Exhibit 2.1
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Asset Purchase Agreement
between
The Med-Design Corporation, as Buyer
and
Luther Needlesafe Products, Inc., as Seller
and
Xxxxxx X. Xxxxxx, Controlling Shareholder of Seller
Dated as of April 1, 2004
Relating to the safety Xxxxx needle business
of Seller
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Table of Contents
Page
ARTICLE 1 DEFINITIONS.......................................................................1
1.1 Definitions...........................................................................1
1.2 Certain Interpretive Matters..........................................................6
ARTICLE 2 PURCHASE AND SALE.................................................................6
2.1 Sale of Assets........................................................................6
2.2 Excluded Assets.......................................................................7
2.3 Assumed Liabilities and Obligations...................................................7
2.4 Excluded Liabilities..................................................................8
ARTICLE 3 THE CLOSING.......................................................................8
3.1 Closing...............................................................................8
3.2 Purchase Price........................................................................9
3.3 Adjustment Purchase Price and Cash Payment...........................................11
3.4 Allocation of Purchase Price.........................................................11
3.5 Deliveries by Seller.................................................................12
3.6 Deliveries by Buyer..................................................................12
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF SELLER
PARTIES..........................................................................13
4.1 Organization.........................................................................13
4.2 Authority Relative to this Agreement.................................................13
4.3 Consents and Approvals; No Violations................................................14
4.4 Financial Information................................................................14
4.5 Undisclosed Liabilities..............................................................14
4.6 Absence of Certain Changes or Events.................................................14
4.7 Title................................................................................14
4.8 Inventory............................................................................15
4.9 Insurance............................................................................15
4.10 Tangible Personal Property...........................................................15
4.11 Contracts............................................................................15
4.12 Litigation and Claims................................................................16
4.13 Permits..............................................................................16
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TABLE OF CONTENTS
(continued)
Page
4.14 Taxes................................................................................17
4.15 Intellectual Property................................................................17
4.16 Transactions with Affiliates.........................................................18
4.17 Purchased Assets.....................................................................19
4.18 Completeness and Accuracy............................................................19
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF BUYER..........................................19
5.1 Organization.........................................................................19
5.2 Authority Relative to this Agreement.................................................19
5.3 Consents and Approvals; No Violations................................................19
5.4 Availability of Funds................................................................20
ARTICLE 6 COVENANTS OF THE PARTIES.........................................................20
6.1 Conduct of Business Relating to the Purchased Assets.................................20
6.2 Access to Information................................................................21
6.3 Expenses.............................................................................21
6.4 Further Assurances; Cooperation......................................................22
6.5 Public Statements....................................................................22
6.6 Consents and Approvals...............................................................23
6.7 Fees and Commissions.................................................................23
6.8 Tax and Audit Matters................................................................23
6.9 Notification of Changes..............................................................23
6.10 Noncompetition and Nonsoliciation....................................................24
6.11 Registration Requirements............................................................25
6.12 Use of "Luther" etc..................................................................26
6.13 Amsino Settlement Agreement..........................................................26
6.14 Performance of Sublicense............................................................26
ARTICLE 7 CONDITIONS.......................................................................26
7.1 Conditions to Obligations of Buyer...................................................26
7.2 Conditions to Obligations of Seller..................................................27
ARTICLE 8 INDEMNIFICATION..................................................................28
8.1 Indemnification......................................................................28
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TABLE OF CONTENTS
(continued)
Page
8.2 Defense of Claims....................................................................29
8.3 Survival of Representations, Warranties, Covenants and Obligations...................30
8.4 Escrow...............................................................................30
ARTICLE 9 TERMINATION......................................................................30
9.1 Termination..........................................................................30
9.2 Procedure and Effect of Termination..................................................31
ARTICLE 10 MISCELLANEOUS PROVISIONS.........................................................31
10.1 Amendment and Modification...........................................................31
10.2 Waiver of Compliance; Consents.......................................................31
10.3 Notices..............................................................................32
10.4 Assignment...........................................................................32
10.5 No Third Party Beneficiary...........................................................33
10.6 Governing Law........................................................................33
10.7 Arbitration of Disputes..............................................................33
10.8 Counterparts.........................................................................34
10.9 Severability.........................................................................34
10.10 Interpretation.......................................................................34
10.11 Schedules and Exhibits...............................................................34
10.12 Entire Agreement.....................................................................34
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LIST OF SCHEDULES
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Schedule 2.1(c) Tangible Personal Property
Schedule 2.1(d) Assigned Contracts
Schedule 2.1(e) Transferable Permits
Schedule 3.3 Inventory Methodology
Schedule 3.4 Allocation of Purchase Price
Schedule 4.3 Consents and Approvals; Seller's Required Regulatory Approvals
Schedule 4.4 Financial Information
Schedule 4.5 Undisclosed Liabilities
Schedule 4.8 Inventory
Schedule 4.9 Insurance
Schedule 4.10 Tangible Personal Property
Schedule 4.11 Contract Matters
Schedule 4.12 Litigation and Claims
Schedule 4.13 Permits
Schedule 4.16 Transactions with Affiliates
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LIST OF EXHIBITS
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Exhibit A Form of Xxxx of Sale, Assignment and Assumption Agreement
Exhibit B Form of Consulting Agreement
Exhibit C Form of Sublicense Agreement
Exhibit D Form of Escrow Agreement
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ASSET PURCHASE AGREEMENT
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THIS ASSET PURCHASE AGREEMENT, dated as of April 1, 2004, is between THE
MED-DESIGN CORPORATION, a Delaware corporation ("Buyer"), and LUTHER NEEDLESAFE
PRODUCTS, INC., a California corporation ("Seller"), and XXXXXX X. XXXXXX ("Xx.
Xxxxxx"), the founder and controlling shareholder of Seller. Buyer, Seller and
Xx. Xxxxxx are referred to individually as a "Party" and collectively as the
"Parties," and Seller and Xx. Xxxxxx are referred to individually as a "Seller
Party," and collectively as the "Seller Parties."
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, Seller is engaged in the business of the development, production
and sale of safety Xxxxx needle devices (the "Business");
WHEREAS, on the terms and conditions set forth in this Agreement, (i)
Buyer desires to purchase, and Seller desires to sell and assign, substantially
all of the operating assets of the Business and the good will associated
therewith, including without limitation inventory, molds and tooling and certain
contractual rights and intellectual property and (ii) Seller will grant to Buyer
an exclusive sublicense of rights obtained under the Patent Assignment and
Consulting Agreement dated April 2, 2001 (the "Xxxxx Agreement") by and among
Seller (as successor to Luther Research Partners L.L.C.), Xx. Xxxxxx and X.
Xxxxx Medical, Inc., a Pennsylvania corporation ("Xxxxx").
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements hereinafter set forth, and intending to be legally
bound hereby, the Parties agree as follows:
ARTICLE 1
DEFINITIONS.
1.1 Definitions. As used in this Agreement, the following terms have
the meanings specified in this Section 1.1.
"Accredited investor" has the meaning set forth in Section 3.2(c)(v).
"Additional Consideration" has the meaning set forth in Section
3.2(c)(i).
"Affiliate" has the meaning set forth in Rule 12b-2 of the General
Rules and Regulations under the Securities Exchange Act of 1934.
"Agreement" means this Asset Purchase Agreement together with the
Schedules and Exhibits hereto, as the same may be from time to time amended.
"Amsino" means Amsino International, Inc., a California corporation,
and any successor thereto.
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"Assigned Contracts" means the Contracts set forth on Schedule 2.1(d).
"Assumed Liabilities and Obligations" has the meaning set forth in
Section 2.3.
"Xxxx of Sale, Assignment and Assumption Agreement" means the Xxxx of
Sale, Assignment and Assumption Agreement between Seller and Buyer,
substantially in the form of Exhibit A hereto.
"Xxxxx" has the meaning set forth in the Recitals.
"Xxxxx Agreement" has the meaning set forth in the Recitals.
"Business" has the meaning set forth in the Recitals.
"Business Day" shall mean any day other than Saturday, Sunday and any
day on which banking institutions in the State of California are authorized by
law or other governmental action to close.
"Buyer Indemnitee" has the meaning set forth in Section 8.1(b).
"Closing" has the meaning set forth in Section 3.1.
"Closing Date" has the meaning set forth in Section 3.1.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commercially Reasonable Efforts" means efforts which are designed to
enable a Party to satisfy a condition to, or otherwise assist in the
consummation of, the transactions contemplated by this Agreement and which do
not require the performing Party to expend funds or assume liabilities other
than expenditures and liabilities which are reasonable in nature and amount in
the context of the transactions contemplated by this Agreement.
"Common Stock" has the meaning set forth in Section 3.2(c)(i).
"Consulting Agreement" means the Consulting Agreement between Buyer and
Seller in the form of Exhibit B hereto, to be executed and delivered at the
Closing, as the same may be amended or modified from time to time by mutual
agreement of the parties hereto.
"Contract" means any contract, agreement, sales order, purchase order,
license, lease or other agreement to which Seller is a party in connection with
the conduct of the Business.
"Copyright" means any copyright and any registration and applications
therefor, including all renewals and extensions thereof and rights corresponding
thereto in both published and unpublished works throughout the world, owned,
used or licensed by Seller in connection with the conduct of the Business.
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"Devices" means the Luther Safety Xxxxx Needle devices and related
packaging and disposables heretofore or presently sold by Seller and all
proposed improvements and other modifications thereof.
"Direct Claim" has the meaning set forth in Section 8.2(c).
"Encumbrances" means any pledges, liens, security interests, activity
and use limitations, encumbrances and charges of any kind.
"Escrow Agreement" means the Escrow Agreement dated the Closing Date
among the Parties hereto and Xxxx & Xxxxx, LLP, as Escrow Agent, in
substantially the form of Exhibit D hereto.
"Excluded Assets" has the meaning set forth in Section 2.2.
"Excluded Liabilities" has the meaning set forth in Section 2.4.
"FDA" has the meaning set forth in Section 4.12.
"FDA Act" has the meaning set forth in Section 4.12.
"Financial Information" has the meaning set forth in Section 4.4.
"GAAP" means generally accepted accounting principles in the United
States.
"Governmental Authority" means any federal, state, local or other
governmental, regulatory or administrative agency, commission, department, board
or authority.
"Indemnifiable Loss" has the meaning set forth in Section 8.1(a).
"Indemnifying Party" has the meaning set forth in Section 8.1(c).
"Indemnitee" has the meaning set forth in Section 8.1(c).
"Intellectual Property" means Copyrights, Patents, Trademarks, Internet
domain names, technology rights and licenses, Trade Secrets, franchises,
Software Products, inventions, invention disclosures, developments, improvements
and modifications of such inventions, invention disclosures and developments,
ideas, discoveries, innovations and rights in research and development, and
commercially practiced processes and inventions, whether patentable or not, in
any jurisdiction throughout the world and any other intellectual property or any
similar, corresponding or equivalent right to any of the foregoing, owned, used
or licensed by Seller in connection with the conduct of the Business.
"Inventory" means the inventory of the Business, including supplies and
finished goods, excluding any finished goods manufactured by Amsino and any
related supplies.
"Inventory Adjustment" has the meaning set forth in Section 3.3(a).
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"Inventory Statement" has the meaning set forth in Section 3.3(c).
"Inventory Value" means the aggregate dollar value of the Inventory,
determined in accordance with the methodology set forth in Schedule 3.3.
"IRB" has the meaning set forth in Section 4.13(d).
"JAMS" has the meaning set forth in Section 10.7(d).
"Knowledge" with respect to Seller, means the actual knowledge of Xx.
Xxxxxx, Xxxxxx Xxxxxxxxx and other persons presently employed or engaged by
Seller having responsibility for the subject matter involved, and such knowledge
that would be obtained after reasonable inquiry by them of the matter involved.
"Liability" means any direct or indirect liability, indebtedness,
obligation, expense, claim, loss, damage, deficiency, guaranty or endorsement of
or by any Person, absolute or contingent, accrued or unaccrued, due or to become
due, liquidated or unliquidated.
"Material Adverse Effect" means any event, circumstance, change or
effect (singly or taken together) in, or effect on, the Purchased Assets or the
Business that is or could reasonably be expected to be materially adverse to the
business, operations, results, condition (financial or otherwise) or prospects
of the Purchased Assets or the Business.
"Noncompete Period" has the meaning set forth in Section 6.10(a).
"Patent" means any patent together with any extensions, reexaminations
and reissues of such patent, patents of addition, patent applications,
divisions, continuations, continuations-in-part, and any subsequent filings in
any country or jurisdiction claiming priority therefrom, owned, used or licensed
by Seller in connection with the conduct of the Business.
"Permits" has the meaning set forth in Section 4.13(a).
"Permitted Encumbrances" means: (i) statutory liens for Taxes or other
governmental charges or assessments not yet due, (ii) mechanics', carriers',
workers', repairers' and other similar liens arising or incurred in the ordinary
course of business relating to obligations not yet due and (iii) Encumbrances
arising under any Contract set forth in Schedule 2.1(d).
"Person" means any individual, partnership, limited liability company,
joint venture, corporation, trust, unincorporated organization, or governmental
entity or any department or agency thereof.
"Proprietary Information" means any non-public information regarding
the Business or the Purchased Assets.
"Purchased Assets" has the meaning set forth in Section 2.1.
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"Purchase Price" has the meaning set forth in Section 3.2.
"SEC" has the meaning set forth in Section 3.2(c)(iv).
"SEC Filings" has the meaning set forth in Section 3.2(c)(vi).
"Securities Act" has the meaning set forth in Section 3.2(c)(iv).
"Seller" has the meaning set forth in the preamble.
"Seller Indemnitee" has the meaning set forth in Section 8.1(a).
"Seller's Required Regulatory Approvals" has the meaning set forth in
Section 4.3.
"Software Products" means any computer software product which has been
developed or designed by or on behalf of Seller, or is in the process of being
developed or designed, by or on behalf of Seller for use, in whole or in part,
directly or indirectly, in the conduct of the Business, including all systems
software, all applications software, whether for general business usage or
specific, unique-to-the-Business usage, and any and all documentation and object
and source codes related thereto.
"Sublicense Agreement" means the Sublicense Agreement between Seller
Parties and Buyer in substantially the form attached hereto as Exhibit C.
"Tangible Personal Property" has the meaning set forth in Section
2.1(c).
