EXHIBIT 2.1
EXECUTION COPY
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ASSET PURCHASE AGREEMENT
AMONG
MEDAMICUS, INC.,
MEDACQUISITION, INC.,
BIOMEC INC.
AND
BIOMEC CARDIOVASCULAR INC.
DATED AS OF
JULY 21, 2003
TABLE OF CONTENTS
ARTICLE 1 TRANSFER OF ASSETS..................................................1
1.1 Assets to be Sold..................................................1
1.2 Assumption and Exclusion of Liabilities............................4
1.3 Transfer Documentation and Possession..............................5
ARTICLE 2 CONSIDERATION........................................................6
2.1 Consideration......................................................6
2.2 Closing Payment....................................................6
2.3 2003 Contingent Payment............................................8
2.4 2004 Contingent Payment............................................8
2.5 Contingent Payment Provisions......................................8
2.6 Allocation of Purchase Price......................................10
ARTICLE 3 CLOSING............................................................10
3.1 The Closing.......................................................10
3.2 Deliveries of Sellers.............................................10
3.3 Deliveries of Buyer...............................................11
3.4 Further Documents.................................................12
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF SELLERS..........................12
4.1 Authority; Organization and Qualification; Effect of Agreement....12
4.2 Financial Statements..............................................13
4.3 Absence of Certain Developments...................................13
4.4 Inventory.........................................................15
4.5 Accounts and Notes Receivable.....................................15
4.6 Title to Assets...................................................15
4.7 Patents, Trademarks and Copyrights................................15
4.8 Assumed Contracts.................................................16
4.9 Litigation........................................................16
4.10 Compliance with Law: Permits......................................16
4.11 Employee Benefit Plans............................................17
4.12 Employees.........................................................17
4.13 Environmental Matters.............................................18
4.14 Real Estate.......................................................19
4.15 Products; Regulation..............................................19
4.16 Material Obligations..............................................20
4.17 Brokerage.........................................................20
4.18 Affiliated Transactions...........................................20
4.19 Insurance.........................................................21
4.20 Suppliers and Customers...........................................21
4.21 Voting Requirement................................................21
4.22 Full Disclosure...................................................21
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ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF BUYER AND ACQUISITION SUB........21
5.1 Authority; Organization and Qualification; Effect of Agreement....22
5.2 Absence of Certain Developments...................................23
5.3 Patents, Trademarks and Copyrights................................23
5.4 Litigation........................................................23
5.5 Compliance with Laws..............................................23
5.6 Products; Regulation..............................................24
5.7 Brokerage.........................................................24
5.8 Suppliers and Customers...........................................24
5.9 Issuance of Shares................................................24
5.10 Anti-Takeover Provisions..........................................25
5.11 Capitalization....................................................25
5.12 Buyer SEC Reports; Financial Statements...........................25
5.13 Voting Requirement................................................26
5.14 Acquisition Sub...................................................26
5.15 Full Disclosure...................................................26
ARTICLE 6 COVENANTS..........................................................26
6.1 Cooperation.......................................................26
6.2 Conduct of Business...............................................26
6.3 Access............................................................28
6.4 Transactions in Buyer's Securities................................28
6.5 Exclusivity.......................................................28
6.6 Other Financial Statements........................................28
6.7 Registration Statement, Joint Proxy Statement/Prospectus,
and Related Matters.............................................28
6.8 Patent and Trademark Assignments..................................30
ARTICLE 7 ADDITIONAL COVENANTS...............................................31
7.1 Sales and Other Tax...............................................31
7.2 Non-Competition...................................................31
7.3 Non-Solicitation..................................................32
7.4 Trade Name........................................................32
7.5 Confidentiality...................................................32
7.6 Board Representation..............................................33
7.7 Transferred Employees.............................................33
7.8 Insurance.........................................................34
7.9 Unassignable Contracts............................................34
7.10 Rule 145 Affiliates...............................................34
7.11 Voting Agreement..................................................34
7.12 Plan of Distribution..............................................34
ARTICLE 8 CONDITIONS TO BUYER'S OBLIGATION...................................35
8.1 Representations, Warranties and Covenants of Sellers..............35
8.2 No Prohibition....................................................35
8.3 Deliveries........................................................35
8.4 No Material Adverse Change........................................35
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8.5 Shareholder Approval..............................................35
8.6 Other Approvals and Consents......................................35
8.7 Research Agreement................................................36
8.8 Employment Agreements.............................................36
8.9 Registration Statement............................................36
ARTICLE 9 CONDITIONS TO SELLERS OBLIGATIONS..................................36
9.1 Representations, Warranties and Covenants of Buyer................36
9.2 No Prohibition....................................................36
9.3 Deliveries........................................................36
9.4 No Material Adverse Change........................................36
9.5 Shareholder Approval..............................................36
9.6 Registration Statement............................................37
9.7 Nasdaq National Market System.....................................37
ARTICLE 10 INDEMNIFICATION AND RELATED MATTERS...............................37
10.1 Survival..........................................................37
10.2 Indemnification by Sellers........................................37
10.3 Indemnification by Buyer..........................................37
10.4 Limitations.......................................................38
10.5 Notice of Indemnification.........................................38
10.6 Indemnification Procedure for Third-Party Claims..................38
10.7 Right to Offset...................................................39
10.8 Exclusive Remedy..................................................39
ARTICLE 11 TERMINATION PRIOR TO CLOSING......................................39
11.1 Termination.......................................................39
11.2 Effects of Termination............................................40
11.3 Reimbursement.....................................................40
ARTICLE 12 MISCELLANEOUS.....................................................40
12.1 Entire Agreement..................................................40
12.2 Amendment; Waiver.................................................41
12.3 Assignment........................................................41
12.4 Headings; Usage...................................................41
12.5 Cooperation.......................................................41
12.6 Expenses..........................................................41
12.7 Governing Law.....................................................41
12.8 Severability......................................................41
12.9 Counterparts......................................................42
12.10 Interpretation....................................................42
12.11 Notices...........................................................42
12.12 Publicity.........................................................43
12.13 No Third-Party Beneficiary........................................43
12.14 Disclosure Schedules..............................................43
12.15 Buyer Guarantee...................................................43
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EXHIBITS
Exhibit 1 Definitions
Exhibit 3.2.1 Sellers' Officers' Certificate
Exhibits 3.2.2(a) and (b) Opinions of Sellers' Counsel
Exhibit 3.2.4 General Xxxx of Sale and Assignment from Parent
Exhibit 3.2.5 General Xxxx of Sale and Assignment from Subsidiary
Exhibit 3.2.6 Assignment of Patents
Exhibit 3.2.7 Assignment of Trademarks
Exhibit 3.2.8 Assumption Agreement
Exhibit 3.2.10 Landlord's Estoppel Certificate
Exhibit 3.2.11 Assignment of Rights In Invention Records
Exhibit 3.3.2 Buyer and Acquisition Sub's Officers' Certificate
Exhibit 3.3.3 Opinion of Buyer's Counsel
Exhibit 7.8 Certificate of Insurance
Exhibit 7.10 Rule 145 Letter
Exhibit 8.7 Research Agreement
Exhibits 8.8(a) and (b) Letter Agreements re: Employment Agreements
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is entered into as of July 21, 2003 among
Medamicus, Inc., a Minnesota corporation ("Buyer"), Medacquisition, Inc., a
Minnesota corporation and wholly owned subsidiary of Buyer ("Acquisition Sub"),
BIOMEC Inc., an Ohio corporation ("Parent"), and BIOMEC Cardiovascular Inc., a
Minnesota corporation ("Subsidiary"). Certain capitalized terms used in this
Agreement are defined in Exhibit 1.
WHEREAS, Subsidiary is a wholly owned subsidiary of Parent (each a
"Seller" and collectively, the "Sellers");
WHEREAS, Subsidiary is engaged in the research, development,
manufacturing, assembly, marketing and sales of proprietary pacing lead products
and pacing accessories and the performance of contract development and contract
manufacturing services (the "Business"); and
WHEREAS, the boards of directors of Parent, Subsidiary, Buyer and
Acquisition Sub have each determined that it is in their respective
corporations' best interests and the best interests of their respective
shareholders that the Sellers sell, assign, transfer, convey and deliver to
Acquisition Sub all of the Assets, and that Acquisition Sub purchase and acquire
the same, subject to the assumption by Acquisition Sub of the Assumed
Liabilities, all upon the terms and subject to the conditions set forth in this
Agreement.
The parties hereto agree as follows:
ARTICLE 1
TRANSFER OF ASSETS
1.1 Assets to be Sold.
(a) On the terms and subject to the conditions of this Agreement,
Subsidiary shall, on the Closing Date, sell, assign, transfer, convey and
deliver to Acquisition Sub, and Acquisition Sub shall purchase on the Closing
Date, all of the right, title and interest of Subsidiary in the assets,
properties, licenses, leases, rights and goodwill of every kind and description
and wherever located, whether tangible or intangible, owned by, or licensed or
leased to and transferable by, Subsidiary on the Closing Date, other than the
Excluded Assets (the assets to be purchased by Acquisition Sub pursuant to this
Section 1.1(a) being referred to as the "Subsidiary Assets," and, together with
the Parent Assets, the "Assets"), including, without limitation, the following:
(i) all furniture, fixtures, equipment, machinery, molds,
tools and dies, vehicles and other tangible personal property,
including, but not limited to the tangible assets listed on Schedule
1.1(a)(i);
(ii) all raw materials, work-in-process, spare parts,
packaging, supplies and finished goods inventories (the "Inventory");
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(iii) all third-party accounts and notes receivable of
Subsidiary arising from the conduct of the Business on or before the
Closing Date;
(iv) all of Subsidiary's business records and files relating
to the Business, including without limitation, books of account,
general and financial records, personnel records related to any
Transferred Employee (to the extent that the transfer of such records
is permitted under law), customer lists and records, sales information,
invoices, shipping records, supplier lists, device history records,
clinical study records, test data, manufacturing records, product
designs and design specifications, drawings, bills of material and
engineering documentation, traceability records, device master records
for each of the Subsidiary Products, regulatory documents, 510(k)
files, including all approved and pending amendments and supplements
and product materials prepared for, or submitted to, other governments
and any files related to approvals by such governments, records,
reports and correspondence, laboratory notes, research records,
correspondence and other documents, records, data files and service
manuals and any rights thereto, used in, or relating to, the Business
on whatever media such records or copies are maintained (the "Business
Records");
(v) all claims, causes of action, choses in action, rights of
recovery and rights of set-off of any kind (including warranty rights
but excluding insurance proceeds) of Subsidiary that relate to the
Assets or the Business;
(vi) all sales and promotional literature, catalogs, trade
show materials and displays, the content of the portion of the
Xxxxxx.xxx internet site that relates to Subsidiary, artwork and other
sales-related materials owned, used, associated with or employed by
Subsidiary;
(vii) all rights of Subsidiary under contracts, agreements,
commitments and other arrangements, whether oral or written, listed on
Schedule 1.1(a)(vii) and all other contracts or orders for the sale of
goods or services of the Business entered into by Subsidiary
(collectively, the "Assumed Contracts");
(viii) all of Subsidiary's interest in all incomplete or
unfilled contracts, commitments and orders issued for the purchase by
Subsidiary of supplies, parts, components, raw materials and finished
products to the extent listed on Schedule 1.1(a)(viii) and all other
contracts, commitments and orders for the purchase of such items
entered into by Subsidiary (the "Purchase Orders");
(ix) all of Subsidiary's interest in Intellectual Property
that is used in or held for, or necessary to the conduct of, the
Business, including but not limited to those items listed on Schedule
1.1(a)(ix) (the "Subsidiary Intellectual Property") and all such
Intellectual Property embodied within any of the Subsidiary Products;
(x) all product approvals, clearances, registrations, permits,
consents, waivers, certificates, listings and exemptions submitted to
or granted to Subsidiary by a regulatory authority, foreign or
domestic, for the purpose of allowing the manufacture, sale or
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distribution of Subsidiary Products, including without limitation the
approvals and clearances listed on Schedule 1.1(a)(x), and all
correspondence with and other permits, orders, certificates,
authorizations or approvals of any supranational, national, federal,
state, provincial or local, domestic or foreign, governmental authority
or regulatory agency held by Subsidiary in respect of the Business;
(xi) all of Subsidiary's interest in computer software and
hardware, source codes, computer files and programs, including without
limitation the items described on Schedule 1.1(a)(xi);
(xii) all advances, trade-show deposits, loans, prepaid
interest and other prepaid expenses of Subsidiary of all kinds; and
(xiii) Subsidiary's interest in the real property lease
described in Schedule 1.1(a)(xiii) (the "Real Property Lease"),
including without limitation, the benefit of any prepaid rent, security
deposit and renewal or purchase options.
(b) On the terms and subject to the conditions of this Agreement,
Parent shall, on the Closing Date, sell, assign, transfer, convey and deliver to
Acquisition Sub, and Acquisition Sub shall purchase on the Closing Date all of
the right, title and interest of Parent as of the Closing Date in (i) all of the
Intellectual Property owned by, or licensed to and transferable by, Parent (and
not owned by Subsidiary) described on Schedule 1.1(b)(i) and (ii) the other
assets and rights owned by Parent that are listed on Schedule 1.1(b)(ii)
(collectively the "Parent Assets").
(c) Notwithstanding any provision of Section 1.1(a) or (b) to the
contrary, the Assets shall exclude the following assets owned by one or more of
the Sellers on the Closing Date (the "Excluded Assets"):
(i) all cash, cash equivalents, bank accounts and securities;
(ii) all intercompany receivables;
(iii) the shares of capital stock of Parent and Subsidiary and
the corporate books and records of Parent and Subsidiary;
(iv) all rights of each Seller under this Agreement and the
Ancillary Agreements;
(v) any assets of any Employee Benefit Plan;
(vi) any Assumed Contract or Permit that is not assignable to
Acquisition Sub as of the Closing Date;
(vii) all personnel records related to any employee or former
employee of a Seller who is not a Transferred Employee and all
personnel records relating to Transferred Employees that Sellers are
not legally permitted to transfer;
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(viii) all records that a Seller is required by law to retain
in its possession;
(ix) tax records and rights to tax refunds; and
(x) all insurance policies and rights thereunder.
1.2 Assumption and Exclusion of Liabilities.
(a) On the terms and subject to the conditions of this Agreement, on
the Closing Date, Acquisition Sub shall assume and shall pay, perform and
discharge when due the following Liabilities of Subsidiary (the "Assumed
Liabilities") arising out of the conduct of the Business or relating to the
Assets:
(i) all third-party accounts payable set forth on the Closing
Balance Sheet;
(ii) all accrued expenses set forth on the Closing Balance
Sheet;
(iii) Liabilities arising in connection with the Assumed
Contracts and Purchase Orders, but not any Liability due thereunder on
or prior to the Closing Date or arising out of a breach thereof on or
prior to the Closing Date; and
(iv) Liabilities for product-liability claims relating to
Subsidiary Products that were manufactured by Subsidiary on or prior to
the Closing Date and sold by Buyer or Acquisition Sub or one of their
Affiliates after the Closing Date.
