Exhibit 2.4
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ASSET PURCHASE AGREEMENT
by and between
HORIZON MEDICAL PRODUCTS, INC.
and
IDEAS FOR MEDICINE, INC.
October 9, 2000
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made as of October 9,
2000 by and between HORIZON MEDICAL PRODUCTS, INC., a Georgia corporation
("Horizon"), and IDEAS FOR MEDICINE, INC., a Florida corporation ("IFM").
W I T N E S S E T H:
WHEREAS, IFM is a wholly-owned subsidiary of CryoLife, Inc., a Florida
corporation ("CryoLife"), and is in the medical device manufacturing business
(the "Business");
WHEREAS, Horizon and IFM previously entered into that certain purchase
agreement, dated as of May 19, 1998 (the "First Purchase Agreement"), pursuant
to which Horizon purchased certain assets of IFM;
WHEREAS, Horizon and IFM previously entered into that certain purchase
agreement, dated as of September 30, 1998 (the "Second Purchase Agreement"),
pursuant to which Horizon purchased certain additional assets of IFM; and
WHEREAS, Horizon wishes to acquire substantially all of the remaining
assets of IFM, and IFM wishes to sell such assets, all on the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and for other good and valuable consideration, the receipt,
adequacy and sufficiency of which are hereby acknowledged, Horizon and IFM agree
as follows:
1. Purchase and Sale of Assets; Assumed Liabilities.
1.1 Purchase and Sale of Assets. On the Closing Date (as hereinafter
defined), upon and subject to the terms and conditions of this Agreement, IFM
shall sell, transfer, assign, convey, and deliver to Horizon, and Horizon shall
purchase and acquire from IFM all right, title and interest of IFM in and to all
of the assets, properties and rights of IFM, of every kind and description,
personal and mixed, tangible and intangible, wherever situated, except for the
Excluded Assets (as defined in Section 1.4) (collectively, the "Purchased
Assets"), free and clear of all mortgages, liens, pledges, security interests,
charges, claims, restrictions and encumbrances of any nature whatsoever, except
for the Assumed Liabilities (as defined in Section 1.7). The Purchased Assets
shall not include any assets previously purchased by Horizon pursuant to the
First Purchase Agreement or the Second Purchase Agreement.
1.2 Purchased Assets. Except as otherwise expressly set forth in
Section 1.4 hereof, the Purchased Assets shall include, without limitation, the
following assets, properties and rights of IFM:
(a) All of IFM's right, title and interest in and to its fixed assets,
as further described in Schedule 1.2(a) hereto, including, without
limitation, all production equipment, office equipment, dies, drawings and
other equipment used in the production, manufacture, sale, marketing or
distribution of products (the "Fixed Assets");
(b) All of IFM's right, title and interest in and to (1) all finished
goods inventory as of the close of business on the Closing Date, including,
without limitation, the items set forth on Schedule 1.2(b)(1) hereto, and
all containers and other packaging materials associated with such finished
goods inventory (the "Finished Goods Inventory"); and (2) all other
inventory, as further described in Schedule 1.2(b)(2) hereto, including,
without limitation, raw materials and work in process, whether located at
IFM's or CryoLife's facilities, in route to the sterilizer or other outside
vendors, or elsewhere (the "Other Inventory," and together with the
Finished Goods Inventory, collectively, the "Inventory").
(c) All leasehold improvements, as further described in Schedule
1.2(c) hereto, including, without limitation, clean rooms and air handling
equipment;
(d) All of IFM's right, title and interest in and to all United States
and foreign patents, patent application, tradenames, trademarks,
copyrights, trade dress, logos, business and product names, slogans,
inventions, trade secrets, industrial models, formulas, processes, designs,
confidential and technical information, manufacturing, engineering and
technical drawings, product specifications, know-how and all other material
intangible property and intellectual property rights to or similar to and
registrations and applications for registration relating to any of the
foregoing or licenses owned by IFM (collectively, "Intellectual Property")
including, without limitation, the items set forth on Schedule 1.2(d)
hereto;
(e) All of IFM's and/or CryoLife's rights and benefits pursuant to
those certain third-party contracts and agreements set forth on Schedule
1.2(e) hereto and incorporated herein by reference (the "Assigned
Contracts");
(f) All of IFM's right, title and interest in and to the "Ideas for
Medicine" and "IFM" names and any trademarks and tradenames, designs and
logos associated therewith; and
(g) All records and documents related to the Business or the Purchased
Assets, whether in paper, electronic or other media, including, without
limitation, all FDA 510(k) filings and other FDA filings, all drawings and
designs, all test protocols and results, all biocompatibility data, all
customer lists, sales brochures, medical records, all production records
and all other business records. IFM shall be entitled to keep a copy of all
such records and documents. IFM shall protect such records and documents
under the confidentiality provisions of Section 11.1 through the sixth
(6th) anniversary of the Closing Date and shall then promptly destroy all
of such records and documents with written notice to Horizon confirming
such destruction. After the destruction of such records and documents, IFM
will have access to such records and documents in Horizon's possession in
accordance with Section 6.8(b). Such records and documents will be used by
IFM solely for the preparation of the prosecution or the defense of any
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suit, action, litigation or administrative, arbitration or other proceeding
or investigation by or against IFM or CryoLife or for any third party claim
for which indemnification is claimed pursuant to the terms of Section 9
below, or for the preparation for the filing of any document required by
any federal, state or local governmental department, regulatory agency,
authority, commission, board or court.
1.3 Technical Files. At the Closing, IFM shall deliver to Horizon
copies of the technical file or dossier on the CE mark for each Product, which
copies shall include, without limitation, all paper and electronic files related
to IFM's products. IFM may redact from such copies any information pertaining to
the Excluded Products.
1.4 Excluded Assets. IFM shall retain and shall not sell or deliver to
Horizon, and Horizon shall not purchase from IFM, the following assets, all of
which shall be excluded from the Purchased Assets (collectively, the "Excluded
Assets"):
(a) All cash;
(b) All accounts receivable relating to or arising out of sales on or
before the Effective Date;
(c) Any rights including without limitation, all trade secrets, know
how and other intellectual property to the following products and their
related inventory and packaging (collectively, the "Excluded Products"):
(i) BioGlue applicator tip connector;
(ii) heart value holder;
(iii) BioGlue Aortic dissection catheters;
(iv) CryoValve tags; and
(v) Cardiac Manipulator for Minimally Invasive Surgical
Procedures;
(d) Any raw materials supplied by third parties, including, without
limitation, work in progress and finished goods inventory resulting from
such raw materials, to which title shall remain with such third party
supplier pursuant to an Assigned Contract;
(e) Accounts receivable resulting from work performed under the
Assigned Contracts prior to the Effective Date, as set forth in Schedule
1.4(e) hereto;
(f) Any packaging or other items bearing the "CryoLife" name;
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(g) Any materials, equipment, fixtures, dies and tooling listed on
Schedule 1.4(g) which are utilized in connection with the packaging and
manufacture of the Excluded Products;
(h) All packaging for and work in process and inventory of the
Excluded Products, including, without limitation, all BioGlue dispensers,
mixing tips and twist rings and connectors, all CryoPacks, and all CryoLife
Intermediates (also known as allograft packaging); and
(i) All equipment owned by third parties and listed on Schedule 1.4(i)
hereto, which shall continue to be owned by such third parties.
1.5 Liabilities Not Assumed. Except as expressly set forth in Section
1.7, Horizon shall not and will not accept or assume any liability or obligation
of any nature whatsoever (whether express or implied, fixed or contingent,
liquidated or unliquidated, known or unknown, accrued or to become due) of IFM
or CryoLife. Without limiting the generality of the foregoing, Horizon shall not
and will not accept nor assume any liability or obligation of IFM:
(a) arising from or related to any federal, state, or local income,
sales, use, excise, or other tax of IFM (including without limitation any
such taxes incurred by IFM as a result of the transactions contemplated
hereby), except as set forth in Section 1.7(c);
(b) relating to any employees or former employees of IFM arising by
reason of any such other person's employment or termination of employment
by IFM, except as expressly set forth in Section 6.5;
(c) resulting from the conduct of the Business on or prior to the
Closing Date, provided the foregoing shall not be deemed to limit IFM's
right to seek indemnification from Horizon under the Manufacturing
Agreement (as defined in Section 2.7);
(d) resulting from any product manufactured by IFM for Horizon
pursuant to the Manufacturing Agreement (the "HMP/IFM Products") which is
returned to Horizon or IFM prior to, on, or after the Closing Date if such
product (i) is defective as a result of a defect in the manufacture or
assembly thereof (and not as a result of any defect in the design or
specifications), and (ii) was sold by IFM, or is a part of the Finished
Goods Inventory (a "Defective HMP/IFM Product"), provided such defect is
not caused by the action or inaction of Horizon;
(e) resulting from IFM's production, manufacture and assembly of any
of IFM's products other than the HMP/IFM Products (the "Non-HMP Products")
on or prior to the Closing Date, including, without limitation, any
personal injury or product damage whether occurring prior to, on, or after
the Closing Date, caused by or through or arising as a result of the
marketing, sale, delivery, production, manufacture or assembly by IFM of
the Non-HMP Products;
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(f) resulting from any defective or damaged Non-HMP Product returned
to Horizon or IFM prior to, on, or after the Closing Date if such product
(i) was sold by IFM, or (ii) is a part of the Finished Goods Inventory (a
"Defective Non-HMP Product," and together with the Defective HMP/IFM
Products, collectively, the "Defective Products"), provided such defect or
damage is not caused by the action or inaction of Horizon; or
(g) resulting from IFM's lack of compliance with any applicable
federal, state, or local laws, rules, regulations, ordinances, or orders.
1.6 Valuation For Tax Reporting Purposes. IFM and Horizon agree that
Schedule 1.6, in which the parties have allocated the Purchase Price (as defined
below) among the Purchased Assets, has been jointly prepared by the parties
hereto. The parties agree to use Schedule 1.6 in preparing and filing their
respective Forms 8594 with the Internal Revenue Service and for all other
relevant federal and state income tax purposes. Each party will provide a copy
of the Form 8594 to the other party prior to filing. In the event the parties
are unable to agree on Schedule 1.6 as of the Closing, the parties shall agree
on such Schedule 1.6 within ninety (90) days of the Closing Date.
1.7 Assumption of Liabilities. On the Closing Date, Horizon shall
assume from IFM the following liabilities and obligations of IFM (the "Assumed
Liabilities"):
(a) the trade payables of IFM with respect to Inventory received after
the Effective Date and the trade payables of IFM arising in respect of the
provision of goods (excluding Inventory) or services on or after the
Effective Date;
(b) all ad valorem taxes on the Purchased Assets accruing on or after
the Effective Date; and
(c) the monetary obligations of IFM accruing on or after the Effective
Date under the Assigned Contracts and all other obligations or liabilities
under the Assigned Contracts accruing after the Closing Date.
2. Purchase Price; Refund of Purchase Price.
2.1 Purchase Price. In consideration for IFM's sale, transfer and
delivery of the Purchased Assets (as defined above) to Horizon, Horizon shall
deliver to IFM at Closing a promissory note in the form of Exhibit A hereto (the
"Note") in favor of IFM with a principal amount equal to Five Million Nine
Hundred Forty-Five Thousand Two Hundred Sixteen Dollars ($5,945,216) (the
"Purchase Price'). The terms of the Note shall be as follows:
(a) Three Million Eight Hundred Thousand Dollars ($3,800,000) of the
Note shall bear interest at the rate of nine percent (9%) per annum and
shall be payable in monthly installments of principal and interest of One
Hundred Forty Thousand Dollars ($140,000) per month until all principal and
interest due under the Note is paid in full.
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(b) Two Million One Hundred Forty-Five Thousand Two Hundred Sixteen
Dollars ($2,145,216) of the Note shall bear no interest so long as Horizon
makes all payments under the Note on a timely basis.
