
test, review or other analysis conducted by, or on behalf of Parent or TCD, or
which are in the possession or under the control of Parent or TCD in relation to
any property or facility now or previously owned or leased by TCD which has not
been delivered to Buyer at least ten (10) days prior to the date hereof.
(viii) There are no Environmental Liabilities of which either Seller
has knowledge that will or may reasonably be expected to have a Material Adverse
Effect.
(ix) For purposes of this Section 3.22, the term "TCD" shall include any
business or business entity (including a corporation) which is a predecessor, in
whole or in part, of TCD.
3.23. CUSTOMERS AND SUPPLIERS. SCHEDULE 3.23 sets forth a schedule of
customers of TCD listing revenues therefrom for the fiscal years ended December
31, 1995 and 1994.
3.24. TRANSACTIONS WITH AFFILIATES; INTERCOMPANY ARRANGEMENTS. Except as
set forth on SCHEDULE 3.24,
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(a) Other than transactions and agreements contemplated by this
Agreement, there are no loans, leases, royalty agreements or other continuing
transactions between TCD and the Parent or any Affiliate of the Parent. To the
knowledge of Parent, none of the officers or directors of TCD or Parent (i) has
any material direct or indirect interest in any entity which does business with
TCD; (ii) has any direct or indirect interest in any property, asset or right
which is used by TCD in the conduct of its business; or (iii) has any
contractual relationship with TCD other than such relationships which occur from
being an officer, director or stockholder of TCD; and
(b)(i) other than transactions and agreements contemplated by
this Agreement, TCD does not own any note, bond, debenture or other
indebtedness, and is not otherwise a creditor, of Parent or any of its
Affiliates, (ii) Parent does not own any note, bond, debenture or other
indebtedness, nor is it otherwise a creditor, of TCD, (iii) since the Balance
Sheet Date there has not been any payment by TCD to Parent or any of its
Affiliates, charge by Parent or any of its Affiliates to TCD or other
transaction between TCD and Parent and any of its Affiliates, except in any such
case in the ordinary course of business of TCD consistent with past practice.
3.25. OTHER INFORMATION. None of the documents or written information
delivered to Buyer on the Closing Date in connection with the transactions
contemplated by this Agreement (including, without limitation this Agreement
and the Exhibits and SCHEDULEs attached hereto and the Ancillary Agreements)
nor TCD's sales history for 1995 previously delivered to Buyer and attached as
SCHEDULE 3.25 hereto, contains any untrue statement of a material fact or omits
to state a material fact necessary in order to make the statements contained
therein taken as a whole not misleading.
3.26. [INTENTIONALLY OMITTED]
3.27. EMPLOYEE BENEFITS PLANS.
(A) EMPLOYEE BENEFITS DEFINITIONS. The following terms, as
used herein, having the following meanings:
"BENEFIT ARRANGEMENT" means each employment, severance or other
similar contract, arrangement or policy (written or oral) and each plan or
arrangement (written or oral) providing for severance benefits, insurance
coverage (including any self-insured arrangements), workers' compensation,
disability benefits, supplemental unemployment benefits, vacation benefits,
retirement benefits or for deferred compensation, profit-sharing, bonuses, stock
options, stock appreciation rights or other forms of incentive compensation or
post-retirement insurance, compensation or benefits which (i) is not an Employee
Plan, (ii) is entered into, maintained or contributed to, as the case may be, by
TCD or any of its ERISA Affiliates and (iii) covers any employee or former
employee of TCD.
"EMPLOYEE PLAN" means each "employee benefit plan", as such term
is defined in Section 3(3) of ERISA, that (i) is subject to any provision of
ERISA and (ii) is maintained or contributed to by TCD or any of its ERISA
Affiliates, as the case may be.
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"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA AFFILIATE" of any entity means any other entity that,
together with such entity, would be treated as a single employer under Section
414 of the Code.
"MULTIEMPLOYER PLAN" means each Employee Plan that is a
multiemployer plan, as defined in Section 3(37) of ERISA.
(B) EMPLOYEE BENEFIT PLAN REPRESENTATIONS:
(i) SCHEDULE 3.27 lists each Employee Plan that covers any
employee of TCD.
(ii) SCHEDULE 3.27 also includes a list of each Benefit
Arrangement of TCD, copies or descriptions of which have been made
available or furnished previously to Buyer.
(iii) No "prohibited transaction", as defined in Section 406 of
ERISA or Section 4975 of the Code, has occurred with respect to any
Employee Plan.
(iv) No Employee Plan is a Multiemployer Plan and no Employee
Plan is subject to Title IV of ERISA. Neither TCD nor any of its ERISA
Affiliates has incurred any liability under Title IV or ERISA arising in
connection with the termination of any plan covered or previously
covered by Title IV of ERISA.
(v) Each Employee Plan which is intended to be qualified under
Section 401(a) of the Code is so qualified and has been so qualified
during the period from its adoption to date, and each trust forming a
part thereof is exempt from tax pursuant to Section 501(a) of the Code.
Parent has furnished to Buyer copies of the most recent Internal Revenue
Service determination letters with respect to each such plan. Each
Employee Plan has been maintained in substantial compliance with its
terms and with the requirements prescribed by any and all statutes,
orders, rules and regulations, including but not limited to ERISA and
the Code, which are applicable to such plan.
(vi) Each Employee Plan and each Benefit Arrangement has been
maintained in substantial compliance with its terms and with the
requirements prescribed by any and all statutes, orders, rules and
regulations which are applicable to such Benefit Arrangement.
(vii) With respect to the employees and former employees of
TCD, there are no employee post-retirement medical or health plans in
effect, except as required by Section 4980B of the Code.
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(viii) All contributions and payments accrued under each
Employee Plan and Benefit Arrangement, determined in accordance with
prior funding and accrual practices, as adjusted to include proportional
accruals for the period ending on the Closing Date, will be discharged
and paid on or prior to the Closing Date except to the extent (i)
reflected on the Closing Balance Sheet or (ii) retained by Parent.
Except as disclosed in writing to Buyer prior to the date hereof, there
has been no amendment to, written interpretation of or announcement
(whether or not written) by Parent or any of its ERISA Affiliates
relating to, or change in employee participation or coverage under, any
Employee Plan or Benefit Arrangement that would increase materially the
expense of maintaining such Employee Plan or Benefit Arrangement above
the level of the expense incurred in respect thereof for the fiscal year
ended prior to the date hereof.
(ix) No tax under Section 4980B of the Code has been incurred
in respect of any Employee Plan that is a group health plan, as defined
in Section 5000(b)(1) of the Code.
(x) No employee of TCD will become entitled to any bonus,
retirement, severance or similar benefit or enhanced benefit solely as a
result of the transactions contemplated hereby.
(xi) No provision of this Section 3.27 shall create any third
party beneficiary or other rights in any employee or former employee
(including any beneficiary or dependent thereof) of TCD in respect of
continued employment (or resumed employment) with TCD and no provision
of this Section 3.27 shall create any such rights in any such Persons in
respect of any benefits that may be provided, directly or indirectly,
under any Employee Plan or Benefit Arrangement or any plan or
arrangement that may be established by Buyer or any of its Affiliates.
No provision of this Agreement shall constitute a limitation on rights
to amend, modify or terminate after the Closing Date any Employee Plan
or Benefit Arrangement.
(C) EMPLOYEES AND OFFERS OF EMPLOYMENT. As soon as practicable
following the Closing Date, Buyer shall offer employment to or sever all active
employees of the Business listed on SCHEDULE 3.20; PROVIDED, that Buyer may
terminate at any time after the Closing Date the employment of any employee who
accepts an offer of employment. For purposes of this Section 3.27(c), the term
"active employee" shall mean any Person who, on the Closing Date, is actively
employed by TCD. Any such offers shall be at such salary or wage and benefit
levels and on such other terms and conditions as Buyer shall in its sole
discretion deem appropriate. The employees who accept and commence employment
with Buyer are hereinafter collectively referred to as the "TRANSFERRED
EMPLOYEES." TCD will not take any action that would impede, hinder, interfere or
otherwise compete with Buyer's effort to hire any Transferred Employees. Buyer
shall not assume responsibility for any Transferred Employee until such employee
commences employment with Buyer.