"Taxes" means all taxes, charges, fees, levies, penalties or other
assessments imposed by any federal, state or local or foreign taxing authority,
including, but not limited to, income, excise, real or personal property, sales,
transfer, franchise, payroll, withholding, social security, gross receipts,
license, stamp, occupation, employment or other taxes, including any interest,
penalties or additions attributable thereto.
"Tax Return" means any return, report, information return, declaration,
claim for refund or other document (including any schedule or related or
supporting information) required to be supplied to any taxing authority with
respect to Taxes.
"Termination Date" has the meaning set forth in Section 9.1(b).
"Third Party Claim" has the meaning set forth in Section 8.2(a).
"Trade Secrets" means any know-how, trade secrets, formulae,
specifications, technical information, data, process technology, plans, drawings
(including engineering and auto-cad drawings), proprietary information, blue
prints and all documentation related to any of the foregoing, owned, used or
licensed by Seller in connection with the conduct of the Business, except for
any such item that is generally available to the public.
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"Trademark" means any registered trademark, registered service xxxx,
trademark and service xxxx applications and unregistered trademark and service
xxxx, brand names, certification marks, trade names, logos, trade dress, and all
goodwill associated with the foregoing throughout the world and registrations in
any jurisdictions of, and applications in any jurisdiction to register, the
foregoing, including any extension, modification or renewal of any such
registration or application, owned, used or licensed by Seller or held for use
by any Affiliate of Seller in connection with the conduct of the Business.
"Transferable Permits" has the meaning set forth in Section 2.1(e).
1.2 Certain Interpretive Matters. In this Agreement, unless the context
otherwise requires, the singular shall include the plural, the masculine shall
include the feminine and neuter, and vice versa. The term "includes" or
"including" shall mean "including without limitation." References to a Section,
Article, Exhibit or Schedule shall mean a Section, Article, Exhibit or Schedule
of this Agreement, and reference to a given agreement or instrument shall be a
reference to that agreement or instrument as modified, amended, supplemented and
restated through the date as of which such reference is made.
ARTICLE 2
PURCHASE AND SALE
2.1 Sale of Assets. Upon the terms and subject to the satisfaction of
the conditions contained in this Agreement and except as otherwise provided in
Section 2.2, at the Closing Seller Parties and Buyer will enter into the
Sublicense Agreement and Seller will grant, sell, assign, convey, transfer and
deliver to Buyer, and Buyer will purchase and acquire from Seller, free and
clear of all Encumbrances (except Permitted Encumbrances) all of Seller's right,
title and interest in and to all of the assets (other than Excluded Assets)
constituting or used in the Business, including those assets described below,
each as in existence on the Closing Date (collectively, "Purchased Assets"):
(a) the business and operations of the Business as a going concern
and all of Seller's goodwill related to the Business, including, without
limitation, all customer and supplier lists, all sales, marketing and other
records, development information, device information, technical information,
manuals, drawings and all other files and correspondence, in whatever form, of
the Business;
(b) all Inventory;
(c) all molds and tooling, wherever located, used in the operation
of the Business, whether currently in use or idle, including those described in
Schedule 2.1(c) (collectively, "Tangible Personal Property");
(d) subject to the provisions of Section 6.4(c), pending and
unfulfilled purchase and sales orders for Devices and all Contracts set forth in
Schedule 2.1(d);
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(e) all Permits that may be transferred to Buyer, including those
set forth on Schedule 2.1(e) (the "Transferable Permits");
(f) all express and implied warranties and guarantees from third
parties with respect to any property constituting part of the Purchased Assets;
(g) all Intellectual Property;
(h) rights of Seller under any products liability insurance
policies now or heretofore in effect to the extent any claim is made against
Buyer with respect to liabilities and obligations of Seller that are not Assumed
Liabilities and Obligations; and
(i) all rights or claims against third parties relating to the
Business.
2.2 Excluded Assets. Notwithstanding anything to the contrary in this
Agreement, nothing in this Agreement will constitute or be construed as
conferring on Buyer, and Buyer is not acquiring, any right, title or interest in
or to, the following specific assets which are associated with the Business (the
"Excluded Assets"):
(a) cash on hand and on deposit in bank accounts;
(b) any rights that accrue or will accrue to Seller under this
Agreement;
(c) any rights of Seller with regard to Taxes or Tax refunds;
(d) any employee records and files;
(e) the corporate seal, minute books, stock books and other records
relating to the corporate organization of Seller and the general ledger and
other original accounting records of Seller;
(f) office equipment or other equipment or supplies, other than
molds and tooling;
(g) Seller's corporate name or the name "Luther" and any trademark
or tradename using the name "Luther," except as expressly provided in this
Agreement;
(h) rights of Seller Parties with respect to Amsino; and
(i) rights of Seller Parties under the Xxxxx Agreement, except as
provided in the Sublicense Agreement.
2.3 Assumed Liabilities and Obligations. At Closing, pursuant to the
Xxxx of Sale, Assignment and Assumption Agreement, Buyer shall assume only the
liabilities and obligations of Seller (collectively, "Assumed Liabilities and
Obligations") arising after the Closing Date under the (i) Assigned Contracts
and the Transferable Permits in accordance with the terms thereof, except to the
extent such liabilities or obligations arise or have arisen out of any claim
asserted by another party thereto related to breach of contract, warranty, tort,
infringement or other default or alleged default by Seller and (ii) unfulfilled
purchase and sales orders relating to Devices issued under the Assigned
Contracts in the ordinary course of business.
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2.4 Excluded Liabilities. Except as expressly set forth in Section 2.3,
Buyer shall not assume or be obligated to pay, perform or otherwise discharge
any Liabilities of Seller, including the following (the "Excluded Liabilities"):
(a) any Liabilities of Seller accruing under any of the Assigned
Contracts prior to the Closing Date;
(b) any Liabilities in respect of any claim, regardless of when
made or asserted, which arises out of or is based upon negligence, strict
liability or any express or implied representation, warranty, agreement or
guarantee made by Seller, or alleged to have been made by Seller, or which is
imposed or asserted to be imposed by operation of law, in connection with any
product of the Business shipped by or on behalf of Seller prior, or alleged to
be prior to, the Closing Date or for any service performed by or on behalf of
Seller prior, or alleged to be prior to, the Closing Date, including any claim
seeking recovery for personal injury;
(c) any Liability of Seller for goods delivered or services
rendered prior to the Closing Date;
(d) any Liability of Seller associated with any contractual
relationship of Seller that existed prior to the Closing Date with any Person,
including without limitation Amsino; and
(e) any other Liability of Seller not specifically assumed
hereunder.
ARTICLE 3
THE CLOSING
3.1 Closing. Upon the terms and subject to the satisfaction of the
conditions contained in Article 7 of this Agreement, the sale, assignment,
conveyance, transfer and delivery of the Purchased Assets to Buyer, the payment
of the Purchase Price to Seller, and the consummation of the other respective
obligations of the Parties contemplated by this Agreement shall take place at a
closing (the "Closing"), to be held at the offices of Xxxxxx, Xxxxx & Xxxxxxx
LLP, 000 Xxxxx Xxxxx Xxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx at 10:00 a.m. local time,
or another mutually acceptable time and location, on the third Business Day
after the conditions set forth in Article 7 have been satisfied (other than
these conditions that are intended to be satisfied at the Closing), or such
other date as the Parties may mutually agree. The date of Closing is hereinafter
called the "Closing Date." The Closing shall be effective for all purposes as of
12:01 a.m. Pacific time on the Closing Date. In connection with the Closing the
Parties shall take such actions as may be requested by Buyer to deliver to it
possession of the Purchased Assets.
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3.2 Purchase Price. (a) The purchase price payable by Buyer for the
Purchased Assets pursuant to this Agreement and the covenants of Seller Parties
under Section 6.10 (the "Purchase Price") is Five Million Six Hundred Thousand
Dollars ($5,600,000), plus or minus the value provided for in Section 3.3, and
plus the additional amount provided for in Section 3.2(c).
(b) Buyer will pay or cause to be paid the following:
(i) at Closing, Three Million Six Hundred Thousand Dollars
($3,600,000) to Seller and Two Million Dollars ($2,000,000) to the Escrow Agent
under the Escrow Agreement, in each case in cash by wire transfer of immediately
available funds or by such other means as are agreed upon by Seller and Buyer;
(ii) upon completion of the adjustment process provided for in
Section 3.3, to Seller any unpaid balance of the Purchase Price, except the
amount payable under Section 3.2(c).
(c) Additional Consideration.
(i) In addition to the foregoing cash consideration, the Buyer
agrees to pay to Seller $250,000 per year payable, at the Buyer's option, in
either shares of the Buyer's common stock, par value $0.01 per share ("Common
Stock"), or in cash (the "Additional Consideration"), to be paid on the Closing
Date and on each of the first three anniversaries of the Closing Date. The
Additional Consideration shall be payable irrespective of Xx. Xxxxxx'x death or
disability. In the event that at the time any of the Additional Consideration is
payable on any anniversary of the Closing Date, there is a claim for
indemnification pending by Buyer under Article 8 hereof, the amount payable by
Buyer may at Buyer's election be deferred until resolution of such claim (by
mutual agreement or through arbitration under Section 10.7) and, if such claim
is resolved in favor of Buyer, such amount otherwise payable by Buyer may be
applied to satisfy such claim to the extent thereof.
(ii) In the event that Buyer elects to deliver shares of Common
Stock, each share shall be valued at a price equal to the average on the Nasdaq
Stock Market or, if applicable, any other stock exchange or market on which the
Common Stock is principally traded, of the reported closing prices of the Common
Stock (or the mean of the bid and asked prices if no trades of Buyer's Common
Stock are reported on such day) during the 10 trading days immediately preceding
the Closing Date or such anniversary, as applicable, appropriately adjusted for
any split, combination or other similar event occurring during such 10
trading-day period.
(iii) If any capital reorganization or reclassification of the
Common Stock, any consolidation or merger of Buyer with or into another entity,
or the sale or other disposition of all or substantially all of Buyer's assets
to another entity shall be effected in such a way that holders of Common Stock
of Buyer shall be entitled to receive stock or other securities with respect to
or in exchange for such Common Stock then, the term Common Stock as used herein
shall refer to such stock or other securities and the value thereof shall be
determined in the manner set forth above or such other manner as shall be
reasonable in the circumstances.
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(iv) Seller acknowledges and understands that the offer and
sale of the shares of Common Stock issuable to it hereunder have not been
registered pursuant to the Securities Act of 1933, as amended (the "Securities
Act"), with the Securities and Exchange Commission (the "SEC") or with any state
official or agency and that such shares are being offered and sold pursuant to
an exemption from the registration requirements set forth in the Securities Act
and applicable blue sky or securities laws, and that no governmental agency has
recommended or endorsed the Common Stock or made and finding or determination
relating to the fairness of the transaction set forth herein. Accordingly Seller
understands that such shares may not be sold or otherwise disposed of unless
registered under the Securities Act or sold or otherwise disposed of pursuant to
an exemption from such registration and agrees that he will not sell or
otherwise dispose of such shares except in such manner.
(v) Seller represents and warrants that it is an "accredited
investor" as such term is defined in Rule 501 of the SEC promulgated under the
Securities Act and that it is acquiring the Common Stock issuable to it
hereunder for its own account for investment, with no present intention of
reselling or otherwise distributing the same, except under circumstances which
do not require registration under the Securities Act and applicable state
securities laws.
(vi) Seller represents and warrants that it has received and
has had an opportunity to review for a reasonable time preceding the date of
this Agreement certain filings made by Buyer with the SEC under the Securities
Exchange Act of 1934 (excluding exhibits, unless requested by Seller) (the "SEC
Filings"). Seller further represents and warrants that it has had the
opportunity to ask questions and receive answers concerning Buyer and to obtain
any additional information which Buyer possesses or can acquire without
unreasonable effort or expense that is necessary to verify the accuracy of such
additional information and/or SEC Filings.
(vii) Seller acknowledges that the following legend shall be
placed on the certificates representing the Common Stock delivered by Buyer
hereunder:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 BUT HAVE BEEN
ACQUIRED FOR INVESTMENT BY THE REGISTERED OWNER. NO SALE, PLEDGE
OR OTHER TRANSFER MAY BE MADE UNLESS THE ISSUER IS FURNISHED WITH
AN OPINION OF COUNSEL FOR THE SHAREHOLDER IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER THAT SUCH SALE IS IN COMPLIANCE WITH
THE SECURITIES ACT OF 1933 AND APPLICABLE STATE SECURITIES LAWS.
(viii) Prior to the delivery of shares of Common Stock on any
anniversary of the Closing Date, Seller will restate the representations
contained in this Section 3.2(c) to the extent required to establish the
exemption from registration under the Securities Act, and Buyer will provide the
information needed to allow Seller to make such representations.
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3.3 Adjustment Purchase Price and Cash Payment.
(a) Purchase Price Adjustment. The Purchase Price shall be
increased or decreased, as the case may be, by the amount (the "Inventory
Adjustment") by which the Inventory Value as of the Closing Date is greater than
or less than, as the case may be, Ninety Thousand Dollars ($90,000).
(b) Physical Inventory. As provided in Schedule 3.3, Buyer and
Seller will take a physical inventory to determine the Inventory of the Business
as of the Closing Date. In the absence of manifest error, such inventory shall
be conclusive and accepted as the final inventory. Inventory so determined will
be valued as set forth in Schedule 3.3.
(c) Statement of Adjustments. Within five Business Days after the
Closing Date, Buyer, with Seller's assistance, shall compute and deliver to
Seller a proposed statement (the "Inventory Statement"), setting forth the
Inventory Amount as of the Closing Date and the adjustment to the Purchase Price
provided for in Section 3.3(a), together with a reasonably detailed basis for
establishing such amount. Upon Seller's request, Buyer shall also deliver to
Seller copies of all documents, schedules, working papers and other factual
material used by Buyer and its accountants in connection with the preparation of
the Inventory Statement.
Within ten (10) days following its receipt of the Inventory
Statement, Seller shall present Buyer with a written statement setting forth
Seller's proposed adjustments thereto, if any, together with a reasonably
detailed explanation of the reason for each such proposed adjustment. Buyer and
Seller shall negotiate in good faith to resolve any disagreement regarding
Buyer's proposed adjustments.
