ACQUISITION AGREEMENT
This Acquisition Agreement (this "Agreement") dated effective as of
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April 30, 2001 is entered into by and among CardioTech International, Inc., a
Massachusetts corporation ("Buyer"), Colorado MEDtech, Inc., a Colorado
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corporation ("Seller"), and CMED Catheter and Disposables Technology, Inc., a
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Minnesota corporation and wholly-owned subsidiary of Seller ("Target").
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WITNESSETH:
WHEREAS, Seller owns Nine hundred fifty five thousand one hundred
sixty two and one-half (955,162.5) shares of Common Stock, par value $0.01 per
share, of Target (the "Shares"), representing all of the issued and outstanding
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shares of capital stock of Target;
WHEREAS, Seller desires to sell, and Buyer desires to purchase, the
Shares, all upon the terms and conditions provided for herein;
NOW, THEREFORE, in consideration of the recitals above, the mutual
promises set forth herein and other good and valuable consideration, the receipt
and legal sufficiency of which is hereby acknowledged, the parties hereto,
intending to be legally bound hereby, agree as follows:
1. THE ACQUISITION.
1.1 PURCHASE AND SALE. Subject to the terms and conditions of this
Agreement, at the Closing (as hereinafter defined) to be held as provided in
Section 2.1 herein, Seller shall sell the Shares to Buyer, free and clear of all
Encumbrances (as hereinafter defined), and Buyer shall purchase the Shares from
Seller.
1.2 PURCHASE PRICE. The aggregate purchase price for the Shares shall
be One Million Three Hundred Thousand U.S. Dollars (U.S. $1,300,000.00) (the
"Purchase Price"), which shall be paid by Buyer to Seller at the Closing in the
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manner provided in Section 2.3 herein.
2. THE CLOSING.
2.1 PLACE AND TIME. The closing of the sale and purchase of the
Shares (the "Closing") shall take place at the offices of Ellenoff Xxxxxxxx
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Schole & Cyruli, LLP, 000 Xxxxxxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000
at 10:00 a.m. (New York City time) on the date hereof.
2.2 DELIVERIES BY SELLER. At the Closing, Seller shall deliver to
Buyer, in addition to any other documents, instruments and writings required by
this Agreement to be delivered by Seller at the Closing, the following:
(a) Certificates representing the Shares, duly endorsed for transfer
to Buyer. (Target shall, and Seller shall cause Target to, immediately exchange
those certificates for, and to deliver to Buyer at the Closing, a certificate
representing the Shares in the name of Buyer (without any legend or other
reference to any purported Encumbrance)).
(b) The documents and instruments contemplated by Section 3 herein.
2.3 DELIVERIES BY BUYER.. At the Closing, Buyer shall deliver to
Seller, in addition to any other documents, instruments and writings required by
this Agreement to be delivered by Buyer at the Closing, the following:
(a) A wire transfer of immediately available funds to Seller's
account at Key Bank World Trade, Account name: Colorado MEDtech, Inc. (account
number 769681008934 at 000000000 in an amount equal to Ninety Percent (90%) of
the Purchase Price.
(b) A wire transfer of immediately available funds to the escrow
account of Seller's counsel, Xxxxxxxx, Xxxxx & Xxxxxxx, P.C., (Bank One,
Downtown Boulder, Account No. 1069002143 (Trust) ABA/Routing No. 000000000;
phone: (000) 000-0000) in an amount equal to ten percent (10%) of the Purchase
Price to be deposited into the Escrow Fund (as hereinafter defined) and held in
escrow pursuant to the Escrow Agreement (as hereinafter defined) in accordance
with Section 8.4 herein.
(c) The documents and instruments contemplated by Section 4 herein.
2.4 RELEASE. Concurrently with the sale of the Shares to Buyer at the
Closing, Seller shall be deemed, without any further action, to have released
Target from all agreements, commitments, indebtedness, obligations and claims
then existing or which, to the extent arising from or in connection with any
act, omission or state of facts taken or existing on or prior to the Closing
Date (as hereinafter defined), may exist after the Closing Date. Seller (a)
shall execute and deliver to Target at the Closing a release, dated as of the
Closing Date, in substantially the form attached hereto as Exhibit 2.4,
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embodying the terms of this Section 2.4 herein, and (b) shall not assert in any
manner (including, without limitation, by way of defense, offset or counterclaim
(unless in response to a claim by Target) any matter purported to be released by
the preceding sentence.
2.5 EXECUTION AND DELIVERY OF ASSIGNMENT AND ASSUMPTION AGREEMENT.
Target and Seller shall execute and deliver to Buyer an assignment and
assumption agreement covering the Seller's Assumed Liabilities.
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3. CONDITIONS TO BUYER'S OBLIGATIONS.
The obligations of Buyer to effect the Closing shall be subject to the
strict satisfaction at or prior to the Closing of the following conditions, any
one or more of which may be waived by Buyer in its sole and absolute discretion:
3.1 NO INJUNCTION.. There shall not be in effect any injunction, order
or decree of a court of competent jurisdiction that prohibits or delays Buyer's
acquisition of the Shares, consummation of any or all of the Contemplated
Transactions (as hereinafter defined), or that will require any divestiture as a
result of Buyer's acquisition of the Shares or that will require all or any part
of the business of the Target to be held separate.
3.2 REPRESENTATIONS, WARRANTIES AND AGREEMENTS. (a) The
representations and warranties of Seller set forth in this Agreement shall be
true and correct in all material respects as of the date of this Agreement and
as of the Closing Date as though made at such time, (b) Seller and Target shall
have performed and complied in all material respects with the agreements
contained in this Agreement required to be performed and complied with by them
prior to or at the Closing, and (c) Buyer shall have received certificates to
the effect set forth in clauses (a) and (b) above signed by the Presidents of
Seller and Target, as applicable.
3.3 COVENANTS AND CONDITIONS. All covenants and conditions
contained in this Agreement or in any exhibit, schedule or ancillary agreement
to be observed by the Seller and/or the Target on or prior to the Closing shall
have been performed or complied with in all material respects.
3.4 LEGAL OPINIONS.. Buyer shall have received an opinion from Xxxxx
X. Xxxxxx, Esq., Seller's and Target's in-house counsel, dated the Closing Date
and in substantially the form of Exhibit 3.4A hereto and an opinion from
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Xxxxxxxx Xxxxx & Xxxxxxx, P.C., counsel to Seller, dated the Closing Date in
substantially the form of Exhibit 3.4B hereto.
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3.5 LITIGATION.. Except as set forth in Exhibit 3.5, no action or
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proceeding shall have been instituted or threatened by or before any
Governmental Body (as hereinafter defined), court or other Person (as
hereinafter defined) and, at what would otherwise have been the Closing Date,
remain pending before any court or Governmental Body or remain threatened to
restrain or prohibit or to recover substantial damages in respect of Buyer's
acquisition of the Shares any or all of the Contemplated Transactions or seeking
any divestiture or seeking to require that all or any part of the business of
the Target or Buyer be held separate or to revoke or suspend any license,
permit, order or approval by reason of Buyer's acquisition of the Shares any or
all of the Contemplated Transactions; nor shall any Governmental Body, court or
other Person have notified any party to this Agreement or any of their
respective affiliates that Buyer's acquisition of the Shares or the consummation
of any or all of the Contemplated Transactions would constitute a violation of
the laws of any jurisdiction or that it intends to commence an action or
proceeding to restrain or prohibit or to recover substantial damages in respect
of Buyer's acquisition of the Shares, any or all of the Contemplated
Transactions or to require such divestiture, holding separate, revocation or
suspension, unless such Governmental Body, court or other Person shall have
withdrawn such notice due to such suits and actions and abandoned such action or
proceeding.
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3.6 REGULATORY APPROVALS; CONSENTS. All licenses, authorizations,
consents, orders and regulatory approvals of Governmental Bodies and all
consents and approvals of any Person necessary or desirable, in the sole
judgment of Buyer, for the consummation of the Contemplated Transactions or
Buyer's acquisition of the Shares and the operation of Target's business shall
have been obtained on terms satisfactory to Buyer and shall be in full force and
effect.
3.7 RESIGNATIONS OF DIRECTORS AND OFFICERS. All directors and
officers of Target shall have submitted their resignations or been removed from
office effective as of the Closing Date.
3.8 COMPLIANCE EVIDENCE.. Buyer shall have received such
certificates, opinions, documents, instruments and information as it may request
in order to establish full satisfaction of the conditions set forth in this
Section 3.
3.9 PROCEEDINGS SATISFACTORY.. All certificates, opinions, other
documents or instruments to be delivered by Seller and Target and all other
matters to be accomplished prior to or at the Closing shall be satisfactory in
the sole judgment of Buyer and its counsel.
3.10 SATISFACTORY DUE DILIGENCE REVIEW. Buyer shall have
completed due diligence review, which shall include, without limitation,
meetings with the key suppliers and customers of Target, satisfactory to Buyer,
in its sole discretion, and review of the business, assets, financial condition
and prospects of Target.
3.11 BOARD APPROVAL. The Board of Directors of each of Buyer
and Seller shall have approved this Agreement.
3.12 ASSERTED CLAIMS. No Person shall have made or threatened any
claim asserting that such Person (a) may be the holder or the beneficial owner
of, or may have the right to acquire or to obtain beneficial ownership of, any
capital stock or other securities of the Target, or (b) may be entitled to all
or any portion of the Purchase Price.
4. CONDITIONS TO SELLER'S OBLIGATIONS..
The obligations of Seller to effect the Closing shall be subject to
the satisfaction at or prior to the Closing of the following conditions, any one
or more of which may be waived by Seller:
4.1 NO INJUNCTION.. There shall not be in effect any injunction,
order or decree of a court of competent jurisdiction that prohibits or delays
the sale of the Shares to Buyer.
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4.2 REPRESENTATIONS, WARRANTIES AND AGREEMENTS (a) The
representations and warranties of Buyer set forth in this Agreement shall be
true and correct in all material respects as of the date of this Agreement and
as of the Closing Date as though made at such time, (b) Buyer shall have
performed and complied in all material respects with the agreements contained in
this Agreement required to be performed and complied with by it prior to or at
the Closing, and (c) Seller shall have received certificates to the effect set
forth in clauses (a) and (b) above signed by the President of Buyer.
4.3 COVENANTS AND AGREEMENTS. All covenants and conditions
contained in this Agreement to be observed by the Buyer on or prior to the
Closing shall have been performed or complied with in all material respects.
4.4 ESCROW AGREEMENT. The Buyer shall have executed and delivered
the Escrow Agreement.
4.5 CORPORATE PROCEEDINGS. All corporate and other proceedings
required to be taken on the part of the Purchaser in connection with the
transactions described in this Agreement, and all documents incident thereto,
shall be reasonably satisfactory in form and in substance to the Seller and
their counsel.
4.6 LEGAL OPINION. Seller shall have received an opinion from
Ellenoff Xxxxxxxx Schole & Cyruli, LLP, counsel to Buyer, dated the Closing Date
and in substantially the form of Exhibit 4.6 hereto.
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5. REPRESENTATIONS AND WARRANTIES OF SELLER.