(c) If Horizon fails to make any payment under the Note on time, the
remaining principal balance of the Note shall bear interest at eighteen
percent (18%). If Horizon makes all payments on a timely basis without any
late or deficient payments until such time as the principal balance on the
Note is reduced (by payment, set-off, adjustment or otherwise) to Two
Million One Hundred Forty-Five Thousand Two Hundred Sixteen Dollars
($2,145,216), IFM shall forgive the remaining Two Million One Hundred
Forty-Five Thousand Two Hundred Sixteen Dollar ($2,145,216) principal
balance of the Note (the "Discount").
2.2. Scheduled Payment of Note. Horizon agrees to pay under the Note
the sum of One Million Dollars ($1,000,000) in cash (the "Scheduled Payment")
upon the earlier of (i) the closing of one or more equity financings which
result in consideration to Horizon of at least Fifteen Million Dollars
($15,000,000) in exchange for Horizon common and/or preferred stock (the "Equity
Financing") or (ii) April 3, 2001. In the event Horizon's pays the Scheduled
Payment prior to April 3, 2001, IFM shall forgive One Million Dollars
($1,000,000) of the principal amount of the Note in accordance with the terms of
the Note.
2.3. Physical Inventory.
(a) Horizon and IFM have taken a physical inventory of the Inventory
and Fixed Assets (the "Physical Inventory") prior to Closing. Based on the
Physical Inventory, the Purchase Price shall be adjusted as follows to
reflect the difference, if any, between (1) the estimated value of the
Inventory and the Fixed Assets totaling Three Million Three Hundred
Eighteen Thousand Three Hundred Twenty ($3,318,320) (the "Estimated Asset
Value"), and (2) the value of the Inventory and Fixed Assets reflected in
the Physical Inventory (the "Actual Asset Value").
(i) In the event that the Estimated Asset Value is greater than
the Actual Asset Value, the principal amount of the Note shall be
reduced to reflect the difference between the Estimated Asset Value
and the Actual Asset Value.
(ii) In the event that the Actual Asset Value is greater than the
Estimated Asset Value, the principal amount of the Note shall be
increased to reflect the difference between the Actual Asset Value and
the Estimated Asset Value.
(b) For purposes of determining the Actual Asset Value pursuant to
this Section 2.3, (i) the value of all raw materials, work in process and
finished goods inventory shall reflect IFM's fully absorbed cost which
shall be equal to the original cost of such Inventory, excluding any
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write-off or discount subsequently taken by IFM with respect thereto, and
(ii) the value of the Fixed Assets shall be the book value for such Fixed
Assets, calculated in accordance with generally accepted accounting
principles.
(c) In connection with the Purchase Price adjustment pursuant to this
Section 2.3, the Parties shall take into account the appropriate prorations
for the following items: utilities, phone service, deposits, rent, prepaid
items and employee compensation. IFM shall be responsible for all such
expenses incurred or accruing prior to October 1, 2000, and Horizon shall
be responsible for all such expenses incurred or accruing on or after
October 1, 2000.
(d) In the event that the parties are unable to agree on the amount of
the Purchase Price adjustment required pursuant to this Section 2.3, if
any, within twenty (20) days after the Closing Date, Horizon and IFM shall
engage an independent accounting firm ("IA") at such time, to determine the
amount of the Purchase Price adjustment. The cost of the IA shall be paid
equally by both parties. The decision of the IA shall be made within thirty
(30) days after being engaged and shall be final and binding on the
parties. In the event that Horizon and IFM are unable to agree on the IA by
the twentieth (20th) day after the Closing Date, any dispute under this
Section 2.3 shall be settled in accordance with the provisions of Section
2.4(b).
(e) Any adjustment to the Purchase Price required pursuant to this
Section 2.3 will be made against the principal balance of the Note. In the
event of such adjustment, IFM shall surrender the Note, and Horizon shall
execute and deliver to IFM an amended and restated Note that reflects such
adjustment. In such case, the original Note shall be canceled regardless of
any failure of IFM to deliver said Note, which failure shall not affect the
amendment and restatement of the Note. Any failure of Horizon to deliver an
amended and restated Note if required hereunder shall not affect the
obligation to make payments as required hereunder.
2.4 Refund for Damaged Finished Goods Inventory.
(a) IFM and CryoLife agree to reduce the principal amount of the Note
by the price paid by Horizon for any Defective Product in accordance with
this Section 2.4. On or before the ninetieth (90th) day after delivery of
the Inventory pursuant to Section 2.5, Horizon shall return all products
which are alleged to be Defective Products to IFM or CryoLife for
inspection with a description of the alleged defect or damage. If IFM
determines in good faith that a product is a Defective Product, IFM or
CryoLife shall agree to reduce the principal amount of the Note by the
price paid by Horizon for each such Defective Product. In the event of such
a reduction, IFM shall surrender the Note, and Horizon shall execute and
deliver to IFM or CryoLife an amended and restated note that reflects such
adjustment.
(b) Any dispute between the parties under this Section 2.4 shall be
settled by arbitration conducted in Atlanta, Georgia before and in
accordance with the then existing Rules for Commercial Arbitration of the
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American Arbitration Association, provided that only one arbitrator as
selected by the American Arbitration Association shall conduct any
arbitration proceeding. Any arbitration shall be final and binding. Any
judgment upon any interim or final award or order rendered by the
arbitrator may be entered by any federal or state court having jurisdiction
thereof. Each party in the arbitration proceeding shall bear its own costs
and expenses of investigating, preparing, and pursuing such arbitration
claim. The cost of the arbitration shall be borne by the non-prevailing
party which the arbitration will determine in such arbitration proceeding.
In the event that the arbitrator is unable to determine a prevailing and
non-prevailing party, the cost of arbitration will be shared equally.
2.5 Shipment of Finished Goods Inventory to Horizon. On or before the
sixtieth (60th) business day after the Closing Date, IFM will deliver the
Finished Goods Inventory which is located at any location (a "Storage Location")
other than the Premises (as defined in Section 4.7) to Horizon or its carrier
F.O.B. such Storage Location. IFM shall deliver such finished Goods Inventory at
such times and in such number of shipments as instructed by Horizon; provided,
however, that the number of shipments requested by Horizon shall not exceed four
(4) shipments.
2.6 Manufacturing Agreement. Horizon and IFM hereby agree to terminate
that certain Manufacturing Agreement dated as of September 30, 1998, by and
between Horizon and IFM (the "Manufacturing Agreement"), as of the Closing Date
and agree that the Manufacturing Agreement shall have no further force or effect
after the Closing Date; provided, however, that the provisions of Sections 6, 8,
9, 12, 14, 17, 18 and 19 of the Manufacturing Agreement shall survive such
termination. The parties acknowledge and agree that upon termination of the
Manufacturing Agreement as provided herein, (i) Horizon shall not owe any
further payment to IFM under the Manufacturing Agreement, (ii) Horizon shall not
be subject to any claims, liabilities, obligations, losses, costs, expenses,
penalties, fines or other judgments (at equity or at law) or damages
(collectively, "Damages"), whenever arising or incurred, arising out of or
relating to Horizon's default under the Manufacturing Agreement prior to the
date hereof, excluding Damages for which the other party is entitled to
indemnification pursuant to Section 6 thereof, and (iii) IFM shall not be
subject to any Damages, whenever arising or incurred, arising out of or relating
to default by IFM, if any, under the Manufacturing Agreement prior to the date
hereof, excluding Damages for which the other party is entitled to
indemnification pursuant to Section 6 thereof.
3. Closing.
3.1 Date and Place of Closing. The purchase and sale of the Purchased
Assets contemplated by this Agreement (the "Closing") shall occur at the offices
of King & Spalding at 191 Peachtree Street, Atlanta, Georgia on October 9, 2000
(the "Closing Date"). The term "Effective Date" as used in this Agreement shall
mean the opening of business on October 1, 2000.
3.2 Deliveries by IFM. At the Closing, IFM shall deliver or cause to
be delivered to Horizon the following:
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(a) An executed copy of the Guaranty of CryoLife in the form of
Exhibit B hereto (the "CryoLife Guaranty");
(b) An executed copy of the Bill of Sale and General Assignment from
IFM in the form of Exhibit C hereto (the "Bill of Sale") conveying good and
marketable title to the Purchased Assets free and clear of all liens,
mortgages, pledges, security interests, restrictions, prior assignments,
charges, encumbrances, equities, and other claims of any kind or nature
whatsoever (collectively, "Encumbrances");
(c) An executed copy of the Assignment and Assumption Agreement in the
form of Exhibit D hereto (the "Assignment and Assumption Agreement")
assigning the Assigned Contracts to Horizon;
(d) A legal opinion of Arnall, Golden & Gregory, counsel to IFM, in
the form of Exhibit E hereto;
(e) An executed copy of the Sublease Agreement in the form of Exhibit
F hereto (the "Sublease Agreement");
(f) An executed copy of the Manufacturing, Assembly and Packaging
Agreement in the form of Exhibit G hereto (the "Manufacturing, Assembly and
Packaging Agreement"), pursuant to which Horizon shall provide certain
manufacturing, assembly and packaging services to CryoLife;
(g) An executed copy of the Transition Services Agreement in the form
of Exhibit H hereto (the "Transition Services Agreement"), whereby IFM and
CryoLife agree to continue to provide information technology, accounting
and laboratory services during the transition period;
(h) A certificate of IFM as required by Section 7.3 hereof;
(i) A certified copy of the corporate charter and bylaws of IFM, and
the resolutions of the Board of Directors of IFM and the shareholder(s) of
IFM authorizing the transactions contemplated by this Agreement;
(j) Certificates from the appropriate public officials evidencing
IFM's good standing in its state of incorporation and any other
jurisdiction in which IFM is qualified to conduct business;
(k) The written consent of each party to the Assigned Contracts
consenting to the assignment of such Assigned Contract if such consent is
required under such Assigned Contract;
(l) Actual possession and operating control of the Purchased Assets;
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(m) A list of open purchase orders for materials purchased by IFM but
not yet received by IFM, together with any supporting materials relating to
such open purchase orders as Horizon shall reasonably request; and
(n) Such other instruments, assignments, terminations, releases, and
other instruments of transfer, assignment, and release of IFM as shall be
reasonably deemed necessary by Horizon to vest in Horizon good and
marketable title to the Purchased Assets, free and clear of any and all
Encumbrances.
3.3 Deliveries by Horizon. At the Closing, Horizon shall deliver or
cause to be delivered to IFM the following:
(a) The Purchase Price in the manner provided by Section 2 hereof,
(b) An executed copy of a Security Agreement in the form of Exhibit I
hereto evidencing a security interest in all of the Purchased Assets
purchased by Horizon to secure payment of the Note which will be junior in
priority to the security interests granted to secure (i) Horizon's
Obligations (as defined in that certain Amended and Restated Credit
Agreement dated as of May 26, 1998, among Horizon, Bank of America, N.A.
f/k/a NationsCredit Commercial Corporation ("Lendee"), and Stepic
Corporation, Horizon Acquisition Corp., and Strato/Infusaid Inc., as
Guarantors, as amended prior to or following the date hereof (collectively,
the "Credit Agreement")) under or in connection with the Credit Agreement,
as the Credit Agreement and/or such Obligations may be increased, renewed,
modified, extended or otherwise changed in the absolute discretion of
Lender, and (ii) any future bank indebtedness incurred by Horizon;
provided, however, that in no event shall the aggregate of subsections (i)
and (ii) above exceed Sixty-Five Million Dollars ($65,000,000) of principal
indebtedness, exclusive of interest, fees and other charges (collectively,
the "Bank Indebtedness").