(d) Payment of Adjustment. Any unpaid portion of the Purchase Price
payable by Buyer, or any refund by Seller of any excess paid by Buyer, as the
case may be, together with required interest, if any, in accordance with this
Section, shall be paid in cash in immediately available funds within five (5)
Business Days after the determination thereof pursuant to Section 3.3(c). Any
unpaid portion of the Purchase Price owed by Buyer, or any refund thereof owed
by Seller, shall accrue interest at a rate of 6% per annum beginning 45 days
after the Closing Date, to the extent it has not been paid by such time.
3.4 Allocation of Purchase Price. The Parties agree that the Purchase
Price shall be allocated for tax purposes as set forth in Schedule 3.4 hereto,
which allocation shall be based upon the fair market values of the Purchased
Assets and conform with the requirements of Section 1060 of the Code. Each Party
agrees not to assert, in connection with any tax return, tax audit or similar
proceeding, any allocation of the Purchase Price that differs from any
allocation agreed upon pursuant to this Schedule 3.4 hereto.
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3.5 Deliveries by Seller. At the Closing, Seller Parties will deliver,
or cause to be delivered, the following to Buyer:
(a) the Xxxx of Sale, Assignment and Assumption Agreement, the
Consulting Agreement, the Sublicense Agreement and the Escrow Agreement, duly
executed by Seller or Seller Parties, as applicable;
(b) copies of any and all governmental and other third party
consents, waivers or approvals obtained by Seller with respect to the transfer
of the Purchased Assets or the consummation of the transactions contemplated by
this Agreement;
(c) the officer's certificate contemplated by Section 7.1;
(d) copies, certified by the Secretary or Assistant Secretary of
Seller, of the Articles of Incorporation and Bylaws of Seller and resolutions
adopted by the Board of Directors of Seller and by the shareholders of Seller,
respectively, authorizing the execution and delivery of this Agreement and all
of the agreements and instruments to be executed and delivered by Seller in
connection herewith and the consummation of the transactions contemplated
hereby;
(e) a certificate of the Secretary or Assistant Secretary of Seller
identifying the name and title and bearing the signatures of the officers of
Seller authorized to execute and deliver this Agreement and the other agreements
and instruments contemplated hereby;
(f) a certificate of good standing with respect to Seller, issued
by the Secretary of State of the State of California;
(g) the originals of all Contracts and Transferable Permits;
(h) all such other instruments of assignment, transfer or
conveyance as shall, in the reasonable opinion of Buyer and its counsel, be
necessary or desirable to transfer to Buyer the Purchased Assets in accordance
with this Agreement; and
(i) such other agreements, documents, instruments and writings as
are required to be delivered by Seller at or prior to the Closing Date pursuant
to this Agreement or otherwise reasonably required in connection herewith.
3.6 Deliveries by Buyer. At the Closing, Buyer will deliver, or cause
to be delivered, the following to Seller:
(a) the amount payable by Buyer at Closing pursuant to Section
3.2(b);
(b) the Xxxx of Sale, Assignment and Assumption Agreement, the
Consulting Agreement, the Sublicense Agreement and the Escrow Agreement, duly
executed by Buyer;
(c) the officer's certificate contemplated by Section 7.2;
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(d) copies, certified by the Secretary or Assistant Secretary of
Buyer, of the Certificate of Incorporation and Bylaws of Buyer and resolutions
adopted by the Board of Directors of Buyer authorizing the execution and
delivery of this Agreement and all of the agreements and instruments to be
executed and delivered by Buyer in connection herewith, and the consummation of
the transactions contemplated hereby;
(e) a certificate of the Secretary or Assistant Secretary of Buyer
identifying the name and title and bearing the signatures of the officers of
Buyer authorized to execute and deliver this Agreement and the other agreements
contemplated hereby;
(f) a certificate of good standing with respect to Buyer issued by
the Secretary of State of Delaware; and
(g) such other agreements, documents, instruments and writings as
are required to be delivered by Buyer at or prior to the Closing Date pursuant
to this Agreement or otherwise reasonably required in connection herewith.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER PARTIES
Seller Parties hereby represent and warrant to Buyer as follows:
4.1 Organization. Seller is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of California and has
all requisite corporate power and authority to own, lease, and operate its
properties and to carry on its business as it is now being conducted. Seller
possesses all rights associated with the Business previously held by Luther
Research Partners, LLC, a California limited liability company that was merged
with and into Seller on November 19, 2002.
4.2 Authority Relative to this Agreement. Seller has full corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action required on the part of
Seller, including the unanimous approval by the shareholders of Seller, and no
other corporate proceedings on the part of Seller are necessary to authorize
this Agreement or to consummate the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by Seller, and,
assuming that this Agreement constitutes a valid and binding agreement of Buyer,
constitutes the legal, valid and binding agreement of Seller, enforceable
against Seller in accordance with its terms, except that such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other similar laws affecting or relating to the
enforcement of creditors rights generally or general principles of equity
(regardless of whether enforcement is considered in a proceeding at law or in
equity).
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4.3 Consents and Approvals; No Violations.
Except as set forth in Schedule 4.3, neither the execution and
delivery of this Agreement by Seller nor the consummation of the transactions
contemplated hereby will (i) conflict with or result in the breach or violation
of any provision of the Articles of Incorporation or Bylaws of Seller, (ii)
require any consent, approval, authorization or permit of, or filing with or
notification or declaration to, any Governmental Authority (the filings and
approvals referred to in Schedule 4.3 are collectively referred to as "Seller's
Required Regulatory Approvals"), (iii) require any consent, approval or waiver
under any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, agreement or other instrument or obligation to which Seller
is a party or by which Seller, or any of the Purchased Assets may be bound, or
(iv) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Seller or any of its assets, including the Purchased Assets.
4.4 Financial Information. Schedule 4.4 sets forth the following
financial information for the Business provided by, or based upon information
provided by, Seller Parties:
Product Sales for 2003 and the two months ended February 29,
2004;
Costs of Goods sold for 2003 and the two months ended February 29,
2004;
Inventory as of March 31, 2004;
Outstanding Seller purchase orders for products as of March 26,
2004; and
Outstanding Seller sales orders for product as of March 26, 2004.
All information regarding sales, cost of goods sold and Inventory was calculated
in accordance with GAAP and all the foregoing information is true, accurate and
complete.
4.5 Undisclosed Liabilities. Except as disclosed in Schedule 4.5,
Seller, with respect to the Business, is not liable for or subject to, and
Seller does not have any Knowledge of any basis for assertion against it with
respect to the Business of, any Liabilities, except (a) customary expenses and
accounts payable that have arisen in the ordinary course of business and (b)
Liabilities incurred in the ordinary course of business which are not required
to be performed prior to the Closing under Assigned Contracts.
4.6 Absence of Certain Changes or Events. With respect to the Business,
since December 31, 2003, there has not been (a) any Material Adverse Effect, (b)
any damage, destruction or casualty loss, whether or not covered by insurance,
(c) any agreement, commitment or transaction entered into by Seller that is
material to the ownership or operation of the Purchased Assets, (d) any sale or
disposition of any Tangible Personal Property, or (e) any transactions entered
into (including purchases and sales of Inventory) except in the ordinary course
of business in accordance with past practice.
4.7 Title. Except for Permitted Encumbrances, Seller has and will
convey to the Buyer good title to each of the Purchased Assets free and clear of
all Encumbrances.
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4.8 Inventory. Except as set forth in Schedule 4.8, the Inventory (a)
was acquired and has been maintained in accordance with the regular business
practices of Seller with respect to the Business, (b) consists of new and unused
items of a quality and quantity useable or saleable in the ordinary course of
business consistent with past practice, (c) is owned by Seller free and clear of
all Encumbrances, other than Permitted Encumbrances, (d) is valued in accordance
with its original cost using the methodology as set forth in Schedule 3.3, and
(e) is not obsolete, damaged or slow moving in the ordinary course of business.
4.9 Insurance. All policies of products liability insurance owned or
held by Seller insuring the Business are in full force and effect, all premiums
with respect thereto covering all periods up to and including the date hereof,
if due, have been paid in full and no notice of cancellation or termination has
been received with respect to any such policy. Seller has not been refused any
products liability insurance with respect to the Business, nor has its coverage
been denied or limited by any insurance carrier to which Seller has applied for
any such insurance. Schedule 4.9 sets forth a true and correct summary of the
products liability insurance policies presently in effect and of all insurance
claims ever made by the Company or any predecessor thereunder.
4.10 Tangible Personal Property. Schedule 2.1(c) contains a listing of
all of the Tangible Personal Property as of the date hereof. Except as set forth
in Schedule 4.10, all Tangible Personal Property is in good operating condition
and repair (ordinary wear and tear excepted) in all material respects and is
useable in the ordinary course of the Business consistent with past practice.
Except for matters disclosed in Schedule 4.10, no person other than Seller owns
any equipment or other property used in the operation of the Business.
4.11 Contracts.
(a) The Assigned Contracts (and purchase and sales orders for
Devices executed pursuant thereto) and the Xxxxx Agreement are all the Contracts
to which Seller is a party with respect to the Business. True, correct and
complete copies of the Contracts, including all amendments thereto, have been
delivered to Buyer.
(b) Except as disclosed in Schedule 4.11, each of the Assigned
Contracts (i) constitutes the legal, valid and binding obligation of Seller and
of the other parties thereto, (ii) is in full force and effect, and (iii) may be
transferred or assigned to Buyer at the Closing without consent or approval of
the other parties thereto, and will continue in full force and effect
thereafter, in each case without breaching the terms thereof or resulting in the
forfeiture or impairment of any material rights thereunder.
(c) Except as set forth in Schedule 4.11, there is not, under any
of the Assigned Contracts, any material default or event which, with notice or
lapse of time or both, would constitute a default on the part of any of Seller,
or to the Knowledge of Seller, any other party.
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(d) The Xxxxx Agreement is in full force and effect and neither the
Seller Parties nor, to Seller's Knowledge, Xxxxx has been or is presently in
violation of any of the provisions thereof.
4.12 Litigation and Claims. Schedule 4.12 contains a list and brief
description of any and all litigation, including any settlement thereof, to
which Seller has been a party with respect to the Business or the Purchased
Assets. Except as disclosed on Schedule 4.12, there is no claim, action,
proceeding or investigation pending or, to the Knowledge of Seller, threatened
against Seller with respect to the Business, and to the Knowledge of Seller, no
event has occurred that provides a reasonable basis for a material claim,
action, proceeding or investigation against Seller with respect to the Business.
4.13 Permits.
(a) Except as set forth in Schedule 4.13 Seller has all permits,
registrations, licenses, franchises and other governmental authorizations,
consents, clearances, exemptions and approvals (collectively, "Permits") used in
or necessary for the ownership and operation of the Purchased Assets, including
for the testing, manufacture, marketing, sale and distribution of the Devices.
Except as set forth in Schedule 4.13, Seller has not received any written
notification that it is in violation of any of such Permits, or any law,
statute, order, rule, regulation, ordinance or judgment of any governmental or
regulatory body or authority applicable to it. Seller is in compliance with all
Permits and all laws, statutes, orders, rules, regulations, ordinances, or
judgments of any Governmental Authority applicable to the Purchased Assets or
the Business. As of the date hereof, no suspension or cancellation of any of the
Permits is pending nor, to Seller's Knowledge, has any such suspension or
cancellation been threatened.
(b) Without limiting the foregoing, except as set forth in Schedule
4.13 Seller has complied with all investigational device exemption, premarket
notification, and premarket approval requirements under the Federal Food, Drug,
and Cosmetic Act (the "FDA Act") and the regulations of the United Stated Food
and Drug Administration (the "FDA") adopted thereunder, and corresponding market
authorization requirements in Canada, applicable to the Device. All such
required notification and applications for Devices tested, distributed or sold
by Seller in U.S. commerce, have been filed with the FDA and have been cleared
or approved, as applicable, by the FDA. Any modifications to the Device have
been made in accordance with applicable laws and regulations.
(c) Seller has complied with all applicable requirements pursuant
to the FDA Act or those of any other foreign, state, or local Governmental
Authority relating to the premarket testing, manufacture, distribution, labeling
and sale of all of the Devices distributed in commerce by Seller, including, but
not limited to, compliance with all applicable FDA Quality System Regulation
requirements.
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(d) All preclinical and clinical trials conducted, supervised or
monitored by Seller have been conducted in full compliance with all applicable
laws, regulations and requirements of any Governmental Authority, including but
not limited to, FDA good clinical practice and good laboratory practice
requirements. Seller has consistently obtained and maintained any necessary
Institutional Review Board ("IRB") approvals of clinical trials or modifications
thereto, conducted, supervised or monitored by Seller. In no clinical trial
conducted, supervised or monitored by Seller has IRB approval ever been
suspended, terminated, put on clinical hold or voluntarily withdrawn because of
deficiencies attributed to Seller.
(e) Except as identified in Schedule 4.13, no Governmental
Authority has served any notice, warning letter, regulatory letter, Section 305
notice or any other similar communication on Seller stating that the Business
was or is in violation of any law, regulation, rule, ordinance, clearance,
approval, permissions, authorizations, consents, exemption, guidance or
guideline, or was or is the subject of any pending, threatened or anticipated
administrative or government agency investigation, proceeding, review or
inquiry, or that there are circumstances currently existing which might
reasonably be expected to lead to any loss of or refusal to renew any of the
Permits held by Seller.
(f) None of the Devices have been recalled or subject to FDA
correction or removal requirements, and Seller has not received notice, either
completed or pending, of any proceeding seeking a corrective action, recall,
suspension or seizure of any Devices. Seller has not received any order, demand
or other formal proceedings from any competent authority or notified body for
medical devices to undertake any form of withdrawal from the market of any of
the Devices.
(g) To the Knowledge of Seller, no employees or agents of Seller
have made an untrue statement of material fact to any Governmental Authority
with respect to the Business or failed to disclose a material fact required to
be disclosed to any Governmental Authority.
(h) Neither Seller nor any of its agents or employees has violated
or caused a violation of any federal or state health care fraud and abuse or
false claims statute or regulation, including, but not limited to, the
Medicare/Medicaid Anti-kickback provisions of the Social Security Act, 42 U.S.C.
ss.1320a-7b(b), and the relevant regulations in 42 C.F.R. Part 1001.
(i) Schedule 4.13 sets forth a listing of all Permits.
4.14 Taxes. Seller has filed all Tax Returns and paid all Taxes that
could become an Encumbrance on any of the Purchased Assets.
