SECOND AMENDMENT TO ASSET PURCHASE AGREEMENT
THIS SECOND AMENDMENT is made as of the 9th day of March, 2001, by and
among Microtek Medical, Inc., a Delaware corporation ("Purchaser"), Deka
Medical, Inc., a Florida corporation ("Seller"), and the stockholders of Seller
set forth on the signature page of this Amendment (collectively, the
"Stockholders").
W I T N E S S E T H:
WHEREAS, Purchaser, Seller and Stockholders entered into that certain Asset
Purchase Agreement dated as of February 9, 2001, as amended by that certain
First Amendment to Asset Purchase Agreement dated as of February 23, 2001 (the
"Purchase Agreement"); and
WHEREAS, the parties hereto desire to amend the Purchase Agreement as
hereinbelow more particularly set forth.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Defined Terms. Initially capitalized terms used in this Amendment which
are not otherwise defined in this Amendment are used with the same meaning
ascribed to such terms in the Purchase Agreement.
2. Amendments.
(a) The Drape Business Closing Date shall occur concurrently with the
date of this Amendment, effective for accounting purposes at 12:01 a.m., March
3, 2001. Collected revenues of the Drape Business from such time to the Drape
Business Closing Date shall be offset against the Drape Business Cash Payment.
(b) The text of Section 2.1(b)(i) of the Purchase Agreement is amended
to read as follows:
"Purchaser shall pay to or for the account of Seller $10,383,000 in
immediately available funds (the "Drape Business Cash Payment"); and"
Section 2.1(b)(ii) is deleted and Purchaser shall not issue to Seller
the Note. Section 2.1(b)(iii) is modified to provide that the Key Employee Note
shall not be issued to all the persons identified in Schedule 2.1(b)(iii) of the
Purchase Agreement due to the failure of certain persons to satisfy the
conditions set forth in such section, and to delete the last person named in
Schedule 2.1(b)(iii). The aggregate principal amount of such Key Employees Note
shall accordingly be reduced from $1.25 million to such amount as shall be
acceptable to Purchaser.
(c) The form of Key Employees Note attached to the Purchase Agreement
at Exhibit 2.1(b)(iii) is hereby substituted with the form of Key Employees Note
attached hereto as Exhibit A and incorporated herein by reference. The terms of
Exhibit A to the Key Employees Note shall be set by Purchaser in its sole
discretion.
(d) The text of Section 2.1(c) of the Purchase Agreement is amended to
read as follows:
The Drape Business Purchase Price shall be decreased by the amount
that Seller's Working Capital (as defined below) transferred to
Purchaser on the Clean-Op Closing Date and the Drape Business Closing
Date (the "Closing Working Capital") is less than $8,500,000 (the
"Baseline Working Capital"). As used herein, the term "Working
Capital" means the sum of the current assets of Seller (to the extent
such current assets are included in the Purchased Assets which are
acquired by Purchaser at either the Clean-Op Closing or the Drape
Business Closing) minus the sum of the Accounts Payable of Seller (to
the extent such Accounts Payable are included in the Assumed
Liabilities (defined in Section 2.2 below) assumed by Seller at the
Clean-Op Closing or Drape Business Closing) as determined in
accordance with Generally Accepted Accounting Principles ("GAAP"). For
purposes of determining Working Capital, (i) the Accounts Receivables
shall be that which arose in the ordinary course to creditworthy
customers and shall not be more than 90 days past due in accordance
with their terms, (ii) the inventory shall be that which is currently
salable or usable in production and shall not exceed 12 months usage
or sales except that Seller may add $650,000 to the amount of
inventory for purposes of calculating the Closing Working Capital so
long as the total amount of inventory after such addition shall not
exceed $5.0 million, (iii) in determining 12 months usage or sales,
the parties will take into consideration calendar year 2000 actual
usage and sales as adjusted for any reasonably verifiable forecasted
increase in sales for the year 2001 or reasonably expected sales for
any new inventory not sold in the year 2000, (iv) for purposes of
determining the market value of finished goods, there shall be a 15%
assumed disposal cost applied to the applicable selling price of
inventory, and (v) for purposes of determining the allocation of
overhead to inventory, the parties will use a method consistent with
the method used by Seller at December 31, 2000. Seller shall deliver
to Purchaser at the Drape Business Closing true, correct and complete
lists of the Accounts Payable, Accounts Receivable and Inventory as of
March 2, 2001. On or before April 16, 2001, the Closing Working
Capital shall be reported in reasonable detail by Purchaser to Seller.
In the event Seller disagrees with Purchaser's determination of the
Closing Working Capital, then Seller shall notify Purchaser in writing
within ten (10) business days after receipt of Purchaser's calculation
of the Closing Working Capital, setting forth in reasonable detail the
basis for such dispute. If Seller does not provide such notice within
such ten (10) business day period, then the determination of the
Closing Working Capital by Purchaser shall be final, binding and
conclusive upon the parties hereto. If Seller does provide such
notice, Purchaser and Seller shall attempt in good faith to reconcile
their differences and any resolution by them as to any disputed
amounts shall be final, binding and conclusive upon each of the
parties hereto. If Purchaser and Seller fail to reach a resolution
within ten (10) business days after Purchaser's receipt of Seller's
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written notice of dispute, Purchaser and Seller shall submit the items
remaining for resolution to KPMG Peat Marwick, LLP ("KPMG"), Jackson,
Mississippi or such other national accounting firm as may be agreed
upon by Purchaser and Seller (the "Independent Accounting Firm") which
shall within thirty (30) business days of submission resolve and
report to Seller and Purchaser upon such remaining disputed items, and
such report shall be final, binding and conclusive upon each of the
parties hereto. Purchaser and Seller agree that the party which claims
the greatest variance in the Closing Working Capital from that finally
determined by the Independent Accounting Firm shall be responsible for
the fees and disbursements of the Independent Accounting Firm in
connection with the resolution of such dispute. If any amounts are due
to Purchaser under this Section 2.1(c), Seller shall pay the
applicable amount due under this Section in immediately available
funds within five (5) days following its determination by the parties
or the Independent Accounting Firm, or at Purchaser's election,
Purchaser may withdraw from the Escrow Fund (as defined below) in the
amount due Purchaser under this Section 2.1(c) together with any
earnings on such amount withdrawn from the Escrow Fund (with such
earnings to compensate Purchaser for the loss of use of funds during
the period of determining the Working Capital Adjustment).
(e) At the Drape Business Closing $1.5 million (the "Escrow Fund") of
the Drape Business Cash Payment shall be paid by Purchaser to the Escrow Agent
named in and to be held under the Escrow Agreement in the form attached hereto
as Exhibit "B" and incorporated herein by reference to secure the payment and
performance by Seller and the Shareholders of their obligations to Purchaser
under the Purchase Agreement, as amended hereby. The Escrow Fund shall be held
in accordance with the Escrow Agreement until the later to occur of (i) the
resolution of the Working Capital adjustment in accordance with Section 2.1(c)
of the Purchase Agreement, (ii) completion of the transition services in
accordance with Section 5.16 of the Purchase Agreement, (iii) eight weeks
following the date hereof, (iv) the date of resolution and satisfaction of any
claims for indemnification of which Purchaser has given Seller a reasonably
detailed notice in accordance with Article 6 hereof prior to the last to occur
of the events described in the preceding clause (i) through (iii).
