ASSET PURCHASE AGREEMENT
between
HAYES MEDICAL, INC.,
a California corporation, as "Buyer"
and
U. S. MEDICAL PRODUCTS, INC.,
a Texas corporation, as "Seller"
Dated as of May 20, 1997
TABLE OF CONTENTS
Page
ARTICLE I - PURCHASE OF ASSETS . . . . . . . . . . . . . . . . . . . . . .1
I.1 ASSET ACQUISITION. . . . . . . . . . . . . . . . . . . . . . . . . .1
I.2 RETAINED RIGHTS IN SELLER ASSETS . . . . . . . . . . . . . . . . . .2
ARTICLE II - ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . . . . .2
II.1 LIABILITIES ASSUMED . . . . . . . . . . . . . . . . . . . . . . . .2
II.2 RETAINED LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . .3
II.3 CERTAIN TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . .3
ARTICLE III - PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . .3
III.1 CONSIDERATION. . . . . . . . . . . . . . . . . . . . . . . . . . .3
III.2 CLOSING STATEMENT. . . . . . . . . . . . . . . . . . . . . . . . .4
ARTICLE IV - REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . .5
IV.1 REPRESENTATIONS OF BUYER. . . . . . . . . . . . . . . . . . . . . .5
IV.2 REPRESENTATIONS OF SELLER . . . . . . . . . . . . . . . . . . . . .5
ARTICLE V - COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . 13
V.1 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . 13
V.2 ACCESS TO BOOKS AND RECORDS. . . . . . . . . . . . . . . . . . . . 13
V.3 PRESERVATION OF RECORDS. . . . . . . . . . . . . . . . . . . . . . 13
V.4 INFORMATION REGARDING INTELLECTUAL PROPERTY. . . . . . . . . . . . 13
V.5 ANNOUNCEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
V.6 ACCESS TO PROPERTIES AND RECORDS . . . . . . . . . . . . . . . . . 14
V.7 GENERAL CONDUCT OF THE BUSINESS PRIOR TO CLOSING DATE. . . . . . . 14
V.8 MUTUAL COVENANT. . . . . . . . . . . . . . . . . . . . . . . . . . 15
V.9 FULFILLMENT OF CONDITIONS TO CLOSING . . . . . . . . . . . . . . . 16
V.10 OBTAINING CONSENTS TO ASSIGNMENTS . . . . . . . . . . . . . . . . 16
V.11 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE VI - EMPLOYEE AND OTHER MATTERS. . . . . . . . . . . . . . . . . 16
VI.1 BUYER TO OFFER EMPLOYMENT . . . . . . . . . . . . . . . . . . . . 16
VI.2 PAYROLL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
VI.3 ACCRUED VACATION. . . . . . . . . . . . . . . . . . . . . . . . . 17
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ARTICLE VII - CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . 17
VII.1 TIME OF CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . 17
VII.2 DELIVERIES BY SELLER . . . . . . . . . . . . . . . . . . . . . . 17
VII.3 DELIVERIES BY BUYER. . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE VIII - CONDITIONS PRECEDENT TO CLOSING . . . . . . . . . . . . . 18
VIII.1 CONDITIONS TO OBLIGATIONS OF BUYER. . . . . . . . . . . . . . . 18
VIII.2 CONDITIONS TO OBLIGATIONS OF SELLER . . . . . . . . . . . . . . 20
ARTICLE IX - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 21
IX.1 EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
IX.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . 21
IX.3 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
IX.4 KNOWLEDGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
IX.5 REMEDIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
IX.6 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . 22
IX.7 INDEMNIFICATION.. . . . . . . . . . . . . . . . . . . . . . . . . 23
IX.8 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
IX.9 ALLOCATION OF ESTIMATED PURCHASE PRICE. . . . . . . . . . . . . . 25
IX.10 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
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EXHIBITS AND SCHEDULES
Exhibit III.1(b)-1 -- Note
Exhibit IV.2(f) -- Financial Statements
Exhibit VII.2(e) -- Assignments of Leases
Exhibit IX.7(a) -- Offset Procedures
Schedule I.1(a) -- Accounts Receivable
Schedule I.1(c) -- Acquired Contracts
Schedule IV.2(b) -- Authorization, Approval, Consents, Notices
Schedule IV.2(d) -- Contracts and Commitments
Schedule IV.2(g) -- Events Subsequent to Balance Sheet Date
Schedule IV.2(i) -- Liens
Schedule IV.2(k) -- Litigation
Schedule IV.2(l) -- Taxes
Schedule IV.2(m) -- Licenses, Permits, Approvals and Authorizations
Schedule IV.2(n) -- Labor Matters
Schedule IV.2(r) -- Personnel
Schedule IV.2(s) -- Insurance
Schedule IV.2(u) -- Interests in Real Property
Schedule IV.2(v) -- Property Taxes
Schedule V.2 -- Seller Retained Books and Records
Schedule VI.1 -- Employees
Schedule IX.9 -- Allocation of Estimated Purchase Price
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of May 20, 1997,
is entered into by and between Hayes Medical, Inc., a California corporation
(the "Buyer"), and U. S. Medical Products, Inc., a Texas corporation (the
"Seller").
RECITALS
A. Seller is in the business of designing, manufacturing, and selling
orthopaedic hip and knee implants (the "Products") through U. S. Medical
Products, Inc., 12201 Technology Boulevard, Suite 100, Austin, Texas 78727 (the
"Company"); and
B. Seller desires to sell and Buyer desires to purchase certain of the
tangible and intangible assets and assume specified and limited liabilities of
the Company. "Business" shall be defined as the Assets (as hereinafter defined)
and the Assumed Liabilities (as hereinafter defined).
AGREEMENT
In consideration of the mutual covenants, agreements, representations and
warranties contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
ARTICLE I
PURCHASE OF ASSETS
I.1 ASSET ACQUISITION. Upon the terms and subject to the conditions
set forth in this Agreement effective as of the Closing Date (as hereinafter
defined), Seller agrees to sell, transfer and deliver to Buyer, and Buyer agrees
to purchase and acquire from Seller, all right, title and interest of Seller in
and to the following assets (tangible and intangible) used in or pertaining to
the Company, and no other assets (collectively, the "Assets"):
(a) all trade and other notes and accounts receivable of Seller, as
selected by Buyer, arising out of the operations related to the Company
specifically identified on SCHEDULE 1.1(a) (the "Accounts Receivable");
(b) all current and usable inventories of Products on hand or under
consignment for use by Seller's customers (the "Inventory");
(c) all rights and benefits of Seller under contracts and agreements
with any third parties made by Seller, as selected by Buyer, including
leases of real or personal property and agreements to provide services
specifically identified on SCHEDULE 1.1(c) and any purchase options
provided therein to acquire the property so leased (the "Acquired
Contracts");
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(d) all lease and rent deposits, prepaid expenses, and prepaid taxes
related to Seller's operation of the Company;
(e) all permits, consents and certificates of any regulatory,
administrative or other governmental agency or body that are used in, or
are required or necessary for, the ownership, operation or maintenance of
the Company (the "Permits"), but only to the extent such Permits are
permitted to be assigned or transferred under the law, including all
regulatory compliance systems and approvals;
(f) all other tangible assets of Seller, excluding leasehold
improvements, directly related to the operation or maintenance of the
Company, including by way of example, furniture, business fixtures, office
supplies and expendables; and
(g) all intangible assets used in Seller's operation or maintenance
of the Company, including, goodwill, the books and records of Seller in
operating the Business, Seller's trade names used in the operation of the
Company business and any confidential or proprietary information of Seller
developed or used in connection with its operation of the Company.
I.2 RETAINED RIGHTS IN SELLER ASSETS. Notwithstanding anything herein
to the contrary, Seller retains all of its right, title and interest in and to
any assets of Seller, except as expressly provided in Section I.1 hereof (the
"Retained Assets").