(b) Except as expressly provided in Section 1.2(a), neither Acquisition
Sub nor Buyer will assume any debt, liability, or obligation of Sellers and
shall not become liable for any obligations or liabilities of Sellers of any
nature whatsoever. Except as expressly provided in Section 1.2(a), Sellers shall
retain, and shall be responsible for paying, performing and discharging when
due, and neither Acquisition Sub nor Buyer shall assume or have any
responsibility for, the following Liabilities (the "Excluded Liabilities"):
(i) Liabilities or obligations arising out of Sellers'
ownership of the Assets or operation of the Business on or prior to the
Closing Date;
(ii) Liabilities relating to or arising out of the Excluded
Assets;
(iii) Liabilities for Taxes now or hereafter owed by any
Seller relating to the operation of the Business or the ownership of
the Assets on or prior to the Closing Date;
(iv) Liabilities for product-liability claims relating to
Subsidiary Products sold by Subsidiary or any predecessor of Subsidiary
for which Sellers may be liable on or prior to the Closing Date;
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(v) Liabilities related to or arising under any Employee
Benefit Plan or any other liabilities to employees or former employees
of a Seller that accrue on or prior to the Closing Date;
(vi) claims for patent infringement to the extent arising
from, related to or in connection with Subsidiary Products
manufactured, used or sold prior to the Closing Date;
(vii) any Liability or expense with respect to any Litigation
with respect to the Business or Assets relating to claims arising
before or after the Closing Date to the extent related to the operation
of the Business or the ownership of the Assets on or prior to the
Closing Date, including without limitation, the Litigation described in
Section 4.9 of Sellers Disclosure Schedule;
(viii) damages, losses, expenses related to, arising from, or
in connection with any investigation, proceeding, examination, action
or request initiated by a regulatory or other governmental authority to
the extent related to the conduct of the Business or the ownership of
the Assets on or prior to the Closing Date, whether such investigation,
proceeding, examination, action or request commences or was initiated
before, on or after the Closing Date;
(ix) Liabilities or obligations to the extent resulting from
any violation by Sellers, or any employee, director or agent of either
Seller (while an employee, director or agent of either Seller), or any
predecessor of Subsidiary for which Sellers may be liable, of any
applicable foreign, federal, state, county, local or other governmental
laws, decrees, ordinances or regulations, or any permit, license,
consent, certificate, approval or authorization issued pursuant to such
laws, decrees, ordinances or regulations, including, without
limitation, those applicable to discrimination in employment,
employment practices, wage and hour, retirement, labor relations,
occupational safety, health, trade practices, environmental matters,
competition, pricing, product warranties, product liability (except as
provided in Section 1.2(a)(iv)), and product advertising;
(x) Liabilities to the extent arising out of a breach, on or
prior to the Closing Date, of any contract or agreement to which a
Seller is bound, including without limitation, any Assumed Contract or
Purchase Order; and
(xi) Liabilities incurred by Sellers in connection with this
Agreement, including, without limitation, fees and expenses of Sellers'
counsel, accountants, and other experts and all other expenses incurred
by Sellers incident to the negotiation, preparation and execution of
this Agreement or the transactions contemplated hereby, including
expenses incurred in proving or perfecting title to the Assets, Taxes
(except as provided in Section 7.1), commissions and all other expenses
of either Seller pertaining to the performance by it of its obligations
under this Agreement.
1.3 Transfer Documentation and Possession. In order to effect the
transfer of the Assets and the assumption of the Assumed Liabilities, the
parties shall deliver the documents
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described in Sections 3.2 and 3.3 and such other conveyance documents as are
necessary to convey (and, as appropriate, record and perfect) title to the
Assets to Acquisition Sub and for Acquisition Sub to assume the Assumed
Liabilities, such other documents to be in form and substance mutually
satisfactory to the Sellers and Buyer and as may be necessary under the laws of
the jurisdiction where such Assets and Assumed Liabilities are located to effect
such transfer and assumption. For example, Sellers will cooperate, at any time
requested, with Acquisition Sub to promptly execute all documents necessary to
perfect the rights, title and interest previously held by Subsidiary and Parent
in the Subsidiary Intellectual Property and the Parent Assets acquired by
Acquisition Sub. Coincident with the Closing, the Sellers shall deliver
possession of the Assets to Acquisition Sub, free and clear of all Liens.
ARTICLE 2
CONSIDERATION
2.1 Consideration. As consideration for the Assets and for the
covenants set forth in the Agreement, Buyer, at the Closing, shall (i) pay to
Parent the portion of the Closing Payment allocated to the Parent Assets (such
allocation as Sellers shall advise Buyer prior to the Closing Date); (ii) pay to
Subsidiary the portion of Closing Payment allocated to the Subsidiary Assets
(such allocation as Sellers shall advise Buyer prior to the Closing Date); and
(iii) grant to Subsidiary the contingent rights to receive the 2003 Contingent
Payment described in Section 2.3 and the 2004 Contingent Payment described in
Section 2.4 (collectively, the "Contingent Payments"). The cash and stock
components of the Closing Payment and the Contingent Payments shall be allocated
between Parent and Subsidiary on a basis proportionate to the fair value of the
Assets being sold by each Seller.
2.2 Closing Payment. Subject to adjustment as provided in this Section
2.2, a payment (the "Closing Payment") in the amount of $18 million less the
amount of those specific Assumed Liabilities described on Schedule 2.2 as of the
close of business on the Business Day immediately preceding the Closing Date (as
such amounts are set forth on a balance sheet prepared in accordance with U.S.
GAAP as of that date), will be made by Buyer to Parent and Subsidiary at the
Closing, as set forth in Section 2.1. The Closing Payment will be composed of
cash and shares of Buyer Common Stock. Buyer may elect the allocation of the
Closing Payment between cash and Buyer Common Stock, but the Closing Payment
must include at least $7 million in cash and must include shares of Buyer Common
Stock having a value of at least $7 million, determined in accordance with this
Section 2.2. The number of shares of Buyer Common Stock delivered as part the
Closing Payment shall be determined by dividing the aggregate value of Buyer
Common Stock that Buyer shall have elected to include in the Closing Payment by
$7.50, which was calculated by taking the average per-share closing price of
Buyer Common Stock over the period of 15 trading days ending on the trading day
immediately preceding the date of this Agreement (the "Average Closing Price");
provided that if the Average Closing Price would have been greater than $7.50
but for this proviso, then the Average Closing Price has been deemed to be
$7.50, and if the Average Closing Price would have been less than $6.50 but for
this proviso, then the Average Closing Price has been deemed to be $6.50. Buyer
shall pay cash in lieu of any fractional shares, equal to the fraction times the
Average Closing Price.
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2.2.1 Net Working Capital Adjustment. The Closing Payment will
be adjusted following the Closing to the extent that the Net Working Capital of
Subsidiary as of the close of business on the Business Day immediately preceding
the Closing Date (the "Closing Net Working Capital") is greater than or less
than $1,769,000 (the "Net Working Capital Baseline"). "Net Working Capital"
means the current assets of Subsidiary (excluding cash) less the current
liabilities of Subsidiary (excluding notes payable). The calculation of the Net
Working Capital Baseline, based on Subsidiary's unaudited balance sheet as of
April 30, 2003 is set forth on Schedule 2.2.1. Any adjustment made pursuant to
this Section 2.2.1 shall be made to the cash portion of the Closing Payment.
2.2.2 Post-Closing Deliveries. As soon as practicable (but in
no event later than 30 days following the Closing Date), Sellers shall prepare
and deliver to Buyer (i) a final unaudited balance sheet for Subsidiary (the
"Closing Balance Sheet"), as of the Closing Date, prepared in accordance with
U.S. GAAP in a manner consistent with Subsidiary's balance sheets as of April
30, 2003 and June 30, 2003 and Subsidiary's audited balance sheet as of December
31, 2002, and (ii) Sellers' calculation of Closing Net Working Capital based on
the Closing Balance Sheet. Sellers and their representatives shall be given
reasonable access to the books, records, facilities and employees of Acquisition
Sub as may be necessary for them to prepare the Closing Balance Sheet.
2.2.3 Buyer's Response. Within 20 days of receipt of the
Closing Balance Sheet and Sellers' calculation of the Closing Net Working
Capital, Buyer shall inform Sellers in writing of any exceptions to the Closing
Net Working Capital calculation. Unless Buyer delivers to Sellers within such
20-day period a letter specifying in reasonable detail such exceptions, the
Closing Net Working Capital calculation delivered by Sellers shall be conclusive
and binding on the parties. If Buyer delivers to Sellers a letter setting forth
any such exceptions within such 20-day period, then Buyer and Sellers shall
promptly endeavor to resolve the matters in dispute and, if they fail to reach
an agreement with respect to such matters on or before the twentieth day after
receipt by Sellers of the dispute letter from Buyer, then, as to any such
matters in dispute, Buyer and Sellers shall in good faith select and jointly
retain a firm of certified public accountants (which has not rendered services
to either Buyer or Parent for at least three years), or other third party
acceptable to Buyer and Sellers, to promptly make a final determination of such
matters and deliver a written opinion thereon to Buyer and Sellers, which
determination shall be conclusive and binding on the parties. The fees and
expenses of the auditing firm shall be paid by Buyer unless the Closing Net
Working Capital calculation delivered by Sellers is more than 10% higher than
the auditing firm's determination of Closing Net Working Capital, in which case
Sellers will pay the fees and expenses of the auditing firm. The auditing firm
shall have a period of 20 days in which to render its opinion concerning the
disputed matters.
2.2.4 Adjustment.
(i) Reduction in Closing Payment. If the amount of the Closing
Net Working Capital as finally determined is less than the Net Working
Capital Baseline, then Subsidiary shall pay Buyer within five Business
Days, as an adjustment to the Closing Payment, an amount in cash equal
to the difference between the Closing Net Working
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Capital as finally determined and the Net Working Capital Baseline,
plus interest thereon at the annual rate of five percent from the
Closing Date to the date of payment.
(ii) Increase in Closing Payment. If the amount of the Closing
Net Working Capital as finally determined is greater than the Net
Working Capital Baseline, Buyer shall pay to Subsidiary within five
Business Days, as an adjustment to the Closing Payment, an amount in
cash equal to the excess of the Net Working Capital Baseline over the
Closing Net Working Capital as finally determined, plus interest
thereon at the annual rate of five percent from the Closing Date to the
date of payment.
2.3 2003 Contingent Payment. Buyer will make a payment to Subsidiary
equal to (a) the product of two times Subsidiary's and Acquisition Sub's
combined Net Sales of Subsidiary Products in the 2003 calendar year minus (b)
$18 million (the "2003 Contingent Payment"), but only if the average Gross
Margin on the combined sales of Subsidiary Products by Subsidiary and
Acquisition Sub for the 2003 calendar year is at least 30% (calculated in
accordance with methodology described on Schedule 2.5.2). If the average Gross
Margin is less than 30%, then the 2003 Contingent Payment will not be due. If
earned, Buyer will make payment in respect of the 2003 Contingent Payment on or
before March 31, 2004 in cash via wire transfer to a bank designated by
Subsidiary and in shares of Buyer Common Stock, which allocation shall be
determined solely by Buyer; provided, however, that neither the cash nor the
stock component, valued in accordance with Section 2.5.3, may be less than 40%
of the total 2003 Contingent Payment.
2.4 2004 Contingent Payment. Buyer will make a payment to Subsidiary
equal to the difference of the Proprietary Sales (as defined in Section 2.5.1)
of Acquisition Sub in the 2004 calendar year minus the combined Proprietary
Sales of Subsidiary and Acquisition Sub in the 2003 calendar year (as it may be
increased pursuant to the immediately following sentence, the "2004 Contingent
Payment". The amount of the 2004 Contingent Payment will be doubled if, on or
before December 31, 2004, Acquisition Sub executes a supply agreement with one
or more of the companies listed on Schedule 2.4 having the minimum terms listed
on Schedule 2.4. Buyer will pay the 2004 Contingent Payment on or before March
31, 2005 in cash via wire transfer to a bank designated by Subsidiary or in
shares of Buyer Common Stock, which allocation shall be determined solely by
Buyer; provided that the cash portion of the payment must be at least the lesser
of (a) 25% of the total 2004 Contingent Payment, any stock portion of which
being valued in accordance with Section 2.5.3, or (b) $2 million.
2.5 Contingent Payment Provisions.
2.5.1 Definitions. For purposes of the Contingent Payments,
(a) "Net Sales" means all revenues recognized or required to be recognized by
Subsidiary and Acquisition Sub for sales of products and services and for
product-related license fees and royalties (excluding any non-recurring license
fees, royalties or technology fees), less (A) reasonable discounts and
allowances customary in the trade, all actually given and properly documented;
and (B) credits or repayments due to rejections, defects or returns; all as
determined in accordance with U.S. GAAP on a basis consistent with Subsidiary's
practices prior to date of this Agreement; and (b) "Proprietary Sales" means Net
Sales of pacing lead wires, pacemaker adaptors and pacing
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implant tools, plus sales of any products directly related to pacing procedures
in which Acquisition Sub has a patent, patent application or invention
disclosure relating to the technology included therein. Proprietary Sales
specifically excludes any non-recurring payments for technology (unless such
payments are associated with product sales) and any sales that would be deemed
"extraordinary items" under U.S. GAAP or that are inconsistent with Subsidiary's
past business practices.
2.5.2 Operation of Acquisition Sub. During the period
beginning at the Closing and ending at the close of business on December 31,
2004, Buyer and Acquisition Sub will: (a) operate the business of Acquisition
Sub in a manner in the best long-term interest of all of Buyer's Shareholders,
including Sellers; (b) sell Subsidiary Products solely through Acquisition Sub;
(c) use reasonable efforts to operate the Business in a manner consistent with
the past practices of Subsidiary; and (d) continue the employment of persons
that were executive officers of Subsidiary immediately before the Closing (so
long as such persons agree to be so employed during that period). Buyer will
provide additional working capital to Acquisition Sub in amounts Buyer deems
appropriate, but will at a minimum provide the additional working capital
described on Schedule 2.5.2.
2.5.3 Stock Values for Contingent Payments. The number of
shares of Buyer Common Stock to be delivered in connection with each Contingent
Payment, if any, will be equal to the value of the stock portion of the
applicable Contingent Payment, as determined by Buyer in accordance with Section
2.3 or 2.4, as the case may be, divided by the average closing price of Buyer
Common Stock for the period of 15 trading days preceding the date on which Buyer
makes its first public announcement of its earnings for the fiscal year
immediately prior to the year in which the Contingent Payment is payable. Buyer
shall pay Subsidiary cash in lieu of any fractional share, equal to the fraction
times the average price of Buyer Common Stock calculated in accordance with the
immediately preceding sentence.
2.5.4 Reports and Disputes.
(a) For purposes of calculating the Contingent Payments: (i) within 60
days after the Closing Date, Sellers shall deliver to Buyer a Statement of
Revenues of Subsidiary for the period of January 1, 2003 through the Closing
Date, and (ii) at least 20 Business Days before a Contingent Payment is due,
Buyer shall deliver to Subsidiary an audited Statement of Revenues of
Acquisition Sub (the statements delivered pursuant to clauses (i) and (ii) being
called the "Revenues Statements"). The Revenues Statements shall set forth the
Net Sales, Gross Margins and the Proprietary Sales for the period to which the
Revenues Statements relate, together with such detailed information as is
reasonably relevant to understand the basis for the computation of the Net
Sales, Gross Margins and Proprietary Sales and the amount of the payment, if
any, of a Contingent Payment for the applicable period.
(b) Within 20 days of receipt of Buyer's Revenues Statement and Buyer's
determination of the applicable Contingent Payment, Sellers shall inform Buyer
in writing of any exceptions to Buyer's Revenues Statement and
Contingent-Payment calculation. Unless Sellers deliver to Buyer within such
20-day period a letter specifying in reasonable detail such exceptions, Buyer's
Revenues Statement and Contingent-Payment calculation delivered by
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Buyer shall be conclusive and binding on the parties. Sellers and their
representatives shall be given reasonable access to the books, records,
accountants and employees of Buyer, including all supporting documents and work
papers used in the preparation of the Revenues Statement. If Sellers deliver to
Buyer a letter setting forth any such exceptions within such 20-day period, then
Sellers and Buyer shall promptly endeavor to resolve the matters in dispute and,
if they fail to reach an agreement with respect to such matters on or before the
twentieth day after receipt by Buyer of the dispute letter from Sellers, then
Sellers may retain a firm of certified public accountants (which has not
rendered services to either Buyer or Parent for at least three years), to review
the Revenues Statement and deliver its opinion thereon to Sellers. The fees and
expenses of the auditing firm shall be paid by Sellers unless the auditing firm
determines that the Contingent-Payment calculation delivered by Buyer contained
a variance of more than 5% from the Contingent-Payment calculation of the
auditing firm, in which case, Buyer will pay the fees and expenses of the
auditing firm.