(D) TCD'S EMPLOYEE BENEFIT PLANS. TCD shall retain all
obligations and liabilities under the Employee Plans and Benefit Arrangements in
respect of each employee or
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former employee (including any beneficiary thereof) who is not Transferred
Employee. TCD or its designated Affiliate shall retain all liabilities and
obligations in respect of benefits accrued as of the Closing Date by
Transferred Employees under the Employee Plans and Benefit Arrangements, and
neither Buyer nor any of its Affiliates shall have any liability with respect
thereto. Except as expressly set forth herein, no assets of any Employee Plan
or Benefit Arrangement shall be transferred to Buyer or any of its Affiliates
or to any plan of Buyer or any of its Affiliates. Accrued benefits or account
balances of Transferred Employees under TCD's Employee Plans and Benefit
Arrangements shall be fully vested as of the Closing Date.
3.28. LEASED EQUIPMENT. SCHEDULE 3.28 hereto lists all leased
equipment of TCD (by description and model number).
3.29. RETAINED ASSETS AND RETAINED LIABILITIES; PURCHASED ASSETS
COMPLETE. SCHEDULE 3.29 hereto sets forth all Retained Assets and Retained
Liabilities either retained by TCD or transferred by TCD to Parent. The
Purchased Assets are adequate to operate the business of TCD as currently
operated, and as operated as of the Balance Sheet Date, for the production of
all Products.
3.30. SECURITIES ACT MATTERS. TCD represents and warrants to, and
agrees with, the Buyer as follows:
(a) TCD is acquiring the Convertible Note and any shares of Buyer
Stock to be acquired by TCD upon conversion of the Convertible Note or upon the
issuance of shares of Buyer Stock by Buyer as part of the Additional Payments,
pursuant to this Agreement and the transactions contemplated hereby (the "Buyer
Securities") for TCD's account for investment and not with a view to the
distribution thereof other than in complete liquidation. TCD acknowledges that
the Buyer Securities are not registered under the Securities Act and agrees that
it will not sell or otherwise dispose of, other than in complete liquidation to
its stockholders, all or any portion of the Buyer Securities, otherwise than
pursuant to registration under the Securities Act or under Rule 144 promulgated
thereunder or other similar rule if then available, without first obtaining (i)
a written opinion of counsel reasonably satisfactory to counsel for Buyer and
addressed to Buyer to the effect that the contemplated sale or other disposition
of Buyer Securities will not be in violation of the Securities Act or (ii) a
"no-action" letter from the staff ("Staff") of the Securities and Exchange
Commission (the "SEC") to the effect that such Staff will take no action in
respect of the contemplated sale or other disposition (a copy of which shall be
furnished to the Buyer prior to any transfer of the Buyer Securities in
question). In conformity herewith, TCD agrees that the Buyer Securities issued
hereunder shall bear the following legend:
"These securities have not been registered under the
Securities Act of 1933, as amended, or any applicable state
securities law, and may not be sold or otherwise disposed of, in
whole or in part, other than pursuant to registration under said
Act or in conformity with the limitations of Rule 144 promulgated
thereunder or other similar rule as then in effect, without first
obtaining (i) a written opinion of counsel reasonably
satisfactory to
33
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the issuer's counsel to the effect that the contemplated sale
or other disposition will not be in violation of said Act or
(ii) a `no-action' letter from the Staff of the Securities and
Exchange Commission to the effect that such Staff will take no
action in respect of the contemplated sale or other disposition."
TCD acknowledges that it was informed by Buyer that because the Buyer
Securities are unregistered, they must be held, and the economic risk of the
investment must be borne, indefinitely unless and until the Buyer Securities are
subsequently registered under the Securities Act or an exemption from such
registration is available.
(b) TCD acknowledges that neither the offering of Buyer
Securities nor any offering literature used in connection therewith has been
reviewed by the SEC or by the securities administrator of any state.
(c) TCD has received copies of Buyer's Annual Report on form 10-K
for its fiscal years ended May 31, 1993, 1994 and 1995, Buyer's Proxy Statement
dated September 25, 1995, Buyer's Quarterly Reports on Form 10-Q for each of the
quarters for the fiscal years 1993, 1994 and 1995 and Buyer's Form S-4 filed on
February 11, 1993 (the "SEC Material") and TCD has relied on the SEC Material in
making an investment decision with respect to the Convertible Note. Buyer has
made available to TCD the opportunity to ask questions of, and receive answers
from, Buyer or persons acting on its behalf concerning the terms and conditions
of the purchase and sale of the Purchased Assets and to obtain any additional
information that TCD may deem necessary to verify the accuracy of the
information contained in the SEC Material.
(d) TCD (i) is either an "accredited investor" as defined in Rule
501 promulgated under the Securities Act, or (ii) has such knowledge and
experience in financial and business matters so that TCD is capable of
evaluating the merits and risks of an investment in the Buyer, or, with regard
to the considerations involved in making such investment, and TCD has such
knowledge and experience in financial and business matters so that TCD is
capable of evaluating the merits and risks of such investment.
3.31. POWERS OF ATTORNEY. Except as disclosed in SCHEDULE 3.31, neither
Parent nor TCD has granted powers of attorney which are presently outstanding.
3.32. CERTAIN ACTIONS. From and after the date of this Agreement,
Parent will not, and will not permit its Affiliates to:
(a) make, or take any action to solicit, initiate or encourage,
any offer or proposal for, or any indication of interest in, a merger,
consolidation or other business combination involving Buyer or any subsidiary of
Buyer or the acquisition of any equity interest in, or a substantial portion of
assets of, Buyer or any subsidiary of Buyer;
(b) "solicit," or become a "participant" in any "solicitation"
of, any "proxy" (as such terms are defined in Regulation 14A under the 1934 Act)
from any holder of Buyer
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Stock in connection with any vote on any matter, or agree or announce its
intention to vote with any Person undertaking a "solicitation";
(c) form, join or in any way participate in a "group" (as
defined in Section 13(d)(3) of the 1934 Act and Rule 13d-5 promulgated
thereunder) (a "Group") with respect to any Buyer Stock, other than the Group
that currently exists among the Parent and its Affiliates which will be
disclosed in the Parent's initial filing of a SCHEDULE 13D under the 1934 Act
relating to its ownership of the Buyer Stock; or
(d) propose any amendment to this Agreement that is or may be
required to be publicly disclosed.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Parent that:
4.01. ORGANIZATION AND EXISTENCE. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts and has all corporate power and corporate
authority required to carry on its business as now conducted.
4.02. CORPORATE AUTHORIZATION. The execution, delivery and performance
by Buyer of this Agreement and each of the Ancillary Agreements and the
consummation by Buyer of the transactions contemplated hereby are within the
corporate powers of Buyer and have been duly authorized by all necessary
corporate action on the part of Buyer. This Agreement and each of the Ancillary
Agreements constitute valid and binding agreements of Buyer. This Agreement and
each of the Ancillary Agreements to which Buyer is a party constitute valid and
binding agreements of Buyer enforceable in accordance with their terms.
4.03. GOVERNMENTAL AUTHORIZATION; CONSENTS. (a) The execution, delivery
and performance by Buyer of this Agreement and each of the Ancillary Agreements
require no action by or in respect of, or any declaration, filing or
registration with, any governmental body, agency, official or authority other
than (i) compliance with any applicable requirements of the HSR Act; (ii)
compliance with any applicable requirements of the 1934 Act; and (iii)
compliance with any applicable requirements of the FDA.