4.15 Intellectual Property.
(a) Contracts.
(i) Except for the Xxxxx Agreement and the Assigned Agreements,
the Seller in not a party to or bound by any Contract relating to the
Intellectual Property, and no current or former employee of Seller and no other
Person owns or has any proprietary, financial or other interest, direct or
indirect, in whole or in part, and including any right to royalties or other
compensation, in any of the Intellectual Property, or in any application
therefor.
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(ii) All present and former employees and consultants of Seller
or any Affiliate thereof who are or were involved in the design, review,
evaluation or development of the Intellectual Property have executed
nondisclosure and assignment of inventions agreements confirming that the rights
in all Intellectual Property are held by Seller and such rights are assignable
to Buyer.
(iii) No present or former employee or consultant of Seller has
used any other Person's Trade Secrets or other information that is confidential
in the course of his or her work for Seller.
(b) Intellectual Property Necessary for the Business.
(i) The Seller Parties do not own any Patents, applications for
Patents, registered Trademarks or registered Copyrights related to the Business.
The Intellectual Property constitutes all of the intellectual property that has
been used or relied upon in the operation of the Business during the past 12
months or that will be used or relied upon in the operation of the Business as
it is currently contemplated to be operated. Seller has not transferred
ownership of, nor granted any license with respect to, any Intellectual
Property, to any other Person, or permitted Seller's rights in such Intellectual
Property to lapse or enter the public domain. Seller is the owner of all right,
title and interest in and to each item of the Intellectual Property, or, in the
case of licensed Intellectual Property, has obtained all licenses necessary to
freely use and commercially exploit the Intellectual Property, free and clear of
any Encumbrances, and has the right to use all of the Intellectual Property
without payment to a third party. All Intellectual Property is fully
transferable, alienable or licensable by Buyer without restriction and without
payment of any kind to any other Person.
(ii) No Intellectual Property is subject to any proceeding or
outstanding order or stipulation restricting in any manner the use, transfer, or
licensing thereof by Buyer, or which may adversely affect the validity, use or
enforceability of such Intellectual Property.
(iii) There are no internet domain names used in the operation
of the Business.
(iv) No claim is pending, or to Seller's knowledge, threatened,
against Seller Parties asserting that any of the Devices or the Intellectual
Property infringes or conflicts with any patent, trademark, copyright or other
intellectual property right of any Person, and to Seller's Knowledge no such
infringement or conflict exists..
4.16 Transactions with Affiliates. None of the directors or officers or
other Affiliates of Seller, directly or indirectly, has business arrangements or
relationships of any kind with Seller with respect to the Business.
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4.17 Purchased Assets. Except general office facilities, equipment and
supplies, there are no other assets, other than the Purchased Assets, used by
the Business.
4.18 Completeness and Accuracy. All information set forth on any
Schedule hereto is true, correct and complete in all material respects. No
representation or warranty of Seller contained in this Agreement or in any
certificate delivered pursuant hereto contains or will contain an untrue
statement of material fact, or omits or will omit to state any material fact
necessary to make the statements made therein not misleading. All contracts,
permits and other documents and instruments furnished or made available to Buyer
by Seller are or will be true, complete and accurate originals or copies of
originals and include all amendments, supplements, waivers and modifications
thereto. There is no fact, development or threatened development (excluding
general economic factors affecting business in general) that Seller has not
disclosed to Buyer in writing that materially adversely affects or, so far as
Seller can now foresee, may materially adversely affect, the Business or the
Purchased Assets
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
5.1 Organization. Buyer is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite power and authority to own, lease and operate its properties and
to carry on its business as is now being conducted.
5.2 Authority Relative to this Agreement. Buyer has full power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by all necessary action required on the part of Buyer and no
other proceedings on the part of Buyer are necessary to authorize this Agreement
or to consummate the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by Buyer, and assuming that this
Agreement constitutes a valid and binding agreement of Seller, constitutes a
valid and binding agreement of Buyer, enforceable against Buyer in accordance
with its terms, except that such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
other similar laws affecting or relating to enforcement of creditors' rights
generally or general principles of equity.
5.3 Consents and Approvals; No Violations. Neither the execution and
delivery of this Agreement by Buyer nor the purchase by Buyer of the Purchased
Assets pursuant to this Agreement will (i) conflict with or result in any breach
of any provision of the Certificate of Incorporation or Bylaws of Buyer, (ii)
require any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Authority, (iii) require any consent, approval
or waiver under any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, agreement, lease or other instrument or obligation to which
Buyer is a party or by which any of its assets may be bound, or (iv) violate any
order, writ, injunction, decree, statute, rule or regulation applicable to
Buyer.
5.4 Availability of Funds. Buyer has available sufficient funds to
enable Buyer to pay the portion of the Purchase Price due on the Closing Date
and to enable Buyer timely to perform all of its obligations under this
Agreement.
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ARTICLE 6
COVENANTS OF THE PARTIES
6.1 Conduct of Business Relating to the Purchased Assets. Except to the
extent Buyer otherwise consents in writing, during the period from the date of
this Agreement to the Closing Date, Seller shall operate the Business in the
ordinary course consistent with past practice, shall use Commercially Reasonable
Efforts to preserve intact the Purchased Assets and preserve the goodwill and
relationships with customers, employees, suppliers and others having business
dealings with it with respect thereto, shall maintain the insurance coverage
described in Section 4.9 and shall comply with all applicable laws, rules and
regulations relating to the Purchased Assets. Without limiting the generality of
the foregoing, and, except as contemplated in this Agreement, or as required
under applicable law or by any Governmental Authority, prior to the Closing
Date, without the prior written consent of Buyer, Seller will not with respect
to the Business or the Purchased Assets:
(a) sell, lease (as lessor), pledge, encumber, restrict, transfer
or otherwise dispose of, or grant any right with respect to, any of the
Purchased Assets, other than Inventory sold, used, consumed or replaced in the
ordinary course of business consistent with past practice;
(b) modify, amend or voluntarily terminate prior to the expiration
date thereof any Assigned Contract or any material Permit or waive any material
default by, or release, settle or compromise any claim against, any other party
thereto, other than in the ordinary course of business;
(c) enter into any commitment or contract for the purchase or sale
of goods or services that will be delivered or provided after the Closing Date
except purchase and sale orders entered into in the ordinary course of business
consistent with past practice and which, in the case of purchase orders, are in
amounts not exceeding $10,000;
(d) enter into any written or oral contract, agreement, commitment
or arrangement with respect to any of the matters set forth in the foregoing
paragraphs (a) through (c).
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6.2 Access to Information.
(a) Between the date of this Agreement and the Closing Date, Seller
will, during ordinary business hours and upon reasonable notice (i) give Buyer
and its representatives reasonable access to all books, records, plants, offices
and other facilities and properties constituting the Purchased Assets, (ii)
permit Buyer to make such reasonable inspections thereof as Buyer may reasonably
request, (iii) furnish Buyer with such financial and operating data and other
information available to Seller with respect to the Business and the Purchased
Assets as Buyer may from time to time reasonably request and (iv) furnish Buyer
a copy of each material report, schedule or other document filed or received by
Seller with respect to the Purchased Assets with any Governmental Authority
having jurisdiction over the Purchased Assets; provided, however, that any such
investigation shall be conducted in such a manner as not to interfere
unreasonably with the operation of the Purchased Assets.
(b) Seller agrees (i) not to release any Person (other than Buyer)
from any confidentiality agreement now existing with respect to the Purchased
Assets or the Business, or waive or amend any provision thereof, and (ii) to
assign any rights arising under any such confidentiality agreement (to the
extent assignable) to Buyer.
(c) Except as required by law, unless otherwise agreed to in
writing by Buyer, Seller shall (i) keep all Proprietary Information confidential
and not disclose or reveal any Proprietary Information to any Person, and (ii)
not use Proprietary Information for any purpose other than consistent with the
terms of this Agreement. Seller shall continue to hold all Proprietary
Information according to the same internal security procedures and with the same
degree of care regarding its secrecy and confidentiality as currently applicable
thereto. Seller shall notify Buyer of any unauthorized disclosure to third
parties that it discovers, and shall endeavor to prevent any further such
disclosures.
(d) After the Closing Date, in the event that Seller is requested
pursuant to, or required by, applicable law or regulation or by legal process to
disclose any Proprietary Information, Seller shall use its best efforts to
provide Buyer with prompt notice of such request or requirement in order to
enable Buyer to seek an appropriate protective order or other remedy, to consult
with Seller with respect to taking steps to resist or narrow the scope of such
request or legal process, or to waive compliance, in whole or in part, with the
terms of this Section 6.2(d). Seller agrees not to oppose any action by Buyer to
obtain a protective order or other appropriate remedy after the Closing Date. In
the event that no such protective order or other remedy is obtained, or Buyer
waives compliance with the terms of this Section 6.2(d), Seller shall furnish
only that portion of the Proprietary Information which Seller is advised by
counsel is legally required. In any such event, Seller shall use its
Commercially Reasonable Efforts, but at Buyer' s expense, to ensure that all
Proprietary Information that is so disclosed will be accorded confidential
treatment.
6.3 Expenses. Except to the extent specifically provided herein,
whether or not the transactions contemplated hereby are consummated, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be borne by the Party incurring such costs and
expenses.
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6.4 Further Assurances; Cooperation.
(a) Subject to the terms and conditions of this Agreement, each of
the Parties hereto will use Commercially Reasonable Efforts to take, or cause to
be taken, all action, and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate and make
effective the sale of the Purchased Assets pursuant to this Agreement, including
without limitation using Commercially Reasonable Efforts to ensure satisfaction
of the conditions precedent to each Party's obligations hereunder. Neither of
the Parties hereto will take or fail to take any action which would reasonably
be expected to prevent or materially impede, interfere with or delay the
transactions contemplated by this Agreement.
(b) From time to time after the Closing Date, without further
consideration, Seller will, at Buyer's expense, execute and deliver to Buyer
such documents as Buyer may reasonably request in order to more effectively
consummate the sale and purchase of the Purchased Assets or to more effectively
vest in Buyer good and marketable title to the Purchased Assets subject to the
Permitted Encumbrances. From time to time after the Closing Date, without
further consideration, Buyer will, at Seller's expense, execute and deliver to
Seller such documents as Seller may reasonably request in order to evidence
Buyer's assumption of the Assumed Liabilities and Obligations.
(c) To the extent that Seller's rights under any Contract may not
be assigned without the consent of another Person which consent has not been
obtained, this Agreement shall not constitute an agreement to assign the same if
an attempted assignment would constitute a breach thereof or be unlawful, and
Seller, at its expense, shall use Commercially Reasonable Efforts to obtain any
such required consent as promptly as possible. Seller and Buyer agree that if
any consent to an assignment of any Contract shall not be obtained or if any
attempted assignment would be ineffective or would impair Buyer's rights and
obligations under the applicable Contract so that Buyer would not in effect
acquire the benefit of all such rights and obligations, Seller, to the maximum
extent permitted by law and such Contract, shall after the Closing appoint Buyer
to be Seller's representative and agent with respect to such Contract, and
Seller shall, to the maximum extent permitted by law and such Contract, enter
into such reasonable arrangements with Buyer as are necessary to provide Buyer
with the benefits and obligations of such Contract. Seller and Buyer shall
cooperate and shall each use Commercially Reasonable Efforts after the Closing
to obtain an assignment of such Contract to Buyer.
6.5 Public Statements. Except as required by law or any stock market
rule, the Parties shall consult with each other before issuing any public
announcement, statement or other disclosure with respect to this Agreement or
the transactions contemplated hereby and shall not issue any such public
announcement, statement or other disclosure prior to such consultation and
agreement on the contents thereof.
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6.6 Consents and Approvals. Seller and Buyer shall cooperate with each
other and (i) promptly prepare and file all necessary documentation, (ii) effect
all necessary applications, notices, petitions and filings and execute all
agreements and documents, (iii) use Commercially Reasonable Efforts to obtain
the transfer or reissuance to Buyer of all Transferable Permits, and (iv) use
Commercially Reasonable Efforts to obtain all necessary consents, approvals and
authorizations of all other parties, necessary or advisable to consummate the
transactions contemplated by this Agreement or required by the terms of any
note, bond, mortgage, indenture, deed of trust, license, franchise, permit,
concession, contract, lease or other instrument to which Seller or Buyer is a
party or by which any of them is bound.
6.7 Fees and Commissions. Seller Parties and Buyer each represent and
warrant to the other that no broker, finder or other Person is entitled to any
brokerage fees, commissions or finder's fees in connection with the transaction
contemplated hereby by reason of any action taken by the Party making such
representation. Seller and Buyer will pay to the other or otherwise discharge,
and will indemnify and hold the other harmless from and against, any and all
claims or liabilities for all brokerage fees, commissions and finder's fees
incurred by reason of any action taken by the indemnifying party.
6.8 Tax and Audit Matters.
(a) All transfer and sales taxes incurred in connection with this
Agreement and the transactions contemplated hereby shall be borne equally by
Buyer and Seller. The Parties will cooperate in the filing of all necessary Tax
Returns and other documentation with respect to all such transfer or sales
taxes.
(b) Buyer and Seller shall provide each other with such assistance
as may reasonably be requested by the other Party in connection with the
preparation of any Tax Return, any audit or other examination by any taxing
authority, or any judicial or administrative proceedings relating to liability
for Taxes, and each will retain and provide the requesting Party with any
records or information which may be relevant to such return, audit or
examination, proceedings or determination.
(c) Seller will cooperate with Buyer in connection with any audit
of the financial statement of the Business as may be required or be desired by
the Buyer by reason of applicable rules of the Securities and Exchange
Commission. The foregoing shall include providing customary letters from
Seller's officers and counsel.
6.9 Notification of Changes. Prior to the Closing Date, each Party will
promptly advise the other in writing with respect to any matter arising after
execution of this Agreement which, if existing or occurring at the date of this
Agreement, would have been required to be set forth in this Agreement, including
any of the Schedules hereto. Nothing contained herein shall relieve Seller or
Buyer of any breach of representation, warranty or covenant under this Agreement
existing as of the date hereof or any subsequent date as of which such
representation, warranty or covenant shall have been made.
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6.10 Noncompetition and Nonsolicitation.