(c) An executed copy of the Manufacturing, Assembly and Packaging
Agreement;
(d) An executed copy of the Transition Services Agreement;
(e) A legal opinion of King & Spalding, counsel to Horizon in the form
of Exhibit J hereto;
(f) A certificate of Horizon as required by Section 8.2 hereof;
(g) A certified copy of the corporate charter and bylaws of Horizon,
and the resolutions of the Board of Directors of Horizon authorizing the
transactions contemplated by this Agreement;
(h) A Certificate from the Secretary of State of Georgia evidencing
Horizon's good standing in the State of Georgia, and Certificates from any
states where Horizon is qualified to do business as a foreign corporation;
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(i) An executed copy of the Assignment and Assumption Agreement; and
(j) An executed copy of the Sublease Agreement.
4. Representations and Warranties of IFM. In order to induce Horizon to
enter into this Agreement and to consummate the transactions contemplated
hereunder, IFM represents and warrants to and covenants with Horizon that:
4.1 Organization and Good Standing. IFM is a corporation duly
organized, validly existing, and in good standing under the laws of Florida, and
has the requisite corporate power and authority to execute and deliver this
Agreement and all other documents, agreements, and certificates (collectively,
the "IFM Transfer Documents") which are required to be executed and delivered by
IFM pursuant to this Agreement and to perform in all respects its obligations
hereunder and thereunder. IFM is duly qualified or licensed to do business and
in good standing in each jurisdiction in which the nature of its business or the
character of the assets owned or leased by IFM makes such qualification or
licensing necessary, except where the failure to be so qualified or licensed
would not materially impair or adversely affect the transactions contemplated
hereunder. IFM has all of the necessary local, state, and federal licenses and
permits to carry on and operate the Business.
4.2 Due Authorization; Enforceability; No Conflict. The execution,
delivery, and performance of this Agreement and the IFM Transfer Documents have
been duly authorized by all requisite corporate action on the part of IFM. This
Agreement has been duly executed and delivered by IFM and constitutes, and each
of the IFM Transfer Documents when executed and delivered will constitute, valid
and binding obligations of IFM, enforceable in accordance with and subject to
their respective terms, except as limited by bankruptcy, insolvency,
reorganization, and similar laws affecting the enforcement of creditors' rights
or contractual obligations generally. Except as expressly described in Schedule
4.2, the execution, delivery, and performance by IFM of this Agreement and IFM
Transfer Documents, the assignment of IFM's rights under the Assigned Contracts,
and the consummation of the transactions contemplated hereby and thereby will
not:
(a) violate any provision of the Articles of Incorporation or bylaws
of IFM;
(b) result in the creation of any liens, security interests, or
encumbrances upon any of the Purchased Assets, assuming the consents set
forth on Schedule 4.2 are obtained;
(c) violate any provision of any judicial or administrative order,
award, judgment, or decree applicable to IFM;
(d) conflict with, result in a material breach of or constitute a
default under any agreement or instrument to which IFM is a party or by
which it is bound, assuming the consents set forth on Schedule 4.2 are
obtained;
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(e) violate, in any material respect, any applicable law, rule,
ordinance, or regulation applicable to IFM; or
(f) require IFM to obtain the consent, approval, or authorization of,
or require IFM to file with, any federal, state, or local governmental
authority or agency, any lender or lien holder, or other person or entity.
4.3 Litigation. There are no judicial or administrative actions,
suits, or proceedings or, to the knowledge of IFM, any investigations pending
against IFM or CryoLife which would, if adversely determined, prevent, hinder,
delay, or otherwise adversely affect the consummation of the transactions
contemplated hereby. IFM is not a party to or subject to the provisions of any
order, decree, or judgment of any court or of any governmental authority or
agency which may prevent, hinder, or otherwise adversely affect the consummation
of the transactions contemplated hereby. Except as expressly described in
Schedule 4.3, to the knowledge of IFM, there are no outstanding or pending
product liability, intellectual property infringement or other claims that have
been asserted against IFM, nor are there any outstanding or pending claims that
have been asserted against CryoLife arising out of or related to the Business or
the Purchased Assets.
4.4 Ownership of Assets.
(a) On the Closing Date, IFM will have, and upon completion of the
Closing will have conveyed to Horizon, good and marketable title to the
Purchased Assets, free and clear of any and all Encumbrances.
(b) All equipment and other items of tangible property and assets
which are included in the Purchased Assets are in good operating condition
and repair subject to normal wear and maintenance, and are usable in the
regular and ordinary course of business.
(c) There are no existing agreements, options, commitments or rights
with, of or to any person to acquire any of the assets, properties or
rights included in the Purchased Assets or any interest therein.
4.5 Tax Returns; Taxes. IFM has duly filed all federal, state, local
and foreign tax returns required to be filed by them, all such returns are
accurate in all material respects, and IFM has duly paid or made adequate
provisions for the payment of all taxes (including any interest, penalties and
additions to tax) which are due or payable pursuant to such returns or which
otherwise are due and payable in any jurisdiction, whether or not in connection
with such returns. There are no pending claims asserted for taxes of IFM or
outstanding agreements or waivers extending the statutory period of limitation
applicable to any tax return of IFM or outstanding agreements or waivers
extending the statutory period of limitation applicable to any tax return of IFM
for any period that would affect the Business or the transaction contemplated by
this Agreement or any of IFM Transfer Documents. IFM has made all estimated
income tax deposits and all other required tax payments or deposits and have
complied for all prior periods in all material respects with the tax withholding
provisions of all applicable federal, state, local and other laws.
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4.6 Inventory. The Inventory is of good and usable quality and is
merchantable and saleable in the ordinary course of business.
4.7 Insurance. Schedule 4.7 hereto sets forth a true and correct
description of all insurance policies of any nature whatsoever maintained by
CryoLife or IFM on the date of this Agreement relating to the Business or any
property owned, leased or used by IFM (the "Premises"). Neither CryoLife nor IFM
has received notice of a cancellation with respect to such policies or of any
default thereunder. Each of IFM or CryoLife has complied in all material
respects with the terms and provisions of such policies. Within the past two
years, neither CryoLife nor IFM has been refused any basic insurance coverage
applied for with respect to the Business.
4.8. Intellectual Property. Except as expressly described on Schedule
4.8:
(a) No interference or infringement actions or other judicial or
adversary proceedings concerning any of such items of intangible personal
property are pending, and to the best of IFM's knowledge, no such action or
proceeding is threatened;
(b) To the best of IFM's knowledge, IFM has the right and authority to
use the Intellectual Property in connection with the conduct of the
Business in the manner presently conducted, and to the best of IFM's
knowledge, such use does not conflict with, infringe upon, or violate any
rights of any other person, firm, or corporation;
(c) There are no outstanding or, to the best of IFM's knowledge,
threatened disputes or other disagreements with respect to any of the
Intellectual Property;
(d) To the best of IFM's knowledge, there is no proprietary intangible
personal property used in any material respect in the operations of the
Business as presently conducted that is not owned by or licensed to IFM;
and
(e) To the best of IFM's knowledge, none of the Intellectual Property
is subject to any outstanding order, ruling, decree, judgment or
stipulation by or with any court, arbitrator, or administrative agency, nor
has any of the Intellectual Property been the subject of any litigation
involving IFM or CryoLife within the last four years, whether or not
resolved in favor of IFM.
4.9 Contracts. Schedule 4.9 hereto sets forth a true and correct list
of each contract pertaining to the Business (other than the Assigned Contracts
and the Manufacturing Agreement) to which IFM or CryoLife is a party
(collectively and together with the Assigned Contracts, but excluding the
Manufacturing Agreement, the "Contracts"). True, complete, and correct copies of
each of the Contracts, or where they are oral, true and complete written
summaries thereof, have been delivered to Horizon by IFM. Except as expressly
described on Schedule 4.9:
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(a) IFM has fulfilled all material obligations required pursuant to
each Contract to have been performed by IFM;
(b) There has not occurred any default under any of the Contracts on
the part of IFM or, to the best knowledge of IFM, on the part of any other
party thereto, nor has any event occurred which, with the giving of notice
or the lapse of time, or both, would constitute a default on the part of
IFM under any of the Contracts, nor, to the best of IFM's knowledge, has
any event occurred which, with the giving of notice or the lapse of time,
or both, would constitute a default on the part of any other party to any
of the Contracts;
(c) Except for the consents described on Schedule 4.2, no consent of
any party to any of the Contracts is required for the execution, delivery,
or performance of this Agreement or the consummation of the transactions
contemplated hereby; and
(d) All such Contracts are in full force and effect and enforceable
against IFM and each other party thereto.
4.10 Compliance with Law; FDA Matters.
(a) Except as set forth on Schedule 4.10(a), IFM has all material
authorizations, approvals, licenses and orders of and from all governmental
and regulatory offices, agencies, officers and bodies necessary to carry on
the Business as it is currently being conducted, to own or hold under lease
the properties and assets it owns or holds under lease and to perform all
of its obligations under all agreements to which it is a party
(collectively, the "Material Licenses"), and IFM has been and is in
compliance with all applicable laws, regulations and administrative orders
of any country, state or municipality or of any subdivision thereof to
which its business and its employment of labor or its use or occupancy of
properties or any part thereof are subject, the failure to obtain or the
violation of which would have a Material Adverse Effect (as defined in
Section 4.12(b)). Schedule 4.10(a) sets forth a true and complete list of
all Material Licenses.
(b) With respect to the Business and the Purchased Assets:
(i) IFM has been and is in compliance with all current and
otherwise applicable statutes, rules, regulations, standards, guides
or orders pertaining to the Purchased Assets (each a "Law" and
collectively the "Laws") administered or issued by the federal Food
and Drug Administration ("FDA") and all other federal, state, local or
foreign governmental departments, regulatory agencies, authorities,
commissions, boards or courts or other law, rule or regulation-making
entities having regulatory authority over CryoLife, IFM or the
Business (the "Authorities"), except for any such failure to comply
that would not have a Material Adverse Effect; and
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(ii) Except as set forth on Schedule 4.10(b)(ii), IFM has not
received any notice of adverse findings, warning letters, Section 305
notices, subpoenas or other similar communications by any Authorities
since September 30, 1998 related to the Purchased Assets.
(c) There have been no recalls, field notifications, alerts or
seizures requested or threatened relating to the Purchased Assets that
Horizon has not itself directed.
(d) IFM has made available to Horizon a copy of all its European Union
notified body's certifications and all FDA inspection reports ("Form
483's") or comparable reports of foreign authorities relating to the
Business, IFM's responses to such Form 483's or comparable foreign reports.
In addition, IFM will make available to Horizon information relating to
design dossiers for the Excluded Products during the term of the
Manufacturing, Assembly and Packaging Agreement.
(e) The representations and warranties set forth in this Section 4.10
shall not apply to any environmental matters with respect to which Section
4.17 shall solely apply.
4.11 Transactions with Affiliates. Except for the Contracts identified
on Schedule 4.11, no officer or director of IFM or CryoLife has any interest in:
(i) any contract, arrangement or understanding with, or relating to, the
Business or the Purchased Assets; (ii) any loan, arrangement, understanding,
agreement or contract for or relating to the Business or the Purchased Assets;
or (iii) any property (real, personal or mixed), tangible or intangible, used or
currently intended to be used in the Business.
4.12 Financial Statements, Absence of Changes, and Related Matters.
(a) IFM has delivered to Horizon (i) the unaudited balance sheets of
IFM as of December 31, 1999 and the related statements of revenues and
expenses for the fiscal years then ending; and (ii) the unaudited balance
sheet of IFM as of August 31, 2000 (the "Interim Balance Sheet") and the
related unaudited statements of revenues and expenses for the quarterly
period then ended (the "Interim Balance Sheet Date"). All of the foregoing
financial statements are hereinafter collectively referred to as the
"Financial Statements." The Financial Statements have been prepared from
and are in accordance with the books and records of IFM and present fairly
the financial position and results of operations of IFM, in accordance with
GAAP, as of the dates for the periods indicated.