Seller represents and warrants (both as of the date of this Agreement
and as of the Closing Date) to Buyer as follows:
5.1 ORGANIZATION OF SELLER; AUTHORIZATION. Seller is a
corporation duly organized, validly existing and in good standing under the laws
of Colorado, with full corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder. The execution, delivery and
performance of this Agreement have been duly authorized by all necessary
corporate action (including, without limitation, approval by the Board of
Directors and, if necessary, stockholders) of Seller and this Agreement
constitutes, and, when executed and delivered, a valid and binding obligation of
Seller, enforceable against Seller in accordance with its terms. At the
Closing, Seller shall deliver to Buyer certified copies of the resolutions
adopted by its Board to authorize the execution, delivery and performance of
this Agreement.
5.2 NO CONFLICT AS TO SELLER. Neither the execution and delivery
of this Agreement nor the consummation of any or all of the Contemplated
Transactions will (a) violate any provision of the articles of incorporation or
by-laws (or other governing instrument) of Seller, (b) except as set forth in
Schedule 5.2(b), violate, be in conflict with, or constitute a default (or an
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event that, with notice or lapse of time or both, would constitute a default)
under any agreement or commitment to which Seller is party, or (c) violate any
statute or law or any judgment, decree, order, regulation or rule of any court
or Governmental Body applicable to Seller.
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5.3 OWNERSHIP OF SHARES. The authorized capital stock of Target
consists of 2,500,000 shares of Common Stock, par value $0.01 per share, Nine
hundred fifty five thousand one hundred sixty two and one-half (955,162.5)
shares of which are issued and outstanding and constituting the Shares
evidencing all of the issued and outstanding capital stock of the Target.
Target has not authorized any other class of capital stock. Seller owns the
Shares, of record and beneficial, free and clear of all Encumbrances. All of
the Shares have been duly authorized and validly issued and are fully paid and
non-assessable. There are no outstanding options, rights, conversion rights,
agreements or commitments of any kind by Seller or Target relating to the
issuance, sale or transfer of any capital stock of Target. To Seller's and
Target's Knowledge, none of the Shares were issued in violation of the
Securities Act of 1933, as amended (the "Securities Act") or the securities or
blue sky laws of any state or other jurisdiction. Except for a legend stating
that the Shares may not be transferred absent registration under the Securities
Act of an exemption therefrom, no legend or other reference to any purported
Encumbrance appears upon any certificate representing Shares. The delivery of
certificates representing the Shares to Buyer provided in Section 2.2(a) and the
payment of the Purchase Price to Seller provided in Sections 2.3(a) and 2.3(b)
will result in Buyer's immediate acquisition of record and beneficial ownership
of the Shares, free and clear of all Encumbrances.
5.4 ORGANIZATION OF TARGET; AUTHORIZATION Target is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Minnesota, with full corporate power and authority to own its
properties and to engage in its business as presently conducted or contemplated
to be conducted, is duly qualified and in good standing as a foreign corporation
under the laws of each other jurisdiction in which it is authorized to do
business as set forth in Schedule 5.4 hereto and is not required to qualify as a
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foreign corporation in any other jurisdiction, except in those jurisdictions
wherein failure to be so qualified would not have a material adverse effect on
its business or financial condition or its ability to enforce agreements or
would not permanently preclude the enforceability of any contract or other right
that is material to Target. Target does not own and does not have any option,
right, agreement or commitment of any kind to acquire, any capital stock or
other securities of any Person or any direct or indirect equity or ownership
interest in any other business. Target is not an "investment company" within the
meaning of the Investment Company Act of 1940. Seller has delivered to Buyer
copies of the articles of incorporation and by-laws (or other governing
instrument) of Target, as currently in effect and all corporate resolutions.
5.5 NO CONFLICT AS TO TARGET. Neither the execution and delivery of
this Agreement nor the consummation of any or all of the Contemplated
Transactions will (a) violate any provision of the articles of incorporation or
by-laws (or other governing instrument) of Target, (b) except as set forth on
Schedule 5.5(b), violate, or be in conflict with, or constitute a default (or an
event that, with notice or lapse of time or both, would constitute a default)
under, or result in the termination of, or accelerate the performance required
by, or excuse performance by any Person of any of its obligations under, or
cause the acceleration of the maturity of any debt or obligation pursuant to, or
result in the creation or imposition of any Encumbrance upon any property or
assets of Seller or Target under, or give any Person the right to do any of the
foregoing under, or give rise to a claim for damages under, any agreement or
commitment to which Seller or Target is a party or by which any of their
respective property or assets is bound, or (c) violate any statute or law or any
judgment, decree, order, regulation or rule of any court, arbitrator or
Governmental Body applicable to Seller or Target.
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5.6 CONSENTS AND APPROVALS OF GOVERNMENTAL AUTHORITIES. No
consent, approval or authorization of, or declaration, filing or registration
with, any Governmental Body is required in connection with the execution,
delivery and performance of this Agreement or the consummation of any or all of
the Contemplated Transactions.
5.7 OTHER CONSENTS. Except as set forth in Schedule 5.7 hereto, no
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consent of any Person is necessary to the execution, delivery and performance of
this Agreement, or the consummation of any or all of the Contemplated
Transactions, or the continuation by Buyer of the business of Target in all
material respects in the same manner as presently or heretofore conducted,
including, without limitation, consents from parties to leases or other
agreements or commitments.
5.8 NO SEC REGISTRATION. Target has no outstanding, or has had
outstanding any securities registered (or required to be registered) under the
Securities Act of 1933 or the Securities Exchange Act of 1934 or has or has had
any reporting obligation thereunder. Target is not subject to any filing or
reporting requirements under the Securities Act of 1933 or the Securities
Exchange Act of 1934.
5.9 FINANCIAL STATEMENTS.
(a) Seller has delivered to Buyer: (i) unaudited balance sheets of the
Target as at June 30 and each of the years 1998 through 2000, and unaudited
statements of income and cash flow for each of the fiscal years then ended,
(the "Balance Sheets"), and (ii) an unaudited balance sheet of Target as at
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March 31, 2001 (the "Interim Balance Sheet") and unaudited statements of
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income and cash flows for the nine months then ended, (collectively, the
"Financial Statements"). Such Financial Statements fairly present in all
material respects the assets, liabilities, financial condition and results
of operations of Target as at the respective dates thereof and for the
periods therein referred to, subject, in the case of unaudited financial
statements, to customary year-end audit adjustments not material in amount,
all in accordance with GAAP.
(b) At the date of the Interim Balance Sheet: (i) the Target had no
material Liabilities of any nature (matured or unmatured, fixed or
contingent) required by GAAP to be provided for in the Unaudited Interim
Balance Sheet that were not provided for therein, (ii) the Company had no
material Liabilities of any nature (mature or unmatured, fixed or
contingent) not required by GAAP to be provided for in the Interim Balance
Sheet and (iii) all reserves established by the Company and set forth in
the Interim Balance Sheet were adequate for the purposes for which they
were established.
5.10 TITLE TO PROPERTIES; ENCUMBRANCES. Except as set forth in
Schedule 5.10, the Target's properties and assets are free and clear of all
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encumbrances. The properties and assets of Target include all rights,
properties and other assets necessary to permit Target to conduct its businesses
in all material respects in the same manner as such businesses are conducted on,
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and have been conducted prior to, the date of this Agreement. Schedule 5.10 (a)
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identifies all equipment, furniture, fixtures, improvements and other tangible
assets owned by Target, and sets forth the original cost and book value of each
of said assets. Schedule 5.10(b) also accurately identifies all tangible assets
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leased to Target.
5.11 ACCOUNTS RECEIVABLE. To Seller's Knowledge, all accounts
receivable of Target, whether or not reflected in the Balance Sheets or the
Interim Balance Sheet, represent sales actually made or services actually
rendered in the Ordinary Course of Business.
5.12 INVENTORY. All inventory of Target is of a quality and
quantity usable and salable in the Ordinary Course of Business, except for
obsolete items and items of below-standard quality, all of which have been
written off or written down to net realizable value on the Balance Sheets or the
Interim Balance Sheet, as the case may be. All inventories not written off have
been priced at the lower of average cost or market. The quantities of each type
of inventory (whether raw materials, work-in-process, or finished goods) are not
excessive, but are reasonable and warranted in the present circumstances of
Target.
5.13 EQUIPMENT. To the Knowledge of Seller and Target, the
equipment of Target has no known material defects and is in normal operating
condition and repair, reasonable wear and tear excepted, and is adequate for the
uses to which it is being put, and none of such equipment is in need of
maintenance or repairs except for ordinary, routine maintenance and repairs that
are not material in nature or cost. Seller and Target have not received
notification that Target is in violation of any applicable building, zoning,
anti-pollution, environmental health or other law, ordinance or regulation in
respect of its buildings, plants or structures or their operations, and to the
Knowledge of Seller and Target no such violation exists.
5.14 NO CONDEMNATION OR EXPROPRIATION. Neither Seller nor Target
has received notice that the whole nor any portion of the property or leaseholds
owned or held by Target is subject to any governmental decree or order to be
sold or is being condemned, expropriated or otherwise taken by any Governmental
Body or other Person with or without payment of compensation therefor, nor, to
the Knowledge of Seller and Target, has any such condemnation, expropriation or
taking been proposed.
5.15 NO UNDISCLOSED LIABILITIES. Target has no material
liabilities or obligations of any nature (absolute, accrued, contingent or
otherwise) of the type required to be reflected or disclosed on a balance sheet
(or the notes thereto) in accordance with GAAP that were not fully reflected or
reserved against in the Balance Sheets and the Interim Balance Sheet, except for
liabilities and obligations incurred in the Ordinary Course of Business since
the respective dates thereof as set forth in Schedule 5.15 hereto; the reserves
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reflected in the Balance Sheets and the Interim Balance Sheet are adequate,
appropriate and reasonable.
5.16 LITIGATION. Except as set forth in Schedule 5.16 hereto,
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there is no action, suit, inquiry, proceeding or investigation by or before any
court or Governmental Body pending or, to the best Knowledge of Seller and
Target, threatened against or involving Target or which questions or challenges
the validity of this Agreement or any action taken or to be taken by Target
pursuant to this Agreement or in connection with the Contemplated Transactions,
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nor is there any valid basis for any such action, proceeding or investigation.
Except as set forth in Schedule 5.16 hereto, Target is not subject to any
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judgment, order or decree that may have an adverse effect on its business
practices or on its ability to acquire any property or conduct any business in
any part of the world.