ARTICLE II
ASSUMPTION OF LIABILITIES
II.1 LIABILITIES ASSUMED. Except as otherwise expressly provided in
this Article II, effective as of the Closing Date, Buyer hereby agrees to
assume, and shall thereafter be responsible for paying and satisfying, to the
extent not discharged prior to the Closing Date, certain debts, liabilities and
obligations of Seller arising in the ordinary course of the operation of the
Business, more particularly described as follows (collectively, the "Assumed
Liabilities"):
(a) Seller's liabilities arising on or after the Closing Date with
respect to the Acquired Contracts including permitted returns and
allowances in the ordinary course of business, which amounts due as of the
Closing Date are set forth in the Final Closing Statement;
(b) All open purchase orders related to Products or related
instruments; or other open purchase orders related to the ongoing Business,
not to exceed $10,000.00 in the aggregate, unless otherwise approved by
Buyer;
(c) All liabilities set forth on the Final Closing Statement (as
hereinafter
2
defined), but in no event is Buyer liable for any amounts coming due prior
to or after the Closing Date beyond what is specifically set forth in the
Final Closing Statement;
(d) All taxes and assessments (including any liabilities with respect
to penalties or interest thereon) imposed by any governmental authority
accruing after the Closing Date to the extent related to the ownership or
use of Assets or the conduct by Buyer of the Business after the Closing
Date; and
(e) Liabilities with respect to any alleged or actual injury to
person or damage to property allegedly or actually resulting from Products
if the Product which gives rise to a claim of alleged or actual injury or
damage is manufactured and sold on or after the Closing Date.
II.2 RETAINED LIABILITIES. Seller shall retain, and Buyer shall not
assume or otherwise be responsible for, any liability or obligation of Seller
except as expressly provided in Section II.1 hereof (the "Retained
Liabilities").
II.3 CERTAIN TAX MATTERS. Seller shall bear all federal and state
taxes accruing or arising from the operations of the Company during any period
ending on or prior to the Closing Date, including without limitation all income
taxes arising out of the sale and purchase of the Assets hereunder. Buyer shall
bear all sales taxes (and in no event to include income-based taxes) arising out
of the sale and purchase of the Assets hereunder and shall bear all federal and
state taxes accruing or arising from the operations of the Assets during any
period commencing after the close of business on the Closing Date.
ARTICLE III
PURCHASE PRICE
III.1 CONSIDERATION. The consideration due at the Closing (the
"Consideration") for the Assets to be sold pursuant to this Agreement shall be
as follows:
(a) CASH PAYMENT TO SELLER. Buyer shall make a $300,000.00 cash
payment to Seller at the Closing; and
(b) PROMISSORY NOTE TO SELLER. Buyer shall issue a secured
promissory note (the "Note") in favor of Seller, which Note shall be in the
principal amount of 56.25% of the agreed upon historical cost of the Assets
(determined according to GAAP) less the Assumed Liabilities at the Closing, less
the $300,000.00 cash payment and less any reduction pursuant to Buyer's right of
offset set forth in the last sentence of Section III.2. The Note will be due in
eighteen equal monthly installments including accrued interest with the first
such monthly installment being due the first day of the first month beginning
after the Closing Date and subsequent installments being due the first day of
each month thereafter. The Note will bear interest at ten percent (10%) per
annum and will be secured by the inventory of Buyer. The Note may be prepaid
at any time, in full or in part, without premium or penalty, provided that the
Note shall be repaid immediately upon (i) any sale of
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all or substantially all of Buyer's assets, (ii) any sale of substantially all
of the shares of Common Stock (or securities exchangeable or exercisable
therefor or convertible thereto) of Buyer, (iii) any merger or consolidation
involving Buyer as a result of which, following any such event, Buyer's and its
respective affiliates and heirs own, in the aggregate, less than a majority of
all outstanding shares of Common Stock of Buyer or such successor, (or
securities exchangeable or exercisable therefor or convertible thereto) as
applicable, or (iv) any transaction or series of transactions that results in
the sale or transfer of equity securities (or securities exchangeable or
exercisable therefor or convertible thereto) of Buyer and results in proceeds to
Buyer or its subsidiary of consideration in excess of five million dollars
($5,000,000.00).
III.2 CLOSING STATEMENT. On the date hereof, Seller shall deliver
to Buyer (i) a closing balance sheet for the Company, prepared in accordance
with generally accepted accounting principles ("GAAP") and (ii) a detailed
schedule of all Assets and Assumed Liabilities (the "Draft Closing Statement").
Three days prior to the Closing Date, Seller shall deliver to Buyer (i) a
closing balance sheet for the Company, prepared in accordance with generally
accepted accounting principles ("GAAP") and (ii) a detailed schedule of all
Assets and Assumed Liabilities (the "Updated Draft Closing Statement"). Within
thirty (30) days after the Closing Date, Seller shall deliver to Buyer a Final
Closing Statement. Upon receipt of the Final Closing Statement, Buyer and
Buyer's independent accountants shall be permitted during the ten (10) business
day period to examine, at Buyer's expense, the books and records of Seller
associated with the Company and any work papers prepared by Seller or Seller's
accountants in the preparation of the Final Closing Statement. As promptly as
possible and in no event later than the last day of such ten (10) business day
period, Buyer shall either inform Seller in writing that the Final Closing
Statement is acceptable or object to the Final Closing Statement by delivering
to Seller a written statement setting forth a specific description of Buyer's
objections to the Final Closing Statement (the "Statement of Objections"). If
the Objection is based on an amount less than $5,000, then the Final Closing
Statement shall be deemed accepted without adjustment. In the event that a
Statement of Objections is made, Buyer may, at its option, elect not to proceed
with the Closing; provided, that Seller may follow the procedure set forth in
the next subsequent paragraph to determine whether such Statement of Objections
was appropriate.
In the event Buyer objects to the Final Closing Statement as provided
above, Seller and Buyer shall attempt to resolve any such objections within ten
(10) business days of Seller's receipt of Buyer's Statement of Objections. If
Seller and Buyer are unable to resolve the matter within such ten
(10) business-day period, they shall jointly select and engage a firm of U.S.
independent certified public accountants to determine whether the bases of the
objections set forth in the Statement of Objections were appropriate and to make
any adjustments to the Final Closing Statement necessitated thereby. The fees
of such third firm shall be divided equally between Seller and Buyer. Seller
and Buyer and their respective accountants shall each make readily available to
such firm all relevant books and records and work papers prepared by them
relating to the Final Closing Statement requested by such firm to resolve the
disputes. Such firm's resolution of the dispute and its adjustments to the
Final Closing Statement shall be conclusive and binding upon the parties and
shall be delivered within thirty (30) business days after it is selected. If
the resolution of
4
the dispute results in a decrease of the Assets or an increase in the Assumed
Liabilities as set forth in the Final Closing Statement, then Buyer may, at its
option, offset all such amounts against the amount payable to Seller (i) under
the Note payable under this Agreement, and (ii) under the Note payable under the
License Agreement.
ARTICLE 1V
REPRESENTATIONS AND WARRANTIES
IV.1 REPRESENTATIONS OF BUYER. Buyer hereby represents and warrants
to Seller that:
(a) ORGANIZATION OF BUYER. Buyer is a corporation duly
organized and validly existing under the laws of the State of California.
(b) AUTHORITY. Buyer has full corporate power and authority to
enter into this Agreement, perform its obligations hereunder and consummate the
transactions contemplated hereby. This Agreement has been duly authorized,
executed and delivered and constitutes a valid and binding obligation of Buyer,
enforceable in accordance with its terms subject to bankruptcy, insolvency,
fraudulent transfer, moratorium, reorganization and other similar laws of
general applicability relating to creditors' rights and to general equity
principles.
(c) NO CONFLICT OR DEFAULT. Neither the execution and delivery
of this Agreement, nor the consummation of the transactions contemplated hereby,
will violate any statute, regulation or ordinance of any governmental authority,
or conflict with or result in the breach of any provision of the charter or
bylaws of Buyer or of any agreement, deed, contract, mortgage, indenture, writ,
order, decree or instrument to which Buyer is a party or by which it is bound.
(d) BROKERS, FINDERS. There is no broker, finder or other
person who has been retained by Buyer or authorized to act on its behalf and who
is entitled to a commission, fee or like payment in connection with the
transactions contemplated by this Agreement.