(a) Noncompetition. From the Closing Date until the fourth (4th)
anniversary thereof (the "Noncompete Period"), except with Buyer's prior written
consent, each of Seller and Xx. Xxxxxx will not, and each will cause its
Affiliates not to, directly or indirectly own, manage, operate, join, control,
finance or otherwise participate in the ownership, management, operation,
control or financing of, or be connected as an officer, director, employee,
principal, agent, representative, consultant, investor, owner, partner, manager,
joint venturer or otherwise with, or permit its name to be used by or in
connection with, any business or enterprise engaged in the business of
developing, manufacturing, marketing, selling or distributing of Xxxxx safety
needles devices within the United States of America.
(b) Nonsolicitation. During the Noncompete Period, each of Seller
and Xx. Xxxxxx will not, and each will cause its Affiliates not to, directly or
indirectly call on or solicit for the purpose of diverting or take away from
Buyer the safety Xxxxx needle business (including, without limitation, by
divulging to any competitor or potential competitor of Buyer in the safety Xxxxx
needle business the name of) of any person, firm, corporation or other entity
who or which on the Closing Date was, or at any time during the two years
preceding the Closing Date had been, a customer of the Business or whose
identity was Known to Seller on the Closing Date as one whom or which the
Business intended to solicit within the succeeding year. Nothing contained in
this Section 6.10(b) shall be deemed to limit or impair, or be limited or
impaired by, the provisions of Section 6.10(a).
(c) Remedies for Breach. Seller Parties acknowledge that (i) the
provisions of this Section 6.10 are reasonable and necessary to protect the
legitimate interests of Buyer, that any violation of this Section 6.10 will
result in irreparable injury to Buyer and that damages at law would not be
reasonable or adequate compensation to Buyer for a violation of this Section
6.10, and (ii) Buyer shall be entitled to have the provisions of this Section
6.10 specifically enforced by preliminary and permanent injunctive relief
without the necessity of proving actual damages and without posting bond or
other security, as well as to have an equitable accounting of all earnings,
profits and other benefits arising out of any violation of this Section 6.10. If
the provisions of this Section 6.10 should ever be deemed to exceed the time,
geographic, product or other limitations permitted by applicable law, then such
provisions shall be deemed reformed to the maximum time, geographic, product or
other limitations permitted by law. If a breach of this Section 6.10 occurs, the
running of the Noncompete Period shall be tolled during the time of such
violation and shall not continue to run until such violation has been fully and
finally cured.
(d) Xxxxx Agreement. Seller's and Xx. Xxxxxx'x provision of
consulting services pursuant to the Xxxxx Agreement shall not be considered
competition with Buyer or a violation of any term of this Agreement.
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6.11 Registration Requirements.
(a) Promptly, but not later than 45 days after, the delivery of
the Common Stock to Seller pursuant to Section 3.2(c), Buyer shall prepare and
file a registration statement (the "Registration Statement") with the SEC under
the Securities Act to register the offer and resale of such Common Stock (the
"Registrable Securities"), and shall use its Commercially Reasonable Efforts to
cause such Registration Statement to become effective promptly thereafter.
(b) Buyer shall pay all Registration Expenses (as defined below)
in connection with any registration of the Registrable Securities, and Seller
shall pay all Selling Expenses (as defined below) and other expenses that are
not Registration Expenses relating to the Registrable Securities. "Registration
Expenses" shall mean all expenses incurred by Buyer in complying with the
registration provisions herein described, including, without limitation, all
registration, qualification and filing fees, printing expenses, accounting fees
and fees and disbursements of counsel for Buyer. "Selling Expenses" shall mean
all selling commissions and stock transfer taxes applicable to the Registrable
Securities and all fees and disbursements of counsel for Seller.
(c) Buyer will use its commercially reasonable efforts to: (i)
keep such registration effective until the earlier of (A) 90 days after the date
such Registration Statement is declared effective, (B) such date as all of the
Registrable Securities have been resold pursuant to a Registration Statement, or
(C) such date as all Registrable Securities may be sold pursuant to Rule 144(k)
of the Securities Act (or any successor rule); (ii) prepare and file with the
SEC such amendments and supplements to the Registration Statement, including the
prospectus which is part of the Registration Statement, as may be necessary to
comply with the provisions of the Securities Act with respect to the disposition
of the Registrable Securities; and (iii) furnish such number of copies of the
prospectus as Seller from time to time may reasonably request.
(d) Notwithstanding the foregoing, Seller hereby acknowledges that
there may occasionally be times when Buyer may for valid corporate reasons (such
as to prevent premature disclosure of Buyer information or because of Buyer's
own financing activities) delay filing or effectiveness of a Registration
Statement or suspend the use of the prospectus which forms a part of the
Registration Statement until such time as an amendment to such Registration
Statement has been filed by Buyer and declared effective by the SEC or until
Buyer has amended or supplemented such prospectus. Seller covenants that it will
not sell any Registrable Securities during the period commencing at the time at
which Buyer gives Seller notice of the suspension of the use of the prospectus
and ending at the time the Buyer gives the Seller notice that Seller may
thereafter effect sales pursuant to said prospectus. Buyer will endeavor to
minimize the length of any delay or suspension.
(e) Seller shall provide to Buyer such information regarding its
ownership of Registrable Securities and plan of distribution as shall be
required for the preparation and filing of the Registration Statement.
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6.12 Use of "Luther" etc. Seller, and, to the extent he has any
interest therein, Xx. Xxxxxx, xxxxx to Buyer an irrevocable fully-paid license
to use the names "Luther," "Xxxxxx Xxxxx Safety Needle" and, to the extent that
it may appear on any existing packaging or literature of Seller, Seller's
corporate name, in connection with the sale of safety Xxxxx needle devices of
the type sold by Seller prior to the Closing; provided, however, that such
license may be terminated if the Buyer materially alters such design.
6.13 Amsino Settlement Agreement. (a) Buyer acknowledges that Seller is
negotiating a settlement of litigation with Amsino, Seller's former
manufacturer. Seller will at any time upon request furnish information regarding
the status of such litigation and settlement negotiation as Buyer may reasonably
request and will furnish a copy of any proposed settlement agreement to Buyer
for review at least 10 days prior to the execution thereof and use its best
efforts to incorporate Buyer's reasonable comments. Without Buyer's prior
written consent, Seller will not enter into any settlement that would:
(i) allow Amsino to sell existing inventory except in the
People's Republic of China strictly for use therein;
(ii) allow use of the name "Luther" or any variation thereof
or fail to provide affirmatively for the removal of any such name from all
product and packaging;
(iii) fail to provide for the return to Seller of all molds
related to Luther safety Xxxxx needles and confidential or proprietary
information, designs, drawings and other materials and intellectual property of
Seller (which Seller will then deliver to Buyer).
(b) Seller will assign to Buyer the right to enforce the
provisions of any settlement agreement that may affect Buyer.
6.14 Performance of Sublicense. Seller Parties will carry out and
perform in all respects their obligations under the Sublicense Agreement for so
long as it shall be in effect.
ARTICLE 7
CONDITIONS
7.1 Conditions to Obligations of Buyer. The obligation of Buyer to
purchase the Purchased Assets and to consummate the other transactions
contemplated by this Agreement shall be subject to the fulfillment at or prior
to the Closing Date of the following conditions:
(a) No preliminary or permanent injunction or other order or
decree by any federal or state court or Governmental Authority which prevents
the consummation of the sale of the Purchased Assets contemplated herein shall
have been issued and remain in effect and no proceeding therefor shall be
pending or threatened;
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(b) Seller shall have performed and complied in all material
respects with the covenants and agreements contained in this Agreement which are
required to be performed and complied with by Seller on or prior to the Closing
Date;
(c) The representations and warranties of Seller Parties set forth
in this Agreement that are qualified by materiality shall be true and correct in
all respects as of the Closing Date, and all other representations and
warranties shall be true and correct in all material respects as of the Closing
Date, in each case as though made at and as of the Closing Date;
(d) Buyer shall have received a certificate of the Seller Parties,
dated the Closing Date, to the effect set forth in Section 7.1(b) and (c);
(e) All consents and approvals for the consummation of the sale of
the Purchased Assets contemplated hereby required under the terms of any
agreement to which Seller is party or by which Seller, or any of the Purchased
Assets, may be bound, shall have been obtained;
(f) Seller shall have delivered, or caused to be delivered, to
Buyer at the Closing, Seller's closing deliveries described in Section 3.5 and,
to the extent applicable, possession of the Purchased Assets;
(g) Since the date of this Agreement, no Material Adverse Effect
shall have occurred;
(h) Xxxxx shall have consented in writing to the Sublicense, such
consent to be in the form furnished by Buyer to Seller or otherwise satisfactory
to Buyer; and
(i) The FDA shall have issued without condition its approval of
Seller's 510(k) application applicable to the Devices submitted on or about
February 27, 2004.
7.2 Conditions to Obligations of Seller. The obligation of Seller to
sell the Purchased Assets and to consummate the other transactions contemplated
by this Agreement shall be subject to the fulfillment at or prior to the Closing
Date of the following conditions:
(a) No preliminary or permanent injunction or other order or decree
by any federal or state court which prevents the consummation of the sale of the
Purchased Assets contemplated herein shall have been issued and remain in effect
and no proceeding therefor shall be pending or threatened;
(b) Buyer shall have performed and complied with in all material
respects the covenants and agreements contained in this Agreement which are
required to be performed and complied with by Buyer on or prior to the Closing
Date;
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(c) The representations and warranties of Buyer set forth in this
Agreement that are qualified by materiality shall be true and correct in all
respects as of the Closing Date and all other representations and warranties
shall be true and correct in all material respects as of the Closing Date, in
each case as though made at and as of the Closing Date;
(d) Seller shall have received a certificate of Buyer signed by an
authorized officer of Buyer, dated the Closing Date, to the effect set forth in
Sections 7.2(b) and (c); and
(e) Buyer shall have delivered, or caused to be delivered, to
Seller at the Closing, Buyer's closing deliveries described in Section 3.6 and
the Additional Consideration payable on the Closing Date pursuant to Section
3.2(c).
ARTICLE 8
INDEMNIFICATION
8.1 Indemnification.
(a) Buyer shall indemnify, defend and hold harmless Seller, its
officers, directors, employees, shareholders, Affiliates and agents (each, a
"Seller Indemnitee") from and against any and all claims, demands, suits,
losses, liabilities, damages, obligations, payments, costs and expenses
(including, without limitation, the costs and expenses of any and all actions,
suits, proceedings, assessments, judgments, settlements and compromises relating
thereto and reasonable attorneys' fees and reasonable disbursements in
connection therewith) (each, an "Indemnifiable Loss"), asserted against or
suffered by any Seller Indemnitee relating to, resulting from or arising out of
(i) any breach by Buyer of any of its representations, warranties or covenants
contained in this Agreement, (ii) any of the Assumed Liabilities and
Obligations, or (iii) any Third Party Claims against a Seller Indemnitee arising
out of or in connection with Buyer's ownership or operation of Purchased Assets
after the Closing Date.
(b) Seller Parties shall, jointly and severally, indemnify, defend
and hold harmless Buyer, its officers, directors, members, employees,
shareholders, Affiliates and agents (each, a "Buyer Indemnitee") from and
against any and all Indemnifiable Losses asserted against or suffered by any
Buyer Indemnitee relating to, resulting from or arising out of (i) any breach by
any Seller Party of any of its representations, warranties or covenants
contained in this Agreement, (ii) any of the Excluded Liabilities, (iii) any
Third Party Claims against a Buyer Indemnitee arising out of or in connection
with Seller's ownership or operation of the Purchased Assets or the Business on
or prior to the Closing Date including, without limitation, any Third Party
Claims arising out of or related to the License Agreement dated as of July 6,
2001 between Seller's predecessor and Amsino or (iv) any other matters expressly
agreed upon in writing by Seller Parties and Buyer with reference to this clause
8.1(b)(iv) to be subject to indemnification by Seller Parties.
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(c) The expiration of any representation or warranty shall not
affect a Party's obligations under this Section 8.1 if the Person entitled to
indemnification hereunder (the "Indemnitee") provided the Party required to
provide indemnification under this Agreement (the "Indemnifying Party") with
proper notice of the claim or event for which indemnification is sought prior to
such expiration.
8.2 Defense of Claims.
(a) If any Indemnitee receives notice of the assertion of any claim
or of the commencement of any claim, action, or proceeding made or brought by
any Person who is not a Party to this Agreement (a "Third Party Claim") with
respect to which indemnification is to be sought from an Indemnifying Party, the
Indemnitee shall give such Indemnifying Party prompt written notice thereof, but
in any event such notice shall not be given later than fifteen (15) calendar
days after the Indemnitee' s receipt of notice of such Third Party Claim. Such
notice shall describe the nature of the Third Party Claim in reasonable detail
and shall indicate the estimated amount, if practicable, of the Indemnifiable
Loss that has been or may be sustained by the Indemnitee. The Indemnifying Party
will have the right to participate in or, by giving written notice to the
Indemnitee, to elect to assume the defense of any Third Party Claim at such
Indemnifying Party's expense and by such Indemnifying Party's own counsel,
provided that the counsel for the Indemnifying Party who shall conduct the
defense of such Third Party Claim shall be reasonably satisfactory to the
Indemnitee. The Indemnitee shall cooperate in good faith in such defense at such
Indemnitee's own expense. If an Indemnifying Party elects not to assume the
defense of any Third Party Claim, the Indemnitee may compromise or settle such
Third Party Claim over the objection of the Indemnifying Party, which settlement
or compromise shall conclusively establish the Indemnifying Party's liability
pursuant to this Agreement.
(b) If, within fifteen (15) calendar days after an Indemnitee
provides written notice to the Indemnifying Party of any Third Party Claims, the
Indemnitee receives written notice from the Indemnifying Party that such
Indemnifying Party has elected to assume the defense of such Third Party Claim
as provided in Section 8.2 (a), the Indemnifying Party will not be liable for
any legal expenses subsequently incurred by the Indemnitee in connection with
the defense thereof; provided, however, that if the Indemnifying Party shall
fail to take reasonable steps necessary to defend diligently such Third Party
Claim within fifteen (15) calendar days after receiving notice from the
Indemnitee that the Indemnitee believes the Indemnifying Party has failed to
take such steps, the Indemnitee may assume its own defense and the Indemnifying
Party shall be liable for all reasonable expenses thereof. Without the prior
written consent of the Indemnitee, the Indemnifying Party shall not enter into
any settlement of any Third Party Claim which would lead to liability or create
any financial or other obligation on the part of the Indemnitee.