(f) Seller hereby grants to Purchaser the exclusive right and option
to purchase from Seller all or substantially all of the assets (the "Gel Lite
Assets") of Seller used or held for use by Seller in its gel-filled pad and
cover business (the "Gel Lite Business"). In the event Seller elects to purchase
the Gel Lite Assets, the purchase price of the Gel Lite Assets shall be $200,000
in immediately available funds payable to or for the account of Seller (the "Gel
Lite Purchase Price"). On or before March 12, 2001, Seller shall prepare and
deliver to Purchaser an addendum to the Schedules attached to and forming a part
of the Purchase Agreement and such other schedules, documents and materials with
respect to the Gel Lite Assets and the Gel Lite Business in order that the
representations and warranties of Seller contained in the Purchase Agreement
shall remain true, correct and complete as though the Gel Lite Business was
included within the Drape Business and the Gel Lite Assets were included within
the Purchased Assets. Purchaser shall have the right to purchase the Gel Lite
Assets by giving notice to Seller within two weeks after Purchaser's receipt of
such disclosures from Seller. In the event Purchaser does purchase the Gel Lite
Assets from Seller, then the Gel Lite Assets will be deemed part of the
Purchased Assets (and Schedule 1.2 shall be modified so that such assets shall
not be deemed Excluded Assets), there shall be no Working Capital adjustment
with respect to the Gel Lite Business as provided in Section 2.1(c) of the
Purchase Agreement, all representations and warranties made by Seller in the
Purchase Agreement with respect to the Drape Business shall be deemed to be made
by Seller with respect to the Gel Lite Business, Seller and the Shareholders
shall have the same indemnification obligations with respect to the Gel Lite
Business that it has or they have in the Purchase Agreement as though the Gel
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Lite Business was the Drape Business, and Seller and Purchaser shall execute and
deliver appropriate documents for the consummation of the purchase and sale of
the Gel Lite Assets as provided in Articles 7 and 8 with respect to the Drape
Business on or before two weeks after Purchaser's receipt of the disclosures
from Seller described above.
(g) To the extent that Seller has not caused the 1999 Audited
Financial Statements to be completed and delivered to Purchaser prior to the
Drape Business Closing, Seller shall cause same to be completed and delivered to
Purchaser as soon as possible after the Drape Business Closing and in no event
later than May 4, 2001.
(h) Section 5.16(b) of the Purchase Agreement is amended by deleting
the cost per week for the transition services provided for therein for Columbus
at $7,000 per week and for Jacksonville at $5,000 per week, and inserting a
total maximum payment obligation of $106,000 by Purchaser to Seller for all
transition services set forth in such Section 5.16(b) to be provided by Seller
to Purchaser, and to provide that such services shall be made available by
Seller to Purchaser until at least April 30, 2001 unless otherwise agreed by
Seller and Purchaser. The payment for the transition services shall be payable
weekly in advance and shall equal, subject to the maximum set forth above, the
overhead expenses of Seller in maintaining transitional operations as reasonably
requested by Purchaser in Seller's facilities in Jacksonville, Florida and
Columbus, Mississippi.
(i) Schedule 1.2 of the Purchase Agreement is hereby amended by adding
to such Schedule the following:
"7. Exclusive Distributorship Agreement dated May 5, 2000 between
Seller and Worldwide Innovations & Technologies, Inc. (the "Rad Pad
Agreement").
(j) Schedule 3.7 of the Purchase Agreement is hereby deleted and
Exhibit "C" attached hereto and incorporated herein by reference is inserted in
lieu thereof.
(k) Schedule 3.16 of the Purchase Agreement is hereby amended by
adding to the Drape Business Agreements appearing in such schedule the Rad Pad
Agreement.
(l) Section 6.5 of the Purchase Agreement is hereby amended by
deleting the term "Note" appearing therein and inserting in lieu thereof the
term "Escrow Fund".
3. Miscellaneous. Except as modified and amended hereby, the parties
hereto adopt and ratify the Purchase Agreement without further modification or
amendment. This Amendment may be executed in any one or more counterparts, each
of which shall be deemed an original but all of which shall together constitute
one and the same agreement.
[Remainder of page left blank intentionally; Signatures contained on
following page]
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IN WITNESS WHEREOF, the parties have executed this Amendment as of the
day and year first above written.
PURCHASER:
MICROTEK MEDICAL, INC.
By:
-------------------------------------
Title:
----------------------------------
SELLER:
DEKA MEDICAL, INC.
By:
-------------------------------------
Title:
---------------------------------
[signatures continued on following page]
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STOCKHOLDERS:
-----------------------------------------
Xxxxxx X. Xxxxxx
-----------------------------------------
Xxxxxxxxx X. Xxxxxx
PNC Capital Corp.
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
South Atlantic Private Equity Fund IV,
Limited Partnership
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
South Atlantic Private Equity Fund IV
(QP), Limited Partnership
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
Kitty Hawk Capital Limited Partnership,
III
By: Kitty Hawk Partners Limited
Partnership, III, the General
Partner
By:
--------------------------------------
Xxxxxx X. Xxxxxxxxx, Xx.,
General Partner
Wood Street Partners II
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
6
Exhibit A
Key Employee Note
See attached.
7
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
ANY STATE SECURITIES ACTS OR LAWS, AND HAVE BEEN ISSUED AND SOLD IN RELIANCE
UPON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SUCH ACTS AND LAWS,
INCLUDING BUT NOT LIMITED TO THE EXEMPTION CONTAINED IN SECTION 4(2) OF THE
SECURITIES ACT OF 1933. THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED UNLESS A
REGISTRATION STATEMENT HAS BECOME AND IS THEN EFFECTIVE WITH RESPECT TO SUCH
SECURITIES OR ISOLYSER HAS RECEIVED AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO ITS COUNSEL, TO THE EFFECT THAT THE PROPOSED SALE OR TRANSFER IS
EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933 AND ALL APPLICABLE
STATE SECURITIES ACTS AND LAWS.
CONTINGENT SUBORDINATED CONVERTIBLE DEBENTURE
OF
ISOLYSER COMPANY, INC.
$ ____________, 2001
--------------------------
ISOLYSER COMPANY, INC., a Georgia corporation ("Isolyser"), for value
received, hereby promises to pay to the order of _____________________, a
resident of _____________ (the "Holder"), the sum of $________________, without
interest, in accordance with and subject to each of the provisions set forth
herein. No interest shall accrue on the principal or any other amounts under
this Debenture. The full principal amount of this Debenture shall be due and
payable on the fourth (4th) anniversary of the date hereof (such anniversary,
the "Maturity Date").