IV.2 REPRESENTATIONS OF SELLER. For purposes of this Section IV.2,
"material" shall mean any amount greater than or equal to $5,000.00, or having a
duration of more than six months, or otherwise material to the Business. Seller
hereby represents and warrants to Buyer that:
(a) ORGANIZATION OF SELLER. Seller is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Texas with all requisite corporate power and authority to carry on the
business conducted by it. Seller is qualified to do business and is in good
standing in all of the states required by reason of its lease or ownership of
property or any of its operations or activities, except for any states wherein
the failure to be so qualified and in good standing will not have a material
adverse effect on Seller's business, operations or financial condition. Seller
has full power and authority to carry on its business as conducted at the
present time.
(b) AUTHORITY. Seller has full corporate power and authority to
enter into this Agreement, perform its obligations hereunder and consummate the
transactions contemplated
5
hereby. This Agreement has been duly authorized, executed and delivered and
constitutes a valid and binding obligation of Seller, enforceable in accordance
with its terms subject to bankruptcy, insolvency, fraudulent transfer,
moratorium, reorganization and other similar laws of general applicability
relating to creditors' rights and to general equity principles. Except as set
forth in SCHEDULE IV.2(b), there are no authorizations, consents, approvals or
notices required to be obtained or given or waiting periods required to expire
in order that this Agreement and the transactions provided for herein may be
consummated by Seller.
(c) NO CONFLICT OR DEFAULT. To Seller's knowledge, neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will violate any statute, regulation or
ordinance of any governmental authority, or conflict with or result in the
breach by Seller of any provision of the charter or governing regulations of
Seller or of any material agreement, deed, contract, mortgage, indenture, writ,
order, decree or instrument to which Seller is a party or by which it or any of
the Assets are bound, or constitute a default by Seller (or an event which, with
the lapse of time or the giving of notice, or both, would constitute a default)
thereunder, or result in the creation or imposition of any material lien, charge
or encumbrance, or restriction of any nature whatsoever with respect to any of
the Assets, or give to others any rights of termination, acceleration or
cancellation in or with respect to the Assets, or any agreement, understanding
or arrangement which it is a party or by which it is bound, except violations,
breaches, defaults or creation of liens or encumbrances that will not at any
time before or after the Closing result in a material change in the Assets or
Assumed Liabilities.
(d) CONTRACTS AND COMMITMENTS. SCHEDULE IV.2(d) sets forth all
material contracts, commitments, leases, permits, and other instruments binding
upon Seller (collectively, "Contracts"). Prior to the date of this Agreement,
Seller has delivered to Buyer true and complete copies of all items listed in
SCHEDULE IV.2(d), and any amendments thereof. Except as disclosed in
SCHEDULE IV.2(d), all such contracts, commitments, permits, instruments and
leases, including, without limitation, the lease for the property located at
12201 Technology Boulevard, Suite 100, Austin, Texas (the "Facility Lease"), are
in full force and effect and are valid, binding and enforceable in all material
respects in accordance with their respective provisions subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to general
equity principles, and neither Seller nor any other party is in default nor has
there occurred an event or condition which, with the passage of time or giving
of notice (or both), would constitute a default with respect to the payment or
performance of any obligation thereunder, except defaults that will not at any
time before or after the Closing result in a material loss or liability to or
against Seller or Buyer; and no claim of such a default has been asserted and
there is no reasonable basis upon which such a claim could validly be made.
(e) RECEIVABLES. The Accounts Receivable arose from valid sales of
Products in the ordinary course of the business, have been collected or, to the
best knowledge of Seller, are collectible in the book amounts thereof.
(f) FINANCIAL STATEMENTS. Seller has delivered to Buyer the
following financial
6
statements (collectively, the "Financial Statements"), attached hereto as
Exhibit IV.2(f): (i) audited balance sheet and statement of operations and cash
flows for Seller as of and for the twelve-month period ended December 31, 1996
(the "Balance Sheet Date"); and (ii) unaudited balance sheet and statement of
operations of Seller for each month from the Balance Sheet Date through the
Closing Date. The Financial Statements fairly present the financial position of
Seller as of the date of each balance sheet included therein and results of
operations of Seller for the periods covered thereby and are consistent with the
books and records of Seller. The Financial Statements have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby except as set forth thereon.
(g) EVENTS SUBSEQUENT TO BALANCE SHEET DATE. Except as set forth on
Schedule IV.2(g), since the Balance Sheet Date, there has not been (i) any
material adverse change in the assets, liabilities, business, properties,
financial condition, or results of operations of Seller or, to the best
knowledge of Seller, future prospects for the Business; (ii) any transaction
entered into by Seller other than in the ordinary course of business; (iii) any
actual or threatened labor dispute (including any union representation
proceeding or organizational activities) which has materially adversely affected
the Business; (iv) any increase or decrease in the rates of direct compensation
payable or to become payable by Seller to any employee, agent or consultant, or
any bonus, percentage compensation, service award or other like benefit,
granted, made or accrued to or to the credit of any such employee, agent or
consultant, or any material welfare, pension, retirement or similar payment or
arrangement made or agreed to by Seller (other than such events occurring
pursuant to any previously existing collective bargaining agreement); or (v) any
modification of an existing contract having a materially adverse effect on the
Business.
(h) ASSETS OF SELLER. The Assets are sufficient to operate the
Business as presently conducted and are in good operating condition in all
material respects, normal wear and tear excepted, and are of sufficient quantity
as may be required under currently existing and required licensure and
certification requirements necessary and appropriate for the operation and
maintenance of the Business. The Inventory is merchantable and ready for sale
in the ordinary course of business.
(i) TITLE TO THE PROPERTY. Except as disclosed in SCHEDULE IV.2(i)
and except for (i) the lien of any current assessments or taxes not yet
delinquent and mechanics and similar liens arising in the ordinary course of
business not exceeding $5,000 in the aggregate, and (ii) with respect to Assets
that are contracts or rights thereunder, the express contractual rights of the
other parties thereto (collectively, the "Permitted Liens"), Seller has, or will
have, and upon Closing, Seller will convey or cause to be conveyed to Buyer,
good, marketable title to the Assets, free and clear of all claims, leases,
mortgages, pledges, liens, encumbrances, security interests, equities, charges,
clouds and restrictions of any nature whatsoever, except mortgages or security
interests shown on the Balance Sheet as securing specific liabilities or
obligations.
(j) INTELLECTUAL PROPERTY. Omitted intentionally.
(k) LITIGATION. Except as set forth on Schedule IV.2(k), there is no
claim,
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litigation, action, suit or proceeding, administrative or judicial, pending or,
to the best knowledge of Seller, threatened against or relating to Seller, the
Business, including products liability claims, at law or in equity, before any
federal, state, local or foreign court or regulatory agency, or other
governmental authority or any state of facts existing which could give rise to
such claim.
(l) TAXES. Except as set forth in Schedule IV.2(l), Seller has no
tax, deficiency or claim outstanding or assessed against it, or, to the best of
Seller's knowledge, proposed against it, and, to the best of Seller's knowledge,
there is no basis for any such deficiency or claim. All tax returns and reports
by Seller required to be filed by Seller have been duly and timely filed and all
taxes which were required to be paid have been paid.
(m) COMPLIANCE WITH LAW. Seller, to its knowledge, is in compliance
in all material respects with all applicable federal, state and local laws,
statutes, licensing requirements, rules and regulations, and judicial or
administrative decisions, except wherein the failure to be in compliance will
not have a material adverse effect on Seller's business, operations or financial
condition. Except for any such licenses, permits, authorizations or approvals
which are not individually or in the aggregate material to the Assets or conduct
of Seller's operations, Seller has been granted any and all licenses, permits
(temporary and otherwise), authorizations and approvals from federal, state,
local and foreign government regulatory bodies necessary to carry on Seller's
operations or the currently existing operations of the Assets as currently
conducted, all of which are valid and in full force and effect. Each such
license, permit, authorization and approval has been set forth in
SCHEDULE IV.2(m) hereto. As of the date of this Agreement, there has been no
order issued, investigation or proceeding pending, or, to the best knowledge of
Seller, threatened, or notice served with respect to any violation of any law,
ordinance, order, writ, decree, rule or regulation issued by any federal, state,
local or foreign court or governmental agency or instrumentality applicable to
Seller's operations.