(c) Any claim by an Indemnitee on account of an Indemnifiable Loss
which does not result from a Third Party Claim (a "Direct Claim") shall be
asserted by giving the Indemnifying Party written notice thereof, stating the
nature of such claim in reasonable detail and indicating the estimated amount,
29
if practicable, and the Indemnifying Party shall have a period of thirty (30)
calendar days within which to respond to such Direct Claim. If the Indemnifying
Party does not respond within such thirty (30) calendar day period, the
Indemnifying Party shall be deemed to have accepted such claim. If the
Indemnifying Party rejects such claim, the Indemnitee will be free to seek
enforcement of its right to indemnification under this Agreement.
(d) A failure to give timely notice as provided in this Section 8.2
shall not affect the rights or obligations of any Party hereunder except if, and
only to the extent that, as a result of such failure, the Party which was
entitled to receive such notice was actually prejudiced as a result of such
failure.
8.3 Survival of Representations, Warranties, Covenants and Obligations.
(a) The representations and warranties given or made by each Party
to this Agreement or in any certificate or other writing furnished in connection
herewith shall survive the Closing for a period of three (3) years after the
Closing Date and shall thereafter terminate and be of no further force or
effect, except that (a) all representations and warranties relating to Taxes and
Tax Returns shall survive the Closing for the period of the applicable statutes
of limitation plus any extensions or waivers thereof (b) the representations and
warranties contained in Section 4.7 will survive indefinitely and (c) any
representation or warranty as to which a claim (including without limitation a
contingent claim) shall have been asserted prior to the expiration of such
representation or warranty shall continue in effect with respect to such claim
until such claim shall have been finally resolved or settled. Each Party shall
be entitled to rely upon the representations and warranties of the other Party
or Parties set forth herein, notwithstanding any investigation or audit
conducted before or after the Closing Date or the decision of any Party to
complete the Closing.
(b) The covenants and obligations of Seller and Buyer set forth in
this Agreement, including without limitation the indemnification obligations of
the Parties under this Article 8, shall survive the Closing indefinitely in
accordance with their terms.
8.4 Escrow. In order to provide a source of funds to secure the
indemnification obligations of Seller Parties under this Article 8, Seller
Parties and Buyer agree that on the Closing Date the sum of $2,000,000 shall be
deposited with the Escrow Agent to be held and disbursed as provided in the
Escrow Agreement.
ARTICLE 9
TERMINATION
9.1 Termination.
(a) This Agreement may be terminated at any time prior to the
Closing Date by mutual written consent of Seller Parities and Buyer.
(b) This Agreement may be terminated by Seller Parties or Buyer, if
(i) any Federal or state court of competent jurisdiction shall have issued an
30
order, judgment or decree permanently restraining, enjoining or otherwise
prohibiting the Closing, and such order, judgment or decree shall have become
final and nonappealable or (ii) any statute, rule, order or regulation shall
have been enacted or issued by any Governmental Authority which, directly or
indirectly, prohibits the consummation of the Closing or (iii) the Closing
contemplated hereby shall have not occurred on or before April 30, 2004 (the
"Termination Date"); provided, however, that the right to terminate this
Agreement under this Section 9.1(b) (iii) shall not be available to a Party
whose failure to fulfill any obligation under this Agreement has been the cause
of, or resulted in, the failure of the Closing to occur on or before such date.
(c) This Agreement may be terminated by Buyer if there has been a
material violation or breach by Seller of any covenant, representation or
warranty contained in this Agreement and such violation or breach is not cured
by the earlier of the Closing Date or the date ten (10) days after receipt by
Seller of notice specifying such violation or breach, and such violation or
breach has not been waived by Buyer.
(d) This Agreement may be terminated by Seller Parties if there has
been a material violation or breach by Buyer of any covenant, representation or
warranty contained in this Agreement and such violation or breach is not cured
by the earlier of the Closing Date or the date ten (10) days after receipt by
Buyer of notice specifying such violation or breach, and such violation or
breach has not been waived by Seller Parties.
9.2 Procedure and Effect of Termination. In the event of termination of
this Agreement by either or all of the Parties pursuant to this Article 9,
written notice thereof shall forthwith be given by the terminating Party to the
other Party. If this Agreement is terminated pursuant to any of Sections 9.1(a)
or (b), the obligations of the Parties hereunder will terminate, except as
otherwise expressly provided in this Agreement, and thereafter neither Party
shall have any recourse against the other by reason of this Agreement. In the
event that this Agreement is terminated by a Party for a breach of any material
representation, warranty, covenant or other agreement contained herein, and
provided that the terminating Party is not then in breach of any material
representation, warranty, covenant or other agreement contained herein, in
addition to any rights or remedies provided by law, the breaching Party shall be
liable to the terminating party for all fees, expenses and disbursements,
including the fees and expenses of counsel, accountants and other experts,
incurred by the terminating party in connection with the subject matter of this
Agreement.
ARTICLE 10
MISCELLANEOUS PROVISIONS
10.1 Amendment and Modification. This Agreement may be amended,
modified or supplemented only by written agreement of Seller Parties and Buyer.
10.2 Waiver of Compliance; Consents. Except as otherwise provided in
this Agreement, any failure of any of the Parties to comply with any obligation,
covenant, agreement or condition herein may be waived by the Party entitled to
the benefits thereof only by a written instrument signed by the Party granting
such waiver, but such waiver of such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent failure to comply therewith.
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10.3 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given and effective if delivered personally or by
facsimile transmission, or mailed by overnight courier or registered or
certified mail (return receipt requested), postage prepaid, to the recipient
Party at its address (or at such other address or facsimile number for a Party
as shall be specified by like notice; provided, however, that notices of a
change of address shall be effective only upon receipt thereof):
(a) If to Buyer, to:
The Med-Design Corporation
0000 Xxxxxx Xxxxxx
Xxxxxxx, XX 00000
FAX: (000) 000-0000
with a copy to:
Xxxxxx X. Xxxxxxxxxxx, III
000 X. Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxxxxx, XX 00000
FAX: (000) 000-0000
(b) if to Seller or Xx. Xxxxxx, to:
Luther Needlesafe Products, Inc.
0000 Xxxxxxx Xxxx Xxxxx
Xxxxx X
Xxxxx Xxxx, XX 00000
Attention: Xxxxxx Xxxxxxxxx
with a copy to:
Xxxxxxx Xxxxx
Xxxx & Xxxxx, LLP
00000 Xxx Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxx, XX 00000
FAX: (000)-000-0000
10.4 Assignment. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the Parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any Party
hereto without the prior written consent of the other Party, such consent not to
be unreasonably withheld. Notwithstanding the foregoing, Buyer may assign its
rights, interests and obligations hereunder, or cause the Purchased Assets to be
conveyed, to one or more Affiliates, but no such assignment shall relieve Buyer
of performance of its obligations hereunder.
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10.5 No Third Party Beneficiary. This Agreement is not intended to
confer upon any other Person except the Parties hereto any rights, interests,
obligations or remedies hereunder.
10.6 Governing Law. This Agreement shall be governed by and construed
in accordance with the law of the State of California (without giving effect to
conflict of law principles) as to all matters, including but not limited to
matters of validity, construction, effect, performance and remedies.
10.7 Arbitration of Disputes. Except as otherwise provided herein, any
controversy or claim arising out of or relating to this Agreement or any related
agreement shall be settled by arbitration in accordance with the following
provisions:
(a) The agreement of the Parties to arbitrate covers all disputes
of every kind relating to or arising out of this Agreement or any related
agreement, as well as any claim for indemnification. In addition, the arbitrator
selected according to procedures set forth below shall determine the
arbitrability of any matter brought to it, and the arbitrator's decision shall
be final and binding on the Parties.
(b) The forum for the arbitration shall be Los Angeles,
California.
(c) The governing law for the arbitration shall be the law of the
State of California, without reference to its conflicts of laws provisions.
(d) There shall be a single arbitrator. Unless the parties are
able to agree on a single arbitrator within thirty 30 days after the initiation
of an arbitration proceeding, the arbitrator shall be selected in accordance
with the rules and procedures of the Judicial Arbitration and Mediation Services
("JAMS").
(e) The arbitration shall be administered by JAMS.
(f) The rules of arbitration shall be the rules and procedures of
JAMS as modified by any other instructions that the Parties may agree upon at
the time, except that each Party shall have the right to conduct discovery in
any manner and to the extent authorized by the Federal Rules of Civil Procedures
as interpreted by the federal courts. If there is any conflict between those
Rules and the provisions of this section, the provisions of this section shall
prevail.
(g) The arbitrator shall be bound by and shall strictly enforce
the terms of this Agreement or any related agreement and may not limit, expand
or otherwise modify its terms. The arbitrator shall make a good faith effort to
apply substantive applicable law, but an arbitration decision shall not be
subject to review because of errors of law. The arbitrator shall be bound to
honor claims of privilege or work-product doctrine recognized at law, but the
arbitrator shall have the discretion to determine whether any such claim of
privilege or work product doctrine applies.
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(h) The arbitrator's decision shall provide a reasoned basis for
the resolution of each dispute and for any award.
(i) Each party shall bear its own fees and expenses with respect
to the arbitration and any proceeding related thereto and the parties shall
share equally the fees and expenses of JAMS, except that the arbitrator may
allocate all costs of the arbitration and reasonable attorneys' fees of the
prevailing Party against the Party who did not prevail.
(j) The arbitrator shall have power and authority to award any
remedy or judgment that could be awarded by a court of law in California. The
award rendered by arbitration shall be final and binding upon the parties and
judgment upon the award may be entered in any court of competent jurisdiction.
(k) Nothing herein shall preclude any Party from seeking specific
performance or injunctive or other equitable relief in a court of competent
jurisdiction.
10.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.9 Severability. Any provision of this Agreement that is invalid or
unenforceable in any jurisdiction shall be ineffective to the extent of such
invalidity or unenforceability without invalidating or rendering unenforceable
the remaining provisions hereof, and any such invalidity or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
10.10 Interpretation. The articles, section and schedule headings
contained in this Agreement are solely for the purpose of reference, are not
part of the agreement of the Parties and shall not in any way affect the meaning
or interpretation of this Agreement.
34
10.11 Schedules and Exhibits. Except as otherwise provided in this
Agreement, all Exhibits and Schedules referred to herein are intended to be and
hereby are specifically made a part of this Agreement.
10.12 Entire Agreement. This Agreement, including the Exhibits,
Schedules, documents, certificates and instruments referred to herein, embody
the entire agreement and understanding of the Parties hereto in respect of the
transactions contemplated by this Agreement. There are no restrictions,
promises, representations, warranties, covenants or undertakings, other than
those expressly set forth or referred to herein. This Agreement supersedes all
prior agreements and understandings between the Parties with respect to the
transactions contemplated hereby.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
signed as of the date first above written.
THE MED-DESIGN CORPORATION
By: /s/ Xxxxx X. Xxxxxxx
--------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Chairman of the Board and
Chief Executive Officer
LUTHER NEEDLESAFE PRODUCTS, INC.
By: /s/ Xxxxxx X. Xxxxxxxxx
--------------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: President
/s/ Xxxxxx X. Xxxxxx
--------------------------------------
XXXXXX X. XXXXXX.
35
EXHIBIT A
FORM OF XXXX OF SALE, ASSIGNMENT AND ASSUMPTION AGREEMENT
XXXX OF SALE, ASSIGNMENT AND ASSUMPTION AGREEMENT dated April
1, 2004 between Luther Needlesafe Products, Inc., a California corporation
("Seller"), and The Med-Design Corporation, a Delaware corporation ("Buyer").
W I T N E S S E T H:
-------------------
WHEREAS, by an Asset Purchase Agreement dated as of April 1,
2004 (the "Agreement") between Buyer and Seller and Xxx Xxxxxx, controlling
shareholder of Seller, Seller agreed to sell to Buyer the assets, properties and
rights described and referred to in Section 2.1 of the Agreement and Buyer
agreed to assume certain liabilities and obligations of Seller described and
referred to in Section 2.3 of the Agreement;
WHEREAS, Seller is executing and delivering this instrument
for the purpose of selling and assigning to and vesting in Buyer all of Seller's
right, title and interest in and to the Purchased Assets and Buyer is executing
and delivering this instrument in order to confirm to Seller Buyer's assumption
of the Assumed Liabilities and Obligations;
NOW, THEREFORE, in consideration of the Purchase Price and
other good and valuable consideration, and intending to be legally bound hereby,
the parties hereto agree as follows (capitalized terms used herein and not
otherwise defined herein shall have the meanings ascribed to them in the
Agreement):
1. Seller hereby grants, sells, conveys, assigns, transfers,
sets over to, and vests in Buyer, its successors and assigns, all of Seller's
right, title and interest, legal and equitable, in and to all of the Purchased
Assets, including, without limitation, all of its rights and privileges under or
otherwise in respect of any contracts, commitments, leases and other agreements
that are part of the Purchased Assets to have and to hold the same, including
the appurtenances thereof, unto Buyer, its successors and assigns, forever, to
its and their own proper use and behoof; and Seller hereby warrants title to the
Purchased Assets unto Buyer to the extent represented and warranted in the
Agreement.
2. Buyer hereby assumes and shall hereafter perform, pay and
discharge the Assumed Liabilities and Obligations as set forth and to the extent
provided in the Agreement.
3. Nothing in this instrument, expressed or implied, is
intended or shall be construed to confer upon or give to any person, firm or
corporation other than Seller and Buyer and their respective successors and
assigns any remedy or claim under or by reason of this instrument or any term,
covenant or condition hereof, and all of the terms, covenants, conditions,
promises and agreements contained in this instrument shall be for the sole and
exclusive benefit of Seller and Buyer and their respective successors and
assigns.
A-1
4. Neither the making nor the acceptance of this instrument
shall enlarge, restrict or otherwise modify the terms of the Agreement or
constitute a waiver or release by Seller or Buyer of any liabilities, duties or
obligations imposed upon each of them by the terms of the Agreement, including,
without limitation the representations, warranties, liabilities and obligations
of Buyer and Seller as well as other provisions that the Agreement provides
shall survive the date hereof.
5. This instrument is being executed by Seller and Buyer and
shall be binding upon Seller and Buyer, and their respective successors and
assigns, for the uses and purposes above set forth, and shall be effective as of
the date hereof.