The following is a statement of the rights of the Holder and the conditions
to which this Debenture is subject, and to which the Holder hereof, by the
acceptance of this Debenture, acknowledges and accepts:
1. Contingency. This Debenture is being given in connection with that
certain Asset Purchase Agreement, by and among Deka Medical, Inc. ("Deka"), the
Holder and Microtek Medical, Inc. ("Microtek"), dated as of ____________, 2001
(the "Asset Purchase Agreement"). Any and all payments under this Debenture, and
the conversion of any portion of this Debenture into Conversion Shares (as
defined below), shall be contingent upon the achievement of the sales revenue
goals attached as Exhibit "A" hereto and Holder's employment with Microtek from
the date hereof on and through the Maturity Date.
2. Prepayment.
2.1 Right to Prepay. Isolyser may at any time and from time to time
prepay the stated principal amount of the Debenture or any portion thereof as
hereinbelow set forth. The amount prepaid (the "Prepaid Face Amount") shall
equal such Prepaid Face Amount discounted to its present value on the Prepayment
Date (as defined below) using a discount rate of 10% per year (the "Discount
Rate") from the Maturity Date (such discounted amount being referred to herein
as the "Discounted Prepaid Face Amount").
8
2.2 Obligation to Prepay. Subject to the other terms and provisions of
the Debenture, Isolyser shall prepay the Prorated Portion (as defined below) of
the stated principal amount of the Debenture in the event Holder's employment
with Microtek is terminated prior to the Maturity Date either (i) by Microtek
without cause (as the term cause is defined in any written employment agreement
between Microtek and Holder) or (ii) due to the death or disability of Holder.
The term "Prorated Portion" means the period of time Holder was employed by
Microtek after the date of this Debenture as compared to four years. The amount
required to be paid in satisfaction of this Debenture in the event of such
prepayment shall equal the Prorated Portion of the stated principal amount of
the Debenture discounted to its present value on the Prepayment Date using the
Discount Rate from the Maturity Date (also referred to herein as the Discounted
Prepaid Face Amount). Any prepayment under this Section 2.2 shall occur on a
date selected by Isolyser as provided in Section 2.3 which shall be not later
than thirty (30) days after the date of such termination of employment.
2.3 Notice. At least fifteen (15) days prior to the desired date of
any prepayment of the Debenture (the "Prepayment Date"), written notice shall be
delivered to the Holder at its address last shown on the records of Isolyser,
notifying the Holder of the election of Isolyser to prepay the Debenture, in
whole or in part, specifying in such notice the Prepayment Date, and stating the
Prepaid Face Amount and the Discounted Prepaid Face Amount (such notice is
hereinafter referred to as the "Prepayment Notice").
2.4 Surrender of Debenture. On or prior to the Prepayment Date, unless
Holder shall have converted the Debenture as provided in Section 4 below, the
Holder shall surrender this Debenture, in the manner and at the place designated
in the Prepayment Notice, and thereupon the Discounted Prepaid Face Amount shall
be payable to the order of the Holder and the Debenture, if prepaid in full,
shall be canceled. In the event the Debenture is prepaid in part, a new
debenture shall be issued to Holder to reflect the partial prepayment and
reduction of principal.
3. Events of Default. If any of the events specified in this Section 3
shall occur (an "Event of Default"), the entire principal and unpaid accrued
interest hereon shall become immediately due and payable if the Holder gives
notice to Isolyser of its election to declare a default hereunder as a result of
any of the following:
(i) Isolyser fails to pay the unpaid principal on any date
due, and does not cure such failure within thirty (30) days of receipt
of written notice of such nonpayment; or
(ii) Isolyser makes an assignment for the benefit of
creditors, or any proceeding is instituted by or against Isolyser
alleging that it is bankrupt or insolvent; provided however, that if
any such proceeding is instituted against Isolyser by a third party,
such event shall not constitute an Event of Default if dismissed within
ninety (90) days.
4. Conversion.
4.1 Election by Holder. The Holder has the right on the Maturity Date
to convert this Debenture, in whole or in part, and in accordance with the
provisions of Subsection 4.2 hereof, into fully paid and nonassessable shares of
the Common Stock of Isolyser (the "Common Stock"). The number of shares of
Common Stock into which this Debenture may be converted (the "Conversion
Shares") on the Maturity Date shall be determined by dividing (a) the principal
amount of the Debenture to be converted at the Maturity Date by (b) the
9
Conversion Price. As used herein, the term "Conversion Price" shall mean a price
of $2.50, which Conversion Price shall be subject to adjustment as set forth in
Section 5. In addition, in the event of a Change of Control (as defined in
Isolyser's 1999 Long Term Incentive Plan), the Holder shall have the right to
convert the Debenture in accordance with the terms hereof into Conversion
Shares, except the principal face amount hereof to be converted shall be reduced
to its present value as of the date of such conversion using the Discount Rate.
4.2 Conversion Procedure. At least fifteen (15) days prior to the
Maturity Date, the Holder shall deliver to Isolyser written notice in the form
attached hereto as Exhibit "B" (the "Conversion Notice"), stating the principal
amount of the Debenture desired to be converted and the number of resulting
Conversion Shares. Upon its receipt of the Conversion Notice, Isolyser, at its
option, may provide to the Holder as a condition to Isolyser's obligations
hereunder, such disclosures of material, nonpublic information as may be
necessary or desirable in the discretion of Isolyser for Isolyser to comply with
any applicable federal or state securities laws, rules, or regulations, all of
which information shall be held and used by Holder according to any
confidentiality and nondisclosure obligation or provisions required by Isolyser.
On or prior to the receipt of any Conversion Shares, the Holder shall surrender
this Debenture, in the manner and at the place designated by Isolyser, and
thereupon the Conversion Shares shall be issued to the Holder and the Debenture,
if converted in full, shall be canceled. In the event only a portion of the
Debenture is converted, the remainder of the principal amount of the Debenture
shall be paid according to the terms hereof. Any conversion of the Debenture
shall be deemed to have been made immediately prior to the close of business on
the date of Holder's surrender of this Debenture and its receipt of the
Conversion Shares, and the person or persons entitled to receive the Conversion
Shares shall be treated for all purposes as the record holder or holders of such
Conversion Shares as of such date.
4.3 No Fractional Shares. No fractional shares of Common Stock shall
be issued upon conversion of this Debenture. Upon conversion of this Debenture
and the proper issuance of the Conversion Shares, Isolyser shall be forever
released from all its obligations and liabilities under this Debenture to the
extent of the Conversion Face Amount.
5. Conversion Price Adjustments.
5.1 Adjustments for Stock Splits and Subdivisions. In the event
Isolyser should at any time or from time to time after the date of issuance
hereof fix a record date for the effectuation of a split or subdivision of the
outstanding shares of Common Stock or the determination of holders of Common
Stock entitled to receive a dividend or other distribution payable in additional
shares of Common Stock or other securities or rights convertible into, or
entitling the holder thereof to receive directly or indirectly, additional
shares of Common Stock (hereinafter referred to as "Common Stock Equivalents")
without payment of any consideration by such holder for the additional shares of
Common Stock or the Common Stock Equivalents (including the additional shares of
Common Stock issuable upon conversion or exercise thereof), then, as of such
record date (or the date of such dividend distribution, split or subdivision if
no record date is fixed), the Conversion Price of this Debenture shall be
appropriately decreased so that the number of shares of Common Stock issuable
upon conversion of this Debenture shall be increased in proportion to such
increase of outstanding shares. If the Conversion Price is adjusted under this
Section 5.1 but the dividend distribution, split or subdivision which was the
basis for such adjustment is ultimately abandoned by Isolyser, then the
Conversion Price shall be readjusted to offset the effect of such previous
adjustment.