(b) Since the Interim Balance Sheet Date, there has not been (i) any
material adverse effect upon the assets, liabilities, results of
operations, financial condition, business or prospects of the Business (a
"Material Adverse Effect"), (ii) any damage, destruction, loss or casualty
to property or assets of the Business, not covered by insurance which
property or assets are material to the Business, (iii) any liability or
obligation (absolute, accrued or contingent) incurred or any bad debt,
contingency or other reserve increased suffering, except, in each such case
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in the ordinary course of business and consistent with past practice, (iv)
any cancellation of any debts or waiver of any claims or rights of
substantial value, or sale, transfer or other disposition of any properties
or assets real, personal or mixed, tangible or intangible) of substantial
value relating to the Business, except in each such case in transactions in
the ordinary course of business and consistent with past practice, (v) any
transactions entered into other than in the ordinary course of business, or
(vi) any agreements to do any of the foregoing (other than this Agreement).
4.13 Hart-Scott-Rodino. No shareholder of CryoLife directly or
indirectly beneficially owns or has the right to vote 50% or more of the
outstanding voting securities of CryoLife, or, directly or indirectly, has the
right (whether by contract or otherwise) to elect 50% or more of the members of
the board of directors of CryoLife. The total assets (within the meaning of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended) of CryoLife
are less than $100,000,000 in the aggregate.
4.14 Officers, Directors and Employees. Schedule 4.14 contains (a) a
true and complete list of all of the officers and directors of IFM, specifying
(i) their office, and (ii) their salary, bonuses, commissions and other
compensation programs paid by IFM, and (b) a true and complete list of all of
the employees of IFM as of the date hereof together with an appropriate notation
next to the name of any employee on such list with whom IFM has a written
employment agreement or to whom IFM has made verbal commitments which are
binding on IFM.
4.15 Employee Benefit Plans.
(a) Definition of Benefit Plans. For purposes of this Section 4.15,
the term "IFM Benefit Plan" means any plan, program, arrangement, fund,
policy, practice or contract which, through which or under which IFM or any
IFM ERISA Affiliate (as hereinafter defined) provides benefits or
compensation to or on behalf of employees or former employees of IFM or any
IFM ERISA Affiliate, whether formal or informal, whether or not written,
including but not limited to the following:
(i) Arrangements. Any bonus, incentive compensation, stock
option, deferred compensation, commission, severance pay, golden
parachute or other compensation plan or rabbi trust;
(ii) ERISA Plans. Any "employee benefit plan" (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), including, but not limited to, any
multiemployer plan (as defined in Section 3(37) and Section 4001(a)
(3) of ERISA), defined benefit plan, profit sharing plan, money
purchase pension plan, 401(k) plan, savings or thrift plan, stock
bonus plan, employee stock ownership plan, or any plan, fund, program,
arrangement or practice providing for medical (including
post-retirement medical), hospitalization, accident, sickness,
disability, or life insurance benefits; and
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(iii) Other Employee Fringe Benefits. Any stock purchase,
vacation, scholarship, day care, prepaid legal services, dependent
care or other fringe benefit plans, programs, arrangements, contracts
or practices.
(b) IFM ERISA Affiliate. For purposes of this Section 4.15, the term
"IFM ERISA Affiliate" means each trade or business (whether or not
incorporated) which together with IFM is treated as a single employer under
Section 414(b), (c), (m) or (o) of the Internal Revenue Code (the "Code").
(c) Identification of Benefit Plans. Except for (i) those IFM Benefit
Plans identified in Schedule 4.15, and (ii) IFM Benefit Plans which have
been terminated and with respect to which neither IFM nor any IFM ERISA
Affiliate has any material financial, administrative or other liability,
obligation or responsibility, IFM neither maintains, nor have they at any
time established or maintained, nor have they at any time been obligated to
make, or otherwise made, contributions to or under or otherwise
participated in any IFM Benefit Plan.
(d) MEPPA Liability/Post-Retirement Medical Benefits/Defined Benefit
Plans/Supplemental Retirement Plans. Neither IFM, nor any IFM ERISA
Affiliate maintains, or has at any time established or maintained, or has
at any time been obligated to make, or made, contributions to or under any
multiemployer plan (as defined in Section 3(37) and Section 4001(a)(3) of
ERISA). IFM does not maintain, nor has at any time established or
maintained, nor has at any time been obligated to make, or made,
contributions to or under (i) any plan which provides post-retirement
medical or health benefits with respect to employees of IFM, (ii) any
organization described in Sections 501(c)(9) or 501(c)(20) of the Code,
(iii) any defined benefit pension plan subject to Title IV of ERISA.
(e) Compliance with Laws. Each IFM Benefit Plan is in material
compliance with the provisions of all applicable laws including, but not
limited to, ERISA and the Code with respect to the administration and
documentation of said plan. In addition, all medical benefit plans are in
material compliance with the provisions of the Consolidated Omnibus Budget
Reconciliation Act relating to the continuance of insurance coverage or
benefit coverage and with the requirements of the Health Insurance
Portability and Accountability Act.
(f) Qualified Status. Each IFM Benefit Plan that is an employee
benefit plan (within the meaning of Section 3(2) of ERISA) that is funded
through a trust or insurance contract or is a welfare benefit plan (within
the meaning of Section 3(l) of ERISA) funded through a trust has at all
times satisfied in all material respects, by its terms and in its
operation, all applicable requirements for an exemption from federal income
taxation under Section 501(a) of the Code. Neither IFM nor any IFM ERISA
Affiliate maintains or has previously maintained a IFM Benefit Plan which
meets or was intended to meet the requirements of Section 401(a) of the
Code except as disclosed on Schedule 4.15.
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(g) Legal Actions. There are no actions, audits, suits or claims which
are pending or, to the knowledge of IFM, threatened against any IFM Benefit
Plan, any fiduciary of any of IFM Benefit Plans with respect to IFM Benefit
Plans or against the assets of any of IFM Benefit Plans, except claims for
benefits made in the ordinary course of the operation of such plans.
(h) Funding. Each of IFM and each IFM ERISA Affiliate has made full
and timely payment of all amounts required to be contributed under the
terms of each IFM Benefit Plan and applicable law or required to be paid as
expenses under such IFM Benefit Plan, and no excise taxes are assessable as
a result of any nondeductible or other contributions made or not made to a
IFM Benefit Plan. The assets of all IFM Benefit Plans which are required
under applicable laws to be held in trust are in fact held in trust, and
the assets of each such IFM Benefit Plan equal or exceed the liabilities of
each such plan. The liabilities of each other plan are properly and
accurately reported on the financial statements and records of IFM. The
assets of each IFM Benefit Plan are reported at their fair market value on
the books and records of each plan.
(i) Liabilities. Neither IFM nor any IFM ERISA Affiliate is subject to
any material liability, tax or penalty to any person as a result of IFM's
or any ERISA Affiliate's engaging in a prohibited transaction under ERISA
or the Code, and IFM has no knowledge of any circumstances which reasonably
might result in any such material liability, tax or penalty as a result of
a breach of fiduciary duty under ERISA. No IFM Benefit Plan has suffered
any accumulated funding deficiency within the meaning of Section 302 of
ERISA and Section 412 of the Code. There is no lien upon any property of
IFM or any IFM ERISA Affiliate outstanding pursuant to Section 412(n) of
the Code in favor of any IFM Plan. No assets of IFM or any IFM ERISA
Affiliate have been provided as security to any IFM Plan pursuant to
Section 401 (a) (29) of the Code.
(j) CIGNA Plan. The only IFM Benefit Plan which provides healthcare
benefits to IFM employees is a fully insured, group health plan issued in
the State of Florida which IFM purchased from CIGNA HealthCare (the "CIGNA
Plan"). Except as set forth on Schedule 4.15(j), IFM pays 100% of the
premiums for each employee's coverage under the CIGNA Plan for each
calendar month (either in whole or in part from IFM's general assets or in
whole or in part from payroll deductions duly authorized by each affected
employee), and all such monthly premium for such coverage for each calendar
month are paid at the beginning of each such calendar month. CIGNA
HealthCare has no right to receive any payments from IFM or any IFM
employee for such coverage in addition to such monthly premium payments,
and IFM has no right to any refunds or rebates from CIGNA HealthCare with
respect to any such coverage.
4.16 Labor Relations. IFM is in material compliance with all federal
and state laws respecting employment and employment practices, terms and
conditions of employment, wages and hours, and IFM is not engaged in any unfair
labor or unlawful employment practice. There is no unlawful employment practice
or discrimination charge pending before the Equal Employment Opportunity
Commission ("EEOC"), EEOC recognized state "referral agency" or any other
governmental agency. There is no unfair labor practice charge or complaint
against IFM pending before the National Labor Relations Board ("NLRB"). There is
no labor strike, dispute, slowdown or stoppage actually pending or, to the best
18
knowledge of IFM, threatened against or involving or affecting IFM and no NLRB
representation question exists respecting the employees of IFM. No grievance or
arbitration proceeding relating to the employees of IFM is pending, and, to the
knowledge of IFM, no written claim therefor exists with respect to any such
employees. There is no collective bargaining agreement that is binding on IFM.
4.17 Environmental Matters. To the best of IFM's knowledge, except as
disclosed on Schedule 4.17 and in the environmental report (the "Horizon
Environmental Report") done by Horizon on the Premises (as defined in Section
4.7 above) and except for such failure to comply that would not have a Material
Adverse Effect, IFM is in compliance with all statutes, regulations and
ordinances and common law requirements relating to hazardous substances and/or
the protection of human health and the environment including, without
limitation, the Clean Water Act, 33 U.S.C. ss. 1251 et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. ss. 6901 et seq., the Clean Air Act, 42
U.S.C. ss. 7401 et seq., the Toxic Substances Control Act, 15 U.S.C. ss. 2601 et
seq., the Emergency Planning Community Right-to-Know Act, 42 U.S.C. ss. 11,001
et seq., the regulations developed pursuant to these statutes and the
corresponding state and local statutes, ordinances and regulations. To the best
of IFM's knowledge, except as disclosed on Schedule 4.17 and the Horizon
Environmental Report, IFM possesses all permits, authorizations, and other
governmental approvals and registrations required under any statute, law,
ordinance, regulation, or other legally binding requirement relating to
hazardous substances and/or the protection of human health and the environment
as are necessary for the continued operation of the Business, is in compliance
with all such permits, authorizations, and approvals, and no proceedings are
pending to revoke or modify such permits, authorizations, or approvals, except
for a failure, non-compliance, or proceeding that would not have a Material
Adverse Effect. To the best of IFM's knowledge, except as disclosed on Schedule
4.17 and the Horizon Environmental Report, there has been no release of a
"hazardous substance" as that term is defined in the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C. ss. 9601(14) into
the environment at the Premises, including, without limitation, any such release
in the soil or groundwater underlying or adjacent to the Premises, except for
such releases that would not have a Material Adverse Effect. To the best of
IFM's knowledge, except as disclosed on Schedule 4.17 and the Horizon
Environmental Report, there is no asbestos, polychlorinated biphenyls or
underground storage tank located on the Premises, and there have been no
releases at, on or under the Premises of asbestos, polychlorinated biphenyls or
materials stored in underground storage tanks, including, without limitation,
petroleum or petroleum-based materials, except for such releases that would not
have a Material Adverse Effect. IFM has not received written notice of and no
IFM officer has received any oral or written notice of any violation of any
environmental statute or regulation or other legal requirement pertaining to
environmental matters, nor has IFM been advised of any material claim or
liability pursuant to any environmental statute or regulation or other legal
requirement pertaining to environmental matters brought by any governmental
agency or private party.
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4.18 Property.
(a) To the best of IFM's knowledge, the structures owned or leased by
IFM are structurally sound, are in good and safe operating condition and
repair and are adequate for the uses to which they are being put, except
for maintenance performed in the ordinary course of business.