5.17 TAXES. Target (and, to the extent Target may be liable therefor,
Seller) has filed or caused to be filed on a timely basis all Tax Returns (as
hereinafter defined) that are or were required to be filed by or with respect to
any of them, either separately or as a member of a group of corporations,
pursuant to the laws, regulations or administrative requirements of each
Governmental Body with taxing power over them or their assets. Seller has
delivered to Buyer copies of, and Schedule 5.17 hereto lists, all such Tax
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Returns filed during the period of June 30, 1998 through April 30, 2001. Target
(and, to the extent Target may be liable therefor, Seller) has paid, or made
provision for the payment of, all Taxes that have or may have become due
pursuant to those Tax Returns, or otherwise, or pursuant to any assessment
received by Seller or Target, except such Taxes, if any, as are set forth in
Schedule 5.17 hereto and are being contested in good faith and as to which
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adequate reserves (determined in accordance with GAAP) have been provided in the
Balance Sheets and the Interim Balance Sheet. All Tax Returns for the period up
to and including the Closing Date for any group of corporations that includes
Target required to be filed up to and including the Closing Date or subsequent
thereto has been or will be timely filed, and all Taxes for such period will be
paid by Seller, as noted in Section 10.3 hereof, without reimbursement by Target
except as provided in Schedule 5.17 hereto. The United States federal and state
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income Tax Returns of Target (and, to the extent Target may be liable therefor,
Seller) subject to such Taxes have been audited by the Internal Revenue Service
or relevant state tax authorities or are closed by the applicable statute of
limitations for all taxable years through June 30, 1997. All deficiencies
proposed as a result of such audits have been paid, reserved against, settled,
or, as described in Schedule 5.17 hereto, and are being contested in good faith
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by appropriate proceedings. Except as set forth in Schedule 5.17 hereto, neither
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Seller nor Target has given or been requested to give waivers or extensions (or
is or would be subject to a waiver or extension given by any other entity) of
any statute of limitations relating to the payment of Taxes of Target or for
which Target may be liable. No consent to the application of Section 341(f)(2)
of the Code has been filed with respect to any property or assets held or
acquired or to be acquired by Target and no election has been made under Section
338(h)(10) of the Code (or will be made without the prior written consent of
Seller and Buyer) with respect to the sale of the Shares to Buyer. All Taxes
that Target is or was required by law to withhold or collect have been duly
withheld or collected and, to the extent required have been paid to the proper
Governmental Body or other Person. All Tax Returns filed by Target (and, to the
extent Target may be liable therefor, Seller) are true, correct and complete.
There is no tax sharing agreement that will require any payment by Target after
the date of this Agreement. During the consistency period (as defined in
Section 338(h)(4) of the Code with respect to the sale of the Shares to Buyer)
neither Target nor any Target affiliate (as defined in Section 338(h)(6) of the
Code with respect to the sale of the Shares to Buyer) has sold or will sell any
property or assets to Buyer or to any member of the affiliated group (as defined
in Section 338(h)(5) of the Code) that includes Buyer. Schedule 5.17 hereto
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lists all such target affiliates.
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5.18 ABSENCE OF CERTAIN CHANGES.. Except as set forth in Schedule
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5.18 hereto, and to the extent reflected in the Agreed Closing Balance Sheet (as
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such term is defined in Section 10 hereof) since the date of the Interim Balance
Sheets, neither Target nor Seller (with respect to Target) has:
(a) permitted the waste of any of its properties or assets, suffered
the damage or destruction of any of its material properties or assets
(whether or not covered by insurance) or made any disposition of any of its
properties or assets other than the sale of finished goods in the Ordinary
Course of Business;
(b) disposed of any records related to its assets or business other
than records that are not necessary to the conduct of its business and were
disposed of in the Ordinary Course of Business;
(c) made any change or amendment in its certificate of incorporation
or by-laws, or other governing instruments;
(d) issued or sold any capital stock or other securities; acquired,
directly or indirectly, by redemption or otherwise, any capital stock or
other securities; reclassified, split-up or otherwise changed any capital
stock or other securities; declared or paid any dividends thereon in cash,
securities or other property or made any other distribution with respect
thereto; or granted or entered into any options, warrants, calls or
commitments of any kind with respect thereto (the purchase price of the
Shares shall be reduced by (i) the amount of any such dividends declared or
paid and (ii) the amount of any such acquisition of capital stock or other
securities (without prejudice to any other remedies to which Buyer may be
entitled under this Agreement or otherwise));
(e) organized any new Subsidiary (as hereinafter defined) or acquired
any capital stock or other securities of any Person or any equity or
ownership interest in any business;
(f) borrowed any funds or incurred, or assumed or become subject to,
whether directly or by way of guarantee or otherwise, any obligation or
liability (absolute or contingent), except obligations and liabilities
incurred in the Ordinary Course of Business;
(g) paid, discharged or satisfied any claim, liability or obligation
(absolute, accrued, contingent or otherwise), other than the payment,
discharge or satisfaction in the Ordinary Course of Business of liabilities
or obligations reflected or reserved against in the Balance Sheets or
incurred in the Ordinary Course of Business since the date of the Balance
Sheets;
(h) except in the Ordinary Course of Business, prepaid any obligation
having a maturity of more than 90 days from the date such obligation was
issued or incurred;
(i) permitted or allowed any of its property or assets (real, personal
or mixed, tangible or intangible) to be subjected to any Encumbrance,
except for those of a kind permitted under Schedule 5.10 hereto;
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(j) canceled any debts or waived any claims or rights of substantial
value, or sold, transferred, or otherwise disposed of any of its properties
or assets, except in the Ordinary Course of Business;
(k) disposed of or permitted to lapse any rights to the use of any
patent, trademark, service xxxx, trade name or copyright owned or used by
it or applicable to its business, or disposed of or, in the Ordinary Course
of Business disclosed to any Person any trade secret, formula, process or
know-how owned or used by it or applicable to its business and not
therefore a matter of public knowledge;
(l) granted any general increase in the compensation of officers or
employees (including any such increase pursuant to any of the Plans (as
hereinafter defined)) or any increase in the compensation payable or to
become payable to any Related Party;
(m) paid, loaned or advanced any amount to, or leased any properties
or assets to or from, or entered into any agreement or arrangement with,
any Related Party;
(n) granted or extended any power of attorney or acted as guarantor,
surety, co-signer, endorser (other than checks endorsed in the Ordinary
Course of Business), co-maker, indemnitor or otherwise in respect of the
obligation of any Person;
(o) purchased or entered into any contract or commitment to purchase
any raw material or supplies, or sold or entered into any contract or
commitment to sell any property or assets, except (i) normal contracts or
commitments for the purchase of, and normal purchases of, raw materials or
supplies, made in the Ordinary Course of Business, (ii) normal contracts or
commitments for the sale of, and normal sales of, inventory in the Ordinary
Course of Business, and (iii) other contracts, commitments, purchases or
sales in the Ordinary Course of Business;
(p) done any act or omitted to do any act, or permitted any act or
omission to act, which has caused or will cause a breach of any material
contract or commitment or which would cause the breach of any
representation or warranty contained in this Agreement;
(q) made any capital expenditures or additions to property, plant or
equipment or acquired any other property or assets (other than raw
materials and supplies) at a cost in excess of $5,000 in the aggregate for
Target;
(r) sold, transferred, assigned or conveyed any property or asset to,
or purchased or acquired any property or assets from, any Related Party, or
otherwise not in the Ordinary Course of Business;
(s) written off or been required to write off any notes or accounts
receivable;
(t) written down or been required to write down any inventory;
11
(u) directly or indirectly, through a representative or otherwise,
solicited, or furnished information to, any prospective buyers, commenced
negotiations with any other party or entered into any agreement with any
other party concerning the sale of (or any business combination involving)
Target or any part thereof (other than the sale of finished goods in the
Ordinary Course of Business);
(v) entered into any collective bargaining or union contracts or
agreements;
(w) agreed or otherwise committed, whether in writing or otherwise, to
do any of the foregoing;
(x) entered into any agreements restricting Target's ability to
compete or to disclose information; or
(y) since the date of the Interim Balance Sheets, experienced any
other material adverse change in the business, operations, properties,
assets or condition of Target or to Seller's or Target's Knowledge any
event, condition or contingency that is likely to result in such a material
adverse change.
5.19 PATENTS, TRADEMARKS, TRADE NAMES, ETC. Subject to Schedule
--------
5.19, Target owns, or is licensed or otherwise has the full and exclusive right
----
to use, all patents, trademarks, service marks, trade names, copyrights,
technology, know-how, processes, names and likenesses used in or necessary for
the conduct of its businesses as heretofore conducted. Schedule 5.19 hereto
-------------
contains an accurate and complete description of (a) all patents, trademarks,
service marks, trade names and copyrights, names and likenesses owned, used or
proposed to be used by Target, all registrations and applications therefor. No
claims have been asserted by any Person to the use of any such patents,
trademarks, service marks, trade names, copyrights, technology, know-how,
processes, names and likenesses or challenging or questioning the validity or
effectiveness of any such licenses or agreements, and Seller's and Target's
Knowledge, there is no valid basis for any such claim.
5.20 PROPRIETARY RIGHTS; PROPRIETARY INFORMATION AND INVENTIONS
AGREEMENT.
(a) The Target has taken reasonable and customary measures and
precautions necessary to protect the confidentiality of the confidential
information and trade secrets used in its business.
(b) All current and, to Seller's and Target's Knowledge, former
employees and consultants of the Target have executed an agreement regarding
confidentiality and proprietary information and copies of such agreements for
current employees have been delivered to Buyer. To the Knowledge the Target, no
employee or consultant of the Target is in violation thereof, any inventions,
trade secrets or proprietary information of any of the Target employees made
prior to their employment by the Target, which are necessary or useful in the
Target's business, have been assigned to the Target.
12
(c) To Knowledge of Seller and Target, the Target is not
infringing and has not at any time infringed or received any notice or other
communication (in writing or otherwise) of any actual, alleged, possible or
potential infringement of any registered United States patent or trademark. To
the Knowledge of the Target, no Person is infringing, and no Proprietary Asset
owned or used by any other Person infringes or conflicts with, any Proprietary
Asset owned or used by the Target.
5.21 LEASES.. Schedule 5.21 hereto lists all leases pursuant to
--------------
which Target leases real or personal property. Except as set forth in Schedule
--------
5.21, all such leases are in full force and effect; there are no existing
----
defaults (or events that, with notice or lapse of time or both, would constitute
a default) by Target, or to the best Knowledge of Seller and Target, any other
party, thereunder; and all lessors under such leases have consented (where such
consent is necessary) to the consummation of the Contemplated Transactions
without requiring modification in the rights or obligations of the lessee under
such leases and all such consents are listed on Schedule 5.21 hereto. Seller
-------------
has delivered executed counterpart copies of all consents referred to in the
preceding sentence to Buyer.