5.2 Adjustments for Reverse Stock Splits. If the number of shares of
Common Stock outstanding at any time after the date hereof is decreased by a
combination of the outstanding shares of Common Stock, then, following the
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record date of such combination, the Conversion Price for this Debenture shall
be appropriately increased so that the number of shares of Common Stock issuable
on conversion hereof shall be decreased in proportion to such outstanding
shares.
5.3 Reservation of Stock Issuable upon Conversion. Isolyser shall at
all times reserve and keep available out of its authorized but unissued shares
of Common Stock such number of its shares of Common Stock as shall from time to
time be sufficient to effect the full conversion of the Debenture.
6. Subordination.
6.1 Definitions. "Senior Indebtedness" means (i) Isolyser's existing
outstanding indebtedness and credit facilities (excluding any trade
indebtedness) ("Existing Indebtedness"), including, without limitation, (A) any
and all obligations, liabilities and indebtedness, whether in respect of
principal, interest (including without limitation interest accruing after the
filing of a petition, action or proceeding by or against Isolyser pursuant to
any bankruptcy law, whether or not the claim for such interest would be allowed
as a claim in such proceeding), premium, fees, expenses, reimbursement
obligations, indemnities or other amounts, of Isolyser, whether contingent or
mature, now existing or hereafter arising or advanced, under and pursuant to
that certain Amended and Restated Credit Agreement, dated as of August 30, 1996,
between, among others, Isolyser and The Chase Manhattan Bank, as Agent, as
amended (the "Credit Agreement"), and the other Loan Documents (as defined in
such Credit Agreement), and any modifications, renewals, extensions, amendments,
supplements or restatements of any of the foregoing, and (B) any indebtedness
incurred by Isolyser to replace the loans identified in (A) or constituting an
extension, refinancing or renewal thereof, and (ii) any indebtedness ("Other
Indebtedness") of Isolyser for money borrowed in a bona fide arms length
transaction from any lender which has assets of more than $5 million (except
from officers or directors of Isolyser), created or incurred after the date
hereof (excluding any Existing Indebtedness).
6.2 Agreement to Subordinate. Notwithstanding anything contained in
this Debenture to the contrary, Isolyser hereby covenants and agrees, and each
holder hereof, by its acceptance thereof, likewise covenants and agrees that the
indebtedness evidenced by this Debenture and the payment of the principal
thereof and interest thereon and all other amounts payable under or in
connection with this Debenture (the "Subordinated Indebtedness") shall be
subordinate and subject in right of payment, to the extent and in the manner
hereinafter set forth, to the prior indefeasible payment in full in cash of all
Senior Indebtedness (as hereinafter defined), and that such subordination is for
the benefit of the holders of Senior Indebtedness.
6.3 Distribution on Dissolution, Etc. In the event of any voluntary or
involuntary insolvency or bankruptcy proceedings or any voluntary or involuntary
receivership, liquidation, reorganization or other similar proceedings in
connection therewith, relative to Isolyser or to its creditors, as such, or to
all or any part of its property, or in the event of any voluntary or involuntary
proceedings for liquidation, dissolution or other winding up of Isolyser or any
assignment for the benefit of creditors or marshalling of assets and
liabilities, whether or not involving insolvency or bankruptcy, then the holders
of Senior Indebtedness shall be entitled to receive payment in full in cash of
the principal of and the premium, if any, and interest on and all other amounts
constituting Senior Indebtedness before the holder of this Debenture is entitled
to receive payment or distribution, direct or indirect, of or on account of the
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principal of, or premium or interest, if any, on this Debenture or any other
Subordinated Indebtedness in cash or property (whether by payment, acquisition,
retirement, defeasance, redemption or otherwise) and to that end the holders of
Senior Indebtedness, until payment in full in cash of the principal of and the
premium, if any, and interest on and other amounts constituting Senior
Indebtedness, shall be entitled to receive any payment or distribution of any
kind or character, whether in cash, securities or other property, which may be
payable or deliverable in respect of this Debenture, including any such payment
or distribution which may be payable or deliverable by virtue of any security
for, or by virtue of the provisions of (or any security for) any securities
which are subordinate and junior in right of payment to, this Debenture.
6.4 Default on Senior Indebtedness.
6.4.1 Payment Defaults. Neither Isolyser nor any person on behalf
of Isolyser shall, directly or indirectly, make any payment or
distribution on account of the principal, or premium or interest, if
any, of this Debenture or any other Subordinated Indebtedness (whether
by payment, acquisition, retirement, defeasance, redemption or
otherwise) in cash or property during the existence of a default in
the payment when due (whether at stated maturity or upon acceleration
or mandatory prepayment or on any principal installment payment date
or interest payment date, or otherwise) of any Senior Indebtedness (a
"Payment Default") until the earlier of (i) the date such Payment
Default is cured (if capable of being cured) or waived in writing in
accordance with the terms of such Senior Indebtedness, and (ii) the
date application of this subsection 6.4.1 has been waived in writing
by all holders of Senior Indebtedness (or the trustee or agent on
behalf of such holders) in accordance with the terms of the agreements
or other documents evidencing such Senior Indebtedness, and in the
event of any Payment Default, the Holder shall not (A) ask, demand or
xxx for any payment, distribution or any other remedy in respect of
any claim hereunder, (B) commence, or join with any other creditor in
commencing, any litigation or other proceeding against Isolyser or any
holder of any Senior Indebtedness, nor (C) declare any amount of this
Debenture to be due and payable.
6.4.2 Non-Payment Defaults. Neither Isolyser nor any person on
behalf of Isolyser shall, directly or indirectly, make any payment or
distribution on account of the principal of, or premium or interest,
if any, on this Debenture or any other Subordinated Indebtedness
(whether by payment, acquisition, retirement, defeasance, redemption
or otherwise) in cash or property during the period (a "Deferral
Period") from the date Isolyser receives from any holder or holders of
Senior Indebtedness (or a trustee or agent on behalf of such holder or
holders) in accordance with the terms of such agreements or other
documents evidencing such Senior Indebtedness, a notice of the
existence of any default (other than a Payment Default) with respect
to any Senior Indebtedness (a "Non-Payment Default") until the
earliest of (i) the date such Non-Payment Default is cured (if capable
of being cured) or waived in writing in accordance with the terms of
such Senior Indebtedness, and (ii) the date application of this
subsection 6.4.2 has been waived in writing by all holders of Senior
Indebtedness (or the trustee or agent on behalf of such holders) in
accordance with the terms of the agreements or other documents
evidencing such Senior Indebtedness, and in the event of any
Non-Payment Default, the Holder shall not (A) ask, demand or xxx for
any payment, distribution or any other remedy in respect of any claim
hereunder, (B) commence, or join with any other creditor in
commencing, any litigation or other proceeding against Isolyser or any
holder of any Senior Indebtedness, nor (C) declare any amount of this
Debenture to be due and payable.