2.5.5 Offset. The Contingent Payments are subject to offset as
provided in Section 10.7.
2.6 Allocation of Purchase Price. The Assets are being sold and
purchased at their fair market values and the consideration paid by Buyer to the
Sellers in exchange for the Assets is being allocated among the Assets pursuant
to arm's-length negotiations. Buyer and Sellers will agree on the allocation
prior to Closing and such allocation will properly reflect the respective fair
market values of the Assets. The allocation of the consideration to the Assets
established by Buyer and Sellers will be binding on all parties for Tax purposes
and will be consistently so reflected in each party's respective Tax Returns.
ARTICLE 3
CLOSING
3.1 The Closing. The closing of the transactions contemplated hereby
(the "Closing") shall take place at the offices of Xxxxxxxxx & Xxxxxx, P.L.L.P.,
0000 XXX Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000, at 10:00 a.m. (Central Time) on
or before the third Business Day after the satisfaction or waiver of the
conditions in Articles 8 and 9, or at such other date, time or place as the
parties may agree (the "Closing Date"). The Closing shall be deemed to have been
effected as of 11:59 p.m. on the Closing Date.
3.2 Deliveries of Sellers. At the Closing, Sellers shall deliver or
cause to be delivered to Buyer and Acquisition Sub the following:
3.2.1 the Officers' Certificate from an executive officer of
each of Parent and Subsidiary, in substantially the form of Exhibit 3.2.1;
3.2.2 the opinions of counsel for Parent and Subsidiary, in
substantially the form of Exhibits 3.2.2(a) and (b);
3.2.3 copies of resolutions of Parent's board of directors and
shareholders and of Subsidiary's board of directors and sole shareholder, each
certified by the Secretary of the
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respective Seller as having been duly and validly adopted and in full force and
effect, authorizing execution and delivery of this Agreement and performance
respectively by Parent and Subsidiary of the transactions contemplated hereby;
3.2.4. the General Xxxx of Sale and Assignment from Parent in
the form of Exhibit 3.2.4.
3.2.5 the General Xxxx of Sale and Assignment from Subsidiary
in the form of Exhibit 3.2.5;
3.2.6 an Assignment of Patents in the form of Exhibit 3.2.6;
3.2.7 an Assignment of Trademarks in the form of Exhibit
3.2.7;
3.2.8 an Assumption Agreement in the form of Exhibit 3.2.8;
3.2.9 the Certificate of Insurance as provided in Section 7.8;
and
3.2.10 an executed Landlord's Estoppel Certificate
substantially in the form of Exhibit 3.2.10;
3.2.11 an Assignment of Rights In Invention Records from
Parent in substantially in the form of Exhibit 3.2.11; and
3.2.12 the allocation of purchase price described in Section
2.6.
3.3 Deliveries of Buyer. At the Closing, Buyer shall deliver to Sellers
the following:
3.3.1 the Closing Payment by delivery of stock certificates,
each in the name of the appropriate Seller, and wire transfer in immediately
available funds to bank accounts designated by Sellers in writing at least two
Business Days prior to the Closing Date;
3.3.2 the Officers' Certificate from an executive officer of
each of Buyer and Acquisition Sub, in substantially the form of Exhibit 3.3.2;
3.3.3 the opinion of counsel for Buyer, in substantially the
form of Exhibit 3.3.3;
3.3.4 copies of resolutions of Buyer's board of directors and
shareholders and Acquisition Sub's board of directors, certified by the
Secretary of the respective company as having been duly and validly adopted and
in full force and effect, authorizing, in the case of the board of directors,
execution and delivery of this Agreement and performance of the transactions
contemplated hereby, and in the case of Buyer's shareholders, the Buyer
Shareholder Proposals;
3.3.5 an executed counterpart of the Assumption Agreement;
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3.3.6 a sales and use tax resale certificate, together with a
schedule prepared by Subsidiary listing the Inventory as of the close of
business on the day prior to the Closing Date;
3.3.7 employment agreements, as may be negotiated pursuant to
the letter agreements attached as Exhibit 8.8(a) and (b); and
3.3.8 the allocation of purchase price described in Section
2.6.
3.4 Further Documents. The parties shall execute and deliver, or cause
to be executed and delivered, such other powers of attorney, instruments,
documents or certificates as the other parties may reasonably request to effect
or evidence the consummation of the transactions contemplated by this Agreement.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLERS
Except as otherwise set forth in the disclosure schedule delivered by
Sellers to Buyer and Acquisition Sub concurrently with the execution and
delivery of this Agreement (the "Sellers Disclosure Schedule") the Sellers
jointly and severally represent and warrant to Buyer and Acquisition Sub as
follows:
4.1 Authority; Organization and Qualification; Effect of Agreement.
4.1.1 Authority. Each of Parent and Subsidiary has full
corporate power and authority to execute and deliver this Agreement and all
agreements referenced herein (the "Ancillary Agreements") to which either is a
party, perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the Ancillary Agreements, the performance by Parent and Subsidiary
of their obligations under this Agreement and the Ancillary Agreements and the
consummation by Parent and Subsidiary of the transactions contemplated hereby
and thereby have been duly authorized by all necessary corporate action on the
part of Parent and Subsidiary, and, except for the approval of the sale of the
Assets and the other transactions contemplated hereby by Parent's shareholders,
no other corporate proceedings on the part of Parent or Subsidiary are necessary
to authorize the execution and delivery of this Agreement or the Ancillary
Agreements and to consummate the transactions so contemplated. This Agreement
and the Ancillary Agreements have been duly executed and delivered by Parent and
Subsidiary and constitute the valid and binding obligations of Parent and
Subsidiary and are enforceable against Parent and Subsidiary in accordance with
their respective terms, except to the extent that such enforceability (i) may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to creditors' rights generally, and (ii) is subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
4.1.2 Organization and Qualification. Each of Parent and
Subsidiary is a corporation duly incorporated, validly existing and in good
standing under the laws of Ohio and Minnesota, respectively, and has full
corporate power and authority to carry on its business as it
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is now being conducted. Each of Parent and Subsidiary is duly qualified to do
business as a foreign corporation in good standing in each jurisdiction where
the character of the property owned or leased by it or the nature of its
activities makes such qualification necessary, except for those jurisdictions
where the failure to be so qualified would not have a Material Adverse Effect on
the Business. Sellers have delivered to Buyer true and complete copies of
Parent's and Subsidiary's governing documents.
4.1.3 Subsidiaries. Subsidiary does not have any subsidiaries
or equity interest in any other corporation, partnership, joint venture,
association, trust or other business association or entity.
4.1.4 Consents. No material consent, authorization, order or
approval, or filing or registration with any governmental authority and no
consent or authorization from any other entity or Person, is required for the
execution, delivery and performance of this Agreement or the Ancillary
Agreements, or the consummation of the transactions contemplated by this
Agreement, including, without limitation, consents from parties to any Assumed
Contract or Purchase Order.
4.1.5 No Violation. The execution, delivery and performance by
Parent and Subsidiary of this Agreement and the consummation of the transactions
contemplated in this Agreement do not and will not (a) in any material respect
contravene or constitute a default under or give rise to a right of termination,
cancellation or acceleration of any right or obligation of Parent or Subsidiary
or to a loss of any benefit to which Parent or Subsidiary is entitled under (i)
any provision of applicable law or regulation (assuming the governmental
consents referred to in Section 4.1.4 have been obtained); (ii) the governing
documents of Parent or Subsidiary; (iii) any Assumed Contract; or (iv) any
judgment, injunction, order or decree binding upon Parent or Subsidiary in
respect of the Business; or (b) result in the creation or imposition of any Lien
on any Asset.
4.2 Financial Statements. Sellers have delivered to Buyer copies of the
unaudited balance sheet of Subsidiary as of June 30, 2003 and an unaudited
income statement for the period then ended, as well as audited balance sheets,
statements of operations, statements of changes in shareholders' equity and of
cash flows for Subsidiary for the fiscal years ended December 31, 2001 and 2002,
together with the related notes and schedules thereto (collectively, the
"Subsidiary Financial Statements"). The Subsidiary Financial Statements are
attached as Section 4.2 of the Sellers Disclosure Schedule. The Subsidiary
Financial Statements have been prepared from the books and records of Subsidiary
in accordance with U.S. GAAP applied on a consistent basis, subject to normal
year-end adjustments and the fact that the June 30, 2003 statements do not
include notes, and fairly present, in all material respects, the financial
condition of Subsidiary at the dates shown and the results of its operations for
the periods then ended.
4.3 Absence of Certain Developments. From December 31, 2002 to the date
of this Agreement, the Business has been operated only in the ordinary course,
and Subsidiary has not:
4.3.1 mortgaged, pledged or subjected to any Lien, any of the
Assets, tangible or intangible;
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4.3.2 except as contemplated by this Agreement, sold, leased,
assigned, transferred or otherwise disposed of any of the Assets, except for
inventory and obsolete equipment sold in the ordinary course of business;
4.3.3 sold, assigned, transferred or licensed to any Person
any rights under any patents, trademarks, service marks, trade names,
copyrights, applications for registration with respect to any of the foregoing,
trade secrets or other intellectual property owned by, or licensed to,
Subsidiary in respect of the Business;
4.3.4 entered into any settlement agreement regarding the
breach or infringement (or alleged breach or infringement) of any United States
or foreign intellectual property license, patent, copyright or trademark
relating to the Business;
4.3.5 made any capital expenditures in excess of $10,000 or an
aggregate of $100,000;
4.3.6 suffered any extraordinary losses or waived any rights
of material value, whether or not in the ordinary course of business or
consistent with past practice;
4.3.7 suffered any damage, destruction or loss of any Assets
that in the aggregate have a replacement cost of more than $10,000 whether or
not covered by insurance;
4.3.8 modified, amended or terminated any Assumed Contract in
a manner materially adverse to the Business;
4.3.9 suffered any Material Adverse Effect;
4.3.10 been the subject of any inquiry or action taken or
threatened by the United States Food and Drug Administration (the "FDA") or any
foreign regulatory authority having jurisdiction over similar matters, excluding
observations of inspectors that have not resulted in any action, claim or
investigation by the FDA or other regulatory authority;
4.3.11 made any change in any method of accounting, except as
required by U.S. GAAP;
4.3.12 failed to maintain its inventory in a normal and
customary manner materially consistent with its prior practice, or made any
material change in the conduct or nature of the Business;
4.3.13 discharged or satisfied accounts receivable in excess
of $5,000 other than in the ordinary course of business consistent with past
practice; or
4.3.14 entered into any agreement (other than this Agreement)
or made any commitment to take any of the types of action described in Sections
4.3.1 through 4.3.13.
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4.4 Inventory. The finished goods Inventory has been reflected on the
Latest Balance Sheet and carried on the books of account of Subsidiary in
accordance with U.S. GAAP consistently applied. The Inventory (including raw
materials, work-in-process and finished goods) on the date of this Agreement is
the same as set forth in the Latest Balance Sheet, except for additions and
reductions made in the ordinary course of business since such date. The
Inventory is of quality usable or salable in the ordinary course of business,
subject to any reserve for obsolescence reflected on the Latest Balance Sheet.
4.5 Accounts and Notes Receivable. All accounts and notes receivable
reflected on the Latest Balance Sheet, and all accounts and notes receivable
arising subsequent to the Latest Balance Sheet Date, have arisen in the ordinary
course of business of Subsidiary and represent valid obligations due to
Subsidiary; provided that nothing stated herein shall constitute a guaranty of
collectability of such receivables. All items that are required by U.S. GAAP to
be reflected as accounts and notes receivable on the Latest Balance Sheet and on
the books of account of Subsidiary are so reflected.
4.6 Title to Assets. Subsidiary owns or has a valid leasehold interest
in all of the Subsidiary Assets, free and clear of all Liens. Parent owns all of
the Parent Assets, free and clear of all Liens. The equipment and fixed assets
of the Business as a whole are in suitable condition for the operation of the
Business as currently conducted. Except for the Excluded Assets, the Assets
constitute all of the assets and properties necessary for the conduct of the
Business as currently conducted.
4.7 Patents, Trademarks and Copyrights.
(a) Section 4.7(a) of the Sellers Disclosure Schedule lists all
patents, patent applications, trademark and service xxxx applications and
registrations, trade names, and copyright registrations and applications that
are fully owned by Subsidiary and that are used in, held for use in or necessary
to the conduct of the Business (the "Subsidiary Proprietary Rights"), all of
which are pending or being maintained in the jurisdictions listed in Section
4.7(a) of the Sellers Disclosure Schedule.
(b) Section 4.7(b) of the Sellers Disclosure Schedule lists all license
agreements under which third-party owned Intellectual Property is licensed to
Subsidiary or Parent with respect to the Business (other than non-negotiated
licenses of commercially available software). All of the license agreements so
listed are in full force and effect. Each of Subsidiary and Parent is not in
material default under any of them nor, to the Knowledge of Subsidiary and
Parent, is any other party to any such license agreement in material default
thereunder.
(c) There are no claims or disputes pending, or to Subsidiary's
Knowledge, threatened, with third parties alleging that Subsidiary, on the one
hand, or such third party, on the other hand, infringes on the other's
Intellectual Property rights in connection with the Business. To Subsidiary's
Knowledge, none of the features, components or configurations or methods of
making or using the same (whether developed or under development) of Subsidiary
Products or Subsidiary's processes infringes the Intellectual Property rights of
any other Person. There are no outstanding orders, judgments or decrees
restricting the use by Sellers of the Intellectual Property owned or licensed by
Sellers for use in the Business.
15
(d) Sellers have provided to Buyer a copy of all pending patent
applications filed by Subsidiary or Parent in respect of the Business.
Subsidiary's ownership of the Subsidiary Intellectual Property is free and clear
of all Liens and rights of third parties. Parent's ownership of the Parent
Assets is free and clear of all Liens. All annuities, registrations and
maintenance fees for the Subsidiary Intellectual Property have been paid. To
Subsidiary's Knowledge, no interference actions are pending, and no notice has
been received of an intention to provoke an interference action or to otherwise
challenge the validity or priority of inventorship before the United States
Patent and Trademark Office or other similar U.S. or foreign authorities with
respect to any patent or application therefor included in the Assets.
(e) Subsidiary has established safeguards to maintain the secrecy of
the secret information of Subsidiary Intellectual Property that it considers to
be reasonable. To the Knowledge of Subsidiary, such secret information that
Subsidiary believes is proprietary information has not been disclosed by
Subsidiary to any other Person (other than its Affiliates), except pursuant to
confidentiality agreements, protective orders or law.
4.8 Assumed Contracts.
(a) Subsidiary has delivered to Acquisition Sub true and complete
copies of the Assumed Contracts, and there are no material oral modifications or
amendments to the Assumed Contracts. Each Assumed Contract is in full force and
effect and is valid, binding, and enforceable in accordance with its terms,
except to the extent such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium, or other similar laws related to the enforcement of
creditors' rights or by general principles of equity.
(b) Subsidiary is not in material breach of any provision of any
Assumed Contract.
(c) No event has occurred that constitutes, or after the giving of
notice or passage of time or both, would constitute, a material default or event
of default under any Assumed Contract by or in respect of Subsidiary.