5.22 CONTRACTS AND COMMITMENTS. Except as set forth in Schedule
--------
5.22 hereto, Target is not a party to nor is Target bound by:
----
(a) (i) any agreement or commitment for the purchase of goods by or
the provision of services to Target that continues for a period of more
than 30 days or is in excess of the normal, ordinary and usual requirements
of its business or at any excessive price and requires payment by Target of
more than $12,000 individually in any calendar year or (ii) any agreement
or commitment to make any capital expenditures or to acquire any property
or assets other than raw materials and supplies, except for agreements or
commitments requiring payments of less than $12,000 individually in any
calendar year;
(b) (i) any outstanding sales or service agreement or commitment for
the provision of goods or services by Target or (ii) any distribution,
sales agency or similar agreement;
(c) (i) any agreement or commitment with officers, employees, agents,
consultants, advisors, salesmen, sales representatives, distributors or
dealers that is not cancelable by Target on notice of not longer than 30
days and without liability, penalty or premium, (ii) any agreement,
commitment or arrangement providing for the payment of any bonus or
commission based on or relating to sales or earnings, (iii) any employment
agreement or commitment providing for annual compensation in excess of
$70,000 individually, (iv) any other agreement or commitment that contains
any severance or termination pay liabilities or obligations, or (v) any
collective bargaining or union agreement or commitment;
(d) any agreement that permits or requires termination or modification
if a named individual ceases to be associated with, or to hold a designated
position with, Target;
13
(e) any agreement or commitment that restricts Target from carrying on
any business anywhere in the world or requires the making of any charitable
contributions;
(f) any liability or obligation with respect to the return of
inventory or merchandise in the possession of wholesalers, distributors,
retailers or other customers;
(g) (i) any loan or credit agreement or other agreement or commitment
with respect to indebtedness for borrowed money, (ii) any guarantee of or
agreement or commitment to acquire any such indebtedness of others, (iii)
any security agreement, mortgage or other agreement or commitment that
creates or may create any Encumbrance on any of its properties or assets,
or (iv) any outstanding power of attorney or any obligation or liability
(whether absolute, accrued, contingent or otherwise) as guarantor, surety,
co-signer, endorser, co-maker, indemnitor or otherwise in respect of the
obligation of any Person;
(h) any agreement or commitment having a remaining term in excess of
one year (other than agreements or commitments under which the only
substantial obligation of Target is to make payments not exceeding $12,000
individually per calendar year); and
(i) any agreement or commitment the performance of which will result
in any violation or failure to comply with any government rule or
regulation.
(j) any other agreement, commitment or restriction that is material to
its business, operations, financial condition, assets or prospects.
5.23 STATUS OF AGREEMENTS.. . All contracts, agreements,
commitments, plans, leases, policies and licenses disclosed or required to be
disclosed in the Schedules hereto are valid legally binding and enforceable in
accordance with its terms, except for non-material oral modifications to such
documents, and in full force and effect. The status of Target's current sales
orders is as set forth on Schedule 5.23 hereto.
--------------
5.24 CUSTOMERS AND SUPPLIERS. Schedule 5.24 hereto sets forth a
-------------
list of (a) the 25 largest customers of Target in terms of sales during the nine
months ended March 31, 2001 and (b) the 25 largest suppliers of Target in terms
of purchases during such period. Except as set forth in Schedule 5.24 hereto,
-------------
to the Knowledge of Seller and Target the business relationships of Target with
any customer or supplier named in Schedule 5.24 are good. Except for the
--------------
customers and suppliers named in Schedule 5.24 hereto, Target did not have any
-------------
customer who accounted for more than 5% of the sales of Target during the nine
months ended March 31, 2001, or any supplier from whom Target purchased more
than 5% of the goods or services that Target purchased during such period.
Except as set forth in Schedule 5.24 hereto, no Related Party has been a
--------------
supplier to or a customer of Target since July 1, 2000.
5.25 LIABILITIES. The aggregate liabilities as of April 30, 2001
shall not be in excess of $475,000.
14
5.26 ORDERS, COMMITMENTS AND RETURNS. The aggregate of all
agreements or commitments for the purchase of inventory, materials and supplies
by Target does not exceed $100,000, all of which orders, agreements and
commitments were made in the Ordinary Course of Business. There are no claims
against Target to return in excess of an aggregate of $25,000 of merchandise by
reason of alleged over-shipments, defective merchandise or otherwise, or of
merchandise in the hands of customers under an understanding that such
merchandise would be returnable. Schedule 5.26 sets forth: (i) a breakdown and
-------------
aging of the Target's existing accounts payable; (ii) a breakdown of all
customer deposits and other deposits held by the Target; and (iii) a breakdown
of the Target's long-term debt.
5.27 INSURANCE. Schedule 5.27 hereto contains an accurate and
--------------
complete list of all forms of insurance owned or held by or covering Target or
all or any portion of its property and assets, and the limits of coverage
thereunder. All such policies are in full force and effect, all premiums with
respect thereto covering all periods up to and including the Closing Date have
been paid, and no notice of cancellation or termination has been received with
respect to any such policy. The Company has not received: (i) any notice or
other communication (in writing or otherwise) regarding the actual or possible
cancellation or invalidation of any of the policies identified in Schedule 5.27
-------------
or regarding any actual or possible adjustment in the amount of the premiums
payable with respect to any of the said policies; (ii) any notice or other
communication (in writing or otherwise) regarding any actual or possible refusal
of coverage under, or any actual or possible rejection of any claim under, any
of the insurance coverage identified in Schedule 5.27; or (iii) any indication
-------------
that the issuer of any of the insurance coverage identified in Schedule 5.27 may
-------------
be unwilling or unable to perform any of its obligations thereunder.
5.28 LABOR RELATIONS.. Target has paid in full to its employees
all wages, salaries, commissions, bonuses and other direct compensation for all
services performed by them, excluding accrued vacation through April 30, 2001.
Target is not liable for any severance pay or other payments on account of
termination of any former employee. Target has performed its obligations under
all labor agreements to which Target is party or by which Target is bound and
has made all payments required thereby. Except as set forth in Schedule 5.28
-------------
hereto, (a) Target is in compliance with all applicable laws respecting
employment and employment practices, terms and conditions of employment and
wages and hours, and Target is not and has not been engaged in any unfair labor
practice, (b) there is no unfair labor practice complaint against Target pending
before the National Labor Relations Board, (c) there is no labor strike,
dispute, slowdown or stoppage actually pending or threatened against or
affecting Target, (d) no representation question exists respecting the employees
of Target, (e) no grievance or arbitration proceeding arising out of or under
collective bargaining agreements relating to employees of Target is pending and
no claim therefor exists, (f) no collective bargaining agreement that is binding
on Target restricts Target from relocating or closing any of its operations, (g)
Target has not experienced any strike, work stoppage or other labor difficulty
since February 1997, and (h) no collective bargaining agreement relating to
employees of Target is currently being negotiated or proposed to be negotiated.
The Company has no collective bargaining agreements, union Contracts or similar
Contract with any of its employees. There is no labor union organizing activity
pending or, to the Target's Knowledge, threatened with respect to the Target.
The employment of each of the Target's employees is terminable by the Target at
will; and no employee has any agreement or contract, written or verbal,
regarding his employment.
15
5.29 EMPLOYEE BENEFIT PLANS; ERISA. Schedule 5.29 hereto contains
-------------
a true and complete list of all bonus, deferred compensation, pension,
profit-sharing, retirement, insurance, stock purchase, stock option, welfare,
severance, hospitalization, insurance or other fringe benefit plan, arrangement
or practice, or any other employee benefit plan (as defined in Section 3(3) of
ERISA (as hereinafter defined), whether formal or informal, presently maintained
by Target or maintained by it since June 30, 1997, under which Target has any
obligation to contribute or under which employees of Target are eligible to
participate (collectively, the "Plans").
-----
5.30 PERSONNEL. Schedule 5.30 hereto lists (a) the names, titles
-------------
and current annualized salaries of all employees, directors and elected and
appointed officers of Target, and (b) the wage rates for non-salaried and
non-executive salaried employees of Target by classification. Schedule 5.30
-------------
contains a list of individuals who are currently performing services for the
Company business and are classified as "consultants" or "independent
contractors" and the respective compensation of each such "consultant" or
"independent contractor."
5.31 COMPLIANCE WITH LAW.. To the Knowledge of Seller and Target,
the operations of Target have been materially conducted in accordance with all
applicable laws, regulations and other requirements of all Governmental Bodies
having jurisdiction over Target, including, without limitation, all such laws,
regulations and requirements relating to anti-trust, foods and drugs, consumer
protection, currency exchange, equal opportunity, health, pollution or
protection of the environment, occupational safety, pension, securities or
trading-with-the-enemy matters, except where the failure so to comply would not
individually or in the aggregate have a material adverse effect on the business
or financial condition of Target. Neither Seller nor Target has since June 30,
1998 received any notification of any asserted present or past failure by Target
to comply with any such laws, rules or regulations. To the Knowledge of Seller
and Target, Target has all licenses, permits, orders or approvals from
Governmental Bodies required for the conduct of its businesses as presently
conducted, except where the failure to have such licenses, permits, orders or
approvals would not individually or in the aggregate have a material adverse
effect on the business or financial condition of Target, and Target is not in
violation of any such license, permit, order or approval, except where the
violation of such license, permit, order or approval would not individually or
in the aggregate have a material adverse effect on the business or financial
condition of Target. All such licenses, permits, orders and approvals are in
full force and effect, and no suspension or cancellation thereof has been
threatened.
5.32 GOVERNMENT, REGULATORY AND INDUSTRIAL AUTHORIZATIONS.
Schedule 5.32 identifies: (i) each Governmental Authorization or License held by
-------------
the Target, and (ii) each other Governmental Authorization that, to Knowledge of
the Seller and the Target, is held by any of the Target's employees and relates
to or is reasonably necessary to the Target's business. The Seller has
delivered to the Buyer accurate and complete copies of all such Governmental
Authorizations including all renewals thereof and all amendments thereto. Each
Governmental Authorization identified or required to be identified in Schedule
--------
5.32 is valid and in full force and effect. The Governmental Authorizations
----
16
identified in Schedule 5.32 constitute all the Governmental Authorizations
--------------
necessary (i) to enable the Target to conduct its business in the manner in
which its business is currently being conducted, and (ii) to permit the Target
to own and use its assets in the manner in which they are currently owned and
used.
5.32.1 Seller and Target represent that they have all
licenses, permits, consents, privileges, authorizations, immunities and orders
of any Governmental Body, including but not limited to the Food and Drug
Administration ("FDA"), required for conducting business as presently conducted
by the Target and at the Target's facility as currently operated. To the best
of their Knowledge, Seller and Target have not received written notice of any
action pending or threatened by any Governmental Body having jurisdiction either
to revoke, restrict, withdraw or suspend any such Governmental Permit.
5.32.2 Seller and Target represent that Target's
facility is registered with the FDA as a device establishment with its own
authority to conduct business, including but not limited to possessing an
owner/operator number issued by the FDA. Seller and Target also represent that
Target's FDA or other Governmental Body authorizations at Target's facility will
continue in effect and Target can continue to operate independently under the
FDA registration and all other authorizations after the Closing.
5.32.3 Target's operations have been conducted so as to
comply with all applicable binding administrative policies of any Governmental
Body, including but not limited to the FDA, relating to the research and
development and manufacture of catheters, medical products, or any other
products under development at Target's facility. Seller and Target also warrant
that all outstanding audit issues from the FDA or other Governmental Body
inspections, including but not limited to those listed on FDA Form 483 have been
answered and resolved to the satisfaction of the FDA or any other Governmental
Body.
5.32.4 Seller and Target represent and warrant that Target's
facility is currently certified for the areas of design, development, production
and distribution of medical disposable products and manufacturing equipment
under the requirements of the International Standards Organization ("ISO") 9001
and EN 46001. To the best of their Knowledge, all outstanding questions or
issues derived from prior audits and inspections by T V, relating to ISO 9001 or
EN 46001 certification, have been rectified and/or corrected or the corrective
action required to correct the outstanding issues remaining will not have a
material adverse effect on the financial condition or business operations of the
Target. Seller and Target represent that there is an ISO audit scheduled to
take place on or about May 7th or May 8th of 2001. Should any cost or fees
arise as a result of a deficiency found in the certification process costing in
excess of twenty thousand dollars ($20,000) Seller will indemnify Target and
Buyer for all such costs in excess of twenty thousand dollars ($20,000). Seller
and Target also represent that the transactions set forth in this Agreement will
not cause the ISO 9001 and EN 46001certification to be revoked, restricted,
withdrawn or suspended. To the best of their Knowledge, Seller and Target have
not received written notice of any action pending or threatened by the ISO
having jurisdiction over any certification program either to revoke, restrict,
withdraw or suspend any such ISO certification.