6. This instrument shall be governed by and enforced in
accordance with the laws of the State of California.
IN WITNESS WHEREOF, Seller and Buyer have caused this Xxxx of
Sale, Assignment and Assumption Agreement to be duly executed on the date first
above written.
LUTHER NEEDLESAFE PRODUCTS, INC.
By:____________________________________
Name:
Title:
THE MED-DESIGN CORPORATION
By:____________________________________
Name:
Title:
A-2
EXHIBIT B
FORM OF CONSULTING AGREEMENT
CONSULTING AGREEMENT
--------------------
This Consulting Agreement (the "Agreement") is made on this 1st day of
April, 2004, by and between The Med-Design Corporation, a Delaware corporation
(the "Company"), and Luther Needlesafe Products, Inc., having an address at 0000
Xxxxxxx Xxxx Xxxxx, Xxxxx X, Xxxxx Xxxx, Xxxxxxxxxx 00000 (the "Consultant" or
"Luther Needlesafe").
WHEREAS, the Company has entered into our Asset Purchase Agreement
dated as of April 1, 2004 (the "Purchase Agreement") with Luther Needlesafe and
Xxxxxx X. Xxxxxx ("Xx. Xxxxxx") to purchase assets of Consultant related to
safety Xxxxx needle devices; and
WHEREAS, the Company and the Consultant desire to enter into this
Agreement in order to set forth the terms and conditions pursuant to which the
Consultant will provide consulting services to the Company, and the Consultant
will agree to assign any intellectual property rights that the Consultant
conceives or invents related to the safety Xxxxx needle devices during the term
of this Agreement.
NOW, THEREFORE, in consideration of the covenants and conditions set
forth in this Agreement, the parties, intending to be legally bound, agree as
follows:
1. Consulting Arrangement. The Company hereby retains the Consultant
as consultant to the Company to perform the consulting services in accordance
with the terms and conditions hereinafter set forth.
1.1 Consulting Term. The consulting term (the "Consulting Term") shall
begin on the date hereof shall continue for a period of four (4) years, subject
to the provisions for earlier termination thereof set forth in Section 4 of this
Agreement.
1.2 Duties and Responsibilities.
(a) During the Consulting Term, the Consultant shall provide such
consulting services to the Company as may be reasonably requested from time to
time by the Company relating to the development, improvement, manufacturing,
licensing and sale of the safety Xxxxx needle devices (collectively, the
"Consulting Services"). The Consultant shall at all times during the Consulting
Term be an independent contractor.
(b) During the Consulting Term, the Consultant shall at all times
comply with policies and procedures adopted by the Company for consultants to
the Company, including, without limitation, any procedures and policies adopted
by the Company regarding conflicts of interest.
(c) The Consultant represents to the Company that neither it nor
Xx. Xxxxxx is currently subject or a party to (and agrees that neither it nor
Xx. Xxxxxx will at any time prior to the termination of the Consulting Term
become subject or a party to) any non-competition covenant, non-disclosure
agreement or other agreement, covenant, understanding or restriction which would
B-1
prohibit the Consultant from executing this Agreement and performing fully his
duties and responsibilities hereunder, or which would in any manner, directly or
indirectly, limit or affect the duties and responsibilities which may now or in
the future during the Consulting Term be assigned to the Consultant by the
Company in accordance with this Agreement.
(d) The Consultant will make available the personal consulting
services of Xx. Xxxxxx, Xxxxxx Xxxxxxxxx ("Xx. Xxxxxxxxx"), and Xxxx Xxxx ("Xx.
Xxxx"), for as long as they are employees of or consultants to or otherwise
available to the Consultant. The Consultant will use its best efforts to retain
the personal services of Xx. Xxxxxx, Xx. Xxxxxxxxx and Xx. Xxxx in order to
enable it to perform its services hereunder.
(e) The Company acknowledges and waives any objection to the
consulting services that the Consultant and Xx. Xxxxxx are required to provide
to X. Xxxxx Medical, Inc. pursuant to the Patent Assignment and Consulting
Agreement dated as of April 2, 2001 among the Consultant, Xx. Xxxxxx and X.
Xxxxx Medical, Inc.
1.3 Extent of Service. During the Consulting Term, the Consultant shall
devote such time, attention and energy as is necessary to fulfill its duties and
responsibilities as a consultant under Section 1.2 hereof; provided that it
shall not be required to provide more than 300 hours of Consulting Services in
any 12-month period and no more than 30 hours in any one-month period.
1.4 Consulting Compensation. The Company shall pay the Consultant for
the Consulting Services $100,000 per year, to be paid in monthly in arrears in
installments of $8,333.33 each, due on the same day of each month as the day on
which this Agreement is dated ("Consulting Compensation").
1.5 Out-of-Pocket Expenses. The Company shall reimburse the Consultant
for all of the Consultant's out-of-pocket expenses reasonably incurred by the
Consultant with respect to the Consulting Services after the Company's receipt
of appropriate documentation from the Consultant of such expenses. Expenses will
require advance approval in accordance with the Company's normal policies.
2. Confidential Information, Assignment of Rights and Covenant Not to
Compete.
2.1 Company Confidential Information. The Consultant recognizes and
acknowledges that it has had, and by reason of its services as a consultant
after the date hereof may continue to have, access to confidential information
of the Company, including, without limitation, trade secrets, information
relating to products, research, developments, inventions or other technical data
("Confidential Information"). The Consultant acknowledges that such Confidential
Information is a valuable and unique asset and covenants that neither it nor its
employees, agents or consultants will, during or after the Consulting Term,
disclose any such Confidential Information to any person for any reason
whatsoever (except as the Consultant's duty as a consultant of the Company may
require) without the prior written authorization of the Company, unless such
information is in the public domain through no fault of the Consultant or except
as may be required by law or use any such Confidential Information except for
the purpose of performing Consulting Services hereunder.
B-2
2.2 Third Party Confidential Information. The Consultant recognizes
that it may have received, and during the Consulting Term the Company may
receive, from third parties their confidential or proprietary information
subject to a duty on Luther Needlesafe's or the Company's part to maintain the
confidentiality of such information and to use it only for certain limited
purposes. During the Consulting Term, the Consultant shall hold all such
confidential or proprietary information in confidence and shall not disclose it
to any person or entity or use it except as consistent with the Company's
agreements with such third parties.
2.3 Assignment of Intellectual Property Rights. (a) The Consultant
recognizes that the Confidential Information and Inventions (as defined below)
shall be the sole property of the Company, and the Company shall be the sole
owner of all Rights (as defined below). The Consultant hereby assigns to the
Company all Rights that he may have or acquire and any other rights that it may
have pertaining to the Confidential Information or Inventions.
(b) For purposes of this Agreement, the term "Rights" means all
patents, trademarks, service marks and copyrights, and other rights pertaining
to Confidential Information, Inventions, or both. In addition, for purposes of
this Agreement, the term "Inventions" means all discoveries, developments,
designs, improvements, inventions, formula, processes, techniques, know-how,
negative know-how, data, research, and technical data (whether or not patentable
or registrable under patent, copyright or similar statutes and including all
rights to obtain, register, perfect, and enforce those proprietary interests)
that are developed, made, conceived or acquired during the term of this
Agreement and are related to or useful in the Company's present or future
business related to the marketing, development, production or sale of safety
Xxxxx needle devices.
2.4 Enforcement of Intellectual Property Rights. (a) The Consultant
agrees to assist the Company or any person designated by it in every proper way
(but at the Company's expense) to obtain and from time to time enforce the
Rights, including registrations and applications for patents, copyrights, mask
work rights, or other intellectual property rights, in any and all countries.
(b) The Consultant agrees to execute all documents for use in
applying for, registering, obtaining, and enforcing the Rights as the Company
may desire, together with any assignments of such Rights to the Company or
persons designated by it. The Consultant agrees that its obligation to assist
the Company or any person designated by it in obtaining and enforcing the Rights
shall continue beyond the cessation of his engagement as a consultant by the
Company, but the Company shall compensate Consultant at a reasonable rate after
the cessation of this engagement for time actually spent at the Company's
request for such assistance. If the Company is unable, after reasonable effort,
to secure the signature of the Consultant or any employee, agent or consultant
of the Consultant on any document or documents needed to apply for or enforce
any Rights, whether because of his physical or mental incapacity or for any
other reason whatsoever, the Consultant irrevocably designates and appoints the
Company and its duly authorized officers and agents as his agents and
attorneys-in-fact to act for and in his behalf and stead in the execution and
filing of any such application and in furthering the application for and
enforcement of Rights, with the same legal force and effect as if such acts were
performed by the Consultant.
B-3
2.5 Disclosure of all Inventions. The Consultant agrees to promptly
disclose to the Company all Inventions made or conceived or reduced to practice
or learned by the Consultant, either alone or jointly with others during the
period of its engagement hereunder. To facilitate the complete and accurate
disclosures described above, the Consultant shall maintain complete written
records of all Inventions and all work, study, and investigation done by the
Consultant during the Consulting Term, which records shall be the Company's
property.
2.6 Agreement with Employees, etc. The Consultant agrees to maintain
agreements with its employees and consultants performing services hereunder
whereby they agree to be bound by the provisions of Section 2.1 though 2.5
hereof and to provide copies of such agreements to the Company upon its request.
3. Equitable Relief.
3.1 The Consultant acknowledges that the restrictions contained in
Sections 2.1 through 2.5 hereof are reasonable and necessary to protect the
legitimate interests of the Company that the Company would not have entered into
this Agreement in the absence of such restrictions, and that any violation of
any provision of those Sections may result in irreparable injury to the Company.
3.2 The Consultant agrees that the Company shall be entitled to
preliminary and permanent injunctive relief, which rights shall be cumulative
and in addition to any other rights or remedies to which the Company may be
entitled. In the event that any of the provisions of Sections 2.1 through 2.5
should ever be adjudicated to exceed the time or other limitations permitted by
applicable law in any jurisdiction, then such provisions shall be deemed
reformed in such jurisdiction to the maximum time, geographic, product or
service, or other limitations permitted by applicable law.
4. Termination.
4.1 Resignation. The Consultant's engagement as a Consultant hereunder
shall terminate immediately upon (a) its resignation or (b) the unavailability
of both Xx. Xxxxxx and Xx. Xxxxxxxxx and of any other persons qualified to
perform the services requested by the Company hereunder. In the event the
Consultant's engagement terminates under clause (a) or (b) above, the Consultant
will receive the Consulting Compensation only through the date of termination.
4.2 Cause. The Company may immediately terminate the Consultant's
engagement as a Consultant hereunder for Cause. For the purposes of this
Agreement, the Company shall have "Cause" to terminate the Consultant's
engagement hereunder upon the Consultant's (1) consistent failure, refusal, or
neglect to perform and discharge its duties and responsibilities in accordance
with this Agreement; (2) material breach of any of the provisions of Section 2
of this Agreement or of the Purchase Agreement; (3) misconduct that is or may be
materially injurious to the Company or the Company's business; (4) conviction
of, or plea of no contest to, a felony, or conviction of, or a plea of no
contest to, a misdemeanor involving the personal dishonesty of the Consultant or
any persons performing services hereunder on its behalf; (5) theft or
misappropriation of the Company's funds or assets; or (6) maintaining an
undisclosed, unauthorized conflict of interest in the discharge of duties owed
to the Company. In the event of termination of the Consultant for Cause, the
Consultant will receive its Consulting Compensation only through the date of
termination.
B-4
4.3 Date of Termination. The term "date of termination" shall mean (i)
if the Consultant's engagement is terminated by resignation under Section 4.1,
the date of resignation or (ii) for any other reason, the date on which such
termination is to be effective pursuant to the notice of termination given by
Company to Consultant terminating the consulting relationship.
5. Survival. Notwithstanding the termination of the Consulting Term
under Section 4 hereof, the Consultant's obligations under Section 2 hereof
shall survive and remain in full force and effect, and the provisions contained
in Sections 3 and 6 through 10 hereof shall likewise continue in force.
6. Governing Law. This Agreement shall be governed by and interpreted
under the laws of the State of California, without giving effect to the
principles of conflicts of law thereof.
7. Notices. All notices and other communications required or permitted
hereunder or necessary or convenient in connection herewith shall be in writing
and shall be deemed to have been given when hand delivered or mailed by
registered or certified mail, as follows (provided that notice of change of
address shall be deemed given only when received):
If to the Company, to:
The Med-Design Corporation
0000 Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attention: President
Fax: 000.000.0000
With a required copy to:
Xxxxxx X. Xxxxxxxxxxx, III
Xxxxxxxxxxx & Xxxxxx
000 X. Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Fax: 000.000.0000
If to the Consultant, to:
Luther Needlesafe Products, Inc.
0000 Xxxxxxx Xxxx Xxxxx, Xxxxx X
Xxxxx Xxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
B-5
with a required copy to:
Xxxxxxx Xxxxx
Xxxx & Xxxxx, LLP
00000 Xxx Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxx, XX 00000
Fax: (000)-000-0000
or to such other names or addresses as the Company or the Consultant, as the
case may be, shall designate by notice to each other person entitled to receive
notices in the manner specified in this Section.
8. Contents of Agreement; Amendment and Assignment.
8.1 This Agreement, together with the Purchase Agreement, supersedes
all prior agreements and sets forth the entire understanding between the parties
hereto with respect to the subject matter hereof. This Agreement may not be
changed, modified, extended or terminated except upon written amendment executed
by the Consultant and approved by the board of directors of the Company and
executed on behalf of the Company by a duly authorized officer. Without
limitation of the foregoing, the Consultant and the Company acknowledge that the
effect of this provision is that no oral modifications of any nature whatsoever
to this Agreement shall be permitted.
8.2 All of the terms and provisions of this Agreement shall be binding
upon and inure to the benefit of and be enforceable by the respective heirs,
executors, administrators, legal representatives, successors and assigns of the
parties hereto, except that the duties and responsibilities of the Consultant
hereunder are of a personal nature and shall not be assignable or delegable in
whole or in part by the Consultant.
9. Remedies Cumulative; No Waiver. No remedy conferred upon the
Company by this Agreement is intended to be exclusive of any other remedy, and
each and every such remedy shall be cumulative and shall be in addition to any
other remedy given hereunder or now or hereafter existing at law or in equity.