(d) To Subsidiary's Knowledge, no other party to an Assumed Contract is
in material breach of any provision of any Assumed Contract.
(e) To Subsidiary's Knowledge, no event has occurred that constitutes,
or after the giving of notice or passage of time or both, would constitute, a
material default or event of default under an Assumed Contract by or in respect
of any other party to the Assumed Contract.
4.9 Litigation. There are no claims, actions, suits, inquiries,
investigations or proceedings pending, or to the Knowledge of Subsidiary or
Parent, threatened relating to Subsidiary in respect of the Business, the
Assets, any of the Assumed Liabilities or the transactions contemplated by this
Agreement.
4.10 Compliance with Law: Permits. Section 4.10(a) of the Sellers
Disclosure Schedule lists all material permits, licenses, clearances, PMA's,
510(k)'s registrations, consents,
16
waivers, listings, exemptions, orders, certificates, authorizations or approvals
of any international, federal, provincial, state or local, domestic or foreign,
governmental authorities or regulatory agencies, including, without limitation,
those regulating safety, effectiveness and market clearance of medical devices
and applicable environmental permits (the "Permits"), held by Subsidiary or
Parent and used in the Business. There are no other material permits necessary
to carry on the Business in the United States, Europe, or any other jurisdiction
where the Business is currently conducted. Subsidiary, in respect of the
Business, has complied in all material respects with all applicable laws,
including any Medicare or Medicaid statutes, rules or regulations, Permits and
orders of foreign, federal, state and local governments and all agencies thereof
(including, without limitation, the FDA or any foreign regulatory authority
having jurisdiction over similar matters) that affect the Business and to which
Subsidiary is subject, and no claims have been filed against Subsidiary in
respect of the Business alleging a violation of any such laws, regulations or
orders. Since January 1, 2001 no notice, warning or other communication from any
governmental authority in respect of any failure or alleged failure by
Subsidiary in respect of the Business to comply with any law, regulation or
order has been received by Subsidiary.
4.11 Employee Benefit Plans.
4.11.1 Neither Parent, Subsidiary nor any ERISA Affiliate
maintains any Employee Benefit Plans or collective bargaining agreements
relating to the Business or covering any Transferred Employee.
4.11.2 There is no liability with respect to any such Employee
Benefit Plan that will be imposed upon Buyer or Acquisition Sub.
4.11.3 There is no provision or condition with respect to any
Employee Benefit Plan or applicable law that will require Buyer to assume or
continue such Employee Benefit Plan following the Closing Date.
4.11.4 There is no Lien (statutory or otherwise) against any
of the Assets arising out of any condition or set of circumstances with respect
to any such Employee Benefit Plan.
4.11.5 There is no action, suit, claim or proceeding, pending
or threatened, that would result in any liability with respect to any such
Employee Benefit Plan against Buyer or Acquisition Sub.
4.11.6 Parent shall make health care continuation coverage as
provided by Section 4980B of the Code (COBRA Coverage) available to M&A
Qualified Beneficiaries with respect to the transactions contemplated by this
Agreement.
4.12 Employees. Section 4.12 of the Sellers Disclosure Schedule sets
forth a true and complete list of all employees of Subsidiary as of the date
hereof. None of Subsidiary's employees is represented by a union or other labor
organization, nor are they covered by a collective bargaining agreement, and no
union organizing efforts have been conducted within the last three years, or to
the Knowledge of Subsidiary, are now being conducted with respect to its
17
employees. Each of Subsidiary and Parent is in material compliance with all U.S.
laws, regulations, ordinances, codes or other legally binding rules applicable
to the Business with respect to its employees and its own policies respecting
employment and employment practices, terms and conditions of employment, wages
and hours, equal opportunity, civil rights, labor relations, occupational health
and safety and payroll taxes (including Social Security and unemployment fund
contributions remaining due and unpaid) with respect to the Employees,
including, without limitation, the Immigration and Reform Control Act, Title VII
of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Americans
with Disabilities Act, the Federal Age Discrimination in Employment Act, the
Federal Family Medical Leave Act, the Consolidated Omnibus Budget Reconciliation
Act of 1987 (COBRA), the Affirmative Action Plan Requirements under executive
Order 11246 and the Vietnam Veterans Era Readjustent Act, and any federal, state
or local law. Neither Parent nor Subsidiary is in receipt of a complaint, demand
letter or charge issued by a U.S. federal, state, provincial or local agency
that alleges a material violation by Parent or Subsidiary of any applicable law
or regulation respecting employment and employment practices, terms and
conditions of employment, wages and hours, equal opportunity, civil rights,
labor relations, occupational health and safety or payroll taxes with respect to
the Employees that has not been resolved. Neither parent nor Subsidiary has
engaged in any plant closing, work force reduction nor other action that has
resulted or could result in material liability under the Workers Adjustment and
Retraining Notification Act or any state plant closing law, or has been issued
any notice that such action is to occur in the future with respect to its
employees. Subsidiary has not entered into any contractual agreements with its
current employees restricting any of them from rendering or performing services
for any other Person.
4.13 Environmental Matters.
4.13.1 Subsidiary has no Knowledge of environmental conditions
existing on or prior to the date hereof and arising or resulting from (i) the
noncompliance by Subsidiary with any applicable Environmental Law; or (ii) the
release of a Regulated Substance into the environment at or from Subsidiary's
Property and, in either case, for which Subsidiary would, or would reasonably be
expected to, be required to expend in excess of $25,000 in order to clean up any
such Regulated Substance or in order to bring Subsidiary into compliance with
any such Environmental Law.
4.13.2 To the Knowledge of Subsidiary, the Business has been
operated at all times in material compliance with all applicable Environmental
Laws.
4.13.3 To the Knowledge of Subsidiary: (i) Subsidiary has all
material governmental licenses, permits and other authorizations required by all
Environmental Laws necessary to conduct and operate the Business as currently
conducted or operated, (ii) all such licenses, permits and other authorizations
are in full force and effect, and (iii) Subsidiary is and at all times has been
in material compliance with all such licenses, permits and other authorizations.
4.13.4 To the Knowledge of Subsidiary, Subsidiary is not
presently generating, storing, handling, transporting, or disposing of any
Regulated Substance on Subsidiary's
18
Property in material violation of any Environmental Laws or that would
reasonably be expected to result in material liability under any Environmental
Laws. Subsidiary has not in the past generated, stored, handled, transported or
disposed of any Regulated Substance on its Property.
4.13.5 Subsidiary has provided to Buyer all documents in its
possession relating to the environmental condition and regulation of its
Property.
4.14 Real Estate. Subsidiary does not own any real property. To
Subsidiary's Knowledge, the buildings, fixtures and other improvements located
on the real property that is subject to the Real Property Lease (the "Subsidiary
Leased Real Property") are operational and are not in material violation, and
Subsidiary and Parent have no Knowledge of, and have received no notice of, any
material violation, of any applicable deed restriction, building code, zoning
ordinance, covenant or other law, ordinance, rule or regulation. To Subsidiary's
Knowledge, (i) all utilities required for the current operation of the
improvements on the Subsidiary Leased Real Property are installed and operating,
(ii) all installation and connection charges have been paid in full, and (iii)
the right to the return of any deposit or contribution in connection therewith
shall inure as of the Closing Date to Acquisition Sub. Subsidiary is not in
material default under, or in material breach of, and to Subsidiary's Knowledge,
no other party is in material default under, or in material breach of, any of
the terms, covenants, conditions, or restrictions of the Real Property Lease.
4.15 Products; Regulation.
4.15.1 There have been no written notices, citations or
decisions by any governmental or regulatory body that any Subsidiary Product or
products sold by predecessor entities for which Parent or Subsidiary may be
liable, is defective or fails to meet any applicable standards or other
regulatory requirements promulgated by any such governmental or regulatory body.
The Business has complied in all material respects with its policies, procedures
and specifications with respect to design, manufacture, labeling, testing,
inspection and sale of Subsidiary Products. There have been no recalls, field
notifications or seizures ordered or, to the Knowledge of Subsidiary, threatened
by any such governmental or regulatory body with respect to any of the
Subsidiary Products. Subsidiary has not received any warning letter, or Section
305 notices from, or civil or criminal investigations by, the FDA.
4.15.2 The Subsidiary Products have been properly listed with
the FDA and any other governments, state, local or foreign, requiring a similar
listing. Each Subsidiary Product has all necessary and current marketing
approvals or clearances by all governments, state, local or foreign, requiring
such approvals or clearances in the jurisdictions where that Subsidiary Product
is currently sold. All necessary amendments, supplements and reports required to
keep the approvals and clearances current with the versions of the Subsidiary
Products being marketed have been filed in a timely manner and are complete and
accurate. Any changes in product design and manufacturing and quality assurance
procedures have been filed in a timely manner.
4.15.3 All management, facilities, personnel, manufacturing,
quality and other systems of Subsidiary regulated by the FDA and other similar
regulatory agencies, either state, local or foreign, are in compliance with all
regulatory requirements (e.g., the FDA's Quality System Regulation, ISO 9001 and
EN46001) related to the Subsidiary Products.
19
4.15.4 Subsidiary has all necessary reimbursement and pricing
authorizations from all regulatory agencies of the countries in which the
Subsidiary Products are marketed and where such authorizations are required.
4.15.5 Subsidiary has complied with all incident and
adverse-event (both injury and malfunction) reporting requirements to the FDA
and similar state, local and foreign governmental agencies with respect to the
Subsidiary Products.
4.15.6 Subsidiary's facilities have all necessary Permits for
operation as a medical device manufacturing and/or distribution facility.
Subsidiary has also obtained all necessary Permits from every country in which
the Subsidiary Products are currently marketed, if such a Permit is required.
4.15.7 Subsidiary is in possession of and will, upon Buyer's
request, provide to Buyer all supportive materials and data substantiating
representations made to the FDA or other domestic or foreign governmental
regulatory authority in its filings therewith, including any and all testing
data in the possession, or under the control, of Subsidiary (but only to the
extent used in the Business), whether or not submitted to the FDA or other
domestic or foreign governmental regulatory authority. The Subsidiary Products
perform in all material respects in compliance with the representations and
performance specifications as contained in those filings. Subsidiary has
provided Buyer with copies of all FDA Establishment Inspection Reports and Form
FDA 483s in its possession and related to inspections of the Subsidiary
Products. In addition, Subsidiary has provided Buyer with copies of all similar
inspections and reviews by Subsidiary's EU conformity assessment body and any
other governmental authorities who have inspected the Subsidiary Products to the
extent in their possession or the possession of their Affiliates, agents or
attorneys.
4.16 Material Obligations. Subsidiary, in respect of the Business, has
no debts, liabilities or obligations of any nature (whether accrued, absolute,
contingent, direct, indirect, perfected, inchoate, unliquidated or otherwise and
whether due or to become due), except (a) to the extent specifically reflected
and accrued for or reserved against in the Subsidiary Financial Statements; (b)
for Liabilities not required to be set forth on a balance sheet under U.S. GAAP;
and (c) for Liabilities and obligations that have arisen after the date of the
Latest Balance Sheet in the ordinary course of business consistent with past
practice.
4.17 Brokerage. There are no claims for brokerage commissions, finder's
fees or similar compensation in connection with the transactions contemplated by
this Agreement based on any arrangement or agreement made by Parent or
Subsidiary.
4.18 Affiliated Transactions. Subsidiary is not a party to any
transaction or commitment with any of its Affiliates with respect to the
Business, and has no obligation or liability owing thereunder in respect of the
Business, in excess of $50,000 that is not cancelable by Subsidiary on at least
60 days' notice without penalty.
20
4.19 Insurance. Section 4.19 of the Sellers Disclosure Schedule lists
the coverages and limits presently applicable to or including the operations and
property of the Business, including an identification of those policies that are
"claims made" and those that are "occurrence" policies. No claims have been made
by Subsidiary with respect to the Business related to Subsidiary Products.
Subsidiary has not received any notice of cancellation in respect of insurance
coverage for operations, assets and properties relating to the Business. All
premiums due and payable in respect of such insurance have been paid. There are
no pending or, to the Knowledge of Subsidiary or Parent, threatened terminations
or premium increases with respect to any such policies, and Subsidiary and
Parent are in compliance with all material conditions contained therein.
Complete copies of the insurance policies have been delivered to Buyer.
4.20 Suppliers and Customers. Subsidiary has delivered to Buyer a
complete list of its top ten suppliers and top ten customers identifying sales
for calendar year 2002 and year-to-date through May 31, 2003, for the products
of each such supplier and customer. No such customer or supplier has canceled or
otherwise terminated, or threatened, verbally or in writing, to cancel or
otherwise terminate, its relationship with Subsidiary during the last 12 months
or has during the last twelve 12 months decreased materially, or threatened to
decrease or limit materially, its services, supplies or material to Subsidiary
or its usage or purchase of the services or products from Subsidiary, as the
case may be. No such customer has notified Subsidiary of any material change in
its arrangements with Subsidiary. To Subsidiary's Knowledge, no such customer
has notified Subsidiary that it intends to cease purchasing or significantly
reduce its purchase of Subsidiary Products from Subsidiary.
4.21 Voting Requirement. The affirmative vote of the holders of two
thirds of the issued and outstanding shares of common stock of Parent, voting as
a single class, to approve the sale of the Assets and the other transactions
contemplated hereby, is the only vote of the holders of any class or series of
Parent's capital stock necessary in connection with this Agreement and the
transactions contemplated hereby.
4.22 Full Disclosure. No representation or warranty of Parent or
Subsidiary contained in this Agreement contains an untrue statement of material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements made, in the context in which made, not false
or misleading in any material respect when made.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER AND ACQUISITION SUB
Except as otherwise set forth in the disclosure schedule delivered by
Buyer to Sellers concurrently with the execution and delivery of this Agreement
(the "Buyer Disclosure Schedule") or as otherwise described in the Buyer SEC
Reports (defined in Section 5.12(a)), Buyer and Acquisition Sub jointly and
severally represent and warrant to Sellers as follows:
21
5.1 Authority; Organization and Qualification; Effect of Agreement.
5.1.1 Authority. Each of Buyer and Acquisition Sub has full
corporate power and authority to execute and deliver this Agreement and the
Ancillary Agreements to which it is a party, perform its obligations hereunder
and thereunder and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and the Ancillary
Agreements, the performance by Buyer and Acquisition Sub of their obligations
under this Agreement and the Ancillary Agreements and the consummation by Buyer
and Acquisition Sub of the transactions contemplated hereby and thereby have
been duly authorized by all necessary corporate action on the part of Buyer and
Acquisition Sub, and, except for the approval of the Buyer Shareholder Proposals
by Buyer's shareholders, no other corporate proceedings on the part of Buyer or
Acquisition Sub are necessary to authorize the execution and delivery of this
Agreement or the Ancillary Agreements and to consummate the transactions so
contemplated. This Agreement and the Ancillary Agreements have been duly
executed and delivered by Buyer and Acquisition Sub and constitute the valid and
binding obligations of Buyer and Acquisition Sub and are enforceable against
Buyer and Acquisition Sub in accordance with their respective terms, except to
the extent that such enforceability (i) may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to
creditors' rights generally, and (ii) is subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
5.1.2 Organization and Qualification. Each of Buyer and
Acquisition Sub is a corporation duly incorporated, validly existing and in good
standing under the laws of Minnesota, and has full corporate power and authority
to carry on its business as it is now being conducted. Each of Buyer and
Acquisition Sub is duly qualified to do business as a foreign corporation in
good standing in each jurisdiction where the character of the property owned or
leased by it or the nature of its activities makes such qualification necessary,
except for those jurisdictions where the failure to be so qualified would not
have a Material Adverse Effect on Buyer. Buyer has delivered to Sellers true and
complete copies of the articles of incorporation and bylaws of Buyer and
Acquisition Sub.