(b) Schedule 4.18(b) hereto sets forth a true and correct description
of each of the services provided to IFM by CryoLife.
4.19 Brokers. Neither IFM nor CryoLife has not retained, employed, or
dealt with any third-party broker, finder, or investment banker in connection
with this Agreement or the transactions contemplated hereby and no broker or
other third-party is entitled to any commission or finder's fee as a result of
any agreement or action taken by IFM or its affiliates in connection with such
transactions.
5. Horizon's Representations and Warranties. Horizon hereby represents and
warrants to IFM as follows:
5.1 Organization and Good Standing. Horizon is a corporation duly
organized, validly existing, and in good standing under the laws of Georgia, and
has the requisite corporate power and authority to execute and deliver this
Agreement and the documents, agreements, and certificates (collectively, the
"Horizon Transfer Documents") which are required to be executed and delivered by
Horizon pursuant to this Agreement and to perform in all respects its
obligations hereunder and thereunder.
5.2 Due Authorization; Enforceability; No Conflict. The execution,
delivery, and performance of this Agreement and the Horizon Transfer Documents
have been duly authorized by all requisite corporate action on the part of
Horizon. This Agreement has been duly executed and delivered by Horizon and
constitutes, and each of the Horizon Transfer Documents when executed and
delivered will constitute, the valid and binding obligation of Horizon,
enforceable in accordance with and subject to their respective terms, except as
limited by bankruptcy, insolvency, reorganization, and similar laws affecting
the enforceability of creditors' rights or contractual obligations generally.
Except as set forth on Schedule 5.2 attached hereto, the execution, delivery,
and performance by Horizon of this Agreement and the Horizon Transfer Documents
and the consummation of the transactions contemplated hereby and thereby will
not:
(a) Violate any provision of the Articles of Incorporation or bylaws
of Horizon;
(b) Violate any provision of any judicial, arbitral or administrative
order, award, judgment, or decree applicable to Horizon;
(c) Conflict with, result in a material breach of or constitute a
default under any agreement or instrument to which Horizon is a party or by
which it is bound;
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(d) Violate, in any material respect, any applicable law, rule,
ordinance, or regulation applicable to Horizon; or
(e) Require Horizon to obtain the consent, approval, or authorization
of, or require Horizon to file a certificate, notice, application, report
or other document with, any federal, state, or local governmental authority
or agency, lender, lien holder, or other person or entity.
5.3 Litigation. There are no judicial, arbitral, or administrative
actions, suits, or proceedings or, to the knowledge of Horizon, any
investigations pending against Horizon which would, if adversely determined,
prevent, hinder, delay, or otherwise adversely affect the consummation of the
transactions contemplated hereby. Horizon is not a party to or subject to the
provisions of any order, decree, or judgment of any court or of any governmental
agency which may prevent, hinder, or otherwise adversely affect the consummation
of the transactions contemplated hereby.
5.4 Brokers. Horizon has not retained, employed, or dealt with any
third-party broker, finder, or investment banker in connection with this
Agreement or the transactions contemplated hereby and no broker or other
third-party is entitled to any commission or finder's fee as a result of any
agreement or action taken by Horizon or its affiliates in connection with such
transactions.
5.5 Priority of Security Interest. Upon execution and delivery of the
Security Agreement, IFM shall obtain a valid lien against all the Purchased
Assets, prior to all other liens or encumbrances, including those which may
hereafter accrue, except for any security interests granted with respect to the
Bank Indebtedness. The current aggregate amount loaned and available for loan to
Horizon under the Bank Indebtedness is approximately Fifty Million Seven Hundred
Thousand Dollars ($50,700,000).
6. Covenants and Agreements of the Parties.
6.1 Horizon Access. Prior to the Closing, (i) authorized
representatives of Horizon shall have reasonable access to the properties,
books, records, employees and documents of IFM pertaining to the Business and
Purchased Assets, (ii) IFM will furnish to Horizon all information with respect
to the affairs of the Business that Horizon may reasonably request.
6.2 Cooperation in Litigation. Each party will fully cooperate with
the other in the defense or prosecution of any litigation or proceeding already
instituted or which may be instituted hereafter against or by such party
relating to or arising out of the conduct of the Business prior to or after the
closing Date (other than litigation arising out of the transactions contemplated
by this Agreement). Except as provided for by Section 9 hereof, the party
requesting such cooperation shall pay the out-of-pocket expenses (including
legal fees and disbursements) of the party providing such cooperation and of its
officers, directors, employees, and agents reasonably incurred in connection
with providing such cooperation, but shall not be responsible to reimburse the
party providing such cooperation for such party's time spent in such cooperation
or the salaries or cost of fringe benefits or other similar expenses paid by the
parties providing such cooperation to its officers, directors, employees, and
agents while assisting in the defense or prosecution of any such litigation or
proceeding.
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6.3 Conduct of Business. From the date of this Agreement and through
and including the Closing Date, (i) IFM shall conduct the Business in accordance
with prior practice and only in the ordinary course of business and (ii) shall
use its commercially reasonable efforts to preserve the Purchased Assets and to
preserve for Horizon, IFM's favorable business relationship with its customers
and others with whom business relationships exist. Without limiting the
generality of the foregoing, unless otherwise consented in writing by Horizon,
IFM shall:
(a) not produce finished goods inventory in excess of the quantity
that is needed to fill Horizon's purchase orders and sustain current
inventory levels;
(b) not purchase production equipment in excess of Twenty-Five
Thousand Dollars ($25,000);
(c) not purchase office equipment in excess of Ten Thousand Dollars
($10,000);
(d) not enter into any material transaction not in the ordinary course
of the Business;
(e) not sell or transfer any of its assets, except for sales in the
ordinary course of the Business;
(f) not pledge or encumber any of the Purchased Assets;
(g) not materially amend, modify, or terminate any material Contract
relating to the Business or the Purchased Assets;
(h) not reduce the amount of the Inventory other than in the ordinary
course of the Business;
(i) not make any material changes in its methods or business
operations relating to the Business or the Purchased Assets; and
(j) comply in all material respects with all Laws applicable to IFM,
the Business or the Purchased Assets.
6.4 CryoLife Projects. After the Closing, Horizon shall continue to
perform the work currently being performed by IFM for CryoLife, including (i)
the manufacturing and packaging of BioGlue dispensers, mixing tips and twist
rings, (ii) the preparation of packaging for allograft tissue, and (iii) the
preparation work for CryoLife's cryopaks, pursuant to the terms of the
Manufacturing, Assembly and Packaging Agreement in the form of Exhibit G hereto.
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6.5 Employees. On the Closing Date, IFM shall terminate the employment
of all employees of IFM, and Horizon shall rehire and engage only such employees
as designated on Schedule 6.5(a) (the "Retained Employees"); provided, however,
that the number of employees of IFM who do not become Retained Employees shall
not exceed forty-nine (49) employees. Horizon agrees to pay the retention bonus
amounts earned by the Retained Employees as set forth in the contracts listed on
Schedule 6.5(b) up to an aggregate amount of $62,123.24, plus any amount
resulting from an increase in any Retained Employee's compensation on or after
October 9, 2000. Horizon shall have no responsibility to pay any Retained
Employee any separation benefit or severance compensation if Horizon should
terminate the Retained Employee prior to December 1, 2000, except to the extent
that such separation benefit or severance compensation results from any increase
in any Retained Employee's compensation after October 9, 2000. Horizon shall
continue the CIGNA Plan (as defined in Section 4.15(j)) under Horizon's name
through the end of the current policy year for all Retained Employees. After the
current policy year, Horizon shall continue the CIGNA Plan on a month-to-month
basis until the Retained Employees are added to the Horizon group health plan.
IFM shall take such steps as reasonably requested by Horizon to assign to
Horizon IFM's rights and interests as the employer under the CIGNA Plan as of
the Closing Date. All other liabilities and obligations arising from employment
or termination of IFM employees who are not engaged by Horizon shall be the
responsibility of IFM or CryoLife. All liabilities and obligations accruing
after Closing relating to the Retained Employees shall be the responsibility of
Horizon, and all liabilities and obligations relating to the Retained Employees
accruing prior to Closing shall be the responsibility of IFM or CryoLife, except
with respect to the payment of employee compensation that is prorated pursuant
to Section 2.3(c) and as otherwise set forth herein. Notwithstanding the
foregoing, Bill Wright shall become an employee of CryoLife, and Horizon shall
not be responsible for any obligations or liabilities arising from the
termination of Mr. Wright as an IFM employee. Mr. Wright's services shall be
made available without cost to Horizon by CryoLife for a period of six (6)
months following the Closing Date to assist with the transition of the Purchased
Assets from IFM to Horizon. Mr. Wright shall make available to Horizon such
information concerning the Business or the Purchased Assets as Horizon shall
request.
6.6 Transition Services. IFM and CryoLife agree to provide information
technology services, accounting assistance and laboratory services to Horizon at
cost for a period of transition as provided in the Transition Services Agreement
in the form of Exhibit H hereto.
6.7 Current Information. IFM will advise Horizon and Horizon will
advise IFM in writing immediately, but in any event prior to the Closing, of:
(a) the occurrence of any event which renders any of the
representations or warranties set forth herein materially inaccurate or the
awareness of either Horizon or IFM that any representation or warranty set
forth herein was not materially accurate when made;
(b) any fact that, if existing or known on the date hereof, would have
been required to be set forth or disclosed in or pursuant to this
Agreement; and
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(c) the failure of any party hereto to comply with or accomplish any
of the covenants or agreements set forth herein.
6.8 Access.
(a) IFM and CryoLife shall reasonably cooperate with Horizon after the
Closing Date so that Horizon has access to any information relating to the
Business or the Purchased Assets as is reasonably necessary (but only to
the extent necessary) for (i) the preparation for or the prosecution or
defense of any suit, action, litigation, or administrative, arbitration, or
other proceeding or investigation by or against Horizon or for any third
party claim for which indemnification is claimed pursuant to the terms of
Section 9 below, (ii) the preparation and filing of any tax return or
election relating to the Business or the Purchased Assets and any audit by
any taxing authority relating thereto, (iii) the preparation and auditing
of Horizon's financial statements, or (iv) the preparation and filing of
any other document required by any federal, state, or local governmental
department, regulatory agency, authority, commission, board, or court. The
access contemplated by this provision shall be during normal business hours
and upon not less than two (2) business days prior written request.
(b) Horizon shall reasonably cooperate with IFM and CryoLife after the
Closing Date so that IFM has access to information and documentation
concerning the Purchased Assets as is necessary (but only to the extent
necessary) for (i) the preparation for or the prosecution or the defense of
any suit, action, litigation, or administrative, arbitration, or other
proceeding or investigation by or against IFM or CryoLife or for any third
party claim for which indemnification is claimed pursuant to the terms of
Section 9 below, (ii) the preparation and filing of any tax return or
election relating to the Business and any audit by any taxing authority
relating thereto, or (iii) the preparation and filing of any other document
required by any federal, state, or local governmental department,
regulatory agency, authority, commission, board, or court. The access
contemplated by this provision shall be during normal business hours and
upon not less than two (2) business days' prior written request.
6.9 Product Liability Insurance. The parties acknowledge and agree
that IFM's obligation to maintain product liability insurance pursuant to
Section 6.6 of the Second Purchase Agreement and Horizon's obligation to
maintain product liability insurance pursuant to Section 18 of the Manufacturing
Agreement shall remain in effect following the execution of this Agreement, in
accordance with the terms of the Second Purchase Agreement and the Manufacturing
Agreement, respectively. In addition, the insurance that IFM maintains pursuant
to Section 6.6 of the Second Purchase Agreement shall cover all products
manufactured by IFM prior to the Closing Date, including, without limitation,
the Excluded Products, in addition to the Products and the Products Business (as
defined in the Second Purchase Agreement).