No delay or omission by the Company in exercising any right, remedy or power
hereunder or existing at law or in equity shall be construed as a waiver
thereof, and any such right, remedy or power may be exercised by the Company
from time to time and as often as may be deemed expedient or necessary by the
Company in its sole discretion.
10. Miscellaneous. All section headings are for convenience only. This
Agreement may be executed in counterparts, each of which is an original. It
shall not be necessary in making proof of this Agreement or any counterpart
hereof to produce or account for any of the other counterparts.
B-6
IN WITNESS WHEREOF, the undersigned, intending to be legally bound,
have executed this Consulting Agreement as of the date first above written.
THE MED-DESIGN CORPORATION
By:________________________________
Name:
Title:
LUTHER NEEDLESAFE PRODUCTS, INC.
By: __________________________________
Name:
Title:
B-7
EXHIBIT C
FORM OF SUBLICENSE AGREEMENT
----------------------------
SUBLICENSE AGREEMENT
--------------------
This Agreement made as of this 1st day of April, 2004, by and between
Luther Needlesafe Products, Inc (hereinafter "Luther"), a California
corporation, Xxxxxx Xxxxxx, an individual living in California (hereafter "Xx.
Xxxxxx") and The Med-Design Corporation (hereinafter "Med-Design"), a Delaware
corporation.
WHEREAS, Luther, by reason of being successor of Luther Research
Partners, L.L.C., has a royalty-free, exclusive, perpetual worldwide license
under U.S. Patent No. 6,585,704, issued July 1, 2003, to X. Xxxxx Medical Inc.
(hereinafter "the Tip Protector Patent"), as evidenced by a "Patent Assignment
and Consulting Agreement", dated April 2, 2001, by and among Luther Research
Partners, L.L.C. and Xxxxxx Xxxxxx and X. Xxxxx Medical Inc. (hereinafter "the
Patent Agreement");
WHEREAS, Med-Design is desirous of acquiring sublicense rights from
Luther, as licensee relative to the Tip Protector Patent under the Patent
Agreement;
WHEREAS, Luther is agreeable to sublicensing all of its license rights
to Med-Design under the Patent Agreement and X. Xxxxx Medical Inc has consented
to the sublicense under this Agreement;
NOW THEREFORE, in and consideration of the mutual covenants and
agreements set forth hereinafter, and in consideration of the consideration set
forth in the Asset Purchase Agreement dated April 1, 2004 between the parties
hereto, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties agree as follows:
1. Luther hereby sublicenses to Med-Design all of its rights as
licensee under the Patent Agreement, including a royalty-free, perpetual
worldwide license under the Tip Protector Patent to make, have made, import, use
and sell and otherwise dispose of safety Xxxxx type needles of the type Luther
has been making, using and/or selling before the date of this Sublicense
Agreement. The exclusive license under this Sublicense Agreement shall be
irrevocable to Med-Design.
2. Luther and Xx. Xxxxxx represent, warrant and covenant that they will
perform the obligations under the Patent Agreement to maintain its license
rights in force and maintain the Tip Protector Patent, if X. Xxxxx Medical Inc.
elects not to maintain the Tip Protector Patent, in order to maintain this
sublicense to Med-Design. Luther and Xx. Xxxxxx recognize that revocation of
this sublicense to Med-Design for any reason will cause irreparable harm to
Med-Design, and, accordingly, Luther and Xx. Xxxxxx, jointly and severally,
shall be liable for damages, attorney's fees of Med-Design and other costs in
Med-Design seeking restitution for such loss of its sublicense rights. Luther
and Xx. Xxxxxx hereby agree to enforce against X. Xxxxx Medical Inc all of their
rights under the Patent Agreement and X. Xxxxx Medical Inc's Consent to this
Sublicense Agreement necessary to protect and preserve Med-Design's rights
hereunder and irrevocably appoint Med-Design their attorney-in-fact to enforce
such rights.
C-1
3. This sublicense shall continue for the life of the Tip Protector
Patent.
4. The sublicense granted herein may be assigned by Med-Design and
Med-Design may grant sublicenses of its rights.
5. This Sublicense Agreement may not be modified or amended except by a
writing duly signed by the parties hereto.
6. This Sublicense Agreement shall be construed in accordance with the
laws of the State of California.
7. This Agreement shall be binding upon and insure to the benefit of
the parties hereto and their respective heirs, successors and assigns.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first set forth above.
Luther Needlesafe Products, Inc.
By:___________________________
Name
Title
Xxxxxx X. Xxxxxx
By:___________________________
Xxxxxx X. Xxxxxx
The Med-Design Corporation
By:___________________________
Name
Title
C-2
EXHIBIT D
FORM OF ESCROW AGREEMENT
ESCROW AGREEMENT
This Escrow Agreement (this "Agreement") is made as of April 1, 2004,
by and among The Med-Design Corporation, a Delaware corporation ("Buyer"),
Luther Needlesafe Products, Inc., a California corporation ("Seller"), Xxxxxx X.
Xxxxxx ("Xx. Xxxxxx") and Xxxx & Xxxxx, LLP ("Escrow Agent").
WHEREAS, Seller, Buyer and Xx. Xxxxxx have entered into the Asset
Purchase Agreement dated as of April 1, 2004 ("Purchase Agreement"), pursuant to
which Buyer has agreed to pay the sum of $2,000,000 (the "Escrowed Funds") to
the Escrow Agent which amount constitutes part of the Purchase Price due under
the Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises of the parties herein contained, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. Establishment of Escrow. The parties hereby designate the Escrow
Agent's client trust account established for the purpose of holding the Escrowed
Funds as the escrow account for the purposes of this Agreement (the "Escrow
Account"). Upon Closing under the Purchase Agreement, Buyer shall send by wire
transfer or overnight mail to the Escrow Agent the Escrowed Funds made payable
Xxxx & Xxxxx, LLP Client Trust Account, FBO The Med-Design Corporation and
Luther Needlesafe Products, Inc. Upon receipt, the Escrow Agent shall cause the
Escrowed Funds in the Escrow Account to be deposited in the Escrow Account.
Notwithstanding the foregoing, the Escrowed Funds will be invested separately
from other funds in such Client Trust Account.
2. Distribution and Investment.
2.1 Purpose of Escrow. This Escrow is established for the sole
purpose of providing a source of funds to secure the indemnification obligations
of Seller Parties under Article 8 of the Purchase Agreement.
2.2 Disbursement of Escrowed Funds.
(a) Interest earned on the Escrowed Funds may be disbursed by
the Escrow Agent from time to time to Seller as directed by it or may be held as
part of the Escrowed Funds.
(b) In the event of the assertion by Buyer of a right to
indemnification under Article 8 of the Purchase Agreement, the Escrowed Funds
shall be disbursed in accordance with the written instructions of Seller and
Buyer or, if the Seller and Buyer do not agree, the Escrowed Funds shall be
disbursed in accordance with the decision of an arbitrator pursuant to Section
10.7 of the Purchase Agreement. In no event shall the Escrowed Funds be
disbursed by the Escrow Agent except as expressly provided in this Section 2.2.
D-1
(c) In the event that on the first anniversary of the Closing
Date, there has been no claim for indemnification made by Buyer or all claims
for indemnification by Buyer have been theretofore resolved, the Escrow Agent
shall disburse to Seller the sum of $1,000,000 less the amount, if any, of any
theretofore paid from the Escrowed Funds on account of claims for
indemnification.
(d) In the event that on the second anniversary of the Closing
Date, there has been no claim for indemnification by Buyer or all claims for
indemnification by Buyer have been theretofore resolved, the Escrow Agent shall
disburse to Seller the remaining Escrowed Funds.
2.3 Acceptable Investments. The Escrow Agent shall cause the
Escrowed Funds to be invested only in insured bank accounts, obligations of the
United States Treasury, and investment grade debt obligations for which there is
an established securities market, provided such debt obligations have a rating
of AAA by Xxxxx'x Inc. or Standard & Poor's rating services. All such investment
shall be held in the name of the Escrow Agent and shall be held separate and
apart from any other escrow or other funds of the Escrow Agent. The Escrow Agent
shall provide to Seller and Buyer monthly statements as furnished by Xxxxxxx
Xxxxx or other depositary of the Escrowed Funds.
3. The Escrow Agent.
3.1 Escrow Fee. The Escrow Agent shall receive a fee of $1,000 per
year for each year that this Agreement is in effect, such amount to be borne
equally by Buyer and Seller.
3.2 Indemnifications. The parties hereto acknowledge and agree that
the Escrow Agent (a) shall be obligated only for the performance of such duties
as are specifically set forth in this Escrow Agreement; (b) shall not be
obligated to take any legal or other action hereunder which might in its
judgment involve any expense or liability to it unless instructed otherwise by
Buyer; (c) may rely upon and shall be protected in acting or refraining from
acting upon, any written notice, instructions, certificate, instrument,
statement, request or document furnished to it hereunder and believed by them to
be genuine and to have been signed or presented by the proper person, and the
Escrow Agent shall have no responsibility for determining the accuracy of any
such certificate, and (d) may consult with counsel satisfactory to it.
3.3 Continued Representation of Seller and Xx. Xxxxxx. Each of the
parties hereto also acknowledges and agrees, notwithstanding the duties and
responsibilities of the Escrow Agent hereunder and notwithstanding any other
provision of this Escrow Agreement, that the Escrow Agent has rendered and may
continue to render legal services to, and serve as counsel for Seller and Xx.
Xxxxxx, in all matters.
3.4 Standard of Care. The Escrow Agent shall not be liable to any
one for any action taken or omitted to be taken by it or any of its partners,
officers or employees hereunder except in the case of gross negligence, willful
misconduct or bad faith.
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3.5 Liability for Costs and Expenses. Buyer and Seller each agree to
indemnify the Escrow Agent and hold it harmless without limitation from and
against any loss, liability or out-of-pocket expense of any nature incurred by
the Escrow Agent (as such) arising out of or in connection with this Agreement
or with the administration of its duties hereunder, including but not limited to
legal fees and other costs and out-of-pocket expenses of defending or preparing
to defend against any claim or liability, unless such loss, liability or expense
shall be caused by the Escrow Agent's gross negligence, willful misconduct or
bad faith. Such obligations shall be borne equally by Buyer and Seller.
3.6 Conflicting Demands. In the event that the Escrow Agent receives
conflicting demands or claims from any party respecting payment, distribution or
delivery of the Escrowed Funds or, except as provided in Section 2.2, if
disbursement instructions are not executed and delivered by all of the parties
to this Agreement, then, notwithstanding any other provision of this Escrow
Agreement, the Escrow Agent may, in its sole discretion, file an interpleader
action or an action in the nature of an interpleader with respect thereto with
Judicial Arbitration and Mediation Service in Los Angeles, California and
deposit the Escrowed Funds with JAMS, or withhold release of the Escrowed Funds
until instructed otherwise by JAMS.
3.7 Resignation. The Escrow Agent may at any time resign as escrow
agent hereunder by giving thirty (30) days prior written notice of resignation
to each of the other parties hereto subject to a successor escrow agent having
been appointed. Prior to the effective date of resignation as specified in such
notice, the parties shall appoint a new Escrow Agent. If they fail to do so, the
Escrow Agent may petition a court for the appointment of a successor escrow
agent.
3.8 Limited Authority and Delegation. The Escrow Agent's duties
shall be determined only with reference to this Escrow Agreement and applicable
laws, and the Escrow Agent is not charged with knowledge of or any duties or
responsibilities in connection with any other document or agreement. The Escrow
Agent shall not be responsible for passing upon the validity, binding effect,
execution or sufficiency of this Escrow Agreement or of any agreement amendatory
or supplemental hereto.
4. Miscellaneous.
4.1 Binding Effect. This Agreement shall be construed under and
governed by the laws of the State of California and shall inure to the benefit
of and be binding upon the successors, assigns, heirs and personal
representatives of the parties hereto.
4.2 Arbitration. Any dispute arising under this Agreement shall be
resolved by a single mutually acceptable arbitrator by JAMS in Los Angeles,
California. If concurrently there exists a dispute under the Purchase Agreement
before JAMS, the same arbitrator shall hear and determine both disputes in a
single consolidated arbitration. The terms of Section 10.7 of the Purchase
Agreement are incorporated herein by this reference. Service of process or
notice to arbitrate on any party in any action arising out of or relating to
this Agreement shall be effective if made in accordance with the provisions of
Section 6 below.
4.3 Capitalized Terms. Any capitalized term not otherwise defined in
this Agreement shall have the same meaning ascribed to such term in the Purchase
Agreement.
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5. Counterparts. This Escrow Agreement may be executed in one or more
counterparts, including electronically transmitted counterparts, all of which
counterparts shall be considered one and the same document.
6. Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be deemed to have been given when
received, if personally delivered or sent by overnight courier service, receipt
required, or three (3) days after being deposited in the U.S. mails for delivery
by registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to Buyer, to:
The Med-Design Corporation: 0000 Xxxxxx Xxxxxx
-------------------------- Xxxxxxx, XX 00000
FAX: (000)000-0000
Attn: Xx. Xxxxx Xxxxxxx
Xxxxxx X. Xxxxxxxxxxx, III
With a copy to: 000 X. Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxxx, XX 00000
FAX: (000)000-0000
If to Seller or Xx. Xxxxxx, to: Xxxxxx Xxxxxxxxx
Luther Needlesafe Products, Inc.: 0000 Xxxxxxx Xxxx Xxxxx, Xxxxx X
-------------------------------- Xxxxx Xxxx, XX 00000
FAX: (000)000-0000
With copy to:
Xxxxxxx X. Xxxxx
Xxxx & Xxxxx, LLP Xxxx & Xxxxx, LLP
00000 Xxx Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
FAX: (000)000-0000
Addresses may be changed by written notice given pursuant to this
Section. Any notice given hereunder may be given on behalf of any party by his
counsel or other authorized representatives.
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IN WITNESS WHEREOF, the parties have caused this Escrow Agreement to be
executed by their duly authorized representatives, as of the date first written
above.
The Med-Design Corporation
By:_________________________________________
Name:
Title:
Luther Needlesafe Products, Inc.
By:_________________________________________
Name: Xxxxxx Xxxxxxxxx
Title: President
____________________________________________
Xxxxxx X. Xxxxxx
Xxxx & Xxxxx, LLP
By:_________________________________________
Name: Xxxxxxx X. Xxxxx
Title: Partner
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