17
5.33 ENVIRONMENTAL MATTERS.
----------------------
5.33.1 Except as set forth in Schedule 5.33, the Target
-------------
has obtained all permits, licenses and other authorizations which are required
in connection with the conduct of its business operations under applicable laws
and regulations relating to pollution or protection of the environment,
including regulations relating to emissions, discharges, releases or threatened
releases of pollutants, contaminants, chemicals, or industrial, toxic or
hazardous substances or wastes into the environment (including without
limitation ambient air, surface water, groundwater, or land), or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, chemicals, or
industrial, toxic or hazardous substances or wastes.
5.33.2 Except as set forth in Schedule 5.33, the Target
-------------
is in full compliance in the conduct of its business with all terms and
conditions of the required permits, licenses and authorizations, and is also in
full compliance with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
those laws or contained in any regulation, code, plan, order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated or approved
thereunder, except where the failure to so comply would not individually or in
the aggregate have a material adverse effect on the business or financial
condition of Target.
5.33.3 Except as set forth in Schedule 5.33, neither the
-------------
Seller nor the Target is aware of, nor has the Seller or Target received notice
of, any past, present or future events, conditions, circumstances, activities,
practices, incidents, actions or plans which may interfere with or prevent
compliance or continued compliance with those laws or any regulations, code,
plan, order, decree, judgment, injunction, notice or demand letter issued,
entered, promulgated or approved thereunder, or which may give rise to any
common law or legal liability, or otherwise form the basis of any claim, action,
demand, suit, proceeding, hearing, study or investigation, based on or related
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling, or the emission, discharge, release or threatened
release into the environment, of any pollutant, contaminant, chemical, or
industrial, toxic or hazardous substance or waste.
5.33.4 Except as set forth in Schedule 5.33, there is no
-------------
civil, criminal or administrative action, suit, demand, claim, hearing, notice
or demand letter, notice of violation, investigation, or proceeding pending or
threatened against the Target in connection with the conduct of its business
relating in any way to those laws or any regulation, code, plan, order, decree,
judgment, injunction, notice or demand letter issued, entered, promulgated or
approved thereunder.
5.33.5 To the best of the Seller's Knowledge, no
property now owned by the Target, and no property formerly owned by the Target,
has any pollutants, contaminants, industrial toxic or hazardous substances
deposited or stored in any buildings therein, on the surface of the land or
below the surface.
5.33.6 Schedule 5.33 lists all discharges or
--------------
release of pollutants, contaminants, industrial toxic or hazardous substances
into the air, water, soil or otherwise into the environment caused in whole or
in part by the Target. Schedule 5.33 lists all environmental reports,
--------------
18
investigations, surveys and inquiries conducted by or on behalf of the Target or
by any other person or governmental agency in respect of property now or at any
time previously owned by the Target, each of which has been made available to
Buyer.
5.34 NO BROKERS OR FINDERS. Neither Seller nor Target, or any of
their respective officers, directors or employees, has employed any broker or
finder or, directly or indirectly, incurred any liability for any brokerage or
finder's fees or commissions or similar payments in connection with this
Agreement or any of the Contemplated Transactions.
5.35 ABSENCE OF CERTAIN COMMERCIAL PRACTICES. Neither Target nor
any director, officer, agent, employee or other Person acting on behalf of
Target, has (a) given or agreed to give any gift or similar benefit with a value
greater than $500 to any customer, supplier, or governmental employee or
official or any other Person who is or may be in a position to help or hinder
Target or assist Target in connection with any proposed transaction, which gift
or similar benefit, if not given in the past, might have materially and
adversely affected the business or prospects of Target, or which, if not
continued in the future, might materially and adversely affect the business or
prospects of Target, or (b) used any corporate or other funds for unlawful
contributions, payments, gifts, or entertainment, or made any unlawful
expenditures relating to political activity to government officials or others or
established or maintained any unlawful or unrecorded funds in violation of
section 30A of the Securities Exchange Act of 1934. Neither Target nor any
director, officer, agent, employee or other Person acting on behalf of Target,
has accepted or received any unlawful contributions, payments, gifts, or
expenditures.
5.36 NO COMPETING BUSINESS. Except to the extent of Seller's
business operations described in Section 9.1 hereof, Seller and the Persons (if
any) in which Seller has any direct or indirect equity interest, do not compete
with or conduct any business similar to the business conducted or proposed to be
conducted by Target.
5.37 RELATED PARTIES. Except as set forth in Schedule 5.37
-------------
hereto, (a) during the nine months ended March 31, 2001, there have been no
transactions between Target and any Related Party or any payment (however
characterized) by Target to any Related Party or by any Related Party to Target
(other than the payment of regular compensation for services rendered by
employees of Target in their capacities as such), and (b) there is no lease,
agreement or commitment between Target and any Related Party. As used in the
preceding sentence, the term "transaction" includes, without limitation, any
sale or other transfer of property or assets, the lease or other use of property
or assets, the provision of services and the furnishing of personnel, whether or
not for consideration. Except as set forth in Schedule 5.37 hereto, (i) no
-------------
Related Party has any material interest in any property, real or personal,
tangible or intangible, including, without limitation, inventions, patents,
trademarks, service marks or trade names, used in or pertaining to the business
of Target, (ii) no Related Party is indebted to Target, and (iii) Target is not
indebted to any Related Party.
5.38 PRODUCTS LIABILITY. Except as set forth in Schedule 5.38
-------------
hereto, there is no action, suit, inquiry, proceeding or investigation by or
before any court or Governmental Body pending or, to the best Knowledge of
Seller and Target, threatened against or involving Target relating to any
product alleged to have been manufactured or sold by Target and alleged to have
been defective, or improperly designed or manufactured, nor, to the Knowledge of
Seller or Target is there any valid basis for any such action, proceeding or
investigation.
19
5.39 BOOKS AND RECORDS. The books of account, minute books, stock
record books and other records of Target, all of which have been or will be made
available to Buyer, are true and complete. At the Closing, all of those books
and records will be in the possession of Target.
5.40 DISCLOSURE. No representations or warranties by Seller
in this Agreement and no statement contained in the Financial Statements or the
Schedules contains or will contain any untrue statement of material fact or
omits or will omit to state any material fact necessary, in light of the
circumstances under which it was made, in order to make the statements herein or
therein not misleading. Documents delivered or to be delivered to Buyer
pursuant to this Agreement are or will be true and complete copies of what they
purport to be.
5.41 DUE DILIGENCE COMPLETE. Target has provided the Buyer and the
Buyer's Representatives with full and complete access to all of the Target's
records and other documents.
5.42 STATEMENTS IN SCHEDULES. All statements made by Seller in the
Schedules submitted by Seller pursuant to Section 5 hereunder shall constitute
representations and warranties made by Seller to Buyer.
5.43 FICTITIOUS NAME. Except as set forth in Schedule 5.43, the
-------------
Target has not since June 30, 1997 conducted any business under or otherwise
used, for any purpose or in any jurisdiction, any fictitious name, assumed name,
trade name or other name.
5.44 POWERS OF ATTORNEY. The Target has not given a power of
attorney to any Person.
6. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer represents and warrants (both as of the date of this Agreement
and as of the Closing Date except as otherwise provided) to, and agrees with,
Seller as follows:
6.1 ORGANIZATION OF BUYER; AUTHORIZATION. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of
Massachusetts, with full corporate power and authority to execute and deliver
this Agreement and to perform its obligations hereunder. The execution,
delivery and performance of this Agreement will have been duly authorized, at or
prior to Closing, by all necessary corporate action (including, without
limitation, approval by the Board of Directors) of Buyer and this Agreement will
constitute a valid and binding obligation of Buyer, enforceable against it in
accordance with its terms. At the Closing, Buyer shall deliver to Seller
certified copies of the resolutions adopted by its Board of Directors to
authorize the execution, delivery and performance of this Agreement.
20
6.2 NO CONFLICT AS TO BUYER. Neither the execution and delivery of
this Agreement nor the performance of Buyer's obligations hereunder will (a)
violate any provision of the certificate of incorporation or by-laws (or other
governing instrument) of Buyer, (b) violate, be in conflict with, or constitute
a default (or an event that, with notice or lapse of time or both, would
constitute a default) under any agreement or commitment to which Buyer is party
or by which it or its assets are bound, or (c) violate any statute or law or any
judgment, decree, order, regulation or rule of any court or Governmental Body
applicable to Buyer.
6.3 PROCEEDINGS; ORDERS.
(a) There is no pending Proceeding, and, to the Buyer's Knowledge, no
Person has threatened to commence any Proceeding that challenges, or that
may have the effect of preventing, delaying, making illegal or otherwise
interfering with, any of the Transactions or the Buyer's ability to comply
with or perform its obligations and covenants under the Transactional
Agreements.
(b) There is no Order nor, to the Knowledge of the Buyer, any proposed
Order that, if issued or otherwise put into effect, (i) may have adverse
effect on the Target's business, condition, assets, liabilities,
operations, financial performance, net income or prospects (or on any
aspect or portion thereof or on the ability of the Seller and/or the Target
to comply with or perform any covenant or obligation under this Agreement,
or (ii) may have the effect of preventing, delaying, making illegal or
otherwise interfering with the Target.
6.4 INVESTMENT REPRESENTATIONS.
(a) The Buyer understands that the Stock has not been registered under
the Securities Act. The Buyer also understands that the Stock is being
offered and sold pursuant to an exemption from registration contained in
the Securities Act based in part upon the Buyer's representations contained
in this Section 6.4.
(b) The Buyer is acquiring the Stock for the Buyer's own account for
investment only, and not with the current intention of making a public
distribution thereof.
(c) The Buyer represents that by reason of its, or of its management's
business or financial experience, the Buyer has the capacity to protect its
own interests in connection with the Transactions contemplated in this
Agreement. The Buyer is able to bear the loss of its entire investment in
the Target. The Buyer is not a corporation, partnership or other entity
specifically formed for the purpose of consummating this transaction.
(d) The Buyer is an accredited investor as that term is defined in
Rule 501(a) of Regulation D, promulgated pursuant to the Securities Act.
21
(e) The Buyer has been afforded an opportunity to ask questions of and
receive responses from the Target and the Seller concerning the business,
assets, properties, condition or operations of the Target and is satisfied
with the results of its due diligence.
6.5 CONSENT. All consents, approvals, orders, or authorizations of, or
registration, qualification, designation, declaration or filing with any
governmental or banking authority required on the part of the Buyer in
connection with the consummation of the Transactions contemplated in this
Agreement and the other Transactional Agreement, have been or shall have been
obtained prior to and shall be effective as of the Closing.
6.6 NO BROKERS OR FINDERS.. Neither Buyer nor any of its officers,
directors or employees, has employed any broker or finder or, directly or
indirectly, incurred any liability for any brokerage or finder's fees or
commissions or similar payments in connection with any of the Contemplated
Transactions other than Garguillo & Company, whose fees have been incurred
solely, and shall be paid, by Buyer.