6.10 Public Announcements. The timing and content of all announcements
regarding any aspect of this Agreement or the transactions contemplated hereby
to the financial community, government agencies, employees or the general public
shall be agreed upon among the parties hereto in advance (unless Horizon or IFM
is advised by counsel that any such announcement or other disclosure not
mutually agreed upon in advance is required to be made by law or applicable rule
of the American Stock Exchange and/or the New York Stock Exchange and then only
after making a reasonable attempt to comply with the provisions of this
Section).
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6.11 Labeling. All Products (as defined in the Second Purchase
Agreement) shall be labeled as follows:
(a) all Products labeled on or prior to the Closing Date (including
all Finished Goods Inventory and labeled work in process) shall bear labels
including the IFM and CryoLife names, and CryoLife grants Horizon a license
to use its name and trademarks in the sale and distribution of such
Products;
(b) all Products labeled after the Closing Date and on or prior to the
sixtieth (60th) day following the Closing Date shall bear labels including
the IFM and CryoLife names; provided, however, that Horizon shall mark out
the CryoLife name on such labels; and
(c) all Products labeled after the sixtieth (60th) day following the
Closing Date shall bear labels which do not include the CryoLife name.
7. Conditions Precedent to Horizon's Obligations. Unless otherwise waived
by Horizon, the obligations of Horizon under this Agreement are subject to the
fulfillment on or before the Closing Date of each of the following conditions:
7.1 Approvals. Horizon's obligations to purchase the Purchased Assets
are subject to:
(i) approval by the Board of Directors of Horizon,
(ii) approval by the Board of Directors of CryoLife,
(iii) approval by Horizon's lender, Bank of America, N.A., and
(iv) consent by Secret Promise, Ltd. to the Sublease Agreement.
7.2 Encumbrances. IFM shall have delivered to Horizon evidence, in
form and substance reasonably satisfactory to Horizon, that IFM has not created
any Encumbrances and that no Encumbrances then exist on the Purchased Assets.
7.3 Representations, Warranties, and Covenants. The representations
and warranties of IFM contained in this Agreement shall be true and correct in
all material respects at and as of the date hereof and at and as of the Closing
Date with the same force and effect as though made at and as of the Closing
Date, except for changes therein as may be specifically contemplated by this
Agreement. IFM shall have duly performed and complied in all material respects
with all agreements and conditions required by this Agreement to be performed or
complied with by it prior to or on the Closing Date. IFM shall have delivered to
Horizon a certificate dated as of the Closing Date to the foregoing effect.
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7.4 Litigation Affecting Closing. There shall not be pending or
threatened any action or proceeding for any injunction, writ, or preliminary
restraining order, or for any order of any court, governmental agency, or
arbitrator, domestic or foreign, federal, state, or local, of competent
jurisdiction, or any investigation or examination which might result in such an
action or proceeding, directing that the sale of the Purchased Assets to Horizon
or any of the other transactions contemplated by this Agreement not be
consummated or otherwise challenging the legality thereof, and there shall not
be in effect on the Closing Date any such injunction, writ, or preliminary
restraining order or such other order.
7.5 Closing Deliveries. At the Closing, IFM shall have delivered to
Horizon such instruments, documents, and certificates as are required pursuant
to Section 3.2 hereof.
7.6 No Damage, etc. Between the date of this Agreement and the Closing
Date, there shall not have occurred any damage or destruction of, or loss to,
any of the Purchased Assets, whether or not covered by insurance, which has had
or may reasonably be expected to have a Material Adverse Effect, nor shall there
have occurred any other event or condition which has had or which reasonably may
be expected to have a Material Adverse Effect.
7.7 Consents. IFM shall have obtained all necessary consents and
approvals as set forth on Schedule 4.2, if any.
7.8 Corporate Action. All corporate action necessary by IFM to
authorize the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby shall have duly and validly
taken.
8. Conditions Precedent to IFM's Obligations. Unless otherwise waived by
IFM, the obligations of IFM under this Agreement are subject to the fulfillment
on or before the Closing Date of each of the following conditions:
8.1 Approvals. IFM's obligation to sell the Purchased Assets is
subject to:
(i) approval by the Board of Directors of CryoLife,
(ii) approval by the Board of Directors of Horizon,
(iii) approval by CryoLife's lender, and
(iv) consent by Secret Promise, Ltd. to the Sublease Agreement.
8.2 Representations, Warranties, and Covenants. The representations
and warranties of Horizon contained in this Agreement shall be true and correct
in all material respects at and as of the Closing Date with the same force and
effect as though made at and as of the Closing Date, except for such changes
therein as may be specifically contemplated by this Agreement. Horizon shall
have duly performed and complied in all material respects with all agreements
and conditions required by this Agreement to be performed or complied with by it
prior to or on the Closing Date. Horizon shall have delivered to IFM a
certificate dated the Closing Date to the foregoing effect.
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8.3 Litigation Affecting Closing. There shall not be pending or
threatened any action or proceeding for any injunction, writ, or preliminary
restraining order, or for any order of any court, governmental agency, or
arbitrator, domestic or foreign, federal, state, or local, of competent
jurisdiction, or any investigation or examination which might result in such an
action or proceeding, directing that the sale of the Purchased Assets to Horizon
or any of the other transactions contemplated by this Agreement not be
consummated or otherwise challenging the legality thereof, and there shall not
be in effect on the Closing Date any such injunction, writ, or preliminary
restraining order or such other order.
8.4 Closing Deliveries. At the Closing, Horizon shall have delivered
to IFM such instruments, documents, certificates, and payments as are required
pursuant to Section 3.3 hereof.
8.5 Consents. Horizon shall have obtained all necessary consents and
approvals as set forth on Schedule 5.2, if any.
8.6 Corporate Action. All corporate action necessary by Horizon to
authorize the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby shall have duly and validly
taken.
9. Indemnification.
9.1. Indemnification Obligations of IFM. From and after the Closing,
IFM shall indemnify and hold harmless Horizon, its officers and directors, and
each of the successors and assigns of any of the foregoing (collectively, the
"Horizon Indemnified Parties") from, against and in respect of any and all
claims, liabilities, obligations, losses, costs, expenses, penalties, fines and
other judgments (at equity or at law) and damages whenever arising or incurred
(including, without limitation, amounts paid in settlement, costs of
investigation and reasonable attorneys' fees and expenses) (collectively
"Damages") arising out of or relating to: (a) any and all liabilities and
obligations of IFM of any nature whatsoever, except the Assumed Liabilities; (b)
any and all actions, suits, claims, or legal, administrative, arbitration,
governmental or other proceedings or investigations against any Horizon
Indemnified Party that relate to IFM, the Business or the Purchased Assets to
the extent the principal event giving rise thereto (i) occurred on or prior to
the Closing Date or (ii) resulted from or arose out of any action or inaction of
IFM after the Closing Date; (c) any breach of any representation, warranty,
covenant, agreement or undertaking made by IFM in this Agreement or in any of
the IFM Transfer Documents; or (d) any fraud, willful misconduct, bad faith or
any intentional breach of any representation, warranty, covenant, agreement or
undertaking made by IFM in this Agreement or the IFM Transfer Documents.
9.2 Indemnification Obligations of Horizon. From and after the
Closing, Horizon shall indemnify and hold harmless IFM and CryoLife and their
officers and directors, and each of the successors and assigns of any of the
foregoing (collectively, the "IFM Indemnified Parties") from, against and in
respect of any and all Damages arising out of or relating to: (a) any failure of
Horizon to perform or discharge any Assumed Liabilities; (b) any and all
actions, suits, claims, or legal, administrative, arbitration, governmental or
other proceedings or investigations against any IFM Indemnified Party that
relate to Horizon or the conduct by Horizon of the Business to the extent the
principal event giving rise thereto resulted from or arose out of any action or
27
inaction of Horizon after the Closing Date; (c) any breach of any
representation, warranty, covenant, agreement or undertaking made by Horizon in
this Agreement or in any of the Horizon Transfer Documents; or (d) any fraud,
willful misconduct, bad faith or any intentional breach of any representation,
warranty, covenant, agreement or undertaking made by Horizon in this Agreement
or any of the Horizon Transfer Documents.
9.3 Indemnification Procedure.
(a) Promptly after receipt by a Horizon Indemnified Party or an IFM
Indemnified Party (hereinafter collectively referred to as an "Indemnified
Party") of notice by a third party of any complaint or the commencement of
any action or proceeding with respect to which indemnification is being
sought hereunder, such Indemnified Party shall notify Horizon or IFM,
whoever is the appropriate indemnifying party hereunder (the "Indemnifying
Party"), of such complaint or of the commencement of such action or
proceeding; provided, however, that the failure to so notify the
Indemnifying Party shall not relieve the Indemnifying Party from liability
for such claim arising otherwise than under this Agreement and such failure
to so notify the Indemnifying Party shall relieve the Indemnifying Party
from liability which the Indemnifying Party may have hereunder with respect
to such claim only to the extent that, such failure to notify the
Indemnifying Party results in the forfeiture by the Indemnifying Party of
rights and defenses otherwise available to the Indemnifying Party with
respect to such claim. The Indemnifying Party shall have the right, upon
written notice to the Indemnified Party, to assume the defense of such
action or proceeding, including the employment of counsel reasonably
satisfactory to the Indemnified Party and the payment of the fees and
disbursements of such counsel. In the event, however, that the Indemnifying
Party declines or fails to assume the defense of the action or proceeding
or to employ counsel reasonably satisfactory to the Indemnified Party, in
either case in a timely manner, then such Indemnified Party may employ
counsel to represent or defend it in any such action or proceeding and the
Indemnifying Party shall pay the reasonable fees and disbursements of such
counsel as incurred; provided, however, that the Indemnifying Party shall
not be required to pay the fees and disbursements of more than one counsel
for all Indemnified Parties in any jurisdiction in any single action or
proceeding. In any action or proceeding with respect to which
indemnification is being sought hereunder, the Indemnified Party or the
Indemnifying Party, whichever is not assuming the defense of such action,
shall have the right to participate in such litigation and to retain its
own counsel at such party's own expense. The Indemnifying Party or the
Indemnified Party, as the case may be, shall at all times use reasonable
efforts to keep the Indemnifying Party or the Indemnified Party, as the
case may be, reasonably apprised of the status of the defense of any action
the defense of which they are maintaining and to cooperate in good faith
with each other with respect to the defense of any such action.
(b) No Indemnified Party may settle or compromise any claim or consent
to the entry of any judgment with respect to which indemnification is being
sought hereunder without the prior written consent of the Indemnifying
Party, unless such settlement, compromise or consent includes an
28
unconditional release of the Indemnifying Party from all liability arising
out of such claim. An Indemnifying Party may not, without the prior written
consent of the Indemnified Party, settle or compromise any claim or consent
to the entry of any judgment with respect to which indemnification is being
sought hereunder unless such settlement, compromise or consent includes an
unconditional release of the Indemnified Party from all liability arising
out of such claim and does not contain any equitable order, judgment or
term which in any manner affects, restrains or interferes with the business
of the Indemnified Party or any of the Indemnified Party's respective
affiliates.
(c) In the event an Indemnified Party shall claim a right to payment
pursuant to this Agreement, such Indemnified Party shall send written
notice of such claim to the appropriate Indemnifying Party. Such notice
shall specify the basis for such claim. As promptly as possible after the
Indemnified Party has given such notice, such Indemnified Party and the
appropriate Indemnifying Party shall establish the merits and amount of
such claim (by mutual agreement, litigation, arbitration or otherwise).