(b) No consent, approval, waiver or other action by any Person
(other than any governmental body, agency, official or authority referred to in
(a) above) any contract, agreement, indenture, lease, instrument or other
document to which Buyer is a party or by which it is bound is required or
necessary for the execution, delivery and performance of this Agreement by Buyer
or the consummation of the transactions contemplated hereby, other than
consents, approvals, waivers or actions, the failure to obtain of which would
not have a Material Adverse Effect.
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4.04. NON-CONTRAVENTION. Other than instances that would not have a
Material Adverse Effect, the execution, delivery and performance by Buyer of
this Agreement and each of the Ancillary Agreements and the consummation of the
transactions contemplated hereby do not and will not (i) contravene or conflict
with the articles of organization or bylaws of Buyer, (ii) assuming compliance
with the matters referred to in Section 4.03(a), contravene or conflict with or
constitute a violation of any provision of any law, regulation, judgment,
injunction, order or decree binding upon or applicable to Buyer, (iii)
constitute a default under or give rise to any right of termination,
cancellation or acceleration of any right or obligation of Buyer or to a loss
of any benefit to which Buyer is entitled under any provision of any agreement,
contract or other instrument binding upon Buyer or any license, franchise,
permit or other similar authorization held by Buyer, or (iv) assuming the
receipt of all required consents, result in the creation or imposition of any
Lien on any asset of Buyer.
4.05. FINDERS' FEES. There is no investment banker, broker, finder or
other intermediary which has been retained by or is authorized to act on behalf
of Buyer who might be entitled to any fee or commission from TCD or any
Affiliate of TCD upon consummation of the transactions contemplated by this
Agreement.
4.06. COMPLIANCE WITH LAWS; PERMITS; NO DEFAULTS. (a) Buyer is not in
violation of, and has not since January 1, 1991 violated, any applicable
provisions of any laws, statutes, ordinances or regulations except for
violations that have not had and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
(b) Buyer has all governmental licenses, authorizations, consents
and approvals required to carry on its business as now conducted.
(c) Buyer is not in default under, and no condition exists that
with notice or lapse of time or both would constitute a default under, (i) any
mortgage, loan agreement, indenture or evidence of indebtedness for borrowed
money to which Buyer is a party or by which Buyer or any material amount of its
assets is bound or (ii) any judgment, order or injunction of any court,
arbitrator or governmental body, agency, official or authority, except, in each
case, defaults which would not reasonably be expected to have a Material Adverse
Effect.
4.07. LITIGATION. There is no action, suit, investigation or proceeding
(or any basis thereof) pending against, or to the knowledge of Buyer threatened
against or affecting, Buyer or any of its properties or the transactions
contemplated hereby before any court or arbitrator or any governmental body,
agency, official or authority.
4.08. CAPITALIZATION. The authorized capital of Buyer consists of
5,000,000 shares of Buyer Stock, 2,829,258 shares of which were issued and
outstanding as of January 12, 1996, although Buyer reserves the right to
increase the authorized Buyer Stock prior to the Closing. All of such
outstanding shares are validly issued and outstanding, fully paid and
nonassessable. All shares of Buyer Stock to be issued to Parent, if any,
pursuant to this Agreement or the Convertible Note will be validly issued,
fully paid and nonassessable.
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4.09 SEC MATERIAL. Buyer has delivered true and correct copies of the
SEC Material to Parent. As of the date of this Agreement, the SEC Material does
not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein taken as a
whole not misleading. Since the latest balance sheet contained in the SEC
Material, there has not occurred any Material Adverse Change with respect to
Buyer or its operations.
4.10 ABSENCE OF CERTAIN CHANGES. Since the date of the latest balance
sheet of the Buyer included in the SEC Material filed with the SEC, with
respect to the Buyer there has not been:
(a) any Material Adverse Change or any event, occurrence,
development or state of circumstances or facts which could reasonably be
expected to result in a Material Adverse Change;
(b) any damage, destruction or other casualty loss (whether or
not covered by insurance) affecting the business or assets of Buyer which,
individually or in the aggregate, has had or would reasonably be expected to
have a Material Adverse Effect; or
(c) any change in any method of accounting or accounting practice
by Buyer.
4.11 NO UNDISCLOSED MATERIAL LIABILITIES. There are no material
liabilities of Buyer of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable or otherwise since the date of the latest
balance sheet of the Buyer included in the latest SEC Material filed with the
SEC, and there is no existing condition, situation or set of circumstances
which could reasonably be expected to result in such a material liability,
other than (i) liabilities incurred in the ordinary course of business
consistent with past practice since the date of the latest balance sheet of the
Buyer included in the latest SEC Material filed with the SEC, which in the
aggregate are not material to Buyer and (ii) liabilities for contractual
obligations incurred in the ordinary course of business.
4.12 COMPLIANCE WITH LAWS; PERMITS; NO DEFAULTS. (a) Buyer is not in
violation of, and has not since January 1, 1991 violated, any applicable
provisions of any laws, statutes, ordinances or regulations except for
violations that have not had and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
(b) Buyer has all governmental licenses, authorizations, consents
and approvals required to carry on its business as now conducted.
(c) Buyer is not in default under, and no condition exists that
with notice or lapse of time or both would constitute a default under, (i) any
mortgage, loan agreement, indenture or evidence of indebtedness for borrowed
money to which Buyer is a party or by which Buyer or any material amount of its
assets is bound or (ii) any judgment, order or injunction of any court,
arbitrator or governmental body, agency, official or authority, except, in each
case, defaults which would not reasonably be expected to have a Material Adverse
Effect.
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ARTICLE V
COVENANTS OF SELLERS
Parent agrees that:
5.01. AUDITED FINANCIAL STATEMENTS. (a) Within 55 days after the
Closing Date, Parent shall deliver audited financial statements of TCD as
follows (the "Audited Financial Statements"): (i) the balance sheets of TCD
(excluding the Retained Assets and Retained Liabilities related thereto) as at
December 31, 1995 and 1994, (ii) the related statements of operations, cash
flows and changes in stockholders' equity (each excluding the revenues, cost of
goods sold, other income and expenses and other appropriate adjustments with
respect to the Retained Assets and Retained Liabilities) for the years ended
December 31, 1995, 1994, and 1993, (iii) the footnotes and schedules to the
above referenced financial statements, and (iv) a report and opinion of PW with
respect to each applicable fiscal year's financial statements.
(b) If Parent does not deliver the Audited Financial Statements
to Buyer within 55 days after the Closing Date, Buyer shall reduce the principal
amount of the Convertible Note by an amount equal to $771.67 for each day beyond
such date in which the Audited Financial Statements are not delivered.
5.02. ACCESS TO INFORMATION; ASSISTANCE WITH FORM 8-K. After the
Closing Date, Sellers (a) will give Buyer, its counsel, financial advisors,
financing sources, auditors and other authorized representatives reasonable
access upon reasonable notice to the offices, properties, books and records of
Sellers, (b) will furnish Buyer, its counsel, financial advisors, auditors and
other authorized representatives such financial and operating data and other
information relating to TCD as such Persons may reasonably request (including,
without limitation, all information necessary for Buyer to prepare its report
on Form 8-K relating to the transactions contemplated hereby and all
information necessary for Buyer to prepare its Form 10-Qs, Form 10-K and any
registration statements of Buyer under the Securities Act filed prior to its
1996 Form 10-K) and (c) will instruct the employees, counsel and financial
advisors of Parent to cooperate with Buyer in such efforts; provided, that the
costs and expenses of preparing Buyer's Form 8K, Forms 10-Q, Form 10-K (other
than the costs and expenses of preparing the Audited Financial Statements which
costs and expenses shall be allocated in accordance with SECTION 10.03 hereof)
and registration statements under the Securities Act shall be borne by Buyer.