7. ACCESS AND REPORTING; FILINGS WITH GOVERNMENTAL AUTHORITIES..
7.1 REGULATORY MATTERS.. Seller and Target shall (a) file with
applicable regulatory authorities the applications and related documents
required to be filed by them (and prosecute diligently any related proceedings)
in connection with the Contemplated Transactions, and (b) cooperate with the
others as they may reasonably request in connection with the foregoing.
7.2 TAX INDEMNITY AND PREPARATION OF RETURNS. The following
provisions shall govern the allocation of responsibility as between Buyer and
Seller for certain tax matters following the Closing Date, provided, however,
that any Tax Indemnity of the Seller established hereunder shall be subject to
the limitations described under Section 8.3 of this Agreement:
7.2.1 TAX PERIODS ENDING ON OR BEFORE THE CLOSING DATE.
Seller shall prepare or cause to be prepared and file or cause to be filed all
Returns for the Target for all periods ending on or prior to the Closing Date
which are filed after the Closing Date. Seller shall permit Buyer to review and
comment on each such Return described in the preceding sentence prior to filing.
Seller agrees, to indemnify and hold Buyer and the Target harmless against, and
will reimburse Buyer (or, at Buyer's option, the Target or an affiliate of
Buyer) for Taxes of the Target with respect to such periods within fifteen (15)
days of payment by Seller or the Target of such Taxes to the extent such Taxes
are not accrued on the Closing Balance Sheet.
7.2.2 TAX PERIODS BEGINNING BEFORE AND ENDING AFTER THE
CLOSING DATE. Buyer shall prepare or cause to be prepared and file or cause to
be filed any Returns of the Target for Tax periods, which begin before the
Closing Date and end after the Closing Date. Seller agrees, to indemnify and
hold Buyer and the Target harmless against, and will reimburse Buyer (or, at
Buyer option, the Target or an affiliate of Buyer) within fifteen (15) days of
the date on which Taxes are paid with respect to such periods an amount equal to
the portion of such Taxes which relates to the portion of such Taxable period
ending on or before the Closing Date to the extent such Taxes are not accrued on
22
the Closing Balance Sheet. For purposes of this Section, in the case of any
Taxes that are imposed on a periodic basis and are payable for a Taxable period
that includes (but does not end on) the Closing Date, the portion of such Tax
which relates to the portion of such Taxable period ending on the Closing Date
shall (x) in the case of any Taxes other than Taxes based upon or related to
income or receipts, be deemed to be the amount of such Tax for the entire
Taxable period multiplied by a fraction the numerator of which is the number of
days in the Taxable period ending on the Closing Date and the denominator of
which is the number of days in the entire Taxable period, and (y) in the case of
any Tax based upon or related to income or receipts be deemed equal to the
amount which would be payable if the relevant Taxable period ended on the
Closing Date. For purposes of this Section, in the case of any Tax credit
relating to a Taxable period that begins before and ends after the Closing Date,
the portion of such Tax credit which relates to the portion of such Taxable
period ending on the Closing Date shall be the amount which bears the same
relationship to the total amount of such Tax credit as the amount of Taxes
described in (y) above bears to the total amount of Taxes for such Taxable
period. All determinations necessary to give effect to the foregoing allocations
shall be made in a manner consistent with prior practice of the Company.
7.2.3 Without the prior written consent of the Buyer,
the Seller shall not make or change any election, change an annual accounting
period, adopt or change any accounting method, file any amended Return, enter
into any closing agreement, settle any Tax claim or assessment, surrender any
right to claim a refund of Taxes, consent to any extension or waiver of the
limitation period applicable to any Tax claim or assessment, or take any other
similar action, or omit to take any action relating to the filing of any Return
or the payment of any Tax, if such election, adoption, change, amendment,
agreement, settlement, surrender, consent or other action or omission would have
the effect, for any period after the Closing, of increasing the Tax liability or
decreasing any Tax benefit of the Buyer or Target. Without the prior written
consent of the Seller, neither Buyer nor Target shall make or change any
election, change an annual accounting period, adopt or change any accounting
method, file any amended Return, enter into any closing agreement, settle any
Tax claim or assessment, surrender any right to claim a refund of Taxes, consent
to any extension or waiver of the limitation period applicable to any Tax claim
or assessment, or take any other similar action, or omit to take any action
relating to the filing of any Return or the payment of any Tax, if such
election, adoption, change, amendment, agreement, settlement, surrender, consent
or other action or omission would have the effect, for any period prior to the
Closing, of increasing the Tax liability or decreasing any Tax benefit of the
Seller.
7.3 ACCESS FOLLOWING CLOSING. Following the Closing Date, (a)
Seller shall give Buyer and Target, and their authorized representatives, access
to their books and records (and permit Buyer and Target to make copies thereof)
to the extent relating to Target, as Buyer may reasonably request, and (b) Buyer
shall cause Target to give Seller, and their authorized representatives, access
to Target's books and records (and permit Seller to make copies thereof) to the
extent relating to periods prior to the Closing Date as Seller may reasonably
request for purposes of preparing Tax Returns and conducting proceedings
relating to Taxes.
23
7.4 CONFIDENTIALITY. Buyer shall keep confidential and not
disclose to any Person (other than its employees, attorneys, accountants and
advisers) or use (except in connection with the evaluation, negotiation,
documentation and closing of the Contemplated Transactions) all Non-Public
Information (as hereinafter defined) relating to Target obtained by Buyer.
Buyer shall keep confidential and not disclose to any Person (other than its
employees, attorneys, accountants and advisers) or use (except in connection
with the evaluation, negotiation, documentation and closing of the Contemplated
Transactions) all Non-Public Information (as hereinafter defined) relating to
Seller obtained by Buyer. Seller shall, keep confidential and not disclose to
any Person (other than its employees, attorneys, accountants and advisers) or
use (except in connection with preparing Tax Returns, conducting proceedings
relating to Taxes and, prior to the Closing Date, as required in the conduct of
the business of Target in the ordinary course and consistent with past practice)
any Non-Public Information relating to Buyer or Target. Seller, Buyer and Target
shall not disclose the existence of this Agreement or the subject matter or the
terms and conditions of this Agreement or of the Contemplated Transactions to
any Person and shall take all necessary precautions to ensure that the existence
of this Agreement, the subject matter, the terms and conditions of this
Agreement and the Contemplated Transactions be held confidential by their
respective employees and representatives, (i) except and to the extent that such
disclosure is required to be made by Seller or Buyer pursuant to the Securities
Act of 1933 or the Securities and Exchange Act of 1934 or (ii) except disclosure
by Seller or Buyer which shall have been previously consented to in writing by
the other party. Prior to the release or publication of any press release,
including, but not limited to, any press release required under the Securities
and Exchange Act of 1934, the releasing party shall provide the other party with
a draft, copy or release and an opportunity to submit comments relating thereto.
No Person shall be deemed to have violated this Section 7.4 by disclosure of
information that (a) at the time of disclosure is publicly available or becomes
publicly available through no act or omission of such Person, (b) is disclosed
to such Person by a third party that did not acquire the information under an
obligation of confidentiality, (c) is independently acquired by such Person as a
result of work carried out by an employee, agent or consultant of such Person to
whom no disclosure of such information has been made, (d) is disclosed as
reasonably required in connection with a proceeding to enforce such Person's
rights under this Agreement, or (e) is disclosed as required by court order or
as otherwise required by law, on condition that notice of the requirement for
such disclosure is given to the other parties prior to making any disclosure and
the Person subject to such requirement cooperates as the other parties may
reasonably request in resisting it. Seller, Buyer and Target shall use their
best efforts to cause their respective representatives, employees, attorneys,
accountants and advisers to whom information is disclosed pursuant to this
Section 7.4 to comply with the provisions of this Section.
7.5 BANK ACCOUNT. The Seller shall close all bank accounts
maintained by or for the Target within five (5) business days after the Closing.
8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION; ESCROW
PROVISIONS.
8.1 SURVIVAL. All representations, warranties and agreements
contained in this Agreement or in any certificate delivered pursuant to this
Agreement shall survive the Closing for a period of eighteen months. For
purposes of this Agreement, although each statement or other item of information
set forth in a Schedule qualifies the specific representation and warranty to
which such information refers, all such statements and other items of
information set forth in the Schedule shall be deemed to be a representation and
warranty made by the Buyer and the Seller as the case may be in this Agreement.
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8.2 INDEMNIFICATION BY SELLER. The Seller guarantees that
Target will receive payments of seven hundred thousand dollar ($700,000), (as
described in Section 10.2(b) hereof) by August 31, 2001 from Target's April 30,
2001 Accounts Receivable, as defined in Section 10.2 hereof. Said list includes
Accounts Receivable related to all work completed by Target through April 30,
2001 (regardless of when billed) and is excluding any uncollected Accounts
Receivable that are included in Target's customer deposit schedule as of April
30, 2001. The seven hundred thousand dollar ($700,000) guarantee described
above shall not be subject to the Minimum Threshold of Section 8.3 hereto.
(a) Seller shall indemnify and hold harmless Buyer and Target, and
shall reimburse Buyer and Target for, any loss, liability, claim, damage,
expense (including, without limitation, costs of investigation and defense
and reasonable attorneys' fees) or diminution of value (collectively,
"Damages") arising from or in connection with (a) any inaccuracy in any of
-------
the representations and warranties of Seller or Target in this Agreement or
in any certificate delivered by Seller or Target pursuant to this
Agreement, or any actions, omissions or state of facts inconsistent with
any such representation or warranty, (b) any failure by Seller or Target to
perform or comply with any of their respective obligations under this
Agreement, (c) any product shipped by Target prior to the Closing Date, or
(d) any claim by any Person for brokerage or finder's fees or commissions
or similar payments based upon any agreement or understanding alleged to
have been made by any such Person with Seller or Target (or any Person
acting on their behalf) in connection with any of the Contemplated
Transactions. Seller at its sole cost and expense shall be required to
defend the suits and actions set forth on Schedule 5.16. Seller shall
-------------
indemnify and hold harmless Target and Buyer from any and all losses and
expenses (including reasonable legal fees to monitor such suits) in
accordance to the provisions of Section 8 hereto without the minimum
threshold of Section 8.3 hereto.
8.3 LIMITATIONS AS TO INDEMNIFICATION AMOUNT. Seller shall have
no liability (for indemnification or otherwise) with respect to the matters
described in Section 8.2(b) until the total of all Damages with respect thereto
exceeds $10,000 but then for the entire amount of such Damages, including those
not in excess of $10,000. However, this Section 8.3 shall not apply to any
intentional misrepresentation or breach of warranty or any intentional failure
to perform or comply with any agreement and Seller shall be liable for all
Damages with respect thereto.
8.4 ESCROW FUND. The performance by Seller's indemnification
obligations under Section 8.2 of this Agreement shall be secured by an escrow
fund ("Escrow Fund") equal to 10% of the Purchase Price to be held and disposed
-----------
of by Xxxxxxxx, Xxxxx & Xxxxxxx, P.C. (the "Escrow Agent") pursuant to an Escrow
------------
Agreement by and among Buyer, Seller, Target and Escrow Agent, substantially in
the form of Exhibit 8.4 annexed hereto and made a part hereof (the "Escrow
------------ ------
Agreement"). Seller's obligations under Section 8.2 of this Agreement shall
---------
not be limited or otherwise affected by any termination, continuation or
depletion of the Escrow Fund or any termination or continuation of the Escrow
Agreement.