5.1.3 Subsidiaries. Other than Acquisition Sub, Buyer does not
have any subsidiaries or equity interest in any other corporation, partnership,
joint venture, association, trust or other business association or entity.
5.1.4 Consents. No material consent, authorization, order or
approval, or filing or registration with any governmental authority and no
consent or authorization from any other entity or Person, is required for the
execution, delivery and performance of this Agreement or the Ancillary
Agreements by Buyer or Acquisition Sub, or the consummation of the transactions
contemplated by this Agreement, excluding consents approving authorizations,
exemptions and filings, if any, that Sellers are required to obtain or make.
5.1.5 No Violation. The execution, delivery and performance by
Buyer and Acquisition Sub of this Agreement and the consummation of the
transactions contemplated in this Agreement do not and will not (a) in any
material respect contravene or constitute a default under or give rise to a
right of termination, cancellation or acceleration of any right or obligation
22
of Buyer or Acquisition Sub or to a loss of any benefit to which Buyer or
Acquisition Sub is entitled under (i) any provision of applicable law or
regulation (assuming the governmental consents referred to in Section 5.1.4 have
been obtained); (ii) the articles of incorporation or bylaws of Buyer or
Acquisition Sub; or (iii) any judgment, injunction, order or decree binding upon
Buyer or Acquisition Sub; or (b) result in the creation or imposition of any
Lien on any asset of Buyer or Acquisition Sub that would have a Material Adverse
Effect on Buyer.
5.2 Absence of Certain Developments. From March 31, 2003 to the date of
this Agreement, Buyer has operated only in the ordinary course, and Buyer has
not:
5.2.1 suffered any Material Adverse Effect;
5.2.2 been the subject of any inquiry or action taken or
threatened by the FDA or any foreign regulatory authority having jurisdiction
over similar matters, excluding observations of inspectors that have not
resulted in any action, claim or investigation by the FDA or other regulatory
authority; or
5.2.3 made any change in any method of accounting, except as
required by U.S. GAAP.
5.3 Patents, Trademarks and Copyrights. There are no claims or disputes
pending or to Buyer's Knowledge, threatened, with third parties alleging that
Buyer, on the one hand, or such third party, on the other hand, infringes on the
other's Intellectual Property rights. All of the material Intellectual Property
license agreements to which Buyer is a party are in full force and effect, and
Buyer is not in material default under any of them nor, to the Knowledge of
Buyer, is any other party to any such license agreement in material default
thereunder. There are no outstanding orders, judgments or decrees restricting
the use by Buyer of any Intellectual Property owned or licensed by Buyer. To
Buyer's Knowledge, no interference actions are pending, and no notice has been
received of an intention to provoke an interference action or to otherwise
challenge the validity or priority of inventorship before the United States
Patent and Trademark Office or other similar U.S. or foreign authorities with
respect to any of Buyer's patents.
5.4 Litigation. There are no claims, actions, suits, inquiries,
investigations or proceedings pending, or to the Knowledge of Buyer, threatened
relating to the business of Buyer or the transactions contemplated by this
Agreement.
5.5 Compliance with Laws. Buyer has complied in all material respects
with all applicable laws, including any Medicare or Medicaid statutes, rules or
regulations, Permits and orders of foreign, federal, state and local governments
and all agencies thereof (including, without limitation, the FDA or any foreign
regulatory authority having jurisdiction over similar matters) that affect
Buyer's business or to which Buyer is subject, and no claims have been filed
against Buyer alleging a violation of any such laws, regulations or orders.
Since January 1, 2001 no notice, warning or other communication from any
governmental authority in respect of any failure or alleged failure by Buyer to
comply with any law, regulation or order has been received by Buyer.
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5.6 Products; Regulation.
5.6.1 Since January 1, 2001, there have been no written
notices, citations or decisions by any governmental or regulatory body that any
of the Buyer Products is defective or fails to meet any applicable standards or
other regulatory requirements promulgated by any such governmental or regulatory
body. Since January 1, 2001, there have been no recalls, field notifications or
seizures ordered or, to the Knowledge of Buyer threatened by any such
governmental or regulatory body with respect to any of the Buyer Products. Buyer
has not received any warning letter, or Section 305 notices from, or civil or
criminal investigations by, the FDA.
5.6.2 Buyer's Products have been properly listed with the FDA
and any other governments, state, local or foreign, requiring a similar listing.
All necessary amendments, supplements and reports required to keep the approvals
and clearances current with the versions of Buyer's Products being marketed have
been filed in a timely manner and are complete and accurate. Any changes in
product design and manufacturing and quality assurance procedures have been
filed in a timely manner.
5.6.3 Buyer has complied with all incident and adverse-event
(both injury and malfunction) reporting requirements to the FDA and similar
state, local and foreign governmental agencies with respect to Buyer's Products.
5.6.4 Buyer's facilities have all necessary Permits for
operation as a medical device manufacturing and/or distribution facility. Buyer
has also obtained all necessary Permits from every country in which the Buyer
Products are currently marketed, if such a Permit is required.
5.7 Brokerage. Except for its agreement with Franklin Capital Partners,
there are no claims for brokerage commissions, finder's fees or similar
compensation in connection with the transactions contemplated by this Agreement
based on any arrangement or agreement made by Buyer or Acquisition Sub.
5.8 Suppliers and Customers. No material customer or supplier of Buyer
has canceled or otherwise terminated, or threatened, verbally or in writing, to
cancel or otherwise terminate, its relationship with Buyer during the last 12
months or has during the last 12 months decreased materially, or threatened to
decrease or limit materially, its services, supplies or material to Buyer or its
usage or purchase of the services or products from Buyer, as the case may be.
Buyer has not received any notification of any material change in its
arrangements with customers or suppliers.
5.9 Issuance of Shares. The shares of Buyer Common Stock to be issued
pursuant to this Agreement are duly authorized and, when issued in accordance
with the terms hereof, shall be validly issued, fully paid and non-assessable.
24
5.10 Anti-Takeover Provisions. The issuance of shares of Buyer Common
Stock pursuant to this Agreement has been approved by a committee of the board
of directors of Buyer formed pursuant to Section 302A.673, Subd. 1(d), of the
Minnesota Statutes.
5.11 Capitalization. As of the date of this Agreement, the authorized
capital stock of Buyer consists of 9 million shares of common stock, $.01 par
value per share ("Buyer Common Stock"), of which, as of the date of this
Agreement, 4,739,293 shares are issued and outstanding, and 1 million shares of
preferred stock, none of which, as of the date of this Agreement, is issued and
outstanding. The authorized capital stock of Acquisition Sub consists of 100,000
shares of common stock, of which, as of the date of this Agreement, 1,000 shares
are issued and outstanding and held by Buyer. There are no outstanding
subscriptions, options, warrants, calls, rights or other agreements,
arrangements or commitments under which Buyer is or may become obligated to
issue, sell, transfer, or otherwise dispose of, or purchase, redeem, or
otherwise acquire, any shares of capital stock of, or other equity or voting
interests in, Buyer, and there are no outstanding securities convertible into or
exchangeable for any such capital stock or other equity or voting interests,
except for options to purchase up to 646,500 shares of Buyer Common Stock as of
the date of this Agreement.
5.12 Buyer SEC Reports; Financial Statements.
(a) All reports, registration statements and other filings (including
amendments to previously filed documents) filed by Buyer with the United States
Securities and Exchange Commission (the "SEC") from January 1, 2001 to the date
of this Agreement are collectively called the "Buyer SEC Reports." No Buyer SEC
Report, as of its filing date, contained any untrue statement of a material fact
or omitted to state any material fact required to be stated therein or necessary
in order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading, and each Buyer SEC Report at the
time of its filing complied as to form in all material respects with all
applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act"), the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations of the SEC promulgated
thereunder. The representation in the immediately preceding sentence does not
apply to any misstatement or omission in any Buyer SEC Report filed before the
date of this Agreement that has been superseded by a subsequent Buyer SEC Report
filed before the date of this Agreement. From January 1, 2001 to the date of
this Agreement, Buyer has filed all reports and other filings that it was
required to file with the SEC under the Exchange Act, Securities Act and the
rules and regulations of the SEC.
(b) The audited financial statements and unaudited interim financial
statements of Buyer included or incorporated in the Buyer SEC Reports (i) have
been prepared in accordance with U.S. GAAP applied on a consistent basis during
the periods involved (except as indicated in the notes thereto); (ii) complied
as of their respective dates in all material respect with applicable accounting
requirements and published rules and regulations of the SEC with respect
thereto; and (iii) fairly present, in all material respects, the financial
position of Buyer as of the dates thereof and the income and cash flows for the
periods then ended (subject, in the case of unaudited interim financial
statements, to normal year-end adjustments).
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(c) Buyer has no debts, liabilities or obligations of any nature
(whether accrued, absolute, contingent, direct, indirect, perfected, inchoate,
unliquidated or otherwise and whether due or to become due), except (a) to the
extent specifically reflected and accrued for or reserved against in the audited
financial statements or unaudited interim financial statements of Buyer included
or incorporated in the Buyer SEC Reports; (b) for Liabilities not required to be
set forth on a balance sheet under U.S. GAAP; and (c) for Liabilities and
obligations that have arisen since March 31, 2003 in the ordinary course of
business consistent with past practice.
5.13 Voting Requirement. The affirmative vote of the holders of a
majority of the issued and outstanding shares of common stock of Buyer present
and entitled to vote at the Buyer's Shareholder Meeting, voting as a single
class, to approve the Buyer Shareholder Proposals, is the only vote of the
holders of any class or series of Buyer's capital stock necessary in connection
with this Agreement and the transactions contemplated hereby.
5.14 Acquisition Sub. Acquisition Sub was formed solely for the purpose
of engaging in the transactions contemplated by this Agreement, has engaged in
no other business activities, and has conducted its operations only as
contemplated by this Agreement.
5.15 Full Disclosure. No representation or warranty of Buyer or
Acquisition Sub contained in this Agreement contains an untrue statement of
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements made, in the context in which made, not false
or misleading in any material respect when made.
ARTICLE 6
COVENANTS
6.1 Cooperation. Each of the parties will use its reasonable best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with the terms and conditions hereof and applicable law. Each of the
parties will use its reasonable best efforts to obtain all governmental consents
and approvals necessary to consummate the transactions contemplated by this
Agreement and to cause the Closing to occur. Each party shall use its reasonable
best efforts to obtain the consent or approval of third Persons to the
transactions contemplated hereby with respect to the Assumed Contracts and
Permits, but shall not be required to make any payments, other than incurring
customary costs, to obtain such consents and approvals. If any consent or
approval of any such third Person necessary or desirable to preserve for the
Business any right or benefit is not obtained prior to the Closing, Sellers
will, subsequent to the Closing, cooperate with Buyer in attempting to obtain
such consent or approval as promptly thereafter as practicable. If such consent
or approval cannot be obtained, Subsidiary shall use its reasonable best efforts
to provide Acquisition Sub with the rights and benefits of the affected contract
or Permit for the term of such contract or Permit.
6.2 Conduct of Business. From the date hereof until the Closing,
Sellers shall cause the Business to be conducted in the ordinary course
consistent with past practice.
6.2.1 Without limiting the generality of Section 6.2, from the
date hereof until the Closing, each Seller will use reasonable efforts to:
26
(a) preserve the Business as a whole intact;
(b) keep available the services of the present officers,
employees and agents of the Business;
(c) except as provided in this Agreement, preserve the
relationships with suppliers, customers, distributors, licensors and
licensees and others having business dealings with the Business;
(d) collect the receivables of the Business in a manner
consistent with past practice;
(e) maintain the assets, properties and interests of the
Business in customary repair, order and condition;
(f) continue to compensate the employees of the Business in a
manner consistent with past practice;
(g) maintain the books, accounts and records relating to the
Business in accordance with past practice as used in the preparation of
the Subsidiary Financial Statements;
(h) maintain and file, in accordance with Sellers' customary
practice with respect to the Business, as they become due or require
changes, all regulatory documents, in any country in which any
Subsidiary Product is marketed; and
(i) promptly inform Buyer in writing of any material variances
from the representations and warranties contained in Article 4 hereof.
6.2.2 Without limiting the generality of Section 6.2, from the
date hereof until the Closing, without the prior written consent of Buyer or
unless otherwise contemplated or permitted by this Agreement, Subsidiary will
not:
(a) amend its articles of incorporation or by-laws;
(b) merge or consolidate with any Person, acquire any stock or
other ownership interest in any Person or substantially all of the
assets of any business as an entity or liquidate, dissolve or otherwise
reorganize or seek protection from creditors;
(c) enter into any other agreements, commitments or contracts
(including without limitation joint venture agreements or material
license agreements) that are material to the Business, except
agreements, commitments or contracts entered into in the ordinary
course consistent with past practice;
27
(d) except as set forth on the purchase order commitments
listed on Section 4.3 of the Sellers Disclosure Schedule, purchase any
capital assets or make any capital expenditures in excess of $25,000 in
the aggregate;
(e) enter into any transaction in violation of Medicare or
Medicaid statute, rule or regulation; or
(f) enter into an agreement or commitment to do any of the
foregoing.
6.3 Access. Each party shall provide the other, its counsel, financial
advisors, auditors and other authorized representatives, with such information
as the other from time to time reasonably may request, and shall permit the
other party and its representatives reasonable access, during regular business
hours and upon reasonable notice, to the offices, properties, books and records
of the party, as the other from time to time may reasonably request, and will
instruct its officers, counsel and financial advisors to cooperate with such
investigation; provided that no investigation shall affect any warranties or
representations given by a party in this Agreement and provided further,
however, that any such investigation shall be conducted in such a manner so as
not to interfere with a party's business operations.
6.4 Transactions in Buyer's Securities. From the date of this Agreement
until the earlier of (i) the termination of this agreement or (ii) the Closing,
each Seller agrees that it and all of its representatives, officers, directors,
agents or Affiliates will abstain from purchasing and selling, directly or
indirectly, any securities of Buyer in the open market or otherwise. The
restrictions in this paragraph are in addition to any obligation imposed upon
Sellers under federal securities laws.
6.5 Exclusivity. Until the Closing or earlier termination of this
Agreement, neither Subsidiary nor Parent, nor any of their respective
representatives, officers, directors, agents, or Affiliates will initiate,
solicit or accept, directly or indirectly, any proposal or offer (an
"Acquisition Proposal") to acquire all or any part of the business, assets,
properties or associated technology rights of Subsidiary or the Parent Assets
used in or held for use in Business, whether by merger, purchase of stock,
purchase of assets, tender offer or otherwise (except for sales of inventory and
obsolete equipment in the ordinary course of business) or enter into any
agreement, arrangement or understanding requiring Subsidiary and Parent to
abandon, terminate or fail to consummate a transaction with Buyer.
6.6 Other Financial Statements. Sellers shall, after the date of this
Agreement, use reasonable best efforts to cause to be delivered to Buyer all
required financial statements and unqualified auditors opinions and consents for
all SEC filings required to be made by Buyer as a result of this transaction,
and to provide access to the work papers of Sellers' auditors for such purpose.
6.7 Registration Statement, Joint Proxy Statement/Prospectus, and
Related Matters.