5.03. NOTICES OF CERTAIN EVENTS. Sellers shall promptly notify Buyer
of:
(i) any notice or other communication from any Person alleging
that the consent of such Person is or may be required in connection with
the transactions contemplated by this Agreement;
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(ii) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions
contemplated by this Agreement; and
(iii) any actions, suits, claims, investigations or proceedings
commenced or, to its knowledge threatened against, relating to or
involving or otherwise affecting Parent or TCD that, if pending on the
date of this Agreement, would have been required to have been disclosed
pursuant to Section 3.11 hereof or that relate to the consummation of
the transactions contemplated by this Agreement.
5.04. [INTENTIONALLY OMITTED]
5.05. NONCOMPETITION. (a) Each Seller agrees that for a period of five
(5) full years from the Closing Date, neither it nor any of its Affiliates
shall:
(i) engage, either directly or indirectly, as a principal or for
its own account or solely or jointly with others, or as stockholder in
any corporation or joint stock association, or as a member of any
limited liability company or limited liability partnership in any
business that competes with the research use only business of TCD
actually developed or being sold (collectively, the "Business") as the
Business exists on the Closing Date within (i) Massachusetts, (ii) the
United States, (iii) Germany, (iv) Japan, (v) North America, (vi) South
America, (vii) Europe or (vi) Asia; provided, however, that the
foregoing shall not prohibit the Sellers or any of their Affiliates from
pursuing pre-clinical or clinical diagnostic products based on the
Retained Assets; or
(ii) employ or solicit, receive or accept the performance of
services by any employee currently employed by TCD, except as set forth
under the caption "Employees to be Retained by Parent" on SCHEDULE 5.05.
(b) If any provision contained in this Section 5.05 shall for
any reason be held invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provisions
of this Section 5.05, but this Section 5.05 shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein. It
is the intention of the parties that if any of the restrictions or covenants
contained herein is held to cover a geographic area or to be for a length of
time which is not permitted by applicable law, or in any way construed to be too
broad or to any extent invalid, such provision shall not be construed to be
null, void and of no effect, but to the extent such provision would be valid or
enforceable under applicable law, a court of competent jurisdiction shall
construe and interpret or reform this Section 5.05 to provide for a covenant
having the maximum enforceable geographic area, time period and other provisions
(not greater than those contained herein) as shall be valid and enforceable
under such applicable law. Sellers acknowledge that Buyer would be irreparably
harmed by any breach of this Section 5.05 and that there would be no adequate
remedy at law or in damages to compensate Buyer for any such breach. Sellers
agree that Buyer shall be entitled to injunctive relief requiring specific
performance by Parent or TCD of this Section 5.05, and Sellers consent to the
entry thereof.
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(c) The parties hereto agree that $10,000 of the Purchase Price
represents payment by Buyer for the noncompetition covenant contained in this
Section 5.05.
5.06. CONFIDENTIALITY. Sellers and their Affiliates will hold, and will
use their best efforts to cause their respective officers, directors,
employees, accountants, counsel, consultants, advisors and agents to hold, in
confidence, unless compelled to disclose by judicial or administrative process
or by other requirements of law (including applicable requirements of the
National Association of Securities Dealers, Inc.), all confidential documents
and information concerning Buyer furnished to TCD or its Affiliates in
connection with the transactions contemplated by this Agreement, and (after the
Closing Date) all confidential documents and information concerning TCD, except
to the extent that such information can be shown to have been (i) previously
known on a nonconfidential basis by Sellers, (ii) in the public domain through
no fault of Sellers or (iii) later lawfully acquired by Sellers from sources
other than Buyer; provided that Seller may disclose such information to their
respective officers, directors, employees, accountants, counsel, consultants,
advisors and agents in connection with the transactions contemplated by this
Agreement so long as such persons are informed by Sellers of the confidential
nature of such information and are directed by Sellers to treat such
information confidentially. The obligation of Sellers and theirs Affiliates to
hold any such information in confidence shall be satisfied if they exercise the
same care with respect to such information as they would take to preserve the
confidentiality of their own similar information. If this Agreement is
terminated, Sellers and their Affiliates will, and will use their best efforts
to cause their respective officers, directors, employees, accountants, counsel,
consultants, advisors and agents to, destroy or deliver to Buyer, upon request,
all documents and other materials, and all copies thereof, obtained by Sellers
or their Affiliates or on their behalf from Buyer in connection with this
Agreement that are subject to such confidence.
ARTICLE VI
COVENANTS OF BUYER
Buyer agrees that:
6.01. CONFIDENTIALITY. Prior to the Closing Date and after any
termination of this Agreement, Buyer and its Affiliates will hold, and will use
their best efforts to cause their respective officers, directors, employees,
accountants, counsel, consultants, advisors and agents to hold, in confidence,
unless compelled to disclose by judicial or administrative process or by other
requirements of law, all confidential documents and information concerning TCD
furnished to Buyer or its Affiliates in connection with the transactions
contemplated by this Agreement, except to the extent that such information can
be shown to have been (i) previously known on a nonconfidential basis by Buyer,
(ii) in the public domain through no fault of Buyer or (iii) later lawfully
acquired by Buyer from sources other than Sellers; provided that Buyer may
disclose such information to its officers, directors, employees, accountants,
counsel, consultants, advisors and agents in connection with the transactions
contemplated by this Agreement and to its bank in
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connection with obtaining the financing for the equipment and leasehold
improvements retained in TCD's business, so long as such Persons are informed
by Buyer of the confidential nature of such information and are directed by
Buyer to treat such information confidentially. The obligation of Buyer and its
Affiliates to hold any such information in confidence shall be satisfied if
they exercise the same care with respect to such information as they would take
to preserve the confidentiality of their own similar information. If this
Agreement is terminated, Buyer and its Affiliates will, and will use their best
efforts to cause their respective officers, directors, employees, accountants,
counsel, consultants, advisors and agents to, destroy or deliver to Parent,
upon request, all documents and other materials, and all copies thereof,
obtained by Buyer or its Affiliates or on their behalf from Parent or TCD in
connection with this Agreement that are subject to such confidence.
6.02. ACCESS. Buyer, on and after the Closing Date, will afford
promptly to Sellers and their agents reasonable access to their properties,
books, records, employees and auditors to the extent necessary to permit
Sellers to determine any matter relating to its rights and obligations
hereunder or to any period ending on or before the Closing Date. Buyer will
hold, and will use its best efforts to cause its officers, directors,
employees, accountants, counsel, consultants, advisors and agents to hold, in
confidence, unless compelled to disclose by judicial or administrative process
or by other requirements of law, all confidential documents and information
concerning TCD provided to it pursuant to this Section 6.02.
6.03. SEC SUPPLEMENTS. Buyer will promptly furnish TCD with any reports
or information required to be filed with the SEC prior to the Closing and will
provide any additional reports or information filed with the SEC at the time of
any issuance of shares of Buyer Stock.
6.04. NON-SOLICITATION OF EMPLOYEES. Buyer agrees that for a period of
five (5) years from the Closing Date, neither it nor any of its Affiliates
shall employ or solicit, receive or accept the performance of services by, any
employee currently employed by TCD or Parent except (i) employees set forth on
SCHEDULE 3.20 or (ii) any employees retained by Parent as set forth on SCHEDULE
5.05 who are terminated by Parent after the Closing Date.
6.05. MAINTENANCE OF MANUFACTURING FACILITY. During the Additional
Period, Buyer shall maintain all of its manufacturing facilities necessary to
perform its obligations under the Manufacturing Agreement at TCD's property
located at Gill Street, Woburn, Massachusetts, provided, that Buyer may
relocate such manufacturing facilities upon providing Parent 180 days prior
written notice of any such relocation and, provided further, that Buyer shall
pay to Parent an amount to be agreed upon by the parties at the time of any
such relocation to compensate Parent for any reduction of Additional Payments
that may result from such relocation.