6.5 Subordination Not Impaired.
6.5.1 No Impairment. The rights under the subordination
provisions set forth in this Section 6 shall remain in full force and
effect without regard to and without impairment or other effect, and
no present or future holder of Senior Indebtedness shall be prejudiced
in its right to enforce subordination of this Debenture, because of:
(i) any act or failure to act on the part of Isolyser; (ii) any
12
extension or indulgence in respect of any payment or prepayment of any
Senior Indebtedness or any part thereof or in respect of any other
amount payable to any holder of any Senior Indebtedness; (iii) any
amendment, modification or waiver of, or addition or supplement to, or
deletion from, or compromise, release, consent or other action in
respect of, any of the terms of any Senior Indebtedness or the Credit
Agreement or any other agreement which may be made relating to any
Senior Indebtedness; (iv) any exercise or non-exercise of the holder
of any Senior Indebtedness of any right, power, privilege, or remedy
under or in respect of such Senior Indebtedness, the Credit Agreement,
or the subordination provisions set forth in this Section 6, or any
waiver of any such right, power, privilege, or remedy or of any
default in respect of such Senior Indebtedness, the Credit Agreement,
or the subordination provisions contained in this Section 6, or any
receipt by the holder of any Senior Indebtedness of any security, or
any failure by such holder to perfect a security interest in, or any
release by such holder of, any security for the payment of such Senior
Indebtedness; (v) any merger or consolidation of Isolyser or any of
its subsidiaries into or with any other person, or any sale, lease, or
transfer of any or all of the assets of Isolyser or any of its
subsidiaries to any other person; (vi) the absence of any notice to,
or knowledge by, any holder of any claim under this Debenture of the
existence or occurrence of any of the matters or events set forth in
the foregoing subdivisions (i) through (v); or (vii) any other
circumstance.
6.5.2 Waiver. The Holder of this Debenture unconditionally waives
(i) notice of any of the matters referred to in Section 6.5.1; (ii)
all notices which may be required, whether by statute, rule of law or
otherwise, to preserve intact any rights of any holder of any Senior
Indebtedness against Isolyser, including, without limitation, any
demand, presentment and protest, proof of notice of nonpayment under
any Senior Indebtedness or the Credit Agreement, and notice of any
failure on the part of Isolyser to perform and comply with any
covenant, agreement, term, or condition of the Senior Indebtedness or
the Credit Agreement; (iii) any right to the enforcement, assertion,
or exercise by any holder of any Senior Indebtedness of any right,
power, privilege, or remedy conferred in such Senior Indebtedness or
the Credit Agreement, or otherwise; (iv) any requirements of diligence
on the part of any holder of any of the Senior Indebtedness; (v) any
requirement on the part of any holder of any Senior Indebtedness to
mitigate damages resulting from any default under such Senior
Indebtedness or the Credit Agreement; and (vi) any notice of any sale,
transfer or other disposition of any Senior Indebtedness by any holder
thereof.
6.5.3 Continued Effect. The obligations of the Holder of this
Debenture under the subordination provisions contained in this Section
6 shall continue to be effective, or be reinstated, as the case may
be, if at any time any payment in respect of any Senior Indebtedness
or any other payment to any holder of any Senior Indebtedness in its
capacity as such, is rescinded or must otherwise by restore or
returned by the holder of such Senior Indebtedness upon the occurrence
of any litigation or other proceeding, or upon, or as a result of the
appointment of a receiver, intervenor, or any substantial part of its
property, or otherwise, all as though such payment had not been made.
The subordination provisions contained in this Section 6 shall be for
the benefit of all holders of Senior Indebtedness from time to time
outstanding, and each of such holders may proceed to enforce such
provisions either directly against the holder of this Debenture or in
any other manner provided by law and without the need to prove
reliance on the subordination hereof. As used herein, the term
"holders" of any indebtedness shall include any trustee for, or other
authorized representative of, the holders of such indebtedness.
6.6 Further Assurances; Limitation on Actions. Notwithstanding the
subordination provisions of this Section 6, the Holder covenants and agrees to
execute and deliver any other documents, instruments, or certificates which
might reasonably be requested or required by the present or future holder of the
13
Senior Indebtedness, including, without limitation, a separate and independent
Subordination Agreement. The Holder of this Debenture by acceptance hereof
agrees and undertakes that it will not take, obtain or hold (or permit anyone
acting on its behalf to take, obtain or hold) any assets of Isolyser, whether as
administrative, legal or equitable action, or otherwise, in violation of the
provisions of the subordination provisions set forth in this Section 6.
6.7 Obligations Not Impaired. Nothing contained in this Section 6 is
intended or shall impair as between Isolyser, its creditors other than the
holders of Senior Indebtedness, and the Holder of this Debenture, the obligation
of Isolyser, which shall be absolute and unconditional, to pay to the Holder of
the Note the principal on this Debenture, as and when the same shall become due
and payable in accordance with its terms, or to affect the relative rights of
the Holder of this Debenture and creditors of Isolyser other than the holders of
Senior Indebtedness, nor shall anything herein prevent any Holder of this
Debenture from exercising all remedies otherwise permitted by applicable law,
upon default, subject to the rights, if any, under these provisions of the
holders of Senior Indebtedness in respect of cash, property or securities of
Isolyser received upon the exercise of any such remedy.
7. Assignment. Subject to the restrictions on transfer described in Section
9 below, the rights and obligations of Isolyser and the Holder shall be binding
upon and benefit the successors, assigns, heirs, administrators and transferees
of the parties.
8. Waiver and Amendment. Any provision of this Debenture may be amended,
waived or modified only upon the written consent of Isolyser and the Holder.
9. Transfer of Debenture. The Holder shall not make any offer, sale or
other disposition or transfer of this Debenture, except to its estate upon the
death of the Holder. Any transferee of this Debenture shall continue to be bound
by all of the terms, conditions, and provisions set forth herein, and the
Debenture shall bear a legend as to the restrictions on transferability in order
to ensure compliance with state and federal securities laws. In the event of any
such permitted transfer, Isolyser may require as a condition to the completion
of such transfer such investment representations and transfer documents as
Isolyser may reasonably deem appropriate, including without limitation, the
surrender of the Debenture for issue of replacement debentures.
10. [Intentionally Omitted].
11. Notices. All notices, demands or other communications hereunder shall
be in writing and shall be deemed given when delivered personally, mailed by
certified mail, return receipt requested, sent by overnight courier service, or
telecopied (transmission confirmed and a copy sent by personal delivery,
certified mail or overnight courier service) to the following addresses or such
other address as may be designated in writing by either party in accordance with
the terms of this provision:
Holder: ---------------------------------------
---------------------------------------
---------------------------------------
Attn:
---------------------------------
14
With a copy to:
---------------------------------------
---------------------------------------
---------------------------------------
Attn:
---------------------------------
If to Isolyser: Isolyser Company, Inc.