6.7.1 As promptly as practicable after the date of this
Agreement, Buyer and Sellers shall prepare, and Buyer shall file with the SEC, a
joint proxy statement/prospectus (the
28
"Joint Proxy Statement Prospectus") to be sent to the shareholders of Buyer and
Parent in connection with the meeting of Buyer's shareholders (the "Buyer
Shareholders' Meeting") to vote on the approval of (a) the issuance of Buyer
Common Stock under this Agreement in an amount equal to 20% or more of the
outstanding shares of Buyer Common Stock and (b) an amendment to Buyer's
articles of incorporation to increase the number of authorized shares of Buyer
Common Stock to 20 million and the number of authorized shares of Buyer's
preferred stock to 2 million (collectively, the "Buyer Shareholder Proposals"),
and in connection with the meeting of Parent's shareholders (the "Parent
Shareholders' Meeting") to vote on the approval of the sale of the Assets
hereunder and the other transactions contemplated hereby, and Buyer shall
prepare and file with the SEC a registration statement on Form S-4 pursuant to
which the shares of Buyer Common Stock to be issued pursuant to this Agreement
will be registered with the SEC (the "Registration Statement"), in which the
Joint Proxy Statement/Prospectus will be included as a prospectus. Buyer shall
use reasonable best efforts to cause the Registration Statement to become
effective as soon after filing as practicable. The Joint Proxy
Statement/Prospectus shall include the unanimous recommendation of the board of
directors of Parent in favor of the sale of the Assets hereunder and the other
transactions contemplated hereby and the unanimous recommendation of the board
of directors of Buyer in favor of the Buyer Shareholder Proposals, provided that
the board of directors of either Parent or Buyer may withdraw such
recommendation if the board of directors shall have determined in good faith,
after consultation with its outside legal counsel, that the withdrawal of its
recommendation is necessary for the board of directors to comply with its
fiduciary duties under applicable law. Buyer shall make all other necessary
filings with respect to this Agreement and the transactions contemplated hereby
under the Securities Act and the Exchange Act and the rules and regulations of
the SEC thereunder.
6.7.2 Sellers shall take such action as may be necessary to
ensure that (a) the information to be supplied by Sellers for inclusion in the
Registration Statement shall not at the time the Registration Statement is
declared effective by the SEC contain any untrue statement of a material fact or
omit to state any material fact required to be stated in the Registration
Statement or necessary in order to make the statements in the Registration
Statement, in light of the circumstances under which they were made, not
misleading, and (b) the information supplied by Sellers for inclusion in the
Joint Proxy Statement/Prospectus shall not, on the date the Joint Proxy
Statement/Prospectus is first mailed to shareholders of Parent or Buyer, and at
the time of the Parent Shareholders' Meeting and the Buyer Shareholders'
Meeting, contain any statement that, at such time and in light of the
circumstances under which it shall be made, is false or misleading with respect
to any material fact, or omit to state any material fact necessary in order to
make the statements made in the Joint Proxy Statement/Prospectus not false or
misleading, or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Parent Shareholders' Meeting or Buyer Shareholders' Meeting that
has become false or misleading. If at any time prior to the Closing any event
relating to Sellers or any of their Affiliates, officers, or directors should be
discovered by Sellers that should be set forth in an amendment to the
Registration Statement or a supplement to the Joint Proxy Statement/Prospectus,
Sellers shall promptly so inform Buyer.
6.7.3 Buyer shall take such action as may be necessary to
ensure that (a) the information to be supplied by Buyer for inclusion in the
Registration Statement shall not at the
29
time the Registration Statement is declared effective by the SEC contain any
untrue statement of a material fact or omit to state any material fact required
to be stated in the Registration Statement or necessary in order to make the
statements in the Registration Statement, in light of the circumstances under
which they were made, not misleading, and (b) the information supplied by Buyer
for inclusion in the Joint Proxy Statement/Prospectus shall not, on the date the
Joint Proxy Statement/Prospectus is first mailed to shareholders of Parent or
Buyer, and at the time of the Parent Shareholders' Meeting and the Buyer
Shareholders' Meeting, contain any statement that, at such time and in light of
the circumstances under which it shall be made, is false or misleading with
respect to any material fact, or omit to state any material fact necessary in
order to make the statements made in the Joint Proxy Statement/Prospectus not
false or misleading, or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Parent Shareholders' Meeting or Buyer Shareholders' Meeting that
has become false or misleading. If at any time prior to the Closing any event
relating to Buyer or any of its Affiliates, officers, or directors should be
discovered by Buyer that should be set forth in an amendment to the Registration
Statement or a supplement to the Joint Proxy Statement/Prospectus, Buyer shall
promptly so inform Sellers.
6.7.4 Parent and Buyer each shall call a meeting of
shareholders to be held as promptly as practicable for the purpose of voting, in
the case of Parent, on the sale of the Assets pursuant to this Agreement and the
other transactions contemplated hereby and, in the case of Buyer, upon the Buyer
Shareholder Proposals. Subject to the provisions of Section 6.7.1 regarding the
withdrawal of the recommendation, Parent and Buyer will, through their
respective boards of directors, recommend to their respective shareholders
approval of such matters and will coordinate and cooperate with respect to the
timing of such meetings and shall use reasonable best efforts to hold such
meetings on the same day and as soon as practicable after the date hereof.
Unless the relevant board of directors shall have withdrawn its recommendation
under Section 6.7.1, each of Parent and Buyer shall use reasonable best efforts
to solicit from its shareholders proxies in favor of such matters.
6.7.5 Buyer shall use reasonable best efforts to cause the
shares of Buyer Common Stock to be issued pursuant to this Agreement to be
approved for quotation on the Nasdaq National Market, subject to official notice
of issuance, before the Closing Date.
6.7.6 From and after the Closing and so long as necessary in
order to permit Sellers' Affiliates to sell the shares of Buyer Common Stock
received by them under this Agreement pursuant to Rule 145 and, to the extent
applicable, Rule 144 under the Securities Act, Buyer will use reasonable best
efforts to file on a timely basis all reports required to be filed by it
pursuant to Section 13 or 15(d) of the Exchange Act, referred to in paragraph
(c)(1) of Rule 144 under the Securities Act (or, if applicable, Buyer will use
reasonable best efforts to make publicly available the information regarding
itself referred to in paragraph (c)(2) of Rule 144).
6.8 Patent and Trademark Assignments. Prior to the Closing, Subsidiary
will cause to be filed with the U.S. Patent and Trademark Office those
name-change or assignment documents necessary for all registered patents and
trademarks (and applications for registered patents and trademarks) included in
the Subsidiary Intellectual Property to be registered in the name of Subsidiary.
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ARTICLE 7
ADDITIONAL COVENANTS
7.1 Sales and Other Tax. Buyer will pay, and shall indemnify and hold
Sellers harmless against (a) transfer, documentary, recording, notarial, sales,
use, registration, stamp and other similar taxes, if any, fees and expenses and
including any penalties, interest and additions to such tax and (b) all expenses
incurred in the transfer of intellectual property, including, without
limitation, the cost of all patent and trademark registrations contemplated
hereby, in each case incurred in connection with this Agreement and the
transactions contemplated hereby, except that Subsidiary will pay for and cause
to be filed prior to Closing, all appropriate name change or assignment
documents necessary to establish Subsidiary as the current assignee of all
patents, patent applications and trademark applications and registrations
included in the Subsidiary Assets.
7.2 Non-Competition.
7.2.1 During the period from the date of this Agreement to and
including the fifth anniversary of the date hereof (or, if not enforceable for
such period in any country or jurisdiction, for such shorter period as shall be
enforceable in such country or jurisdiction), Sellers shall not, nor shall they
permit any of their Affiliates (while such Persons are Affiliates of a Seller)
to, directly or indirectly, engage in the development, marketing, production,
sale or distribution anywhere in the world of Competitive Products (as defined
in this Section 7.2).
7.2.2 As used in Section 7.2.1, the phrase "directly or
indirectly, engage in" includes any direct or indirect ownership, profit
participation or other interest by Sellers, whether as owner, stockholder,
partner, joint venturer, beneficiary or otherwise, in any Person; provided,
however, that the foregoing provisions shall not prevent Sellers from investing
in (a) any non-public company that competes with the Competitive Products where
sales of Competitive Products account for less than one-third of the annual
revenues of the company, so long as Sellers advise Buyer of the identity of such
company and obtain the consent of Buyer, which will not be unreasonably
withheld, and so long as Sellers deem Buyer to be a preferred source and use
reasonable efforts to cause such company to purchase products or services from,
or license its products or technologies to, Buyer or Acquisition Sub (to the
extent that Buyer or Acquisition Sub is competitive in terms of price, quality,
technology, and delivery), or (b) any public company, so long as Sellers'
investment constitutes, in the aggregate, less than 5% of the outstanding
securities or voting interest of any such company.
7.2.3 As used in this Section 7.2, "Competitive Products"
means lead products and lead-delivery systems in the fields of cardiovascular
and neurological stimulation, but specifically excludes systems such as
implantable stimulators (including but not limited to implantable pulse
generators and implantable cardioverter defibrillators), external programmers,
interrogation and/or diagnostic devices, and other primarily electronic-or
software-based systems used in cardiac rhythm management or neurostimulation
applications.
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7.3 Non-Solicitation. Except for the transfer of the Transferred
Employees as of the Closing Date, for a period of five years from the Closing
Date, neither Parent nor its Affiliates, on the one hand, nor Buyer nor any of
its Affiliates, on the other hand, may, without the prior written consent of the
other, hire any person that is or was an employee of the other on or after the
Closing Date.
7.4 Trade Name.
7.4.1 Acquisition Sub is not acquiring the corporate name of
Subsidiary or any corresponding logo, trade dress or trademark. Subsidiary
hereby grants Acquisition Sub the license and right to use the trade name
"BIOMEC Cardiovascular" and its logo and trade dress in the labeling,
advertising, marketing and sale of products and in connection with conduct of
the Business for a period of two years from the Closing Date. Any rights arising
from such limited use of "BIOMEC Cardiovascular" shall inure to the sole benefit
of Sellers, and all liability associated with such use shall be borne by Buyer
and Acquisition Sub, except for such use that is in accordance with standards
established by Parent. Parent and Buyer will cooperate to develop mutually
agreeable language for or links from the Xxxxxx.xxx internet site, indicating
that the Business has been acquired by Buyer. Within five Business Days after
the Closing Date, Sellers shall change the corporate name of Subsidiary to a
name not similar to its current name that does not imply continuation of the
Business by Subsidiary.
7.4.2 Acquisition Sub's limited right to use the trade name
"BIOMEC Cardiovascular," shall be in accordance with the guidance and direction
furnished by Parent. Parent shall have the right upon reasonable notice to Buyer
and Acquisition Sub to inspect during regular business hours and monitor the
quality of the usage of this name and the quality of any products and services
with which this name is used to meet the quality control standards established
by Parent, and Buyer and Acquisition Sub shall fully cooperate in this regard.
7.5 Confidentiality.
7.5.1 Except as otherwise provided in this Agreement, after
the Closing, Sellers shall not use or disclose to third Persons any information
disclosed to and transferred and assigned, licensed or otherwise made available
to Buyer or its Affiliates in connection with the Business and transfer of
Assets hereunder. Without limitation, this obligation of confidentiality shall
apply to information related to the Subsidiary Products and the business plans,
strategies, technologies, and future business relationships of the Business.
These obligations of confidentiality and non-use shall not apply to the extent
any such information (a) is or becomes part of the public domain through no
fault of the Sellers (but only after and only to the extent that it is published
or otherwise becomes part of the public domain); (b) after the Closing, comes
into the possession of a Seller from a third Person, other than Buyer or its
Affiliates, who was not, to Sellers' Knowledge, under a continuing obligation of
confidence to the disclosing party; or (c) is disclosed by Sellers pursuant to
any judicial compulsion, provided that Buyer is notified at the time such
judicial action is initiated. Disclosures relating to the products and the
business plans, strategies and future business relationships of Buyer or Sellers
shall not be deemed to be in the public domain or in the possession of the
receiving party merely because they are embraced (but
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not disclosed) by general disclosures in the public domain or in the possession
of the receiving party.
7.5.2 Except as otherwise provided in this Agreement, after
the Closing, Buyer and Acquisition Sub may not use or disclose to third Persons
any information disclosed by Sellers to Buyer but not transferred or assigned to
them hereunder. Without limitation, this obligation of confidentiality shall
apply to information related to the products, business plans, strategies,
technologies, and future business relationships of Sellers not related to the
Business. This obligation of confidentiality and non-use shall not apply to the
extent any such information (a) is or becomes part of the public domain through
no fault of Buyer or Acquisition Sub (but only after and only to the extent that
it is published or otherwise becomes part of the public domain); (b) after the
Closing, comes into the possession of Buyer or Acquisition Sub from a third
Person, other than Sellers or their Affiliates, who was not, to Buyer's
Knowledge, under a continuing obligation of confidence to the disclosing party;
or (c) is disclosed by Buyer or Acquisition Sub pursuant to any judicial
compulsion, provided that Sellers are notified at the time such judicial action
is initiated.
7.5.3 Disclosures relating to the products, business plans,
strategies and future business relationships of Buyer or Parent shall not be
deemed to be in the public domain or in the possession of the receiving party
merely because they are embraced (but not disclosed) by general disclosures in
the public domain or in the possession of the receiving party.
7.5.4 Notwithstanding anything to the contrary in this Section
7.5 or in the letter agreement between Buyer and Sellers dated June 3, 2003,
each party (and their employees, representatives, or other agents) may disclose
to any and all Persons, without limitation of any kind, the tax treatment and
tax structure of the transaction contemplated hereby and all materials of any
kind (including opinions or other tax analyses) that are provided to the party
relating to such tax treatment and tax structure.
7.6 Board Representation. Simultaneous with the Closing, Buyer will
increase the size of its board of directors and appoint Xxxxxx X. Xxxxx,
Chairman of Parent, or his successor as Chairman of Parent, as a director of
Buyer. Buyer will continue to nominate and solicit proxies for re-election of
the Chairman of Parent until the later of (a) the date on which the 2004
Contingent Payment is paid (or, if no 2004 Contingent Payment is due, March 31,
2005) or (b) such time as Sellers hold less than 5%, in the aggregate, of the
outstanding voting power of Buyer. The board of directors of Buyer will take
appropriate action to elect the Chairman of Parent as Vice Chairman of the board
of directors of Buyer.
7.7 Transferred Employees. Prior to Closing, Buyer will make offers of
employment to all employees of Subsidiary and to the employee of Parent listed
on Schedule 7.7. Each such employee (other than those employees who enter into
employment agreements with Buyer) will be offered employment at his or her
current salary or hourly rate and will be offered benefits such as health
insurance, dental insurance, 401(k) and any other benefit offered to full-time
employees of Buyer, on the same terms provided to full-time employees of Buyer
(subject to any eligibility and waiting-period requirements; provided that Buyer
will give such employees credit for service with Sellers to the extent permitted
under such benefit plans). Buyer will honor all
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accrued and earned vacation for employees who accept the offer. To the extent an
offer is accepted by any such employee, the employee shall be referred to as a
"Transferred Employee."
7.8 Insurance. Sellers shall deliver at Closing a Certificate of
Insurance naming Buyer and Acquisition Sub as additional insureds under Sellers'
products liability insurance policy. Sellers shall maintain such insurance with
at least the coverage set forth in Exhibit 7.8 for a period of six years after
the Closing Date.
7.9 Unassignable Contracts. If any Assumed Contract is not capable of
being assigned to Acquisition Sub without the consent or approval of another
party thereto and such consent or approval has not been obtained prior to the
Closing, then Acquisition Sub shall not be required to assume that contract
under Section 1.1(a)(vii), and that contract will be deemed to be an Excluded
Asset under Section 1.1(c)(vi). For any such contract, Acquisition Sub shall
assume Subsidiary's obligations thereunder (but not the contract itself)
accruing after the Closing Date, and the rights and benefits of Subsidiary
thereunder arising after the Closing Date shall be included in the Assets. If,
after the Closing, the parties obtain the required consent to assign any such
contract to Acquisition Sub, then the contract shall be deemed to be an Assumed
Contract and the post-assignment liabilities relating thereto shall be deemed to
be Assumed Liabilities.