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ARTICLE VII
COVENANTS OF ALL PARTIES
The parties hereto agree that:
7.01. BEST EFFORTS. Subject to the terms and conditions of this
Agreement, each party will use its best efforts to take, or cause to be taken,
all actions and to do, or cause to be done, all things necessary or desirable
under applicable laws and regulations to consummate the transactions
contemplated by this Agreement. Parent, TCD and Buyer each agree, and Parent
and TCD prior to the Closing, and Buyer, after the Closing, agree to execute
and deliver such other documents, certificates, agreements and other writings
and to take such other actions as may be necessary or desirable in order to
consummate or implement expeditiously the transactions contemplated by this
Agreement.
7.02. CERTAIN FILINGS. TCD, Parent and Buyer shall cooperate with each
other (a) in determining whether any action by or in respect of, or filing
with, any governmental body, agency, official or authority is required, or any
actions, consents, approvals or waivers are required to be obtained from
parties to any material contracts, in connection with the consummation of the
transactions contemplated by this Agreement and (b) in taking such actions or
making any such filings (including one or more Current Reports on Form 8-K),
furnishing information required in connection therewith and seeking timely to
obtain any such actions, consents, approvals or waivers.
7.03. PUBLIC ANNOUNCEMENTS. The parties agree to consult with each
other before issuing any press release or making any public statement with
respect to this Agreement or the transactions contemplated hereby and, except
as may be required by applicable law or any listing agreement with any national
securities exchange, will not issue any such press release or make any such
public statement prior to such consultation; provided, however, that the
parties shall have no continuing obligation to consult each other once Buyer
and Sellers have each issued their initial press release relating to this
Agreement and the transactions contemplated hereby. Any party seeking to issue
a press release or make a public statement in accordance with this Section 7.03
shall provide the other party with as much advance notice as possible.
7.04. ACCESS TO THE SELLERS' BUSINESS RECORDS. Sellers acknowledge
that some business records of the Sellers relating to the operation of the
business of TCD prior to the Closing will not be conveyed to the Buyer pursuant
to the transactions contemplated hereby, and that the Buyer may from time to
time require access to such records, and the Sellers agrees that upon
reasonable prior notice from the Buyer, they will, during normal business
hours, either provide the Buyer with access to or, at the Buyer's option and
expense, copies of such records during the three year period after the Closing
Date and they will not within the two year period after that destroy any
business records prepared prior to the Closing without first notifying the
Buyer and affording it the opportunity to remove or copy them.
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7.05. USE OF TRAX TECHNOLOGY. Parent hereby grants Buyer a perpetual,
non-exclusive, royalty-free license under the TRAx Technology to make, use and
sell research-use only immunoassay products sold under Buyer's label or
manufactured by Buyer for sale by Buyer's distributors or agents, whether or
not under Buyer's label. Such license shall not include the right to, and Buyer
shall not sublicense the right to, sell TRAx Components (as defined in the
Manufacturing Agreement) or the right to, and Buyer shall not, sell any product
which competes with TRAx Products.
7.06. ALLOCATION OF EMPLOYEE PLAN RESPONSIBILITIES.
(a) Sellers shall have and retain exclusive liability and
responsibility for providing any and all benefits due and payable to or in
respect of participants and other beneficiaries under any Employee Plan in
accordance with the terms of such plans, whether earned or accrued prior to or
on the Closing Date.
(b) Nothing in this Agreement will limit or restrict in any way
the rights of TCD or Parent to modify, amend, terminate or establish any
Employee Benefit Plan or arrangement in whole or in part at any time after the
Closing Date. This Agreement shall not, in any way or at any time, create any
third party beneficiary rights for or on behalf of any person or persons.
7.07. EMPLOYEES. Parent and Buyer expressly acknowledge and agree that
Parent, not Buyer, shall bear all responsibility and liability with respect to
the payment of all compensation, commissions, bonuses, benefits due under any
Employee Plan, severance pay, vacation pay (whether the same are due and
payable, or are accrued, contingent or otherwise) and otherwise pay and be
responsible for any liabilities arising in connection with or by virtue of the
employment up to and including the Closing Date or severance of employment of
any employee (which severance shall occur prior to or as of the Closing Date)
and former employees, including, without limitation, the payment of
post-retirement pay and benefits after the Closing Date to all those employees
who have retired prior to the Closing Date. It is the understanding and
agreement of the parties hereto that the Buyer will continue to employ or sever
the employees set forth on SCHEDULE 3.20, which are described therein as
employees which Buyer is assuming responsibility of either retaining or
separating, in accordance with Buyer's benefits and policies on the Closing
Date, as amended from time to time and that any liability resulting from the
termination of benefits and severance rights provided by Parent or TCD at the
Closing Date shall be the liability of Sellers. Sellers and Buyer agree that
Buyer shall pay all costs of severance after the Closing Date with respect to
the severance of any employees retained by Buyer and set forth on SCHEDULE
3.20.
7.08. TAX CONSEQUENCES. The following provisions shall govern the
allocation of responsibility as between Buyer and Parents for certain tax
matters following the Closing Date:
(a) Within 120 days after the Closing Date, Buyer, after
consultation with the Sellers, shall submit a schedule of the allocation of the
Purchase Price among the Purchased Assets, which allocation shall comply with
Section 1060 of the Code and any comparable
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provisions of state, local or foreign law, as appropriate and which allocation
shall be reasonably acceptable to Sellers.
(b) Buyer and Sellers agree to furnish or cause to be furnished
to each other, upon request, as promptly as practicable, such information and
assistance relating to the Purchased Assets and the business of TCD as is
reasonably necessary for the filing of all Tax returns, and making of any
election related to Taxes, the preparation for any audit by any taxing
authority, and the prosecution or defense of any claim, suit or proceeding
relating to any Tax return. Sellers and Buyer shall cooperate with each other in
the conduct of any audit or other proceeding related to Taxes involving the
business of TCD and each shall execute and deliver such powers of attorney and
other documents as are necessary to carry out the intent of this Section
7.08(b).
(c) All real property taxes, personal property taxes and similar
AD VALOREM obligations levied with respect to the Purchased Assets for a taxable
period which includes (but does not end on) the Closing Date (collectively, the
"APPORTIONED OBLIGATIONS") shall be apportioned between Sellers and Buyer as of
the Closing Date based on the number of days of such taxable period included in
the Pre-Closing Tax Period and the number of days of such taxable period
included in the Post-Closing Tax Period. Sellers shall be liable for the
proportionate amount of such taxes that is attributable to the Pre-Closing Tax
Period. Within 90 days after the Closing, Sellers and Buyer shall present a
statement to the other setting forth the amount of reimbursement to which each
is entitled under this Section 7.08(c) together with such supporting evidence as
is reasonably necessary to calculate the proration amount. The proration amount
shall be paid by the party owing it to the other within 10 days after delivery
of such statement. Thereafter, Sellers shall notify Buyer upon receipt of any
bill for real or personal property taxes relating to the Purchased Assets, part
or all of which are attributable to the Post-Closing Tax Period, and shall
promptly deliver such bill to Buyer who shall pay the same to the appropriate
taxing authority, provided that if such bill covers the Pre-Closing Tax Period,
Sellers shall also remit prior to the due date of assessment to Buyer payment
for the proportionate amount of such bill that is attributable to the
Pre-Closing Tax Period. If either the Sellers or Buyer shall thereafter make a
payment for which it is entitled to reimbursement under this Section 7.08(c),
the other party shall make such reimbursement promptly but in no event later
than 30 days after the presentation of a statement setting forth the amount of
reimbursement to which the presenting party is entitled along with such
supporting evidence as is reasonably necessary to calculate the amount of
reimbursement. Any payment required under this Section 7.08(c) and not made
within 10 days of delivery of the statement shall bear interest at the rate per
annum determined, from time to time, under the provisions of Section 6621(a)(2)
of the Code for each day until paid.
(d) Any transfer, documentary, sales, use or other Taxes assessed
upon or with respect to the transfer of the Purchased Assets to Buyer and any
recording or filing fees with respect thereto shall be the responsibility of
Sellers.