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8.5 PROCEDURE FOR INDEMNIFICATION. In the event that Seller has
not performed or is not performing its obligations under this Agreement, or in
the event of a breach of any representation, warranty or covenant made by Seller
or Target under this Agreement which results in any Damages for which Buyer or
Target would be entitled to indemnification pursuant to Section 8.2, Buyer shall
give written notice of the same (including, without limitation, the monetary
value of such Damages) and Buyer shall be entitled to receive immediately from
the Escrow Fund an amount equal to the value of such Damages. If any such legal
action shall be brought against Buyer or Target for which Buyer or Target is
entitled to indemnification under Section 8.2, Buyer shall give notice thereof
to Seller and Seller shall be entitled to participate in the defense thereof at
Seller's own costs and expense. Notwithstanding the foregoing sentence, if Buyer
or Target determines in good faith that there is a reasonable probability that
an action may materially and adversely affect them or their affiliates other
than as a result of monetary damages, Buyer or Target may, by written notice to
Seller, assume the exclusive right to defend, compromise or settle such action.
The failure of Buyer or Target to notify Seller pursuant to the provisions of
this Section 8.5 shall not relieve Seller of any liability that it may have
owing to Buyer or Target hereunder.
8.6 RELEASE OF ESCROW FUND TO SELLER. Provided no claim by Buyer
then exists for all or a portion of the Escrow Fund, one-half (1/2) of the
Escrow Fund shall be released to Seller six-months after the Closing Date and
all remaining balance of the Escrow Fund shall be released to Seller twelve
months from the Closing Date whereupon the Escrow Agreement shall terminate. To
the extent a claim does exist on either of the foregoing dates, all sums in the
Escrow Fund shall continue to be held in escrow pursuant to the Escrow Agreement
until such claim shall have been fully resolved. Release of escrow funds does
not absolve Seller/Target of any subsequent responsibilities.
9. RESTRICTIVE COVENANTS.
9.1 COVENANT NOT-TO-COMPETE. For a two-year period commencing on
the Closing Date, Seller and Persons (if any) in which Seller has any direct or
indirect equity interest, shall not compete with or conduct any business,
anywhere in the world, similar to the business conducted by Target at any time
prior to the Closing Date; provided, however, that this Section 9.1 shall not be
deemed to (i) restrict or limit Seller's usual development business in which
catheters may be parts of larger medical devices or (ii) apply to restrict or
limit the business activity of any Person (other than a Related Person) which
may acquire Seller or into which Seller may merge. During the two year period
set forth above, Seller shall not (a) engage or invest in, own, manage, operate,
finance, control, or participate in the ownership, management, operation or
control of, or render services to, any business that is in competition with the
business of Target as it exists on the date of Closing except Seller may
purchase or otherwise acquire up to (but not more than) one percent (1%) of any
class of securities of any enterprise (but without otherwise participating in
26
the activities of such enterprise) if such securities are listed on any national
or regional securities exchange or have been registered under Section 12(g) of
the Exchange Act; (b) either for himself or any other Person, induce or
attempt to induce any customer, supplier, licensee or business relation of the
Buyer or any entity under common control with Seller to cease doing business
with the Buyer or such entity, or in any way interfere with the relationship
between any customer, supplier, licensee or business relation of the Buyer or
such entity.
9.2 NON-SOLICITATION. For a two-year period commencing the
Closing Date, Seller shall not solicit any employees of Buyer or Target without
the prior written consent of Buyer.
10. ASSETS AND LIABILITIES.
10.1 AGREED CLOSING BALANCE SHEET. The parties agree that Target's
balance sheet as of the Closing Date shall have assets and liabilities in the
amounts set forth on Exhibit 10.1 attached hereto (the "Agreed Closing
-------------
Balance Sheet").
10.2 ACCOUNTS RECEIVABLE.
(a) By May 15, 2001, Seller shall prepare and deliver to Buyer a list
of accounts receivable of Target as of April 30, 2001 (the "April 30, 2001
Accounts Receivable"). The list shall include the name and telephone number
of the person responsible to pay such receivables. By May 15, 2001, Seller
and Target shall deliver to Buyer a notification to each of the Persons
listed on the list of April 30, 2001 Accounts Receivable instructing such
person to pay the April 30, 2001 Accounts Receivable to Target's account
maintained by Buyer. Buyer and Target shall use reasonable efforts with the
assistance of Seller to collect the April 30, 2001 Accounts Receivable. Any
amounts of the April 30, 2001 Accounts Receivable received by Target or
Buyer in excess of $700,000 shall be paid to Seller upon receipt. Upon
request by Seller made not more often than once in two weeks, Buyer will
provide Seller with a schedule listing amounts collected of the April 30,
2001 Accounts Receivable.
(b) On August 31, 2001, Seller will pay Target an amount equal to
$700,000 less all April 30, 2001 Accounts Receivable collected by Buyer and
Target from the Closing Date until August 31, 2001. Contemporaneously with
the payment to Target, Target shall assign to Seller all April 30, 2001
Accounts Receivable not collected.
(c) Each party to this Agreement shall be given full access to the
other parties' accounting records to verify and/or audit payment activity
relating to the April 30, 2001 Accounts Receivable.
10.3 LIABILITIES.
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(a) Seller shall be responsible to pay all of Target's Accounts
Payable, Accrued Compensation (excluding accrued vacation) and Income Taxes
outstanding at April 30, 2001 ("Seller's Assumed Liabilities") including
such liabilities for any period prior to April 30, 2001 but billed after
April 30 2001. Seller shall pay the Seller's Assumed Liabilities when due
and provide Buyer with evidence of such payments. Seller shall indemnify
and hold harmless Buyer and Target from any losses and expenses resulting
from the non-payment when due of Seller's Assumed Liabilities, in
accordance with the provisions of Section 8 hereto, without regard to the
minimum threshold set forth in Section 8.3 hereto including reasonable
attorney fees.
(b) In addition to the purchase price set forth in Section 1.2 herein,
Buyer and Target shall pay Seller for assuming Seller's Assumed Liabilities
an amount equal to $475,000, less accrued vacation and customer deposit
liabilities (excluding any customer deposits included in the April 30, 2001
Accounts Receivable). This payment shall be paid to Seller from the first
proceeds received from collection of the April 30, 2001 Accounts
Receivable.
11. DEFINITIONS..
As used in this Agreement, the following terms have the meanings
specified or set forth in this Section 11.
"Agreements" shall mean this Agreement including any exhibits or
Schedule hereto.
"Balance Sheets" shall have the meaning ascribed thereto in Section
5.9 herein.
"Business Day" shall mean any day that is not a Saturday or Sunday or
a day on which banks located in the City of New York are authorized or required
to be closed.
"Buyer" shall mean CardioTech International, Inc., a Massachusetts
corporation.
"Closing" shall have the meaning ascribed thereto in Section 2.1
herein.
"Closing Date" shall mean the date and time of the Closing.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Contemplated Transactions" shall mean the sale of the Shares by
Seller to Buyer, the purchase of the Shares by Buyer from Seller, performance of
and compliance with all agreements contained in this Agreement, and Buyer's
exercise of control over Target, including, without limitation, the removal of
any or all of the directors, officers and employees of the Target and the
replacement of those individuals by individuals selected by Buyer.
"Damages" shall have the meaning ascribed thereto in Section 8.2
herein.
28
"Encumbrance" shall mean any security interest, mortgage, lien,
charge, adverse claim or restriction of any kind, including, without limitation,
any restriction on the use, voting, transfer, receipt of income or other
exercise of any attributes of ownership.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Escrow Agent" shall have the meaning ascribed thereto in Section 8.4
herein.
"Escrow Agreement" shall have the meaning ascribed thereto in Section
8.4 herein.
"Escrow Fund" shall have the meaning ascribed thereto in Section 8.4
herein.
"GAAP" shall mean generally accepted United States accounting
principles consistently applied.
"Governmental Body" shall mean any domestic or foreign national, state
or municipal or other local government or multi-national body, any subdivision,
agency, commission or authority thereof, or any quasi-governmental or private
body exercising any regulatory or taxing authority thereunder.
"HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976, as amended.
"Interim Balance Sheet" shall have the meaning ascribed thereto in
Section 5.9 herein.
"Knowledge" of a particular fact or other matter shall be met if such
Person is actually aware of such fact or other matter.
"Material" shall refer to any amount in excess of $10,000.
"Non-Public Information" shall mean all data, information, and
materials (including, without limitation, financial statements, costs and
expense data, trade secrets, and technology, marketing and customer data) made
available by a party hereto to another party hereto in connection with this
Agreement that is not generally ascertainable from public or published
information or trade sources.
"Ordinary Course of Business" shall mean the routine conduct of the
business of Target (excluding any extraordinary, irregular or abnormal
transactions) on a basis consistent with the regular practice of Target in the
last three years.
"Person" shall mean any individual, corporation, partnership, joint
venture, trust, association, unincorporated organization, other entity, or
Governmental Body.
29
"Plans" shall have the meaning ascribed thereto in Section 5.29
herein.
"Proprietary Asset" shall mean any patent, patent application,
trademark (whether registered or unregistered and whether or not relating to a
published work), trademark application, trademark application, trade name,
fictitious business name, service xxxx (whether registered or unregistered),
service xxxx application, copyright (whether registered or unregistered),
copyright application, invention, design, or other intellectual property right
or intangible asset.
"Purchase Price" shall have the meaning ascribed thereto in Section
1.2 herein.
"Related Party" shall mean (a) Seller, (b) any individual who is a
director or officer of Seller or Target, (c) any Person that owns five percent
or more of the outstanding equity securities of any class of Seller, (d) any
member of the family (as defined in Section 267(c)(4) of the Code) of, or any
individual who has the same home as, any individual (or the spouse of any such
individual) described in clause (b) or (c) of this definition, (e) any trust,
estate or partnership of which an individual described in clause (b), (c) or (d)
of this definition is a grantor, fiduciary, beneficiary or partner or (f) any
Person (and any Subsidiary of such a Person) of which one or more Persons
described in clause (a), (b), (c), (d) or (e) of this definition have either (i)
aggregate record or beneficial ownership (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934) of at least ten percent (10%) of the
outstanding equity securities or at least ten percent (10%) of the outstanding
voting securities or (ii) the power to direct or to cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities, by contract or otherwise.
"Seller" shall mean Colorado MEDtech, Inc., a Colorado corporation.
"Seller's Assumed Liabilities" shall have the meaning ascribed in
Section 10.3 herein.
"Shares" shall mean Nine hundred fifty five thousand one hundred sixty
two and one-half (955,162.5) shares of Common Stock, par value $0.01 per share,
of Target, representing all of the issued and outstanding shares of capital
stock of Target.
"Subsidiary" shall mean with respect to any Person, any corporation or
other entity of which securities having the power to elect a majority of that
corporation's or entity's Board of Directors or other governing body (other than
securities having that power only upon the happening of a contingency that has
not occurred) are held by such Person, one or more of its Subsidiaries, or both.