7.10 Rule 145 Affiliates. Before the date of the Parent Shareholders'
Meeting, Parent will deliver to Buyer a letter identifying all persons who are
"affiliates" of Parent within the meaning of Rule 144 and Rule 145 under the
Securities Act ("Parent Affiliates"). Parent will use reasonable best efforts to
cause to be delivered to Buyer on or before the date of the Parent Shareholders'
Meeting a letter agreement substantially in the form attached as Exhibit 7.10
from each of the Parent Affiliates.
7.11 Voting Agreement. Each of Parent and Subsidiary (i) agrees that,
except as provided in the next sentence, it will vote all shares of Buyer Common
Stock owned by it in favor of the slate of director-nominees recommended by the
board of directors of Buyer at any annual or special shareholder meeting held
after the Closing Date (including the director-nominee described in, and for the
period set forth in, Section 7.6) and (ii) agrees that, except as provided in
the next sentence, it will, upon written request, appoint Xxxxx Xxxxxxx (or such
other person as may be designated in writing by the board of directors of Buyer)
as proxy to vote its the shares in this manner at the meeting. Nothing in this
Section 7.11 requires Parent or Subsidiary, individually or collectively,
however, (a) to vote more than 19.9% of the outstanding shares of Buyer in this
manner, (b) to grant any proxy to any person if, as a result of the granting of
the proxy, the person has the right to vote more than 19.9% of the outstanding
shares of Buyer, if at such time, Buyer is subject to the provisions of
Minnesota Statues Section 302A.671, or (c) to act in a manner that would
conflict with the fiduciary duties of the board of directors of Parent or
Subsidiary.
7.12 Plan of Distribution. Without the prior written consent of Buyer,
Sellers may not sell or otherwise transfer (except transfers from Subsidiary to
Parent) the shares of Buyer Common Stock received pursuant to this Agreement
except as provided in this Section 7.12. Sellers may not sell or otherwise
transfer any such shares before April 1, 2004. From April 1, 2004 until October
31, 2004, Sellers may distribute, on a pro rata basis, up to 500,000 shares of
34
Buyer Common Stock to Parent's shareholders. On or within ten Business Days
after April 1, 2005, Sellers shall distribute, on a pro rata basis, all of the
remaining shares of Buyer Common Stock held by Sellers to Parent's shareholders.
ARTICLE 8
CONDITIONS TO BUYER'S OBLIGATION
The obligation of Buyer to consummate the transactions contemplated by
this Agreement shall be subject to the satisfaction (or waiver by Buyer in
writing), on or prior to the Closing Date, of all of the following conditions:
8.1 Representations, Warranties and Covenants of Sellers. The
representations and warranties of Sellers contained herein shall be true on and
as of the Closing Date (except for those representations that speak as of an
earlier date, which shall be true as of such date), except to the extent that
any inaccuracy in any such representation or warranty, individually or in the
aggregate, has not had and would not be reasonably likely to have a Material
Adverse Effect on the Business (provided that, solely for purposes of this
Section 8.1, any representation or warranty that is qualified as to
"materiality" or "Material Adverse Effect" shall be read as if that qualifier
was not present), and the Sellers shall each have, in all material respects,
performed and complied with all of their agreements and covenants contained
herein to be performed on or prior to the Closing Date.
8.2 No Prohibition. No statute, rule or regulation or order of any
court or administrative agency prohibiting consummation of the transactions
contemplated hereby shall be in effect.
8.3 Deliveries. Parent and Subsidiary shall each have made or caused to
be made delivery to Buyer of the items set forth in Section 3.2.
8.4 No Material Adverse Change. Since the date of this Agreement, no
change in the business, financial condition, properties, operating results,
assets, or customer base of the Business or other event or incident, other than
the decision of Sellers to sell the Assets, shall have occurred that has had or
would be reasonably likely to have a Material Adverse Effect on the Business.
8.5 Shareholder Approval. The sale of the Assets pursuant to this
Agreement and the other transactions contemplated hereby shall have been
approved by the shareholders of Parent and Subsidiary, and the Buyer Shareholder
Proposals shall have been approved by the shareholders of Buyer.
8.6 Other Approvals and Consents. All governmental filings,
authorizations and approvals identified on Schedule 8.6 and all consents
identified on Schedule 8.6 that are required for the consummation of the
transactions contemplated hereby or to permit Acquisition Sub, after
consummation of the transactions contemplated hereby, to carry on the Business
in the manner now conducted, and will have been made or obtained.
35
8.7 Research Agreement. Buyer and Parent shall have entered into a
Research Agreement, substantially in the form of Exhibit 8.7.
8.8 Employment Agreements. The letter agreements attached as Exhibits
8.8(a) and (b) with the persons named therein shall remain in effect as of the
Closing Date (or have been replaced by the employment agreements described in
those letter agreements).
8.9 Registration Statement. The Registration Statement shall have
become effective under the Securities Act, no stop order suspending the
effectiveness of the Registration Statement shall then be in effect, and no
proceedings for that purpose shall then be threatened by the SEC or shall have
been initiated by the SEC and not concluded or withdrawn.
ARTICLE 9
CONDITIONS TO SELLERS' OBLIGATIONS
The obligations of Sellers to consummate the transactions contemplated
by this Agreement shall be subject to the satisfaction (or waiver by Sellers in
writing), on or prior to the Closing Date, of all of the following conditions:
9.1 Representations, Warranties and Covenants of Buyer. The
representations and warranties of Buyer and Acquisition Sub contained herein
shall be true on and as of the Closing Date (except for those representations
that speak as of an earlier date, which shall be true as of such date), except
to the extent that any inaccuracy in any such representation or warranty,
individually or in the aggregate, has not had and would not be reasonably likely
to have a Material Adverse Effect on Buyer (provided that, solely for purposes
of this Section 9.1, any representation or warranty that is qualified as to
"materiality" or "Material Adverse Effect" shall be read as if that qualifier
was not present), and Buyer shall have, in all material respects, performed and
complied with all of its agreements and covenants contained herein to be
performed on or prior to the Closing Date.
9.2 No Prohibition. No statute, rule or regulation or order of any
court or administrative agency prohibiting consummation of the transactions
contemplated hereby shall be in effect.
9.3 Deliveries. Buyer shall have made or caused to be made delivery to
Sellers of the items set forth in Section 3.3.
9.4 No Material Adverse Change. Since the date of this Agreement, no
change in the business, financial condition, properties, operating results,
assets or customer base of Buyer or other event, or incident, other than the
decision of Buyer to purchase the Assets, shall have occurred that has had or
would be reasonably likely to have a Material Adverse Effect on Buyer.
9.5 Shareholder Approval. The sale of the Assets pursuant to this
Agreement and the other transactions contemplated hereby shall have been
approved by the shareholders of Parent and Subsidiary, and the Buyer Shareholder
Proposals shall have been approved by the shareholders of Buyer.
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9.6 Registration Statement. The Registration Statement shall have
become effective under the Securities Act, no stop order suspending the
effectiveness of the Registration Statement shall then be in effect, and no
proceedings for that purpose shall then be threatened by the SEC or shall have
been initiated by the SEC and not concluded or withdrawn.
9.7 Nasdaq National Market System. Buyer shall have applied and been
approved for listing of Buyer Common Stock on the Nasdaq National Market System.
ARTICLE 10
INDEMNIFICATION AND RELATED MATTERS
10.1 Survival. Subject to the limitations and other provisions of this
Agreement, the representations and warranties of the parties contained herein
shall survive the Closing and shall remain in full force and effect, regardless
of any investigation made by or on behalf of any party for a period of eighteen
months after the Closing Date, except for claims based on intentional fraud,
which shall survive until the expiration of the applicable statute of
limitations. The agreements of indemnification in Sections 10.1 and 10.2 will
remain effective in respect of claims made in writing as provided in Section
12.11 with respect to such representations and warranties prior to the
expiration of the relevant survival period until such claims are finally
determined and satisfied in full. All other covenants, agreements and
indemnification obligations will survive indefinitely unless a different period
is specified in this Agreement.
10.2 Indemnification by Sellers. Subject to the terms, conditions, and
limitations of this Article 10, Sellers shall, jointly and severally, indemnify
and hold Buyer and its Affiliates, including, in each case, any of its or their
respective directors, officers, employees and representatives, harmless from and
against:
10.2.1 Losses resulting from any breach of any of the
representations and warranties, covenants or other agreements of Sellers
contained in this Agreement; and
10.2.2 Losses arising out of, related to or resulting from
Excluded Liabilities.
10.3 Indemnification by Buyer. Subject to the terms, conditions, and
limitations of this Article 10, Buyer agrees to indemnify and hold Sellers and
their Affiliates, including, in each case, any of its or their respective
directors, officers, employees and representatives, harmless from and against:
10.3.1 Losses resulting from any breach of any of the
representations and warranties, covenants or other agreements of Buyer contained
in this Agreement;
10.3.2 Losses arising out of, related to or resulting from
Assumed Liabilities; and
10.3.3 Losses arising out of, related to or resulting from the
operation of the Business or the ownership of the Assets after the Closing Date,
other that those Losses for which Sellers are obligated to indemnify Buyer under
this Article 10.
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10.4 Limitations. Notwithstanding the provisions of Section 10.2,
Losses for which Buyer or its Affiliates are entitled to indemnification as a
result of a breach by Sellers of any representation or warranty of Sellers in
Article 4 of this Agreement shall not include the first $100,000 of Losses (the
"Basket") or exceed one-half of the cash portion of the Closing Payment paid to
Sellers at the Closing (the "Cap"); provided that the Basket and the Cap shall
not apply to matters that may be covered by the representations and warranties
but that are also Excluded Liabilities. No Losses shall be deemed to have been
sustained by a party to the extent of (a) any tax savings actually realized by
the party with respect thereto or (b) any proceeds received by the party from
any third party, including any insurance carrier.
10.5 Notice of Indemnification. In the event any legal proceeding shall
be threatened or instituted or any claim or demand shall be asserted by any
Person in respect of which payment may be sought by one party hereto from the
other party under the provisions of this Agreement, the party seeking
indemnification (the "Indemnitee") shall promptly cause written notice of the
assertion of any such claim of which it has Knowledge that is covered by this
indemnity to be forwarded to the other party (the "Indemnitor") which notice, in
the case of a claim arising under Section 10.2 or 10.3, must be received by the
Indemnitor before the expiration of the relevant survival period set forth in
Section 10.1 or if no such period is specified, until the applicable period
under the statute of limitations therefor has expired; provided, however, that
no delay on the part of the Indemnitor in notifying the Indemnitee shall relieve
the Indemnitor from any liability or obligation under this Article 10 except to
the extent that the Indemnitor is damaged by the delay (but no such delay may
extend the survival period set forth in Section 10.1 for the parties'
representations and warranties). Any notice of a claim by reason of any of the
representations, warranties, covenants or agreements contained in this Agreement
shall state specifically the representation, warranty, covenant or agreement
with respect to which the claim is made, the facts giving rise to an alleged
basis for the claim, and the amount of the liability asserted against the
Indemnitor by reason of the claim.
10.6 Indemnification Procedure for Third-Party Claims. If an Indemnitee
receives written notice of the commencement of any action or proceeding, the
assertion of any claim by a third party or the imposition of any penalty or
assessment for which indemnity may be sought pursuant to this Article 10 (a
"Third-Party Claim"), and the Indemnitee intends to seek indemnity pursuant to
this Article 10, then the Indemnitee shall promptly provide the Indemnitor with
notice of such action, proceeding, claim, penalty or assessment; provided,
however, that no delay on the part of the Indemnitor in notifying the Indemnitee
shall relieve the Indemnitor from any liability or obligation under this Article
10 except to the extent that the Indemnitor is damaged by the delay (but no such
delay may extend the survival period set forth in Section 10.1 for the parties'
representations and warranties). The Indemnitor shall have the right, by giving
notice to the Indemnitee within 20 days after receipt of notice from the
Indemnitee of a Third-Party Claim, at its expense, to defend against, negotiate,
settle or otherwise deal with any claim with respect to which it is the
Indemnitor and to have the Indemnitee represented by counsel reasonably
satisfactory to the Indemnitee, selected by the Indemnitor, provided that the
Indemnitee may participate in any proceeding with counsel of its choice and at
its expense; provided further that the Indemnitee, at any time when it
reasonably believes that (i) the Indemnitor does not have the financial
resources to defend against the claim and fulfill its indemnification
obligations
38
hereunder; or (ii) the Indemnitor is not conducting the defense of the
Third-Party Claim actively and diligently, may conduct the defense of the
Third-Party Claim in good faith, with counsel of its choice, and be fully
indemnified therefor; and provided further, that the Indemnitor may not enter
into a settlement of any Third-Party Claim without the consent of the Indemnitee
unless such settlement requires no restrictions of obligations upon the
Indemnitee other than a monetary payment for which the Indemnitee is fully
indemnified and that the Indemnitee may not enter into any settlement of any
Third-Party Claim without the consent of the Indemnitor (which consent may not
be unreasonably withheld). If the Indemnitee is controlling the defense, the
Indemnitor may participate in such defense and settlement through counsel chosen
by it or consent to any settlement of the Third-Party Claim, which consent shall
not be unreasonably withheld. The parties will cooperate fully with each other
in connection with the defense, negotiation or settlement of any Third-Party
Claim.
10.7 Right to Offset. Buyer shall have the right to offset against any
amount due under the Contingent Payments any amounts determined to be due Buyer
from Sellers under this Article 10 by mutual agreement of Buyer and Sellers or
by a final judgment (whether or not appealable) of a court of competent
jurisdiction.
10.8 Exclusive Remedy. From and after the Closing, the sole recourse
and exclusive remedy of Buyer and its Affiliates against Sellers and their
Affiliates, arising out of this Agreement or otherwise arising from the Buyer's
acquisition of Assets, except for intentional fraud, shall be to assert a claim
for indemnification under this Article 10.
ARTICLE 11
TERMINATION PRIOR TO CLOSING
11.1 Termination. This Agreement may be terminated at any time prior to
the Closing:
11.1.1 by the mutual written consent of the parties;
11.1.2 by Sellers or Buyer if (a) there has been a breach of a
representation that has had or would be reasonably likely to have a Material
Adverse Effect on the Business (with respect to a termination by Buyer) or on
Buyer (with respect to a termination by Sellers) or (b) a breach of a material
covenant on the part of the other party in the representations, warranties and
covenants contained herein, unless, in the cause of clause (a) or (b), such
breach is cured within 30 days of receipt of notice of such breach;
11.1.3 by Sellers or Buyer if the Closing has not occurred by
December 31, 2003; provided that no party may terminate this Agreement pursuant
to this clause if the party's failure to fulfill any of its obligations under
this Agreement shall have been the reason that the Closing Date shall not have
occurred on or before that date;
11.1.4 by Sellers or Buyer if there shall be any law or
regulation that makes consummation of the acquisition of the Assets or any other
material component of the transactions contemplated hereby illegal or otherwise
prohibited or if any judgment, injunction,
39
order or decree enjoining Buyer or Sellers from consummating the transactions
contemplated hereby is entered and such judgment, injunction, order or decree
shall become final and non-appealable;
11.1.5 by Sellers or Buyer if (a) the shareholders of Parent
fail to approve the sale of the Assets and the other transactions contemplated
hereby at the first shareholders' meeting called for that purpose or any
adjournment thereof or (b) the shareholders of Buyer fail to approve the Buyer
Shareholder Proposals at the first shareholders' meeting called for that purpose
or any adjournment thereof;
11.1.6 by Buyer if the board of directors of Parent withdraws
or adversely modifies its recommendation that Parent shareholders approve the
sale of the Assets and the other transactions contemplated hereby; or
11.1.7 by Sellers if the board of directors of Buyer withdraws
or adversely modifies its recommendation that Buyer shareholders approve the
Buyer Shareholder Proposals.