(n) LABOR RELATIONS. Except as set forth on SCHEDULE IV.2(n), (i)
Seller is not a party to any collective bargaining or union contract; (ii)
there are no material disputes, grievances, charges, complaints, proceedings
or labor controversies pending or, to the best of Seller's knowledge,
threatened as of the date of this Agreement between Seller and any of the
employees of Seller or any labor union or other collective bargaining unit
representing any of the employees of Seller and Seller is not aware of any
basis for such controversies; and (iii) Seller is not a party to or bound by
any employment contracts with any of its employees. Seller is not a party to
any collective bargaining agreement and has suffered no strikes, lockouts or
general work stoppages which have caused a cessation of operations.
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(o) ENVIRONMENTAL MATTERS., Seller does not in the course of its
operation engage in the manufacture, processing, distribution, use, treatment,
storage, generation, disposal, transport or handling of hazardous wastes or
substances. Seller, to its knowledge, has not taken any action or failed to
take any action legally required to have been taken by Seller with respect to
the Business that might result in (i) actual or threatened violation of or
noncompliance with any environmental law or regulation; or (ii) actual or
threatened personal injury or property damage or contamination of any kind.
Seller has delivered to Buyer true and complete copies of all reports, studies
or tests in the possession of or initiated by Seller that pertain to Hazardous
Substances or other environmental concerns regarding the Business. To Seller's
knowledge, there is no contamination of the former or current real property
owned or leased by Seller for its Business. For purposes of this Agreement,
Hazardous Substance shall mean asbestos, urea formaldehyde, polychlorinated
biphenyls, nuclear fuel or materials, chemical waste, radioactive materials,
explosives, known carcinogens, petroleum products, pesticides, fertilizers, or
other substance which is dangerous, toxic or hazardous or, which is a pollutant,
contaminant, chemical material or substance defined as hazardous or as a
pollutant or contaminant in, or the use, transportation, storage, release or
disposal of which is regulated by, any environmental laws or regulations.
Seller neither knows nor has reason to know of any liabilities of Seller,
whether vested or unvested, contingent or fixed, which arise under or relate to
federal, state and local laws, rules and regulations governing the foregoing
activities or that relate to actions of Seller occurring on or prior to the
Closing Date respecting such activities.
(p) UNDISCLOSED MATERIAL LIABILITIES. There are no liabilities of
Seller of any kind whatsoever that are material to the business of Seller that
are of a nature customarily reflected in financial statements prepared in
accordance with generally accepted accounting principles (and, to the knowledge
of Seller, there is no basis for any present or future charge, complaint,
action, suit, proceeding, hearing, investigation, claim, or demand against
Seller giving rise to any such liability) except for (i) liabilities disclosed
or provided for on the Final Closing Statement and (ii) liabilities which have
arisen after the date of the Final Closing Statement in the ordinary course of
business and which would not reasonably be expected to have a material adverse
effect on the business, assets or results of operations of Seller or the
Company.
(q) BROKERS, FINDERS. There is no broker, finder or other person who
has been retained by Seller or authorized to act on its behalf and who is
entitled to a commission, fee or like payment in connection with the
transactions contemplated by this Agreement.
(r) PERSONNEL. SCHEDULE IV.2(r) constitutes a complete and correct
list of (i) all employment, bonus, profit-sharing, percentage compensation,
incentive plans, pension or retirement plans, contracts or agreements with
officers, employees or unions, or consulting agreements, to which Seller is a
party or is subject as of the date of this Agreement; (ii) the names, job
descriptions, titles, locations and current salary (or wage) rates of all
employees, consultants or agents of Seller; and (iii) the wage rates for the
non-executive employees of Seller by classification. SCHEDULE IV.2(r) also sets
forth a listing of all bonuses paid to employees of Seller since December 31,
1994.
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(s) INSURANCE. SCHEDULE IV.2(s) constitutes a list of all insurance
policies and all surety and other bonds in force with respect to Seller showing
for each such policy or bond: (i) the owner, (ii) the coverage of such policy or
bond, (iii) the premium, (iv) the name of the insurer, and (v) the termination
date of the policy or bond. All of such policies, sureties and bonds are valid
and in full force and effect at the present time, and no claim has been made, or
notice given, and there exists no ground, to cancel or avoid any of said
policies or bonds or to reduce the coverage provided thereby.
(t) ACCURACY OF DOCUMENTS AND INFORMATION. The copies of all
instruments, agreements, other documents and written information delivered to
Buyer by Seller or any representative of Seller are and will be complete and
correct in all material respects as of the date hereof and as of the Closing
Date, subject to changes made in the ordinary course of business. There is no
fact which, to the knowledge of Seller, materially and adversely affects the
Business, or Seller which has not been expressly and fully set forth in this
Agreement or the Schedules hereto.
(u) INTERESTS IN REAL PROPERTY. SCHEDULE IV.2(u) constitutes a true
and complete list and description of all real property owned by or leased to
Seller. Except as set forth on SCHEDULE IV.2(u): (i) none of the real property
owned by or leased to Seller is encroached upon by or encroaches upon the
property of others; (ii) there is no defect in or condition of any of the real
property owned by or leased to Seller which does or will impair the use of such
real property for the purposes presently being used; (iii) there is not, to the
knowledge of Seller, any pending or contemplated condemnation of any real or
personal property of Seller or any intended public improvement which will result
in any charge being levied or assessed against, or in the creation of any lien
or assessment upon, any real or personal property of Seller; (iv) there are not,
to the knowledge of Seller, any facts or conditions which will result in the
termination of any present access from any real property of Seller to any
utility services or from any real property of Seller to existing highways, roads
and alleys; (v) such leased property is free and clear of any zoning or use or
building restriction or any pending, proposed or threatened zoning or use or
building restriction which would either singly or in the aggregate, interfere in
any material way with the present or any intended use of any of such leased
property.
(v) PROPERTY TAXES. SCHEDULE IV.2(v) constitutes a complete list of
all real property and personal property tax bills of Seller for the current and
two prior property tax years, indicating whether or not Seller is aware of any
proposal by any such taxing authority to change the assessed values or
assessment rate reflected in such bills. Seller has timely and properly filed
all federal, state, local and foreign tax returns and reports and forms which it
is or has been required to file, either on its own behalf or on behalf of its
employees or other persons or entities, including but not limited to income,
profits, franchise, sales, use, occupation, property, excise, ad valorem and
payroll (including employee taxes withheld), all such returns and reports and
forms being true and correct and complete in all respects, and has paid all
taxes owing by it, including penalties and interest, if any, which have become
due pursuant to such returns or reports or forms or pursuant to assessments
received by Seller. To its knowledge, Seller has no liability for any taxes in
excess of the amounts stated in the Final Closing Statement.
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(w) PRODUCT WARRANTIES. No product warranty claims have been made
against Seller relating to the Products. Each Product manufactured by a vendor
and sold or delivered by Seller, its distributors or sales representatives has
been sold or delivered in conformity with all applicable contractual commitments
and all express and implied warranties, and Seller does not have any liability
(and there is no basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand against Seller giving
rise to any liability) for replacement or repair thereof.
(x) RELATIONS WITH CUSTOMERS, SUPPLIERS AND VENDORS. No supplier or
vendor has canceled any contract or order for provision of, and, to the
knowledge of Seller, there has been no threat by any such supplier or vendor not
to provide Products, supplies or services to Seller either prior to or following
the Closing Date. Seller has not, to the knowledge of Seller, received any
information from any customer of Seller during the last full fiscal year to the
effect that such customer intends to materially decrease the amount of business
it does with Seller either prior to or following the Closing Date.
(y) CHANGE OF NAME OF SELLER. Seller shall, on the Closing Date or
as soon thereafter as reasonably possible, file all necessary documents and take
such other actions, if any, as are necessary or required to change its name.