7.09. CHANGE OF NAME. Within twenty-four (24) months after the Closing
Date, Sellers shall cause to be filed a duly approved amendment to TCD's
certificate of incorporation
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changing TCD's corporate name so as to delete any reference to "T Cell
Diagnostics, Inc." or any variant thereof and thereafter Buyer and Seller
shall not use such name or any associated logo except on any Products, product
literature or other Inventory existing on the Closing Date.
7.10. RIGHT OF FIRST REFUSAL ON NEW TRAx PRODUCTS. (a) if at any time
after the Closing Date, Parent shall desire to commercially exploit any of the
technology under the Retained Assets ("TRAx Technology") to develop new
research-use only immunoassay products ("New TRAx Products"), Parent agrees to
disclose to Buyer in writing such New TRAx Products and Buyer shall have a
Right of Refusal to sell and distribute any such New Products (the "Right of
Refusal"); provided, however, that Buyer shall not have a Right of Refusal to
the extent Parent shall be prohibited from granting such Right of Refusal
pursuant to any agreement with an independent third party. Parent shall not
otherwise commercially exploit such New TRAx Products while Buyer's Right of
Refusal is in effect. Parent shall not be required to make the Right of Refusal
to Buyer if Buyer is otherwise in material breach of its obligations under any
material term of this Agreement or the Ancillary Agreements. Buyer shall have
thirty (30) days from the first date of notice to Buyer of any New TRAx
Products (the "Evaluation Period") to indicate in writing to Parent whether it
wishes to accept the Right of Refusal by beginning negotiations with Parent.
The parties shall negotiate in good faith the terms and conditions of such
sales and distribution of the New TRAx Products. If Buyer rejects the Right of
Refusal, or if Buyer accepts the Right of Refusal but Buyer and Parent are
unable to agree to the terms and conditions for the commercialization of the
New TRAx Products within ninety (90) days after Parent's receipt of Buyer's
written acceptance of the Right of Refusal, then Parent shall be free to
commercially exploit the New TRAx Products with any third party without any
obligation to Buyer.
7.11. MANUFACTURE AND SUPPLY AGREEMENT. Within thirty (30) days after
the Closing Date, Buyer and Parent shall enter into a mutually agreeable
Manufacture and Supply Agreement with respect to the contract manufacturing by
Buyer for Parent of the TRAx Products set forth on SCHEDULE 3.21-2.
ARTICLE VIII
CONDITIONS TO CLOSING
8.01. CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The obligations of
Buyer and Sellers to consummate the Closing are subject to the satisfaction of
the following conditions:
(a) Any applicable waiting period under the HSR Act relating to
the transactions contemplated hereby shall have expired or been terminated.
(b) No provision of any applicable law or regulation and no
judgment, injunction, order or decree shall prohibit the consummation of the
Closing.
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(c) No proceeding challenging this Agreement or the transactions
contemplated hereby or seeking to prohibit, alter, prevent or materially delay
the Closing shall have been instituted by any Person before any court,
arbitrator or governmental body, agency or official and be pending.
(d) Each other party shall have executed and delivered each of
the Ancillary Agreements to be entered into by it at Closing, in each case in
the form attached as an exhibit to this Agreement.
(e) All actions by or in respect of or filings with any
governmental body, agency, official or authority required to permit the
consummation of the Closing including, but not limited to FDA approval, shall
have been obtained.
8.02. CONDITIONS TO OBLIGATION OF BUYER. The obligation of Buyer to
consummate the Closing is subject to the satisfaction of the following further
conditions:
(a)(i) Sellers shall have performed in all material respects all
of their obligations hereunder required to be performed on or prior to the
Closing Date, (ii) the representations and warranties of Sellers contained in
this Agreement at the time of its execution and delivery and in any certificate
or other writing delivered by TCD or Parent pursuant hereto shall be true at and
as of the Closing Date.
(b) No court, arbitrator or governmental body, agency or official
shall have issued any order, and there shall not be any statute, rule or
regulation, restraining the effective operation by Buyer of the business of TCD
after the Closing Date, and no proceeding challenging this Agreement or the
transactions contemplated hereby or seeking to prohibit, alter, prevent or
materially delay the Closing shall have been instituted by any Person before any
court, arbitrator or governmental body, agency or official and be pending.
(c) Buyer shall have received an opinion of Sellers' Counsel in
the form of EXHIBIT F attached hereto, dated the Closing Date. Such opinion
shall recite that it may be relied upon by Buyer's senior secured lender as if
it were addressed to it. In rendering such opinion, such counsel may rely upon
certificates of public officers and, as to matters of fact, may rely upon
certificates of officers of Parent and TCD.
(d) Execution and delivery of other relevant agreements,
including equipment leases, patent and trademark assignments or other transition
agreements.
(e) TCD shall have received all consents, authorizations or
approvals from the governmental agencies referred to in Section 3.03(a), in each
case in form and substance reasonably satisfactory to Buyer, and no such
consent, authorization or approval shall have been revoked.
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(f) Buyer shall have received the financial statements described
in Section 3.07.
(g) Buyer shall have obtained a consent to the assignment of the
Woburn Lease from Cummings.
(h) Buyer shall have obtained an assignment of the Woburn Lease
from TCD.
(i) Buyer shall have received all other closing documents
specified in Section 2.07 of this Agreement and all other closing documents that
it may reasonably request, all in form and substance reasonably satisfactory to
Buyer.
(j) Buyer shall have obtained reports from environmental
consulting firms selected by Buyer as to the condition of such of the real
property owned or leased by TCD as Buyer shall select and the compliance of such
real property, and the business operated by TCD, with all applicable
Environmental Laws, and such reports shall not have disclosed any violation of
law by Parent or TCD or any risk of any Environmental Liabilities of Parent or
TCD that could have a Material Adverse Effect.
8.03. CONDITIONS TO OBLIGATION OF PARENT. The obligation of Parent to
consummate the Closing is subject to the satisfaction of the following further
conditions:
(a)(i) Buyer shall have performed in all material respects all of
its obligations hereunder required to be performed by it at or prior to the
Closing Date and (ii) the representations and warranties of Buyer contained in
this Agreement at the time of its execution and delivery shall be true at and as
of the Closing Date.
(b) Parent shall have received an opinion of Buyer's Counsel
in the form of EXHIBIT F attached hereto dated the Closing Date. In rendering
such opinion, such counsel may rely upon certificates of public officers and,
as to matters of fact, upon certificates of officers of Buyer.
(c) Parent shall have received all items specified in Section
2.07 of this Agreement and all other closing documents that they may reasonably
request, all in form and substance reasonably satisfactory to them.
ARTICLE IX
SURVIVAL; INDEMNIFICATION
9.01. SURVIVAL. The covenants, agreements, representations and
warranties of the parties hereto contained in this Agreement or in any
certificate or other writing delivered pursuant hereto or in connection
herewith shall survive the Closing until eighteen (18) months following the
Closing Date; PROVIDED, that (i) in the case of Section 5.05, for the period
set forth therein, (ii) in
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the case of any matters arising pursuant to or in connection with the
Sellers' former facilities in Cambridge, Massachusetts, at any time in the
future, without limitation, and (iii) in the case of the covenants, agreements,
representations and warranties contained in Sections 3.19, 3.27, 7.06, 7.07 and
7.08 until three (3) months after the expiration of the applicable statutory
period of limitations (giving effect to any waiver, mitigation or extension
thereof), if later. Notwithstanding the preceding sentence, any covenant,
agreement, representation or warranty in respect of which indemnity may be
sought under Section 9.02 shall survive the time at which it would otherwise
terminate pursuant to the preceding sentence, if notice of the inaccuracy or
breach thereof giving rise to such right to indemnity shall have been given to
the party against whom such indemnity may be sought prior to such time.