11.2 Effects of Termination. If this Agreement is terminated pursuant
to Section 11.1, this Agreement shall become void and of no effect with no
liability on the part of any party hereto, except (i) as set forth in Sections
7.3, 7.5, 11.3 and 12.6; and (ii) that nothing shall relieve any party hereto
for liability for any willful and material breach of this Agreement.
11.3 Reimbursement.
(a) If this Agreement is terminated by Buyer under Section
11.1.6, then Sellers will promptly reimburse Buyer in immediately
available funds an amount, not to exceed $225,000, equal to the
documented out-of-pocket expenses of Buyer (including without
limitation, printing fees, filing fees and fees and expenses of its
attorneys, accountants and financial advisors) related to this
Agreement and the transactions contemplated by this Agreement.
(b) If this Agreement is terminated by Sellers under Section
11.1.7, then Buyer will promptly reimburse Sellers in immediately
available funds an amount, not to exceed $225,000, equal to the
documented out-of-pocket expenses of Sellers (including without
limitation, printing fees, filing fees and fees and expenses of its
attorneys, accountants and financial advisors) related to this
Agreement and the transactions contemplated by this Agreement.
ARTICLE 12
MISCELLANEOUS
12.1 Entire Agreement. This Agreement (including the exhibits and
schedules hereto, the Sellers Disclosure Schedule, the Buyer Disclosure
Schedule, the documents referred to herein and the other documents executed by
the parties on the date hereof) contain the entire understanding of the parties
hereto in respect of the subject matter contained herein and supersede all prior
agreements and understandings between the parties with respect to such
40
subject matter. There are no restrictions, promises, representations,
warranties, covenants, or undertakings, other than those expressly set forth or
referred to herein or therein.
12.2 Amendment; Waiver. No waiver and no modification or amendment of
any provision of this Agreement shall be effective unless specifically made in
writing and duly signed by the parties to be bound thereby. Waiver by a party of
any breach of or failure to comply with any of the provisions of this Agreement
by any other party shall not be construed as, or constitute, a continuing waiver
of, or a waiver of any other breach of, or failure to comply with, any other
provision of this Agreement.
12.3 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 of
the parties hereto without the prior written consent of the other parties;
provided, however, that Buyer may assign this Agreement and its rights,
interests and obligations in whole or in part hereunder to one or more directly
or indirectly wholly owned subsidiaries of Buyer without the consent of Sellers;
provided, however, that such assignment shall not relieve Buyer of any of its
obligations hereunder.
12.4 Headings; Usage. The section headings contained herein are for the
purposes of convenience only and are not intended to define or limit the
contents of those sections. The meanings of any terms defined herein are equally
applicable to both the singular and plural forms of the terms defined.
12.5 Cooperation. Each party hereto shall cooperate, shall take further
action and shall execute and deliver such further documents as may be reasonably
requested by the other party in order to carry out the provisions and purposes
of this Agreement.
12.6 Expenses. Except as provided in Sections 7.1 and 11.3, each party
shall bear its own costs and expenses in connection with the negotiation,
preparation, performance and consummation of the transactions contemplated by
this Agreement, including all taxes of any type, the fees and disbursements of
all attorneys, accountants, appraisers, investment bankers and advisors retained
by or representing them in connection with the preparation and performance of
this Agreement.
12.7 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Minnesota applicable to contracts
made and to be performed therein without regard to the principles of any
jurisdiction with respect to conflicts of laws.
12.8 Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under the
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Agreement.
41
12.9 Counterparts. This Agreement may be executed in one or more
counterparts, all of which taken together will constitute one and the same
instrument.
12.10 Interpretation. This Agreement has been fully negotiated by the
parties through their legal counsel. Accordingly, in interpreting this
Agreement, the rule of the interpretation requiring that documents be construed
against the draftsman shall be inapplicable.
12.11 Notices. All notices, requests and other communications to any
party hereunder shall be in writing, will be effective upon receipt, and shall
be given or made (and shall be deemed to have been duly given or made upon
receipt) by delivery in person, by courier service, by cable, by facsimile
transmission, by telegram or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties at the following addresses
(or at such other address for a party as shall be specified in a notice given in
accordance with this Section 12.11):
if to Parent, to: BIOMEC Inc.
0000 Xxxx 00xx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxx
Chairman and Chief Executive Officer
if to Subsidiary, to: BIOMEC Cardiovascular Inc.
0000 Xxxx 00xx Xxxxxx
Xxxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx
President and Chief Executive Officer
with a copy to:
Faegre & Xxxxxx LLP
2200 Xxxxx Fargo Center
00 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxxxxx
if to Buyer to: Medamicus, Inc.
00000 Xxxxxxx 00 Xxxx
Xxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx
Chief Executive Officer
with a copy to:
Xxxxxxxxx & Xxxxxx P.L.L.P.
0000 XXX Xxxxxx
00 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Attention: Xxxxxxx Xxxx Xxxxxx
42
12.12 Publicity. Upon execution of this Agreement, the parties shall
jointly issue a press release, as agreed upon by them. Neither party shall,
without the prior written consent of the other, issue any statement or
communication to the public or to the press regarding this Agreement, or any of
the terms, conditions or other facts with respect to the Agreement, except as
required by law or the rules of any recognized stock exchange.
12.13 No Third-Party Beneficiary. The provisions of this Agreement are
for the sole benefit of the parties to this Agreement and are not for the
benefit of any third party.
12.14 Disclosure Schedules. Matters reflected in the Sellers Disclosure
Schedule or the Buyer Disclosure Schedule are not necessarily limited to matters
required by this Agreement to be reflected therein. Such additional matters are
set forth for informational purposes and do not necessarily include other
matters of a similar nature that are not required to be reflected therein. A
disclosure made by Sellers or Buyer in any Section of its Disclosure Schedule
that is sufficient to reasonably inform the other party of information required
to be disclosed in another Section of its Disclosure Schedule in order to avoid
a misrepresentation thereunder shall be deemed to have been made with respect to
such other Section of its Disclosure Schedule.
12.15 Buyer Guarantee. Buyer unconditionally guarantees to Sellers the
full and punctual payment and performance, when due, by Acquisition Sub of all
obligations, liabilities and covenants hereunder, including, without limitation,
the Assumed Liabilities.
43
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
MEDAMICUS, INC.
/s/ XXXXX X. XXXXXXX
--------------------
By: Xxxxx X. Xxxxxxx
Chief Executive Officer
MEDACQUISITION, INC.
/s/ XXXXX X. XXXXXXX
--------------------
By: Xxxxx X. Xxxxxxx
Chief Executive Officer
BIOMEC CARDIOVASCULAR INC.
/s/ XXXXXXX X. XXXXX
----------------------
By: Xxxxxxx X. Xxxxx
President and Chief Executive Officer
BIOMEC INC.
/s/ XXXXXX X. XXXXX
-------------------
By: Xxxxxx X. Xxxxx
Chairman and Chief Executive Officer
EXHIBIT 1
DEFINITIONS
For purposes of this Agreement, the following terms have the meaning
set forth below:
"Affiliate" means as to any Person controlling, controlled by, or under
common control with, such Person, any officer, director or executive employee of
such Person, and any Employee Benefit Plan maintained by such Person (including,
without limitation, related trusts and the fiduciaries thereof).
"Assets" has the meaning given to it in Section 1.1(a).
"Assumed Contracts" has the meaning given to it in Section 1.1(a)(vii).
"Assumed Liabilities" has the meaning given to it in Section 1.2(a).
"Assumption Agreement" means the Assumption Agreement to be executed by
Buyer, Acquisition Sub and the Sellers on the Closing Date substantially in the
form of Exhibit 3.2.8.
"Business" has the meaning given to it in the second "WHEREAS" clause
of the Agreement.
"Business Day" means any day that is not a Saturday, a Sunday or a day
on which banks are required or permitted to be closed in the State of Minnesota
or Ohio.
"Buyer Products" means all products in development by or for Buyer and
those produced, manufactured, marketed or distributed at any time by Buyer.
"Closing" has the meaning given to it in Section 3.1.
"Closing Balance Sheet" has the meaning given to it in Section 2.2.2.
"Closing Date" has the meaning given to it in Section 3.1.
"Code" means the Internal Revenue Code of 1986, as amended.
"Competitive Products" has the meaning given to it in Section 7.2.3.
"Dollars" and the symbol "$" means lawful currency of the United States
of America.
"Employee" means a current employee, including both active employees
(including light-duty employees), inactive employees (including employees on a
leave of absence, sick leave, short-term disability or worker's compensation
disability on the Closing Date) working for Subsidiary or working for Parent
primarily with respect to the Business as of the Closing Date,
1
and former employees (including retirees and employees on long-term disability)
who worked primarily in the Business immediately before their termination of
employment.
"Employee Benefit Plan" means any agreement, plan, program, fund,
policy, contract or arrangement (either written or unwritten) providing
compensation, benefits, pension, retirement, profit sharing, stock bonus, stock
option, stock purchase, phantom or stock equivalent, bonus, incentive, deferred
compensation, hospitalization, medical, dental, vision, vacation, insurance,
sick pay, disability, severance, or similar employee benefits covering any
Employee, and the beneficiaries and dependents of the Employee, including
without limitation, (i) any Employee Welfare Benefit Plan, whether or not
terminated, including but not limited to any severance agreement or plan, any
material fringe benefit plan or program, any medical plan, life insurance plan,
short-term or long-term disability plan, dental plan, personnel policy, vacation
time, holiday pay, bonus program, service award, moving expense reimbursement
program or sick leave; (ii) any deferred compensation or retirement plan or
arrangement which is an Employee Pension Benefit Plan, whether or not
terminated, including but not limited to any excess benefit plan, top hat plan,
or deferred compensation plan, any Multiemployer Plan, defined contribution or
defined benefit arrangements which are Employee Pension Benefit Plans; (iii) any
other plan, program, policy, contract or arrangement, including but not limited
to any bonus or incentive plan, stock options, restricted stock, stock bonus,
deferred bonus plan, salary reduction agreement, change-of-control agreement,
retention agreement, employment agreement, or consulting agreement with former
Employees.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
Section 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Section 3(1).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Environmental Condition" has the meaning given to it in Section
4.13.2.
"Environmental Laws" means any and all applicable national, federal,
state, foreign and local treaties, laws, regulations, ordinances, codes,
standards or criteria, orders or decrees of any court, agency, entity,
organization or authority, or of any jurisdiction where a party conducts its
business pertaining to the public health and safety, workers health and safety
and the pollution of or protection of the environment, including but not limited
to those related to air, water, noise, odor, land, soil, pesticide, hazardous or
toxic substances and wastes, in effect at the Closing Date.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" of any Person means any other Person that, together
with the first Person, is treated as a single employer under Section 414 of the
Code.
"EU" means the European Union.
"Excluded Assets" has the meaning given to it in Section 1.1(c).
2
"Excluded Liabilities" has the meaning given to it in Section 1.2(b).
"Gross Margins" has the meaning given to it on Schedule 2.5.2.
"Intellectual Property" means all rights in patents, patent
applications, invention disclosures, trademarks, service marks, applications and
registrations for trademarks and service marks, copyrights, applications and
registrations for copyrights, trade secrets, know-how, confidential information,
and inventions.
"Knowledge" of a Person means the actual knowledge of any officer or
director of the Person.
"Latest Balance Sheet" means the unaudited balance sheet of Subsidiary
as of December 31, 2002.
"Liabilities" means any and all debts, liabilities and obligations,
whether accrued or fixed, absolute or contingent or matured or unmatured.
"Lien" means any mortgage, claim, lien, pledge, charge, security
interest, option, preemptive right, assessment, security interest, restriction
on transfer or encumbrance of any kind, other than mechanics, warehousemen,
materialman and similar liens and except for Tax liens (in each case for
payments not yet delinquent).
"Litigation" means any claim, action, suit or proceeding in any court
or before any arbitrator or governmental body, agency or official.
"Losses" means all Liabilities, obligations, duties, demands, claims,
actions, causes of action, assessments, losses, costs, damages, deficiencies,
taxes, fines or expenses, including, without limitation, interest, penalties,
reasonable attorneys' fees and reasonable amounts paid in investigation, defense
or settlement of any of the foregoing.
"M&A Qualified Beneficiary" means a qualified beneficiary whose
qualifying event occurred prior to or in connection with the transactions
contemplated by this Agreement and who is, or whose qualifying event occurred in
connection with, a covered employee whose last employment prior to the
qualifying event was associated with the Assets.
"Material Adverse Effect" means a material adverse effect on a party's
ability to consummate the transactions contemplated hereby or on the business,
financial condition, properties, operating results, assets or customer base of
the Business in the case of the Business or the Buyer in the case of the Buyer,
in each case taken as a whole, except to the extent that the adverse effect
results from (a) general economic conditions or changes therein, (b) financial
market fluctuations or conditions, (c) adverse economic or regulatory changes or
effects in or affecting the medical device industry generally, or (d) the
announcement of the transactions contemplated hereby.
3
"Multiemployer Plan" has the meaning set forth in ERISA Sec. 3(37).
"Permits" has the meaning given to it in Section 4.10.
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated association, corporation, limited liability
company, or other such entity or government (whether domestic, foreign, federal,
state, county, city or otherwise, including, without limitation, any
instrumentality, division, agency or department thereof).
"Property" means all real estate and property, including groundwater
underlying the surface, now owned or leased by a party.
"Regulated Substances" means toxic, radioactive or hazardous substances
or wastes, pollutants or contaminants, including but not limited to: asbestos;
urea formaldehyde; the group of organic compounds known as polychlorinated
biphenyls; petroleum products including gasoline, fuel oil, crude oil and the
various constituents of such products; and any substance or material the
generation, storage, handling, release, disposal or cleanup of which is
regulated by any Environmental Law.
"Sellers" has the meaning given to it in the first WHEREAS clause.
"Subsidiary Financial Statements" has the meaning given to it in
Section 4.2.
"Subsidiary Products" means all products in development by or for
Subsidiary for use in the Business and those produced, manufactured, marketed or
distributed at any time by the Business.
"Tax" or "Taxes" means with respect to any Person any federal, state,
county, local or foreign income, gross receipts, profits, capital, franchise,
estimated, alternative minimum, add-on minimum, estimated, sales, use,
occupancy, transfer, registration, value added, ad valorem, excise, natural
resources, severance, stamp, occupation, premium, windfall profit, environmental
(including taxes under Section 59A of the Code), customs, duties, levies, real
property, personal property, capital stock, mercantile, social security (or
similar), unemployment, disability, payroll, license, employment, employee or
other withholding, or other tax, governmental fee or like assessment or charge
of any kind whatsoever, including any interest, penalties or additions to tax or
additional amounts in respect of the foregoing, whether disputed or not and
whether computed on a separate, consolidated, unitary, combined or any other
basis; the foregoing shall include any transferee or secondary liability for a
Tax and any liability assumed by agreement or arising as a result of being (or
ceasing to be) a member of any affiliated group, (as defined in Section 1504 of
the Code) or being included (or required to be included) in any Tax Return
relating thereto).
"Tax Returns" means returns, amendments, statements, forms,
information, elections, declarations, reports, claims for refund, information
returns or other documents (including any related or supporting schedules,
statements or information) filed or required to be filed in connection with the
determination, assessment or collection of any Taxes of any party or the
administration of any laws, regulations or administrative requirements relating
to any Taxes.
4
"Transferred Employee" has the meaning given to it in Section 7.7.
"U.S. GAAP" means United States generally accepted accounting
principles.
5