(z) NON-COMPETE. For a period of time extending from the Closing
Date until the second anniversary following the Closing Date, Seller will not,
and Seller will cause each of its employees, officers, directors (for so long as
they serve in such capacities) and persons having a controlling interest in
Seller not to, directly or indirectly compete with Buyer or its subsidiaries in
the development, manufacturing, distribution, marketing or sale of any
orthopaedic hip or knee implants or related instruments or devices. Seller and
Buyer acknowledge that it would be difficult to measure the damages resulting
from the breach of the foregoing and that therefore the nonbreaching party shall
be entitled in case of any such breach, in addition to any legal remedies
available to it, to obtain equitable relief to enjoin any such breach or
threatened breach. The parties hereto desire that the foregoing provisions
shall be enforced to the fullest extent permissible under applicable law. If
any restriction contained in this Section IV.2(z) shall be deemed invalid or
unenforceable, such restriction shall be deemed automatically revised to permit
the restriction to remain in full force to the maximum extent permitted under
applicable laws. Seller represents that its parent company and Fred Mindermann,
Seller's CEO, as shareholders of Seller, have received sufficient consideration
through this Asset Purchase Agreement to enforce this non-compete provision.
(aa) SEC FILINGS. Seller has filed all forms, reports and documents
required to be filed with the SEC, and has made available to Buyer such forms,
reports and documents in the form filed with the SEC. All such required forms,
reports and documents (including those that Seller may file subsequent to the
date hereof) are referred to herein as "SEC Reports". As of their respective
dates, the SEC Reports (i) were prepared in accordance with the requirements of
the Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC
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thereunder applicable to such SEC Reports, and (ii) did not at the time they
were filed (or if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing) contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(bb) SCHEDULES. Seller has had full and adequate opportunity
to prepare, review, and complete the schedules attached hereto and represents
and warrants that these Schedules are true, complete and correct in all material
respects as of the date hereof and as of the Closing Date.
ARTICLE V
COVENANTS
V.1 FURTHER ASSURANCES
(a) At or after the Closing, Seller and Buyer shall prepare, execute
and deliver such further instruments of conveyance, sale, assignment or transfer
and shall take or cause to be taken such other or further action as either party
shall reasonably request at any time or from time to time in order to consummate
the terms and provisions of this Agreement.
(b) After the Closing, Seller and Buyer shall reasonably cooperate to
maintain in full force and effect all sales and supply contracts and agreements
between Seller and all third parties related to the operation of the Business
under which Seller or any entity affiliated with Seller has obligations which
continue after the Closing Date. Seller agrees to transfer promptly to Buyer
all orders for and correspondence and inquiries related the Business which it
receives on or after the Closing Date to Buyer.
V.2 ACCESS TO BOOKS AND RECORDS. After the Closing, both parties shall
provide each other with reasonable access to books and records pertinent to the
Business during regular business hours for five years following the Closing
Date. Except as set forth on SCHEDULE V.2, Seller agrees that, from and after
the Closing, Buyer shall have possession of all documents, books, records,
agreements and financial data of any sort relating to the Business, but shall
provide Seller with reasonable access to such books, records, agreements and
financial data. Seller shall retain books and records of Seller set forth on
SCHEDULE 5.2, but shall provide Buyer with reasonable access to such other books
and records. Seller will cooperate with Buyer in delivering the Final Closing
Statement pursuant to Section III.2(a).
V.3 PRESERVATION OF RECORDS. After the Closing, both parties agree to
preserve such books, records and filings relating to the Assets and Assumed
Liabilities as may be required by applicable law.
V.4 INFORMATION REGARDING INTELLECTUAL PROPERTY. After the Closing, both
parties agree to provide each other such documentation as is reasonably
requested relating to the Intellectual Property.
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V.5 ANNOUNCEMENTS. All press releases or other public communications
relating to this transaction will require the prior approval of both parties
(which approval shall not be unreasonably withheld), unless otherwise required
by law; provided, however, either party may issue such press release or public
communication to the extent such party reasonably determines that such action is
legally required.
V.6 ACCESS TO PROPERTIES AND RECORDS. Between the date of this Agreement
and the Closing Date, Seller shall give Buyer and Buyer's authorized
representatives full access as may be reasonably requested during reasonable
business hours, in such a manner as not unduly to disrupt the normal business
activities of the Company, to any and all of the premises and properties of the
Company and to the contracts, internal reports, data processing files and
records, state and local tax returns and records, commitments, books, records
and affairs of the Company. Seller shall furnish to Buyer any and all
financial, technical and operating data and other information pertaining to the
Business as Buyer shall from time to time reasonably request, including, without
limitation, financial statements and schedules. Such access shall also include,
but shall not be limited to, the placing of one or more employees or
representatives of Buyer at the Company's facilities for the purpose of enabling
such employees to become familiar with the operations of the Business. Buyer
shall not improperly use or disclose any confidential information pertaining to
the Business prior to the Closing.
V.7 GENERAL CONDUCT OF THE BUSINESS PRIOR TO CLOSING DATE. Pending the
Closing Date, and except as otherwise consented to or approved by an officer of
Buyer in writing (such requests to be directed to Daniel E. E. Hayes, Jr. or
Robert L. Addington) or as required or permitted by this Agreement, Seller
covenants as follows:
(a) Seller shall conduct the Company in the ordinary course and in a
normal business-like fashion and Seller shall use Seller's best efforts to
preserve and maintain the goodwill of the Business, including relationships with
providers, suppliers and customers.
(b) Seller shall not take any action, or suffer any action to be
taken against Seller, which would cause any material change in any of the items
and matters concerning Seller covered by the representations and warranties of
Seller set forth above in Article IV of this Agreement, including, without
limitation:
(i) incurring or becoming subject to, or agreeing to incur or
become subject to, any obligation or liability (absolute or contingent)
except current liabilities incurred and any obligations under contracts
entered into, in the ordinary course of business and provided specifically
that Seller shall not enter into any material lease, or extend or modify
any material lease (including the Facility Lease) with respect to any real
or personal property of Seller;
(ii) discharging or satisfying any lien or encumbrance or payment
of any obligation or liability (absolute or contingent) other than as
called for by the Agreement or
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current liabilities in the ordinary course of business;
(iii) mortgaging, pledging or assuming any lien, charge or
any other encumbrance, or the agreement so to do, with respect to any of
the Assets;
(iv) selling, transferring, or agreeing to sell or transfer, any
of the Assets, or canceling or agreeing to cancel any debts or claims,
except in each case in the ordinary course of business;
(v) entering into any transaction in which an extraordinary loss
would be incurred or waiving any rights of substantial value;
(vi) entering into any transaction other than in the ordinary
course of business;
(vii) increasing (other than pursuant to any collective
bargaining agreement in effect as of the date of this Agreement) the rate
of compensation payable or to become payable by Seller to any of the
Company's officers, employees or agents over the rate being paid to them on
the date of this Agreement except for routine regularly scheduled merit
increases;
(viii) terminating any material contract, agreement, license
or other instrument relating to the Business to which Seller is a party,
except agreements which are by their terms terminable in the ordinary
course of business;
(ix) negotiating or otherwise making any commitment or incurring
any liability or obligation to any labor organization not binding and
enforceable against Seller on the date of this Agreement;
(x) making, or agreeing to make, any accrual or arrangement for
or payment of any bonus or special compensation of any kind to any officer,
employee or agent other than pursuant to any program presently in effect;
(xi) entering into commitments for capital expenditures exceeding
the aggregate amount of $5,000.
V.8 MUTUAL COVENANT. Each of Seller and Buyer shall use its best efforts
to obtain all consents, approvals, orders, authorizations, registrations,
qualifications, designations or declarations from, and make any filings with,
any governmental authority required in connection with the consummation of the
transactions contemplated by this Agreement. Seller and Buyer each shall
furnish promptly to each other information reasonably requested by the other
party for inclusion in any statement or application made by either party to any
governmental or regulatory body in connection with the transactions contemplated
by this Agreement.
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V.9 FULFILLMENT OF CONDITIONS TO CLOSING. Each of Seller and Buyer
shall use its best efforts to cause the fulfillment at the earliest practicable
date of all of the conditions to the parties' respective obligations to
consummate the transactions contemplated hereby.