Within five (5) business days of the final determination of the merits and
amount of such claim, the Indemnifying Party shall deliver to the
Indemnified Party in immediately available funds an amount equal to such
claim as determined hereunder; provided, however, that to the extent any
such claim arising out of Section 9.1 of this Agreement does not involve a
payment by Horizon to any third party (including attorneys' fees incurred
by Horizon), an amount equal to such claim shall instead (i) be set off
against the monthly obligations of Horizon to pay principal and interest
under the Note as such monthly payments become due, and (ii) be delivered
to the Horizon Indemnified Party in immediately available funds to the
extent that such claim exceeds the remaining principal and interest due
under the Note.
9.4 Claims Period. Except as provided in this Section 9.4, no claim
for indemnification under this Agreement, including, but not limited to claims
for indemnification or breach of warranty or covenants, may be asserted by an
Indemnified Party after the expiration of the appropriate claims period (the
"Claims Period") which shall commence on the Closing Date and shall terminate
eighteen (18) months after the Closing Date; provided, however, that (a) the
Claims Period with respect to Damages arising under Sections 4.1, 4.2., 4.4,
4.5, 4.15, 5.1, 5.2, 5.5, 9.1(a), (b), and (d), and 9.2(a), (b) and (d) of this
Agreement shall commence on the Closing Date and shall survive and remain in
effect without limitation until the expiration of the applicable statute of
limitations period, (b) the Claims Period with respect to Damages arising under
Section 4.17 of this Agreement shall commence on the Closing Date and shall
survive and remain in effect without limitation until the fifth (5th)
anniversary of the Closing Date, (c) the obligation of Horizon to pay, perform
and discharge the Assumed Liabilities shall survive until such liabilities have
been paid, performed and discharged, and (d) if prior to the close of business
on the last day of the Claims Period, an Indemnifying Party shall have been
properly notified of a claim for Indemnity hereunder and such claim shall not
have been finally resolved or disposed of at such date, the basis of such claim
shall continue to survive with respect to such claim and shall remain a basis
for indemnity hereunder with respect to such claim until such claim is finally
resolved or disposed of in accordance with the terms hereof.
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9.5 Liability Limits. Notwithstanding anything to the contrary set
forth herein:
(a) IFM shall be liable to Horizon Indemnified Parties and Horizon
shall be liable to IFM Indemnified Parties for Damages only to the extent
that any such Damages exceed, in the aggregate, Fifteen Thousand Dollars
($15,000) (the "Basket Amount"); provided, however, that Damages arising
under or pursuant to Sections 4.1, 4.2, 4.4, 4.5, 4.15, 5.1, 5.2, 5.5,
9.1(a), (b) and (d) and 9.2(a), (b) and (d) shall not be subject to Basket
Amount, nor shall the amount of any such Damages or indemnification be
included in determining whether such Basket Amount has been reached.
(b) Cap Amount.
(i) The indemnification obligations of IFM or Horizon hereunder
shall not exceed Three Million Eight Hundred Thousand Dollars
($3,800,000) (the "Cap Amount"). Notwithstanding the first sentence of
this Section 9.5(b)(i), the Cap Amount shall be increased to Five
Million Nine Hundred Forty-Five Thousand Two Hundred Sixteen Dollars
($5,945,216) in the event that Horizon becomes ineligible for any
reason to receive the Discount (as defined in Section 2.1(c)). Except
to the extent that any claim arising out of Section 9.1 of this
Agreement involves a payment by Horizon to any third party (including
attorneys' fees incurred by Horizon), in no event shall the aggregate
amount of funds that may be paid by CryoLife and IFM pursuant to their
indemnification obligations hereunder exceed (a) the aggregate amount
of principal and interest payments received by IFM from Horizon under
the Note, plus (b) any amount offset by Horizon against the Note
pursuant to Section 9.3(c) as a result of any claim covered by Section
9.5(b)(ii).
(ii) Notwithstanding the provisions of Section 9.5(b)(i), any
Damages arising under or pursuant to Sections 4.1, 4.2, 4.4, 4.5,
4.15, 5.1, 5.2, 5.5, 9.1(a), (b) and (d), and 9.2(a), (b), and (d)
shall not be subject to the Cap Amount, and there shall be no
limitation on the indemnification obligations of IFM or Horizon with
respect to Damages or indemnification arising under or pursuant to
such Sections.
(c) Neither Horizon nor IFM shall be liable under this Agreement for
any Damages arising out of or relating to the Port Business (as that term
is defined in the First Purchase Agreement) and the provisions of this
Section 9 shall neither extend nor limit the indemnification provided by
the First Purchase Agreement.
(d) Neither Horizon nor IFM shall be liable under this Agreement for
any Damages arising out of or relating to the Products Business (as that
term is defined in the Second Purchase Agreement) and the provisions of
this Section 9 shall neither extend nor limit the indemnification provided
by the Second Purchase Agreement.
(e) Neither Horizon nor IFM shall be liable under this Agreement for
any Damages arising out of or resulting from any defects in or damage or
injury to any person caused by any products manufactured or delivered by
IFM to Horizon pursuant to the Manufacturing Agreement, such
indemnification for such Damages to be as set forth in the Manufacturing
Agreement.
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(f) The rights and remedies set forth in Sections 9.1 through 9.5
shall be the exclusive remedies available to the parties pertaining to any
alleged environmental liability, and the parties explicitly waive any
rights to cost recovery or contribution that they have or may have under
any state or federal environmental statute or under the common law.
9.6 Jurisdiction and Forum.
(a) By the execution and delivery of this Agreement, each Indemnifying
Party irrevocably designates and appoints each of the parties set forth
under its name below as its authorized agent upon which process may be
served in any suit or proceeding arising out of or relating to this
Agreement that may be instituted in any state or federal court in the State
of Georgia.
IFM:
Clinton D. Richardson, Esq.
Arnall Golden & Gregory, LLP
1201 West Peachtree Street
2800 One Atlantic Center
Atlanta, Georgia 30309
Horizon:
Jon R. Harris, Jr., Esq.
King & Spalding
191 Peachtree Street, N.E.
Suite 4600
Atlanta, Georgia 30303-1763
In addition, each party agrees that service of process upon the
above-designated parties shall be deemed in every respect effective
service of process upon such Indemnifying Party in any such suit or
proceeding. Each such Indemnifying Party further agrees to take any
and all action reasonably requested by an Indemnified Party, including
the execution and filing of any and all such documents and
instruments, as may be necessary to continue such designation and
appointment of the above-designated parties in full force and effect
so long as this Agreement shall be in effect. The foregoing shall not
limit the rights of any party to serve process in any other manner
permitted by law.
(b) To the extent that any Indemnifying Party has or hereafter may
acquire any immunity from jurisdiction of any court or from any legal
process (whether through service or notice, attachment prior to judgment,
attachment in aid of execution or otherwise) with respect to itself or its
property, each Indemnifying Party hereby irrevocably waives such immunity
in respect of its obligations with respect to this Agreement.
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(c) The parties hereto consent and agree that the appropriate forum
and venue for any disputes between any of the parties hereto arising out of
this Agreement shall be in any of the following courts and hereby waive any
defense or objection they may have of improper venue in any such lawsuits
filed in these courts: (i) the state or superior court of the county where
each of CryoLife and Horizon has its principal place of business
(presently, Cobb County, Georgia and Meriwether County, Georgia); and (ii)
the United States District Court for the Northern District of Georgia,
Atlanta Division, and each of the parties hereto hereby submits to the
personal jurisdiction of any such court. The foregoing shall not limit the
rights of any party to obtain execution of judgment in any other
jurisdiction. The parties further agree, to the extent permitted by law,
that a final and unappealable judgment against any of them in any action or
proceeding contemplated above shall be conclusive and may be enforced in
any other jurisdiction within or outside the United States by suit on the
judgment, a certified or exemplified copy of which shall be conclusive
evidence of the fact and amount of such judgment.
9.7 Bulk Sales Indemnity. Horizon hereby waives compliance with the
provisions of any applicable bulk sales or transfer laws in connection with the
sale of the Purchased Assets contemplated by this Agreement. IFM agrees to
indemnify and hold Horizon harmless from and against any and all Damages,
including without limitation any claims made by creditors and any Damages
arising out of or relating to any Encumbrance on Purchased Assets arising out of
or relating to IFM's non-compliance with any applicable bulk sales or transfer
laws in connection with the sale of the Purchased Assets contemplated by this
Agreement, except to the extent that any such Damages results from or arises out
of any failure by Horizon to pay or perform, when due, any obligations to be
paid or performed by Horizon as provided in this Agreement.
9.8 Exclusive Remedies. After the Closing, the rights of
indemnification contained in this Section 9 shall be deemed to be the exclusive
remedy of the parties hereto with respect to a default or breach by any other
party or other claim under or with respect to this Agreement.
10. Termination.
10.1 Termination and Abandonment. This Agreement may be terminated at
any time prior to the Closing:
(a) by mutual agreement of Horizon and IFM;
(b) by either party at any time after November 1, 2000 if Closing has
not occurred and the Closing Date has not been extended by the parties
hereto;
32
(c) by IFM, if the conditions set forth in Section 8 hereof shall not
have been complied with or performed and such noncompliance or
nonperformance shall not have been cured or eliminated (or by its nature
cannot be cured or eliminated) by Horizon on or before the Closing Date;
and
(d) by Horizon, if the conditions set forth in Section 7 hereof shall
not have been complied with or performed and such noncompliance or
nonperformance shall not have been cured or eliminated (or by its nature
cannot be cured or eliminated) by IFM on or before Closing Date.
10.2 Effect of Termination. In the event of termination of this
Agreement pursuant to this Section 10, this Agreement shall forthwith be void
and there shall be no liability on the part of any party or its respective
officers, directors, partners or shareholders, except for obligations under
Sections 10, 11 and 12.3, all of which shall survive the termination.
Notwithstanding the foregoing, nothing contained herein shall relieve any party
from liability for any breach of any covenant or agreement in this Agreement
prior to termination.
11. Confidentiality.
11.1 Confidentiality. All proprietary information related to the
Business or the Purchased Assets (the "Confidential Information") shall be
treated by IFM and CryoLife as confidential and shall not be disclosed to any
third parties unless (i) such Confidential Information is or becomes part of the
public knowledge or literature through no fault of IFM or CryoLife, or (ii) IFM
and CryoLife are advised by written opinion of counsel that it is legally
required to disclose such Confidential Information, in which case such
Confidential Information may be disclosed only to the extent legally required;
provided, however, that IFM and CryoLife agree to promptly notify Horizon of
such legal disclosure requirement so that Horizon has a reasonable opportunity
to seek a protective order. IFM and CryoLife shall use all reasonable efforts to
prevent the use of all or any part of such Confidential Information in any other
connection or the transmission thereof to third parties unless and until it has
first obtained the written consent of Horizon specifically authorizing such use
or transmission.
11.2 Remedies. IFM and Horizon hereby agree that any remedy at law for
any breach of the provisions contained in Section 11.1 hereof shall be
inadequate and that Horizon or IFM, as the case may be, shall be entitled to
injunctive relief in addition to any other remedy Horizon might have under this
Agreement.
11.3 Continuing Right to Use. IFM and CryoLife shall retain the right
to use portions of the trade secrets, Confidential Information and know-how
conveyed to Horizon which have applications outside the Business (the "Shared
Information") and are retained in the minds of CryoLife employees and Bill
Wright, but only in connection with the manufacture of medical products not in
competition with the Business or Horizon, provided that IFM and/or CryoLife
shall be responsible for paying any royalty, license or fee obligations arising
out of IFM's and/or CryoLife's use of the Shared Information. Notwithstanding
anything to the contrary contained in this Section 11.3, neither IFM nor
CryoLife shall have the right to use any portion of the Shared Information
relating to the development, manufacture or sale of any synthetic latex product.