0000 Xxxxxxxxxxxxx Xxxxxxxxx
Xxxxxxxx, Xxxxxxx 00000
Attn: President
With a copy to: Xxxxxx Xxxxxx Xxxxxxx LLP
2800 One Atlantic Center
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Attn: Xxxxxxx X. Xxx, Esq.
IN WITNESS WHEREOF, Isolyser has caused this Contingent Subordinated
Convertible Debenture to be issued as of the date first set forth hereinabove.
ISOLYSER COMPANY, INC.
By:
---------------------------------
Name:
-------------------------------
Its:
--------------------------------
15
Exhibit "A"
Sales Revenue Goals
16
Exhibit "B"
Form of Conversion Notice
Date:
-------------------------------
This Conversion Notice (the "Conversion Notice") is given pursuant to
Section 4.2 of that certain Contingent Subordinate Convertible Debenture, dated
as of __________, 2001, in the principal face amount of $____________________,
from Isolyser Company, Inc. ("Isolyser") (the "Debenture"). Capitalized terms
used in this Conversion Notice and not defined herein shall have the meanings
ascribed to them in the Debenture. The undersigned desires to convert as of the
Maturity Date $______________ (the "Conversion Amount") into that number of
fully paid and nonassessable shares of Common Stock of Isolyser (the "Conversion
Shares") equal to the Conversion Amount divided by the Conversion Price, all as
set forth below.
The undersigned hereby covenants, represents, and warrants to Isolyser
as follows, and acknowledges that each such covenant, representation, and
warranty is material to and intended to be relied upon by Isolyser in its
issuance of the Conversion Shares.
1. The undersigned is acquiring the Conversion Shares solely for the
undersigned's own account for investment purposes and not with a view or
interest of participating, directly or indirectly, in the resale or distribution
of all or any part thereof.
2. The undersigned is a resident of the State of _______________.
3. The undersigned acknowledges that all Conversion Shares acquired by
the undersigned are to be issued and sold to the undersigned without
registration and in reliance upon certain exemptions under the Federal
Securities Act of 1933, as amended, and in reliance upon certain exemptions from
registration requirements under applicable state securities laws.
4. The undersigned will make no transfer or assignment of any of the
Conversion Shares except in compliance with the Securities Act of 1933, as
amended, and any other applicable securities laws.
5. The undersigned consents, agrees, and acknowledges that the
certificate or certificates representing the Conversion Shares will be inscribed
with the following legend, or another legend to the same effect and agrees to
the restrictions set forth therein:
The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or under the
securities laws of any other jurisdiction, in reliance upon exemptions
from the registration requirements of such laws. The shares represented
by this certificate may not be sold or otherwise transferred, nor will
17
an assignee or endorsee hereof be recognized as an owner of the shares
by the issuer unless: (i) a registration statement under the Securities
Act of 1933 and other applicable securities laws with respect to the
shares and the transfer shall then be in effect; or (ii) in the opinion
of counsel satisfactory to the issuer, the shares are transferred in a
transaction which is exempt from the registration requirements of such
laws.
6. The undersigned is aware that no federal or state agency has made
any recommendation or endorsement of the Conversion Shares or any finding in
such Conversion Shares.
7. Neither Isolyser nor any person acting on its behalf has offered the
Conversion Shares to the undersigned by means of general or public solicitation
or general or public advertising, such as by newspaper or magazine
advertisements, by broadcast media, or at any seminar or meeting whose attendees
were solicited by such means.
8. The undersigned has reviewed the periodic reports and proxy
statements filed by Isolyser with the Securities and Exchange Commission ("SEC")
and press releases issued by Isolyser, and acknowledges that Isolyser has made
available to the undersigned the opportunity to ask questions and to receive
answers, and to obtain information necessary to evaluate the merits and risks of
this investment. To the extent Isolyser has provided the undersigned with
certain disclosures of material nonpublic information related to Isolyser, such
information shall be held in the strictest confidence by the undersigned and
shall not be divulged, communicated, used to the detriment of Isolyser, nor used
for the improper benefit of any business, firm, person, partnership or
corporation, or otherwise misused in any manner.
9. The undersigned hereby acknowledges that the Conversion Shares are a
speculative investment. The undersigned represents that the undersigned can bear
the economic risks of such an investment for an indefinite period of time.
10. The undersigned hereby acknowledges and represents that no
commission or other remuneration has been paid or given directly or indirectly
in connection with the offer or sale of the Conversion Shares to the
undersigned.
11. The undersigned has full legal power and authority to execute and
deliver, and to perform the undersigned's obligations under, this agreement and
such execution, delivery and performance will not violate any agreement,
contract, law, rule, decree, or other legal restriction by which the undersigned
is bound.
12. The undersigned shall not sell, transfer, or otherwise dispose of
any of the Conversion Shares without first offering them for purchase to
Isolyser, which shall have the right, at its sole option, to purchase such
Conversion Shares at a price per share equal to the closing price of the Common
Stock of Isolyser as of the close of trading on the date immediately preceding
Isolyser's purchase. A legend to such effect may be placed by Isolyser on the
certificate or certificates representing the Conversion Shares.
13. The undersigned acknowledges that Isolyser is relying upon the
representations and covenants of the undersigned contained herein for the
purpose of complying with federal and state securities laws and for other
purposes, and agrees to indemnify and hold harmless Isolyser, and each of its
18
officers and directors, from and against any and all loss, damage, or liability
(including, without limitation, court costs and reasonable attorney's fees) due
to or arising from a breach of any representation, warranty, or covenant
contained in this Agreement.
The undersigned agrees to surrender the Debenture in the manner and at
the place designated by Isolyser, after which surrender Isolyser shall issue the
Conversion Shares, and the Debenture, if converted in full, shall be cancelled.
In the event only a portion of the Debenture is being converted, Isolyser shall
pay such remaining amount to the undersigned on the Maturity Date. All
Conversion Shares shall be deemed to have been made immediately prior to the
close of business on the date of Holder's surrender of this Debenture and its
receipt of the Conversion Shares, and the person or persons entitled to receive
the Conversion Shares shall be treated for all purposes as the record holder or
holders of such Conversion Shares as of such date.
This Conversion Notice is given as of the date set forth above by the
undersigned.
--------------------------------
Address:
------------------------------
------------------------------
------------------------------
Maturity Date:
---------------------------------------
Conversion Amount: $
---------------------------------
Number of Conversion Shares:
-------------------------
19
Exhibit B
See attached.
20
ESCROW AGREEMENT
THIS ESCROW AGREEMENT ("Escrow Agreement") is made and entered into as
of the ____day of March, 2001, by and among Microtek Medical, Inc., a Delaware
corporation ("Microtek"), Deka Medical, Inc., a Florida corporation ("Deka"),
and SunTrust Bank, as escrow agent (the "Escrow Agent").