V.10 OBTAINING CONSENTS TO ASSIGNMENTS. Seller shall use its best
efforts to obtain all approvals, consents or waivers as shall be necessary to
convey and assign to and vest in Buyer all of its right, title and interest in
and to the Assets, including, without limitation, any claim, right, or benefit
arising thereunder or resulting therefrom, as soon as practicable after the date
hereof. To the extent that Seller's rights under any agreement, contract,
commitment, lease (including, without limitation, the Facility Lease), license,
permit, authorization or other Asset to be assigned to Buyer hereunder may not
be assigned without the consent of another person, and such consent has not been
obtained by the Closing Date, neither this Agreement nor any document executed
by the parties hereto in connection with this Agreement shall constitute an
agreement to assign the same if any attempted assignment would constitute a
breach thereof or would be unlawful.
V.11 INSURANCE From the Closing Date until the fifth anniversary of
the Closing Date, Seller shall continue to maintain product liability insurance
with a limit of not less than One Million dollars ($1,000,000.00) per occurrence
to cover claims relating to Products manufactured and sold by Seller to any
third party, including distributors, prior to the Closing Date. Seller shall
provide Buyer with a current Certificate of Insurance each year during the five
year period, which provides evidence of such product liability insurance,
including broad form vendors coverage and naming Buyer and its subsidiary,
National Medical Specialty, Inc., as additional insureds. Seller shall promptly
provide proof of such insurance coverage to Buyer within 2 days of Buyer's
request.
ARTICLE VI
EMPLOYEE AND OTHER MATTERS
VI.1 BUYER TO OFFER EMPLOYMENT.
(a) Buyer shall offer employment to the employees listed on
SCHEDULE VI.1, as Buyer, in its sole discretion, elects to employ, effective as
of the close of business on the Closing Date, with a level of compensation and
benefits and on other terms and conditions of employment substantially similar
to each such employee's existing arrangements with the Company, unless otherwise
agreed to by such employees.
(b) Effective at the close of business on the Closing Date, all
employees of the Company who accept Buyer's offer of employment (collectively,
the "Transferring Employees") shall cease to be covered by Seller's employee
welfare benefit plans, including plans, programs, policies and arrangements
which provide medical and dental coverage, life and accident insurance and
disability coverage (collectively, "Welfare Plans"). Seller shall retain
responsibility for all Welfare Plans claims incurred by all employees of Seller
(and their dependents) on or prior to the Closing Date. Buyer shall assume
responsibility for all claims under Buyer's employee welfare benefit plans
incurred by Transferring Employees after the Closing Date. For purposes of this
15
paragraph, a claim shall be deemed to have been incurred on the date treatment
is rendered except as to claims resulting from Company confinement commencing on
or prior to the Closing Date or from illness, injury or a condition which
requires medical or dental treatment being treated on or prior to the Closing
Date.
(c) Other than as set forth herein, Buyer shall have no
obligation to any employees of Seller.
VI.2 PAYROLL. Seller shall pay all employees of the Company all wages
to which they are entitled through the Closing Date.
VI.3 ACCRUED VACATION. As of the Closing Date, Buyer shall assume all
liability for and thereafter have sole responsibility for all vacation time
accruing for the Transferring Employees. Seller shall remain liable for accrued
vacation of its employees, including Transferring Employees for all periods
through to and preceding the Closing Date.
ARTICLE VII
CLOSING
VII.1 TIME OF CLOSING. The closing (the "Closing") of the purchase and
sale of the Business shall take place at the offices of U. S. Medical Products,
Inc., 12201 Technology Boulevard, Suite 100, Austin, Texas 78727 on such date
and time as to which Buyer and Seller shall mutually agree that all Conditions
as set forth in Section VIII have been met (such date being referred to herein
as the "Closing Date"), and the transactions effected by this Agreement shall be
effective at the close of business on the Closing Date.
VII.2 DELIVERIES BY SELLER. At the Closing, Seller shall deliver to
Buyer the following, all duly and properly executed (where necessary):
(a) A good and sufficient Bill of Sale, which shall be in form
and substance satisfactory to Buyer and Seller, selling, delivering,
transferring and assigning to Buyer all of Seller's right, title and interest in
and to the Business (other than the contracts and agreements that are not
Acquired Contracts), free and clear of all liens other than Permitted Liens;
(b) Good and sufficient assignments of all Acquired Contracts,
which shall be in form and substance satisfactory to Buyer and shall include the
written consents of all parties necessary in order to transfer all of Seller's
rights thereunder to Buyer;
(c) A certificate of the President or Chief Executive Officer of
Seller in accordance with Section VIII.1(h);
(d) The Note and the Security Agreement, each duly and validly
executed;
(e) Such other separate instruments of sale, assignment or
transfer that Seller
16
and Buyer may reasonably deem necessary or appropriate in order to perfect,
confirm or evidence in Buyer title to all or any part of the Business.
VII.3 DELIVERIES BY BUYER. At the Closing, Buyer shall deliver to
Seller the following, all duly and properly executed (where necessary):
(a) Cash in the amount of $300,000.00;
(b) The Note;
(c) A certificate of the President or Chief Executive Officer of
Buyer in accordance with Section VIII.2(e); and
(d) Such other separate instruments of assumption that Seller
and Buyer may reasonably deem necessary or appropriate in order to perfect,
confirm or evidence the assumption by Buyer of the Assumed Liabilities or the
effectuation of the transactions contemplated hereby.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS
VIII.1 OBLIGATIONS OF BUYER. Each and every obligation of Buyer to be
performed at the Closing shall be subject to the satisfaction as of or before
the Closing Date of the following conditions (unless waived in writing by
Buyer):
(a) CONSENTS. Seller shall have obtained and delivered to Buyer
all consents which are necessary in order to consummate the transactions
contemplated herein, including the consent of the other parties to the Acquired
Contracts as to the assignment of such contracts;
(b) PERFORMANCE OF AGREEMENT. All covenants, conditions and
other obligations under this Agreement which are to be performed or complied
with by Seller shall have been fully performed and complied with in all material
respects at or prior to the Closing Date, including the delivery of the
instruments and documents in accordance with Section VII.2;
(c) NO ADVERSE PROCEEDING. There shall be no material pending
or threatened claim, action, litigation or proceeding, judicial or
administrative, or governmental investigation against Seller for the purpose of
enjoining or preventing the consummation of this Agreement, or otherwise
claiming that this Agreement or the consummation of any of the transactions
contemplated hereby is illegal;
(d) NO MATERIAL ADVERSE CHANGE. (i)There shall have been no
material adverse change in the properties, business or financial condition, the
Assets, or Products of Seller since the Draft Closing Statement provided on the
date hereof, or to the best knowledge of Seller, the prospects for the Business
or the Company, however, changes in the value of the Assets arising in the
ordinary course of business or due to the sale of Inventory to Buyer prior to
the Closing shall not be deemed a material adverse change; and(ii) in the
Updated Draft Closing Statement, the
17
Assets shall exceed the Assumed Liabilities by at least $300,000.00;
(e) REPRESENTATIONS AND WARRANTIES. All representations and
warranties (including any Schedules contained therein) contained in Section IV.2
of this Agreement shall be true and correct as of the Closing Date;
(f) FAIRNESS OPINION. Seller's Board shall have obtained an opinion
regarding the fairness of the transaction covered by this Agreement from an
investment banking firm acceptable to Seller's Board, which opinion provides
reasonable support for the approval required by Seller's Board under Section
VIII.1(g);
(g) APPROVAL OF THE SHAREHOLDERS AND BOARD OF SELLER. Seller shall
have obtained the approval of the Board of Directors of Seller (Seller's Board)
and approval of the Shareholders of Seller for the execution and delivery of
this Agreement and the transactions contemplated hereby;
(h) Seller shall have delivered to Buyer a certificate executed by
its President or Chief Executive Officer, dated the date of the Closing, to the
effect that the conditions set forth in subsections (a), (b), (c), (d), (e), (f)
and (g) of this Section VIII.1 have been satisfied;
(i) APPROVAL OF DOCUMENTATION. The form and substance of all
certificates, instruments, opinions and other documents delivered or to be
delivered to Buyer under this Agreement shall be satisfactory to Buyer and
Buyer's counsel in all reasonable respects;
(j) BULK SALES LAWS. The parties shall have complied with all
applicable bulk sales and similar laws with respect to the transfer of the
Business;
(k) MATERIAL CLOSING DOCUMENTS. Buyer shall have received each of
the Bill of Sale, Assumption of Liabilities, the Assignment of Lease and all
other documents deemed necessary by Buyer in connection with Closing duly
executed by authorized signatories of each party thereto;
(l) FACILITY SURVEY. Buyer shall have provided Seller with a survey
of the real property subject to the Facility Lease together with the
improvements thereon, such survey to be reasonably satisfactory to Buyer and to
be conducted at Buyer's cost;
(m) MERIDIAN CAPITAL. Seller shall have provided Buyer with a
release of all claims asserted against Seller and its parent, by Meridian
Capital, in a letter from Meridian Capital's counsel dated February 27, 1997;
(n) PERFORMANCE OF DISTRIBUTOR AGREEMENT AND LICENSE AGREEMENT. All
covenants, conditions and other obligations under the Worldwide Exclusive
Distributor Agreement and the License Agreement which are to be performed or
complied with by Seller shall have been fully performed and complied with in all
material respects at or prior to the Closing Date, including
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the delivery of all assignments of the Intellectual Property under the License
Agreement;
(o) FAILURE OF CONDITIONS. In the event that any condition set
forth in this Section VIII.1 is not fulfilled within the time required, Buyer
shall either waive fulfillment of such condition or give Seller notice that such
condition has not been fulfilled, setting forth the reason that such condition
has not been fulfilled. In the event that any such failure to fulfill a
condition is curable, Seller shall have a reasonable period (but in no event to
exceed 20 days) to attempt to fulfill such condition. In the event such failure
is not curable or that Seller fails to secure fulfillment of such condition
within such period, Buyer shall within a reasonable period not to exceed 15
days, in the exercise of Buyer's absolute discretion, either elect to waive
fulfillment of such condition or to terminate this Agreement.