9.02. INDEMNIFICATION. (a) Each Seller, jointly and severally agrees to
indemnify Buyer against and agrees to hold it harmless from any and all damage,
loss, liability and expense (including without limitation reasonable expenses
of investigation and reasonable attorneys' fees and expenses in connection with
any action, suit or proceeding) ("Damages") incurred or suffered by Buyer
related to or arising, directly or indirectly, out of (i) any misrepresentation
or breach of warranty, covenant or agreement made or to be performed by TCD or
Parent pursuant to this Agreement; or (ii) any matters arising pursuant to or
in connection with the Sellers' former Cambridge, Massachusetts headquarters,
including without limitation, the litigation matter listed on SCHEDULE 3.11 and
any current or future health claims of the employees of the Sellers in
connection with such facilities (the items in this clause (ii) are hereinafter
referred to as the "KNOWN CLAIMS"), and any obligations or liability of Parent
or TCD arising under or in connection with any Employee Plan, or any obligation
or liability of Parent or TCD, to any employee, former employee or beneficiary
of any Employee Plan, including those arising in connection with or by virtue
of the Employment up to the Closing Date or termination of employment of any
such employee or former employee; provided that (i) Sellers shall not be liable
under this Section 9.02(a) unless the aggregate amount of Damages with respect
to all matters referred to in this Section 9.02(a) (determined without regard
to any materiality qualification contained in any representations, warranty or
covenant giving rise to claim for indemnity hereunder) exceeds $50,000 and then
solely to the extent of such excess and (ii) except with regard to Damages
related to or arising pursuant to Sections 3.19 and 7.08 and Known Claims as to
which Sellers' liability shall have no limit. Except as provided in the
immediately preceding sentence, Sellers' maximum liability under this Section
9.02(a) shall not exceed $1,000,000.
(b) Buyer hereby indemnifies Sellers against and agrees to hold
them harmless from any and all Damages incurred or suffered by Sellers arising
out of any misrepresentation or breach of warranty, covenant or agreement made
or to be performed by Buyer pursuant to this Agreement; PROVIDED that (i) Buyer
shall not be liable under this Section 9.02(b) unless the aggregate amount of
Damages with respect to all matters referred to in this Section 9.02(b)
(determined without regard to any materiality qualification contained in any
representations, warranty or covenant giving rise to the claim for indemnity
hereunder) exceeds $50,000 and then solely to the extent of such excess and (ii)
Buyer's maximum liability under this Section 9.02(b) shall not exceed
$1,000,000.
48
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(c) Buyer's claims for indemnification pursuant to this Article
IX shall, to the extent available, be satisfied by exercising its right of
set-off pursuant to the Convertible Note by placing such set-off amount in
escrow until resolution of such applicable indemnity claim; provided, that any
such set-off amount shall occur with respect to payments due by Buyer in reverse
order of maturity of the principal of such Convertible Note.
9.03. PROCEDURES; NO WAIVER. (a) The party seeking indemnification
under Section 9.02 (the "Indemnified Party") agrees to give prompt notice to
the party against whom indemnity is sought (the "Indemnifying Party") of the
assertion of any claim, or the commencement of any suit, action or proceeding
in respect of which indemnity may be sought under such Section. The
Indemnifying Party may, and at the request of the Indemnified Party shall,
participate in and control the defense of any third party suit, action or
proceeding at its own expense. The Indemnifying Party shall not be liable under
Section 9.02 for any settlement effected without its consent of any claim,
litigation or proceeding in respect of which indemnity may be sought hereunder.
Notwithstanding the foregoing, no Indemnifying Party shall be entitled to
settle any claim, litigation or proceeding unless in connection with such
settlement the Indemnified Party receives a complete release with respect to
the subject matter of such claim, litigation or proceeding.
(b) No waiver of a closing condition by either Buyer or the
Sellers shall limit its rights under Section 9.02 hereof.
(c) Indemnification by the parties hereto shall be net of any tax
benefits and insurance payments received by the indemnified party as a result of
or in connection with any such indemnification claim; PROVIDED, HOWEVER, that
any increase in insurance premiums resulting from any matter in which the
applicable Indemnified Party seeks indemnification hereunder shall be
specifically included as a cost for which the Indemnified Party is entitled to
indemnification.
ARTICLE X
MISCELLANEOUS
10.01. NOTICES. All notices, requests and other communications to
either party hereunder shall be in writing (including telecopy or similar
writing) and shall be given,
if to Buyer, to:
President and Chief Executive Officer
Endogen, Inc.
640 Memorial Drive
Cambridge, MA 02139-4815
Telecopy: (617) 225-2040
49
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with a copy to:
William J. Schnoor, Jr., Esq.
Testa, Hurwitz & Thibeault
High Street Tower
125 High Street
Boston, MA 02110
Telecopy: (617) 248-7100
if to either of the Sellers, to:
President and Chief Executive Officer
T Cell Sciences, Inc.
115 Fourth Ave.
Needham, MA 02194
Telecopy: (617) 433-0262
with a copy to:
Goodwin, Procter & Hoar L.L.P.
Exchange Place
Boston, MA 02109
Attention: Stuart M. Cable, Esq.
Telecopy: (617) 523-1231
10.02. AMENDMENTS; NO WAIVERS. (a) Any provision of this Agreement
may be amended or waived prior to the Closing Date if, and only if, such
amendment or waiver is in writing and signed by Buyer and Sellers.
(b) No failure or delay by either party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
10.03. EXPENSES. All costs and expenses incurred through the Closing
Date in connection with this Agreement shall be paid by the party incurring
such cost or expense; PROVIDED, HOWEVER, that the fees and expenses incurred by
TCD or Parent in the preparation of the Audited Financial Statements shall be
paid fifty percent (50%) by the Sellers and fifty percent (50%) by the Buyer.
50
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10.04. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; PROVIDED that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
other than to one or more of its Affiliates without the consent of the other
parties hereto.
10.05. FURTHER ASSURANCES. From time to time after the Closing, at the
request of Buyer and without further consideration, the Sellers will execute
and deliver to Buyer such other documents, and take such other action, as Buyer
may reasonably request in order to consummate more effectively the transactions
contemplated by this Agreement and to vest in Buyer good, valid and marketable
title to the Purchased Assets. From time to time after the Closing, at the
request of the Sellers, Buyer will execute and deliver to the Sellers such
other documents and take such other action, as the Sellers may reasonably
request in order to consummate more effectively the transactions contemplated
by this Agreement.
10.06. GOVERNING LAW. This Agreement shall be construed IN accordance
with and governed by the internal laws of the Commonwealth of Massachusetts,
without regard to its conflict of laws provisions.
10.07. COUNTERPARTS; EFFECTIVENESS. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto shall have
received a counterpart hereof signed by the other parties hereto.
10.08. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior agreements, understandings and negotiations, both written
and oral, between the parties with respect to the subject matter hereof. No
representation, inducement, promise, understanding, condition or warranty not
set forth herein has been made or relied upon by either party hereto. Neither
this Agreement nor any provision hereof is intended to confer upon any Person
other than the parties hereto any rights or remedies hereunder.
10.09. CAPTIONS. The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation
hereof.
10.10. JURISDICTION. Any action or proceeding seeking to enforce any
provision of, or based on any right arising out of, this Agreement may be
brought against any of the parties in the courts of the Commonwealth of
Massachusetts, and each of the parties hereby consents to the jurisdiction of
such courts (and of the appropriate appellate courts) in any such action or
proceeding and waives any obligation to venue laid therein. Process in any such
action or proceeding may be served on any party anywhere in the world, whether
within or without the Commonwealth of Massachusetts.
51
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
ENDOGEN, INC.
By: /s/ Owen A. Dempsey
-------------------------------------
Owen A. Dempsey
President and Chief Executive Officer
T CELL DIAGNOSTICS, INC.
By: /s/ Alan W. Tuck
-------------------------------------
Alan W. Tuck
President
T CELL SCIENCES, INC.