"Target" shall mean CMED Catheter and Disposables Technology, Inc., a
Minnesota corporation and wholly-owned Subsidiary of Seller.
"Taxes" shall mean all taxes, charges, fees, levies, interest,
penalties, additions to tax or other assessments, including, without limitation,
income, excise, property, sales, use, transfer, value added and franchise taxes
and customs duties, imposed by any Governmental Body and any payments with
respect thereto required under any tax-sharing agreement.
30
"Tax Returns" shall mean any return, report, information return or
other document (including any related or supporting information) filed or
required to be filed with any Governmental Body in connection with the
determination, assessment or collection of any Taxes filed or required to be
filed by or on behalf of Target.
12. MISCELLANEOUS.
12.1 NOTICES. All notices, consents and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given when (a) delivered by hand, (b) sent by telecopier (with receipt
confirmed), or (c) received by the addressee, if sent by Express Mail, Federal
Express or other express delivery service (receipt requested), in each case to
the appropriate addresses and telecopier numbers set forth below (or to such
other addresses and telecopier numbers as a party may designate as to itself by
notice to the other parties):
(i) If to Buyer and Target:
CardioTech International, Inc.
00-X. Xxxxxxx Xxxxxx
Xxxxxx, XX 00000-0000
Telecopier No.: (000) 000-0000
Attention: Xxxxxxx Xxxxxxx
with a copy to:
Ellenoff Xxxxxxxx Schole & Cyruli, LLP
000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Telecopier No.: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxx, Esq.
(ii) If to Seller:
Colorado MEDtech, Inc.
0000 Xxxxxxx Xxxxx
Xxxxxxx, XX 00000
Telecopier No.: (000) 000-0000
Attention: Xxxxx Xxxxxx
with a copy to:
Xxxxxxxx Xxxxx & Xxxxxxx, P.C.
0000 Xxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Telecopier No.: (000) 000-0000
Attention: Xxxxxxxxxxx Xxxxxxx, Esq.
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12.2 SERVICE OF PROCESS. . Process in any action or proceeding in
connection with the Contemplated Transactions or this Agreement may be served on
any party anywhere in the world, whether within or without the State of New York
and may also be served on Buyer by personal service on any partner of Ellenoff
Xxxxxxxx Schole & Cyruli, LLP (Buyer hereby irrevocably designates such firm its
agent for such service) and on Seller or Target by personal service
12.3 EXPENSES. Each party shall bear its own expenses incident to
the preparation, negotiation, execution and delivery of this Agreement and the
performance of its obligations hereunder, and Seller shall bear all such
expenses incurred by Target.
12.4 PAYMENT. . A wire transfer or delivery of a check shall not
operate to discharge any obligation of payment under this Agreement and is
accepted subject to collection.
12.5 SPECIFIC PERFORMANCE. The parties acknowledge that the
subject matter of this Agreement (i.e., the business and assets of Target) is
unique and that no adequate remedy of law would be available for breach of this
Agreement. Accordingly, each party agrees that the other parties will be
entitled to an appropriate decree of specific performance or other equitable
remedies to enforce this Agreement (without any bond or other security being
required) and each party waives the defense in any action or proceeding brought
to enforce this Agreement that there exists an adequate remedy at law.
12.6 CAPTIONS. The captions in this Agreement are for convenience
of reference only and shall not be given any effect in the interpretation of
this Agreement.
12.7 ATTORNEYS' FEES. .In any action or proceeding brought by a
party to enforce any provision of this Agreement, the prevailing party shall be
entitled to recover the reasonable costs and expenses incurred by it in
connection with that action or proceeding (including, without limitation,
attorneys' fees).
12.8 NO WAIVER. . The failure of a party to insist upon strict
adherence to any term of this Agreement on any occasion shall not be considered
a waiver or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Agreement. Any waiver must be
in writing.
12.9 EXCLUSIVE AGREEMENT; AMENDMENT. This Agreement supersedes
all prior agreements and understandings, written or oral among the parties with
respect to its subject matter (including, without limitation, the letter of
intent among Buyer, Seller and Target dated February 13, 2001, and is a complete
and exclusive statement of the terms of the agreement among the parties with
respect thereto and cannot be changed or terminated except by a written
instrument executed by Buyer, Seller and Target. In entering into this
Agreement and the Contemplated Transactions, Buyer has not relied on any oral
statements or other inducements not expressly provided for in this Agreement.
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12.10 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be considered an original, but all of which
together shall constitute the same instrument.
12.11 GOVERNING LAW. This Agreement and (unless otherwise
provided) all amendments hereof and waivers and consents hereunder shall be
governed by the internal law of the State of New York, without regard to the
conflicts of law principles thereof.
12.12 SUCCESSORS AND ASSIGN. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of
the parties hereto and the indemnities and shall inure to the benefit of and be
enforceable by each person who shall be a holder of the Stock from time to time.
Neither the Target nor the Seller may assign any of its rights or obligations
hereunder to any other party (by contract, operation of law otherwise) without
the prior written consent of the Buyer, and any attempted assignment in
violation thereof shall be void and of no effect. The Buyer may assign any or
all of its rights or transfer any or all of its obligations hereunder to any
other party at its own discretion.
12.13 SEPARABILITY. In case any provision of this Agreement shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
12.14 REMEDIES CUMULATIVE; SPECIFIC PERFORMANCE.
All remedies, either under this Agreement or by law or otherwise
afforded to the parties hereto, shall be cumulative and not alternative. Each of
the parties agrees that:
(a) in the event of any breach or threatened breach by a party or
Target of any covenant, obligation or other provision set forth in this
Agreement, the other party shall be entitled (in addition to any other
remedy that may be available to it to (i) a decree or order of specific
performance of mandamus to enforce the observance and performance of such
covenant, obligation or other provision, and (ii) an injunction restraining
such breach or threatened breach; and
(b) neither the Buy, on the one hand, nor the Seller, on the other,
shall be required to provide any bond or other security in connection with
any such decree, order or injunction or in connection with any related
action or proceedings.
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In witness whereof, the undersigned have entered into this Acquisition
Agreement as of the date first above written.
COLORADO MEDTECH, INC.
By __________________________
Name: _______________________
Title: ______________________
CARDIOTECH INTERNATIONAL,
INC.
By __________________________
Name: _______________________
Title: ______________________
CMED CATHETER AND DISPOSABLES
TECHNOLOGY, INC.
By __________________________
Name: _______________________
Title: ______________________
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ACQUISITION AGREEMENT
DATED AS OF ___________, 2001
BY AND AMONG
CARDIOTECH INTERNATIONAL, INC.,
COLORADO MEDTECH, INC.
AND
CMED CATHETER AND DISPOSABLES TECHNOLOGY, INC.
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[NOT updated per 5/2/01 draft]
TABLE OF CONTENTS
Page
1. The Acquisition.
1.1 Purchase and Sale.
1.2 Purchase Price.
2. The Closing.
2.1 Place and Time.
2.2 Deliveries by Seller.
2.3 Deliveries by Buyer.
2.4 Release.
2.5 List of April 30, 2001 Accounts Receivable.
2.6 Execution and Delivery of Assignment and Assumption Agreement.
3. Conditions to Buyer's Obligations.
3.1 No Injunction.
3.2 Representations, Warranties and Agreements.
3.3 Covenants and Conditions.
3.4 Legal Opinions.
3.5 Litigation.
3.6 Regulatory Approvals; Consents.
3.7 Resignations of Directors.
3.8 Compliance Evidence.
3.9 Proceedings Satisfactory.
3.10 Satisfactory Due Diligence Review.
3.11 Board Approval.
3.12 Change in Financial Condition.
3.13 Asserted Claims.
3.14 Westport Business Center Lease.
4. Conditions to Seller's Obligations.
4.1 No Injunction.
4.2 Representations, Warranties and Agreements.
4.3 Covenants and Agreement.
4.4 Escrow Agreement.
4.5 Corporate Proceedings.
4.6 Legal Option.
5. Representations and Warranties of Seller.
5.1 Organization of Seller; Authorization.
5.2 No Conflict as to Seller.
5.3 Ownership of Shares.
5.4 Organization of Target; Authorization.
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5.5 No Conflict as to Target.
5.6 Consents and Approvals of Governmental Authorities.
5.7 Other Consents.
5.8 No SEC Registration.
5.9 Financial Statements.
5.10 Title to Properties; Encumbrances.
5.11 Accounts Receivable.
5.12 Inventory.
5.13 Buildings, Plants and Equipment.
5.14 No Condemnation or Expropriation.
5.15 No Undisclosed Liabilities.
5.16 Litigation.
5.17 Taxes.
5.18 Absence of Certain Changes.
5.19 No Material Adverse Change.
5.20 Patents, Trademarks, Trade Names, Etc.
5.21 Proprietary Rights; Proprietary Information and Inventions Agreement.
5.22 Banking Relationships.
5.23 Leases.
5.24 Contracts and Commitments.
5.25 Status of Agreements.
5.26 Customers and Suppliers.
5.27 Liabilities.
5.28 Orders, Commitments and Returns.
5.29 Insurance.
5.30 Labor Relations.
5.31 Employee Benefit Plans; ERISA.
5.32 Personnel.
5.33 Compliance with Law.
5.34 Government, Regulatory and Industrial Authorizations.
5.35 Environmental Matters.
5.36 No Brokers or Finders.
5.37 Absence of Certain Commercial Practices.
5.38 No Competing Business.
5.39 Related Parties.
5.40 Products Liability.
5.41 Books and Records.
5.42 Disclosure.
5.43 Due Diligence Complete.
5.44 Statements in Schedules.
5.45 Fictitious Name.
5.46 Power of Attorney.
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6. Representations and Warranties of Buyer.
6.1 Organization of Buyer; Authorization.
6.2 No Conflict as to Buyer.
6.3 Proceedings; Orders.
6.4 Investment Representations.
6.5 Consent.
6.6 No Brokers or Finders.
7. Access and Reporting; Filings With Governmental Authorities.
7.1 Regulatory Matters.
7.2 Tax Indemnity and Preparation of Returns.
7.3 Access Following Closing.
7.4 Confidentiality.
8. Survival of Representations and Warranties; Indemnification; Escrow
Provisions.
8.1 Survival.
8.2 Indemnification by Seller.
8.3 Limitations as to Indemnification Amount.
8.4 Escrow Fund.
8.5 Procedure for Indemnification.
Release of Escrow Fund to Seller.
9. Restrictive Covenants.
9.1 Covenant No-to-Compete.
9.2 Non-Solicitation.
10. Assets and Liabilities.
10.1 Accounts Receivable.
10.2 Liabilities.
11. Definitions.
12. Termination.
12.1 Termination.
12.2 Effect of Termination.
13. Miscellaneous.
13.1 Notices.
13.2 Service of Process.
13.3 Expenses.
13.4 Payment.
13.5 Specific Performance.
13.6 Captions.
13.7 Attorneys' Fees.
13.8 No Waiver.
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13.9 Exclusive Agreement; Amendment.
13.10 Counterparts.
13.11 Governing Law.
13.12 Successors and Assign.
13.13 Separability.
13.14 Remedies Cumulative; Specific Performance.
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