VIII.1 CONDITIONS TO OBLIGATIONS OF SELLER. Each and every obligation
of Seller to be performed at the Closing shall be subject to the satisfaction as
of or before the Closing of the following conditions (unless waived in writing
by Seller):
(a) PERFORMANCE OF AGREEMENT. All covenants, conditions and
other obligations under this Agreement which are to be performed or complied
with by Buyer shall have been fully performed and complied with in all material
respects at or prior to the Closing Date including the delivery of all payments
pursuant to Section VII.3(a) and the instruments and documents in accordance
with Section VII.3;
(b) NO ADVERSE PROCEEDING. There shall be no material pending
or threatened claim, action, litigation or proceeding, judicial or
administrative, or governmental investigation against Buyer for the purpose of
enjoining or preventing the consummation of this Agreement, or otherwise
claiming that this Agreement or the consummation of any of the transactions
contemplated hereby is illegal;
(c) REGULATORY APPROVALS. Buyer shall have obtained all other
governmental or regulatory permits, consents, certificates that are material and
necessary for the operation of the Business;
(d) APPROVAL OF THE BOARD OF BUYER. Buyer shall have obtained
the approval of the Board of Directors of Buyer (Buyer's Board) for the
execution and delivery of this Agreement and the transactions contemplated
hereby;
(e) CERTIFICATE. Buyer shall have delivered to Seller at the
Closing a certificate, dated the date of the Closing, executed by the Senior
Vice President or Chief Executive Officer of Buyer, to the effect that the
conditions set forth in subsection (a), (b), (c) and (d) of this Section VIII.2
have been satisfied; and
(f) APPROVAL OF DOCUMENTATION. The form and substance of all
certificates, instruments, opinions and other documents delivered or to be
delivered to Seller under this Agreement shall be satisfactory to Seller and
Seller's counsel in all reasonable respects.
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(g) FAILURE OF CONDITIONS. In the event that any condition set
forth in this Section VIII.2 is not fulfilled within the time required, Seller
shall either waive fulfillment of such condition or give Buyer notice that such
condition has not been fulfilled, setting forth the reasons that such condition
has not been fulfilled. In the event that any such failure to fulfill a
condition is curable, Buyer shall have a reasonable period (but not to exceed 20
days) to attempt to fulfill such condition. In the event such failure is not
curable within such period, Seller shall, within a reasonable period not to
exceed 15 days, in the exercise of Seller's absolute discretion, elect to waive
fulfillment of such condition or to terminate this Agreement.
ARTICLE IX
MISCELLANEOUS
IX.1 EXPENSES. Each party shall pay its own expenses and costs
incidental to the preparation of this Agreement and to the consummation of the
transactions contemplated hereby.
IX.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties and covenants contained in this Agreement shall survive the Closing
of the transactions contemplated hereby.
IX.3 NOTICES. All notices and other communications hereunder shall be
in writing and shall be delivered by facsimile transmission with telephone
confirmation of receipt, or, if such means should be available, by hand or sent
by first-class mail, postage prepaid, or by overnight courier, as follows:
If to Buyer: HAYES MEDICAL, INC.
819 Striker Avenue, Suite 10
Sacramento, CA 95834
Attn: Daniel E. E. Hayes, Jr.
CEO
If to Seller: U. S. MEDICAL PRODUCTS, INC.
12201 Technology Blvd., Suite 100
Austin, Texas 78727
Attn: Fred Mindermann
CEO
or, in each case, at such address and to the attention of such person as either
party shall have furnished to the other by notice.
IX.4 KNOWLEDGE. The phrase "to the knowledge" of an entity shall
refer to the actual knowledge of the chief executive officer, chief financial
officer and other officers (including all
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persons with the title Senior Vice President or Vice President) after
appropriate inquiry with respect thereto.
IX.5 REMEDIES. The parties hereto shall be entitled to enforce their
rights under this Agreement specifically to recover damages caused by reason of
any breach of any provision of this Agreement and to exercise all other rights
granted by law. The parties hereto agree and acknowledge that money damages may
not be an adequate remedy for any breach of the provisions of this Agreement and
that any party may in its sole discretion apply to any court of law or equity of
competent jurisdiction (without posting any bond or other security) for specific
performance and for other injunctive relief in order to enforce or prevent
violation of the provisions of this Agreement.
IX.6 MISCELLANEOUS. This Agreement together with all Schedules and
Exhibits hereto constitutes the entire understanding between the parties hereto,
and supersedes all prior agreements or letters of intent, representations and
understandings of the parties hereto. This Agreement may be modified or
terminated only by an instrument in writing signed by the party against which
enforcement is sought. This Agreement shall be binding upon and inure to the
benefit of the parties hereto, their successors and assigns, and may not be
assigned by any party without the express written consent of the other parties
hereto. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAW
PRINCIPLES. This Agreement may be executed in one or more separate
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. The headings of the
sections of this Agreement are solely for convenience of reference and shall not
affect the meaning of any of the provisions hereof.
IX.7 INDEMNIFICATION.