WITNESSETH:
WHEREAS, pursuant to a separate Asset Purchase Agreement dated as of
February 9, 2001, as amended (the "Purchase Agreement") between Microtek, Deka
and certain stockholders of Deka, Microtek and Deka wish to establish an escrow
account to secure the obligations of Deka under the Purchase Agreement.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, and intending to be legally bound, the parties
hereto do hereby agree as follows:
ARTICLE I
DEFINITIONS
Unless otherwise defined herein, capitalized terms used in this Escrow
Agreement have the definitions set forth in the Purchase Agreement.
ARTICLE II
THE ESCROW FUND
2.1 Delivery. Simultaneously with the execution hereof, Microtek is
depositing with Escrow Agent the sum of $1,500,000 (the "Escrow Fund") to be
held by Escrow Agent pursuant to the terms of this Escrow Agreement.
2.2 Receipt. Escrow Agent hereby agrees to receive the Escrow Fund from
Microtek and agrees to hold, administer and disburse the Escrow Fund in
accordance with the terms and conditions of this Escrow Agreement and for the
uses and purposes stated herein.
2.3 Investment. Escrow Agent shall, pending the disbursement of the
Escrow Fund pursuant to this Escrow Agreement, invest any cash in the Escrow
Fund in accordance with Microtek's instructions in:
(a) interest bearing savings accounts (the terms of which have no
restrictions as to the date of withdrawal) in a federally insured banking or
thrift institution (including, without limitation, Escrow Agent or any
affiliate);
(b) commercial paper having the highest rating conferred by a
nationally-recognized investment rating agency;
21
(c) money market funds which are investment companies registered under
the Investment Company Act of 1940, including, without limitation, those for
which Escrow Agent or an affiliate acts as investment adviser (including Escrow
Agent's STI Class money market fund); and/or
(d) securities issued or insured by the United States Government or an
agency or instrumentality thereof with a remaining term to maturity of no more
than one year.
Provided, that, all such investments can be liquidated without penalty to cash
promptly in order to allow timely disbursement of cash in accordance with this
Escrow Agreement.
ARTICLE III
PROCEDURES FOR DISBURSEMENT OF THE ESCROW FUND
The following procedures shall govern the distribution of the Escrow
Fund by Escrow Agent.
3.1 Notice of Claims. Subject to Sections 3.2 and 3.3 below, upon
receipt of notice from either Microtek or Deka (the "Notice") that it is
entitled to a payment and the amount thereof, along with a copy of the Notice
sent to the other Party, the Escrow Agent shall, not less than ten days nor more
than 15 days following receipt of such Notice, disburse to the party delivering
such Notice an amount equal to the lesser of (i) the balance thereof in the
Escrow Fund or (ii) the amount specified in the Notice. Any notice shall specify
with reasonable detail the reasons why the requesting party is entitled to such
disbursement.
3.2 Notice of Dispute. Notwithstanding the foregoing, in the event that
either Deka or Microtek objects to the disbursement of any portion of the Escrow
Fund, such objecting party shall so notify Escrow Agent not more than nine (9)
days from the date of the Notice. Any objection shall specify with reasonable
detail the reasons why the objecting party is objecting to the disbursement.
Such a dispute shall be resolved in the manner set forth in Section 3.5 below.
3.3 Uncertainty. In the event that Escrow Agent, in good faith, shall
be in doubt as to what action it should take hereunder, Escrow Agent may, at its
option, refuse to comply with any claims or demands on it or refuse to take any
other action hereunder, so long as such disagreement continues or such doubt
exists; and in any such event, Escrow Agent shall not be or become liable in any
way or to any person for its failure or refusal to act, and Escrow Agent shall
be entitled to continue to so refrain from acting until it has received (a) a
nonappealable court order from a court of competent jurisdiction directing the
disposition of such property, (b) a signed arbitration award in accordance with
Section 3.5 hereof or (c) appropriate written instructions signed by both Deka
and Microtek.
3.4 Time of Essence. The parties agree that time is of the essence
with respect to all deliveries referenced in this Article III.
22
3.5 Resolution of Disputes.
(a) Any dispute between the parties arising out of or relating to this
Escrow Agreement shall be resolved by arbitration in Atlanta, Georgia, in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association ("AAA") in effect at the time the demand for arbitration is filed.
The AAA rules shall govern the enforcement of this Article only to the extent
the rules do not conflict with these express provisions. One arbitrator shall
hear the dispute. Such arbitrator shall be a retired judge or practicing
attorney with at least twenty years of experience in business and commercial
law.
(b) To commence arbitration, Microtek or Deka shall file with the AAA
and serve a demand for arbitration in accordance with the applicable AAA rules.
Any such demand shall include a reasonably detailed description of the facts
forming the basis of the demand and shall specify the relief or remedy sought.
(c) The parties recognize and agree that interstate commerce is
involved, and the parties agree that enforcement of their agreement to arbitrate
and any arbitration award entered pursuant to this agreement to arbitrate shall
be pursuant to the Federal Arbitration Act, 9 U.S.C.ss.1, et. seq., and not
pursuant to any state arbitration statute.
(d) The award shall be final and binding upon the parties, and judgment
may be entered upon it in any court having jurisdiction thereof.
(e) The non-prevailing party in the arbitration proceeding shall pay
the reasonable attorney's fees of the prevailing party in the arbitration and
the cost of all arbitrators' compensation and AAA assessed expenses of the
arbitration. If the arbitrator does not determine that one party is the
prevailing or non-prevailing party, then the parties shall each bear their own
expenses and attorney's fees in any arbitration, and both parties shall equally
bear the cost of all arbitrators' compensation and AAA assessed expenses of the
arbitration.
ARTICLE IV
ESCROW AGENT
4.1 Appointment. Microtek and Deka hereby appoint Escrow Agent to serve
hereunder, and Escrow Agent hereby accepts such appointment and agrees to
perform all duties which are expressly set forth in this Escrow Agreement.
4.2 Compensation. Escrow Agent will be entitled to compensation in
accordance with its customary fee schedule, a copy of which is attached hereto
at Exhibit A. Microtek and Deka shall each pay half of the Escrow Agent's fees.
4.3 Resignation. Escrow Agent may resign at any time upon giving the
other parties hereto 30 days' prior written notice. In such event, the acting
Escrow Agent shall deliver the Escrow Fund and any and all documents relating
thereto then in its possession to a successor Escrow Agent; the successor to
Escrow Agent shall be such person, firm or corporation as shall be mutually
agreed upon by Microtek and Deka. Such resignation shall not be effective until
a successor agrees to act hereunder; provided, however, that if no successor is
23
appointed and acting hereunder within 30 days after such notice is given, Escrow
Agent may pay and deliver the Escrow Fund into a court of competent jurisdiction
and shall have no further responsibility hereunder. Such resignation shall not
deprive the Escrow Agent of the compensation earned prior thereto.