By: /s/ Alan W. Tuck
-------------------------------------
Alan W. Tuck
President and Chief Executive Officer
1
T CELL SCIENCES, INC.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited financial statements have been derived from statements
previously presented in the Company's Annual Report on Form 10-K for the year
ended December 31, 1994, and the Company's Quarterly Report on Form 10-Q for the
Quarter and Nine Months Ended September 30, 1995, and should be read in
conjunction with the financial statements and notes thereto included in such
reports. The unaudited balance sheet presents the financial position of the
Company as of September 30, 1995 assuming the sale of certain of the assets of
the research products and operations (the "Assets") of its wholly-owned
subsidiary T Cell Diagnostics, Inc. to Endogen, Inc. ("Endogen") had occurred on
that date. In addition, the unaudited statements of operations for the year
ended December 31, 1994 and the nine months ended September 30, 1995 present the
results of operations of the Company for the periods then ended assuming the
sale of the Assets had occurred immediately prior to commencement of the
statement of operations period.
The unaudited pro forma adjustments are based upon available information and
certain assumptions that management believes are reasonable in the
circumstances. The unaudited pro forma consolidated financial information
neither purports to represent what the Company's financial position or results
of operations would actually have been if the sale of the Assets to Endogen had
occurred on January 1, 1994, January 1, 1995 or September 30, 1995 nor to
project the Company's financial position or results of operations for any future
date or period.
2
T CELL SCIENCES, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET (UNAUDITED)
September 30, 1995
As Reported Adjustments(1) Pro Forma
========================================================================================
ASSETS
Current Assets:
Cash and cash equivalents $ 6,230,896 $ (452,153)(b)(c) $ 5,778,743
Accounts receivable, net 299,630 (286,997) 12,633
Inventories, net 521,969 (521,969) --
Notes receivable, including current
portion of long-term note -- 832,153 (a)(b) 832,153
Prepaid and other current assets 682,995 (210,738) 472,257
- ----------------------------------------------------------------------------------------
Total Current Assets 7,735,490 (639,704) 7,095,786
- ----------------------------------------------------------------------------------------
Property and equipment, net 1,295,781 (587,733)(b)(c) 708,048
Note receivable -- 1,520,000 (a) 1,520,000
Other noncurrent assets 2,641,288 (80,897) 2,560,391
- ----------------------------------------------------------------------------------------
Total Assets $ 11,672,559 $ 211,666 $ 11,884,225
========================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 833,579 $ (267,920) $ 565,659
Accrued Expense 994,752 99,156 (d) 1,093,908
- ----------------------------------------------------------------------------------------
Total Current Liabilities 1,828,331 (168,764) 1,659,567
- ----------------------------------------------------------------------------------------
Collaborator Advance 181,573 -- 181,573
- ----------------------------------------------------------------------------------------
Stockholders' Equity
Preferred stocks at par value -- -- --
Common stock at par value 17,112 -- 17,112
Additional paid-in capital 55,866,408 -- 55,866,408
Common treasury stock at cost (39,830) -- (39,830)
Accumulated deficit (46,181,035) 380,430(2) (45,800,605)
- ----------------------------------------------------------------------------------------
Total Stockholders' Equity 9,662,655 380,430 10,043,085
- ----------------------------------------------------------------------------------------
Total Liabilities and
Stockholders' Equity $ 11,672,559 $ 211,666 $ 11,884,225
========================================================================================
See notes to Consolidated Pro Forma Financial Statements
3
T CELL SCIENCES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
Twelve Months Ended
December 31, 1994
As Reported Adjustments(2) Pro Forma
========================================================================================
OPERATING REVENUE:
Product development and
licensing agreements $ 3,737,143 $ -- $ 3,737,143
Product sales 3,230,815 (3,032,231) 198,584
- ----------------------------------------------------------------------------------------
Total Operating Revenue 6,967,958 (3,032,231) 3,935,727
- ----------------------------------------------------------------------------------------
OPERATING EXPENSE:
Cost of product sales 2,008,279 (1,884,839) 123,440
Research and development 8,697,174 (945,989) 7,751,185
General and administrative 4,345,972 (1,103,896) 3,242,076
Marketing and sales 1,411,420 (936,206) 475,214
Facility relocation 1,598,609 -- (3) 1,598,609
- ----------------------------------------------------------------------------------------
Total Operating Expense 18,061,454 (4,870,930) 13,190,524
- ----------------------------------------------------------------------------------------
Operating Loss (11,093,496) 1,838,699 (9,254,797)
- ----------------------------------------------------------------------------------------
Other non-operating expenses, net (490,055) -- (490,055)
- ----------------------------------------------------------------------------------------
Net Loss $(11,583,551) $ 1,838,699 $(9,744,852)
========================================================================================
Net Loss per Common Share $ (0.68) $ (0.57)
========================================================================================
Weighted Average Common Shares
Outstanding 17,053,443 17,053,443
========================================================================================
See notes to Consolidated Pro Forma Financial Statements
4
T CELL SCIENCES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
Nine Months Ended
September 30, 1995
As Reported Adjustments(2) Pro Forma
========================================================================================
OPERATING REVENUE:
Product development and
licensing agreements $ 1,329,428 $ -- $ 1,329,428
Product sales 1,820,043 (1,793,029) 27,014
- ----------------------------------------------------------------------------------------
Total Operating Revenue 3,149,471 (1,793,029) 1,356,442
- ----------------------------------------------------------------------------------------
OPERATING EXPENSE:
Cost of product sales 1,448,529 (1,426,863) 21,666
Research and development 5,994,478 (615,157) 5,379,321
General and administrative 2,999,578 (987,304) 2,012,274
Marketing and sales 1,208,218 (504,044) 704,174
Facility relocation 85,132 -- (3) 85,132
- ----------------------------------------------------------------------------------------
Total Operating Expense 11,735,935 (3,533,368) 8,202,567
- ----------------------------------------------------------------------------------------
Operating Loss (8,586,464) 1,740,339 (6,846,125)
- ----------------------------------------------------------------------------------------
Other non-operating income, net 486,016 -- 486,016
- ----------------------------------------------------------------------------------------
Net Loss $(8,100,448) $ 1,740,339 $(6,360,109)
========================================================================================
Net Loss per Common Share $ (0.47) $ (0.37)
========================================================================================
Weighted Average Common Shares
Outstanding 17,066,026 17,066,026
========================================================================================
See notes to Consolidated Pro Forma Financial Statements
5
T CELL SCIENCES, INC.
Notes to Consolidated Pro Forma Financial Statements
(1) The pro forma balance sheet has been prepared to reflect the sale of
certain assets to Endogen for a total purchase price of $2,880,494 net of
transaction fees of approximately $160,000. Pro forma adjustments assume
the transactions giving rise to the adjustments were consummated on the
balance sheet date and include the following:
(a) Receipt of a $1,900,000 convertible subordinated note receivable,
with payment due in ten semi-annual installments commencing
September 1, 1996 with interest receivable thereon at the rate of
7% per annum. The oustanding principal amount of the note is
convertible at any time at the option of the Company into shares
of common stock of Endogen.
(b) Receipt of a promissory note in the amount of $452,153, payable in
full on March 28, 1996 for payment of property and equipment. The
Company purchased certain property and equipment outstanding under
an operating lease, and simultaneously sold this property and
equipment to Endogen, at no gain or loss, in conjunction with this
transaction.
(c) Receipt of $528,341 in cash from Endogen to purchase certain
property and equipment also outstanding under an operating lease.
This property and equipment was simultaneously purchased from a
leasing company prior to selling to Endogen at, no gain or loss.
(d) Total proceeds for the sale of assets were reduced by transaction
costs, approximating $160,000.
(2) All summary income statement pro forma adjustments assume the transactions
giving rise to the adjustments were consummated immediately prior to the
first day of the period presented. The anticipated gain of $300,000 from
the transaction is not reflected in the income statement of the period
presented.
(3) No portion of the costs relating to the Company's evacuation of its
former headquarters in 1994 are reflected as pro forma adjustments,
as the costs are not recurring in nature.