(a) SELLER'S INDEMNIFICATION OF BUYER. Seller, and its
successor, shall indemnify Buyer and hold Buyer harmless at all times after the
Closing against and in respect of any of the following (collectively, "Buyer
Losses") and Buyer's right to indemnification from Seller shall include, but is
not limited to, Buyer's right to offset the Note payments (pursuant to the terms
of the Offset Procedures attached hereto as Exhibit IX.7(a)) for any of the
Buyer Losses:
(i) OBLIGATIONS NOT ASSUMED. Any and all claims, losses,
costs, expenses, commitments, agreements, liabilities and obligations of Seller,
or arising from the operations, or employees of Seller either before or after
the Closing Date (including, without limitation, the operation of the Company
prior to the Closing Date), whether accrued, absolute, contingent or otherwise
and whether or not disclosed in this Agreement or the Schedules, to the extent
not expressly assumed by Buyer pursuant to the Agreement, it being agreed that
the Assumed Liabilities shall be as set forth on the Final Closing Statement,
but to the extent such Assumed Liabilities exceed the amount of liabilities set
forth on the balance sheet as of the Closing Date delivered to Buyer pursuant to
Section III.2 hereof, Buyer shall have a right of offset as
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provided in Section III.2 hereof;
(ii) BREACH OF AGREEMENTS. Any and all damages
resulting to Buyer from any misrepresentation, breach of warranty or covenant
made by Buyer, or nonfulfillment, in whole or in part, of any obligation on the
part of Seller under this Agreement, the License Agreement or any Schedule or
document delivered pursuant hereto;
(iii) PRODUCT RECALLS. Any and all damages and costs
associated with Product recalls, notifications, or other actions for Products
manufactured and sold to third parties, including distributors, prior to the
Closing;
(iv) TAXES. Any and all taxes of Seller, or applicable
to operation of the Business prior to the Closing Date to the extent not
provided for on the Final Closing Statement; and
(v) ASSOCIATED COSTS. All costs, assessments,
judgments (including reasonable costs and attorneys' fees and other expenses)
arising out of any claim, or the defense or investigation thereof, made with
respect to any of the matters described in Section IX.7(a)(i), (ii), or (iii);
(b) BUYER'S INDEMNIFICATION OF SELLER. Buyer shall indemnify Seller
and hold Seller harmless at all times after the Closing against and in respect
of any of the following (collectively, "Seller Losses"):
(i) OBLIGATIONS ASSUMED. Any and all claims, losses,
costs, expenses, commitments, agreements, liabilities and obligations of Seller
to the extent expressly included within the Assumed Liabilities;
(ii) BREACH OF AGREEMENT. Any and all damages
resulting to Seller from any misrepresentation, breach of warranty or covenant
made by Seller, or nonfulfillment, in whole or in part, of any obligation on the
part of Buyer under this Agreement or any Schedule;
(iii) POST-CLOSING OPERATIONS. Any and all claims,
losses, costs, expenses, commitments, agreements, liabilities and obligations of
Buyer arising from events occurring in the operation of the Business after the
Closing Date; and
(iv) ASSOCIATED COSTS. All costs, assessments,
judgments (including reasonable costs and attorneys' fees and other expenses
arising out of any claim, or the defense or investigation thereof, made with
respect to any of the matters described in Section IX.7(b)(i), (ii) or (iii);
(c NOTICE OF CLAIMS - PARTICIPATION IN THIRD PARTY SUITS. Any party
with a right to indemnification pursuant to this Section IX.7 ("Indemnified
Party") shall be reimbursed by the
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other party ("Indemnifying Party") for any damage subject to such
indemnification. Any Indemnified Party making any claim against an Indemnifying
Party for indemnification shall make such claim in writing, setting forth in
general terms the facts upon which the Indemnified Party bases such claim. In
the event of any claim or demand asserted against any Indemnified Party by a
third party upon which the Indemnified Party may claim indemnification under
this Section IX.7, the Indemnified Party shall give the Indemnifying Party
written notice within thirty (30) days after receipt thereof indicating whether
the Indemnified Party intends to assume the defense of such claim or demand.
The Indemnifying Party shall have the right, at its own expense, to participate
in such defense, by written notice given to the Indemnified Party within fifteen
(15) days from the date of the Indemnified Party's notice of such claim. If the
Indemnified Party assumes the defense and the Indemnifying Party does not
participate, the Indemnified party shall have the right fully to control and to
settle the proceeding. If the Indemnifying Party elects to participate in such
defense, and does not dispute liability for indemnification of all damages
arising out of such action, the Indemnifying Party may elect to control the
proceeding, but shall not settle the same without the consent of the Indemnified
Party, which consent shall not be unreasonably withheld. If the Indemnifying
Party does not so elect to control the proceeding, the Indemnified Party shall
control the proceeding but shall not settle the same without the consent of the
Indemnifying Party, which consent shall not be unreasonably withheld. If the
Indemnified Party elects not to assume the defense, the Indemnifying Party shall
have the right to do so and to control the proceeding, but the Indemnified Party
shall nonetheless have the right to participate therein, and the Indemnifying
Party shall not settle the same without the consent of the Indemnified Party,
which consent shall not be unreasonably withheld.
(d) OFFSET FOR SELLER'S INDEMNIFICATION OF BUYER. In the event
that Seller becomes liable to Buyer under the provisions of this Agreement,
Seller shall be entitled to a credit or offset against such liability of an
amount equal to the sum of: (A) the value of any asset of Seller which existed
(contingently or otherwise) on the Closing Date, excluding intangible assets
described herein, but was not reflected as an Asset on the Final Closing
Statement of Seller, which was transferred to Buyer under this Agreement, the
value of which must be mutually agreed upon by the parties; (B) the amount, if
any, by which the Accounts Receivable of Seller which are purchased by Buyer
under this Agreement are actually collected in excess of the net amount thereof
(after the applicable allowance for doubtful accounts, if any); and (C) the
amount, if any, by which the actual amount of any Assumed Liability shown on the
Final Closing Statement is less than that amount at which such liability or the
reserve therefor is recorded thereon.
IX.8 TERMINATION.
(a) MUTUAL AGREEMENT. This Agreement may be terminated and
abandoned at any time prior to the Closing Date by the written agreement of
Seller and Buyer.
(b) FAILURE OF CONDITIONS. This Agreement may be terminated on
the grounds of failure of fulfillment of conditions as provided in Sections
VIII.1 and VIII.2.
(c) FAILURE TO TIMELY CLOSE. This Agreement shall terminate if
the Closing is
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not consummated on or before JULY 15, 1997, unless otherwise extended by the
mutual written agreement of the parties.
(d) EFFECT OF TERMINATION. In the event of termination of
this Agreement in accordance with this Section IX.8, neither party shall have
any obligation to the other whatsoever with respect to this Agreement, the
transactions provided for herein, or the expenses either of them incurred in
connection with or in contemplation of such transactions.
IX.9 ALLOCATION OF ESTIMATED PURCHASE PRICE. SCHEDULE IX.9
constitutes the allocation agreed to by Seller and Buyer of the consideration
among the various items included in the Assets being transferred by Seller to
Buyer. Buyer and Seller shall file all tax returns and reports in a manner
consistent with SCHEDULE IX.9.
IX.10 PRORATIONS. All items of income or expense respecting the Assets
and the Business being transferred pursuant to this Agreement which properly
apply to periods commencing prior to and ending after the Closing Date shall be
prorated as of the close of business on the Closing Date. Such items of income
or expense shall include, without limitation, the following, which shall be
governed by any special proration principles set forth below:
(a) Current real and personal property taxes; in the event that
such taxes are not determinable on the Closing Date, such taxes shall be
tentatively prorated upon the basis of taxes for the preceding tax year and
appropriate adjustments shall be made when such taxes are finally determined;
(b) Premiums on any insurance policies transferred to Buyer
pursuant to this Agreement; and
(c) Buyer and Seller shall cooperate so as to cause utility
companies to read all utility meters on the morning of the Closing Date so as to
minimize the need for such proration.
[Signature Page to Asset Purchase Agreement Follows]
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IN WITNESS WHEREOF, the parties hereto have executed this Asset
Purchase Agreement on the date first above written.
U. S. MEDICAL PRODUCTS, INC.
By:
-------------------------------------
Frederick J. Mindermann
Chief Executive Officer
HAYES MEDICAL, INC.
By:
-------------------------------------
Daniel E. E. Hayes, Jr.
Chief Executive Officer
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USMP
PRELIMINARY CLOSING STATEMENT
PURCHASE PRICE ALLOCATION
DESCRIPTION ASSUMED HISTORICAL
BALANCES COST
(per 3/31/97 G/L)
CASH - -
ACCOUNTS RECEIVABLE 14,522 14,522
ALLOWANCE FOR DOUBTFUL ACCTS. - -
METRAX RECEIVABLE - -
HAYES RECEIVABLE 198,260 198,260
EMPLOYEE RECEIVABLE 542 542
INVENTORY 1,799,306 3,198,766
PREPAIDS 23,596 23,596
PREPAID INVENTORY 226,232 226,232
FIXED ASSETS 759,429 759,429
OTHER ASSETS 23,492 41,764
AP - TRADE 1,989,467 1,989,467
AP - EMPLOYEES 522 522
AP - PRIOR YEAR TAXES 18,011 18,011
PRODUCT LIABILITY -
METRAX LIABILITY -
PAYROLL RELATED 90,184 90,184
ACCRUED PROPERTY TAX 21,900 21,900
NMSI LIABILITY 228,825 228,825
SAB FEES - -
INCENTIVES 3,000 3,000
ACCRUED SALES TAXES -
OTHER ACCRUED LIAB. 1,800 1,800
LEASES 105,934 105,934
BLDG LEASE OBLIGATION ASSUMED 114,673
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