ARTICLE V
LIABILITIES AND INDEMNIFICATION OF ESCROW AGENT
Escrow Agent shall not liable for any damages, or have any obligations
other than the duties prescribed herein in carrying out or executing the
purposes and intent of this Escrow Agreement; provided, however, that nothing
herein contained shall relieve Escrow Agent from liability arising out of its
own willful misconduct or gross negligence. Escrow Agent's duties and
obligations under this Escrow Agreement shall be entirely administrative and not
discretionary. Escrow Agent shall not be liable to any party hereto or to any
third party as a result of any action or omission taken or made by Escrow Agent
in good faith. The parties to this Escrow Agreement shall at their joint expense
(one-half by Microtek and one-half by Deka), indemnify, hold harmless, and
reimburse Escrow Agent and its officers, directors, employees, and agents, from,
against and for, any and all liabilities, costs, fees, claims, damages and
expenses (including reasonable attorneys' fees) Escrow Agent may suffer or incur
by reason of its execution and performance of this Escrow Agreement. In the
event any legal questions arise concerning Escrow Agent's duties and obligations
hereunder, Escrow Agent may consult its counsel and rely without liability upon
written opinions given to it by such counsel.
Escrow Agent shall be protected in acting upon any written notice,
request, waiver, consent, authorization, or other paper or document which Escrow
Agent, in good faith, believes to be genuine and what it purports be.
ARTICLE VI
TERMINATION
This Escrow Agreement shall be terminated (a) upon disbursement or
release of the entire Escrow Fund by the Escrow Agent, (b) by written mutual
consent signed by all parties, (c) upon receipt by Escrow Agent of an
arbitration award to that effect in accordance with Section 3.5 hereof or (d)
upon receipt by Escrow Agent of a nonappealable order to that effect from a
court of competent jurisdiction. This Escrow Agreement shall not be otherwise
terminated.
ARTICLE VII
OTHER PROVISIONS
7.1 Notices. Any notice, demand or request required or permitted to be
given under the provisions of this Agreement shall be in writing, shall be
delivered by personal delivery, overnight delivery service, or certified or
registered mail, and shall be deemed to have been duly delivered and received on
the date of personal delivery or on the date of receipt if sent by overnight
delivery service or mailed by registered or certified mail, postage prepaid and
24
return receipt requested to the addresses set forth below, or to such other
addresses as any party may request in a notice delivered in accordance with this
Section 7.1 to the other parties hereto. Such notice, if mailed, shall also be
sent to a party by electronic transmission to the telecopier number specified
below (or to such other telecopier number for a party as shall be specified by
like notice) and shall be deemed delivered on the date of transmission. Notices
shall be sent to the following addresses:
(a) If to Escrow Agent, at:
SunTrust Bank
00 Xxxx Xxxxx
00xx Xxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Attn: Ms. Xxxxxxx Xxxxxx
Fax: (000) 000-0000
Phone: (000) 000-0000
With required copies to both Deka and Microtek as set forth below in
subsections (b) and (c) below.
(b) If to Deka by mail or facsimile, at:
Deka Medical, Inc.
P. O. Xxx 0000
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: President
Fax: (000) 000-0000
Phone (000) 000-0000
If to Deka by courier:
Deka Medical, Inc.
000 Xxxxxxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
(c) If to Microtek, at:
Microtek Medical, Inc.
000 Xxxxxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: President
Fax: (000) 000-0000
Phone: (000) 000-0000
25
7.2 Benefit and Assignment. The rights and obligations of each party
under this Agreement may not be assigned without the prior written consent of
all other parties. Subject to Section 7.3 below, this Escrow Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns.
7.3 Interest of Third Parties. No right or interest of a Party in the
Escrow Funds shall be assignable or transferable or subject to any lien, in
whole or in part, either directly or by operation of law or otherwise, including
without limitation, by execution, levy, garnishment, attachment, pledge,
bankruptcy or in any other manner.
7.4 Entire Agreement; Amendment. This Escrow Agreement contains all the
terms agreed upon by the parties with respect to the subject matter hereof. This
Escrow Agreement may be amended only by a written instrument signed by the party
against whom enforcement of any waiver, change, modification, extension or
discharge is sought.
7.5 Headings. The headings of the articles, sections and subsections
of this Agreement are for ease of reference only and do not evidence the
intentions of the parties.
7.6 Counterparts. This Escrow Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
together shall be deemed to be one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
DEKA MEDICAL, INC.
By:
---------------------------------
Title:
------------------------------
MICROTEK MEDICAL, INC.
By:
---------------------------------
Title:
------------------------------
ESCROW AGENT:
SUNTRUST BANK
By:
---------------------------------
Title:
------------------------------
26
EXHIBIT A TO ESCROW AGREEMENT
FEE SCHEDULE
The annual fee of $2,500.00 for administering this Escrow Agreement is
payable in advance at the time of closing and if applicable, will be invoiced
each year to the appropriate party(ies) on the anniversary date of the closing
of the Escrow Agreement.
Out of pocket expenses such as, but not limited to, postage, courier,
overnight mail, insurance, money wire transfer, long distance telephone charges,
facsimile, stationery, travel, legal or accounting, etc., will be billed at
cost.
These fees do not include extraordinary services which will be priced
according to time and scope of duties. The fees shall be deemed earned in full
upon receipt by the Escrow Agent, and no portion shall be refundable for any
reason, including without limitation, termination of the Escrow Agreement.
It is acknowledged that the schedule of fees shown above are acceptable
for the services mutually agreed upon.
27
Exhibit C
Replacement Schedule 3.7
See attached.
28
Schedule 3.7
Licenses
Clean-Op Licenses
Certificate No. Description Status/Expiration
K944037 Diacide HD Disinfecting Solution Cleared
Drape Business Licenses
Certificate No. Description Status/Expiration
9005087 FDA Owner/Operation Number(Columbus) Current
1055932 FDA Registration Number (Jacksonville) Current
9613259 FDA Registration Number (Dominican Republic) Current
164665 FDA Registration Number (Athens, Texas) Current
1033598 FDA Registration Number (Waynesville, NC) Current
K911040 Invotec Microscope Drape Cleared
K911041A Invotec X-Ray Cassette Radiographic Film Cleared
K911039 Invotec Ear Drape Cleared
K944198 Surgical Microscope Drape, Hydro-Med
Products, Inc. (Spectrum Laboratories, Inc.) Cleared
K951214 Sterile Equipment Cover Cleared
K980210 Various Surgical or Patient Drapes Cleared
K831287 Surgical Drape/Equipment Covers Cleared
K823054 Surgical Drape Cleared
K812143 Catheter Introducer/Percutaneous Introducer Cleared
K802576 Electrocardiograph Electrode/External Jugular
CVP Kit Cleared
K962666 Surgical Gown Cleared
K840391 Catheter Guide Wire/Angiographic Procedure Tray Cleared
041058158 ISO 9002/EN46002 (TUV Essen) Exp. April 2001
041058158/01 ISO 9001/EN46001 (TUV Essen) Exp. April 2001
00 000-0000/98 MDD 00/00 XXX Annex II Product Certification Exp. April 2001
29
1334815