33
12. Miscellaneous.
12.1 Further Assurances. Subject to the other provisions of this
Agreement, IFM agrees that after the Closing Date it shall, from time to time,
upon the reasonable request of Horizon, execute and deliver such other
instruments of conveyance and other similar documents and take such other
actions as Horizon may reasonably require, consistent with the terms of this
Agreement, as are reasonably necessary or desirable to transfer to Horizon title
to the Purchased Assets and to otherwise perform the provisions of this
Agreement to be performed by IFM. From and after the Closing Date, upon the
reasonable request of IFM, Horizon shall execute, deliver, and acknowledge all
such further instruments of conveyance and other similar documents and take such
other actions as IFM may reasonably require, consistent with the terms of this
Agreement, as are reasonably necessary or desirable to perform the provisions of
this Agreement to be performed by Horizon.
12.2 Benefit of Agreement. This Agreement shall be binding upon and
inure to the benefit of IFM and Horizon and their respective successors and
assigns and shall not confer any rights upon any third persons.
12.3 Expenses. Except as otherwise provided herein, each party hereto
agrees to pay its expenses incurred in connection with the transactions
contemplated by this Agreement, including, without limitation, the fees and
expenses of its accountants and counsel.
12.4 Entire Agreement; Amendments. This Agreement and the agreements
referenced herein (including, without limitation, the Horizon Transfer
Documents, the IFM Transfer Documents, the surviving provisions of the
Manufacturing Agreement as specified herein, the First Purchase Agreement and
the Second Purchase Agreement) constitute the entire agreement between the
parties pertaining to the subject matter contained herein, and supersedes all
prior agreements, arrangements, and understandings of the parties. No
supplement, modification, or amendment of or to this Agreement shall be binding,
unless executed in writing by the parties hereto. No waiver of any of the
provisions of this Agreement shall be deemed, or shall constitute, a waiver of
any other provision, whether or not similar, nor shall any waiver constitute a
continuing waiver. No waiver shall be binding unless executed in writing by the
party granting the waiver.
12.5 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which shall
constitute one and the same instrument.
12.6 Section and Paragraph Headings. The index and section and
paragraph headings of this Agreement are included for purposes of convenience
only and shall not affect in any way the construction or interpretation of any
of the provisions of this Agreement.
34
12.7 Notices. All notices, requests, demands, and other communications
under this Agreement shall be in writing and shall be deemed to have been given
on the date when delivered personally or sent by facsimile, the next business
day after delivery to a nationally recognized overnight delivery service, or on
the seventh (7th) day after mailing if mailed by first class mail, registered or
certified, postage prepaid, and properly addressed as follows or to such other
address as either party may designate by notice to the other party:
(a) To Horizon:
Horizon Medical Products, Inc.
Attn: Robert M. Dodge, Chief Financial Officer
Seven North Parkway Square
4200 Northside Parkway, N.W.
Atlanta, Georgia 30327
FAX: 404/264-9919
With copies to:
Nat G. Slaughter, III
Slaughter & Virgin, P.C.
400 Colony Square; Suite 1110
1201 Peachtree Street, N.E.
Atlanta, Georgia 30361
FAX: 404/872-7879
and
Jon R. Harris, Jr., Esq.
King & Spalding
191 Peachtree Street, N.E.
Suite 4600
Atlanta, Georgia 30303-1763
FAX: 404/572-5146
(b) To IFM:
Ideas for Medicine, Inc.
c/o CryoLife, Inc.
Attn: Vice President of Finance
1655 Roberts Blvd., N.W.
Kennesaw, Georgia 30144
FAX: 770/590-3754
35
With a copy to:
Arnall Golden & Gregory, LLP
Attn: Clinton D. Richardson
2800 One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3450
FAX: 404/873-8665
(c) To CryoLife:
CryoLife, Inc.
Attn: Chief Financial Officer
1655 Roberts Blvd., N.W.
Kennesaw, Georgia 30144
FAX: 770/590-3754
With a copy to:
Arnall Golden & Gregory, LLP
Attn: Clinton D. Richardson
2800 One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3450
FAX: 404/873-8665
12.8 Governing Law. This Agreement shall be governed by and construed
exclusively in accordance with the internal laws of the State of Georgia,
without reference to its conflicts of law principles.
12.9 Interpretation. The parties acknowledge and agree that: (i) each
party and its counsel reviewed and negotiated the terms and provisions of this
Agreement and have contributed to its revision; (ii) the rule of construction to
the effect that any ambiguities are resolved against the drafting party shall
not be employed in the interpretation of this Agreement; and (iii) the terms and
provisions of this Agreement shall be construed fairly as to all parties hereto,
regardless of which party was generally responsible for the preparation of this
Agreement.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
36
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed and delivered by its duly authorized officer as of the day and year
first above written.
HORIZON MEDICAL PRODUCTS, INC.
By: /s/ William E. Peterson, Jr.
--------------------------------------------
Name: William E. Peterson, Jr.
Title: President
IDEAS FOR MEDICINE, INC.
By: /s/ D. A. Lee
--------------------------------------------
Name: D.A. Lee
Title: VP Finance and CFO
List of Exhibits
Exhibit A Form of Note
Exhibit B Form of CryoLife Guaranty
Exhibit C Form of Bill of Sale
Exhibit D Form of Assignment and Assumption Agreement
Exhibit E Form of Opinion of Counsel to IFM and CryoLife
Exhibit F Form of Sublease Agreement
Exhibit G Form of Manufacturing, Assembly and Packaging Agreement
Exhibit H Form of Transition Services Agreement
Exhibit I Form of Security Agreement
Exhibit J Form of Opinion of Counsel to Horizon
List of Schedules
Schedule 1.2(a) Fixed Assets
Schedule 1.2(b)(1) Finished Goods Inventory
Schedule 1.2(b)(2) Other Inventory
Schedule 1.2(c) Leasehold Improvements
Schedule 1.2(d) Intellectual Property
Schedule 1.2(e) Assigned Contracts
Schedule 1.4(e) Accounts Receivable
Schedule 1.4(g) Excluded Product Materials
Schedule 1.4(i) Third Party Equipment
Schedule 1.6 Allocation of Purchase Price
Schedule 1.7(a) Trade Payables
Schedule 4.2 IFM Consents and Approvals
Schedule 4.3 Litigation
Schedule 4.7 Insurance
Schedule 4.8 Intangible Personal Property
Schedule 4.9 Contracts
Schedule 4.10(a) Material Licenses
Schedule 4.10(b)(ii) Notice of Adverse Filings, etc.
Schedule 4.11 Transactions with Affiliates
Schedule 4.14 Officers, Directors and Employees
Schedule 4.15 Employee Benefit Plans
Schedule 4.15(j) CIGNA Plan Premiums
Schedule 4.17 Environmental Matters
Schedule 4.18(b) Assets Necessary to Conduct Business
Schedule 5.2 Horizon Consents and Approvals
Schedule 6.5(a) Retained Employees
Schedule 6.5(b) Bonuses
Exhibit A
FORM OF SUBORDINATED PROMISSORY NOTE
October 9, 2000 $5,945,216
Atlanta, Georgia
FOR VALUE RECEIVED, the undersigned, HORIZON MEDICAL PRODUCTS, INC., a
Georgia corporation ("Maker"), promises to pay to the order of IDEAS FOR
MEDICINE, INC., a Florida corporation ("Payee" and, together with any subsequent
holder(s) hereof, "Holder"), the principal sum of FIVE MILLION NINE HUNDRED
FORTY-FIVE THOUSAND TWO HUNDRED SIXTEEN DOLLARS ($5,945,216) (the "Principal
Amount"). The Principal Amount is comprised of the following three amounts: (i)
an amount equal to Three Million Eight Hundred Thousand Dollars ($3,800,000)
(the "Interest Bearing Amount"), (ii) an amount equal to One Million Dollars
($1,000,000) (the "Scheduled Payment Discount Amount"), and (iii) an amount
equal to One Million One Hundred Forty-Five Thousand Two Hundred Sixteen Dollars
($1,145,216) (the "Timely Payment Discount Amount," and together with the
Scheduled Payment Discount Amount, collectively, the "Discount Amounts").
1. Interest.
(a) The unpaid principal balance of the Interest Bearing Amount shall
bear simple interest at the rate of nine percent (9%) per annum (computed
on the basis of a 360-day year of twelve 30-day months).
(b) The Discount Amounts shall bear no interest so long as Maker makes
all payments under this Note on a timely basis. All payments shall be
considered to have been made on a "timely basis" unless Maker defaults in
any payment of principal or interest when the same becomes due and payable
and such default continues for a period of ten (10) days after Maker
receives written notice of such default from Holder.
(c) If Maker fails to make any payment under this Note on a timely
basis, the remaining unpaid principal balance of the Principal Amount shall
bear interest at eighteen percent (18%) per annum.
2. Payment of Principal.
(a) This Note shall be payable in monthly installments of principal
and interest of One Hundred Forty Thousand Dollars ($140,000) per month
until all principal and interest due under the Interest Bearing Amount is
paid in full. The first payment under this Note shall be due on October 15,
2000, and thereafter the monthly payments shall be due on the fifteenth
(15th) day of each month.
(b) If Maker makes the Scheduled Payment pursuant to Section 3 of this
Note prior to April 3, 2001, Holder shall forgive the Scheduled Payment
Discount Amount, and the Principal Amount shall be reduced by an amount
equal to the Scheduled Payment Discount Amount as of the date Horizon makes
the Scheduled Payment.
(c) If Maker makes all payments on a timely basis until such time as
the principal balance of the Interest Bearing Amount is paid in full (by
payment, set-off, adjustment or otherwise), Holder shall forgive the Timely
Payment Discount Amount and the entire Principal Amount shall be deemed
paid in full.
(d) In the event that Maker fails to qualify for forgiveness of a
Discount Amount, Maker shall continue to make monthly payments of principal
and interest of One Hundred Forty Thousand Dollars ($140,000) per month,
until all principal and interest due under such Discount Amount is paid in
full.
(e) Payments of principal and interest hereunder shall be made at such
place as Holder may designate and shall be in immediately available funds
in lawful money of the United States. All payments, prepayments,
adjustments and set-offs (excluding forgiveness of the Discounts pursuant
to Section 2(b) or 2(c) above) in respect of this Note shall be applied
first to accrued interest, then to the outstanding principal balance of the
Interest Bearing Amount, and then, if not forgiven pursuant to Section 2(b)
and/or (c) above, to the outstanding principal balance of the Discount
Amount(s).
3. Scheduled Payment. Maker agrees to pay under this Note the sum of One
Million Dollars ($1,000,000) (the "Scheduled Payment") upon the earlier of (i)
the closing of one or more equity financings which result in consideration to
Maker of at least Fifteen Million Dollars ($15,000,000) in exchange for Maker
common and/or preferred stock or (ii) April 3, 2001. Upon payment by Maker of
the Scheduled Payment prior to April 3, 2001, Holder shall forgive the Scheduled
Payment Discount Amount in accordance with Section 2(b) above.
4. Prepayment. Any prepayment of this Note in part or in whole is hereby
permitted without premium or penalty. Interest shall cease to accrue on all
amounts which are prepaid.
5. Adjustment or Set-off of Note. This Note is being issued pursuant to
that certain Asset Purchase Agreement (the "Asset Purchase Agreement"), dated as
of October 9, 2000, by and among Maker and Payee. This Note shall be subject to
adjustment and set-off as provided in the Asset Purchase Agreement, and the
Principal Amount of this Note shall be reduced if required pursuant to the Asset
Purchase Agreement. In the event of any such reduction, this Note shall be
amended and restated to reflect such reduction and this original Note shall have
no force and effect. Contemporaneously with the return of this original Note to
Maker, Maker shall deliver the amended and restated Note to Holder. Any such
reduction in the principal amount of this Note shall be deemed to have occurred
on the date of this Note if the reduction is based on (i) an adjustment made
2
pursuant to Section 2.3 of the Asset Purchase Agreement, (ii) an adjustment made
pursuant to Section 2.4 of the Asset Purchase Agreement, or (iii) an
indemnification claim by Maker against Payee which is set off under Section 9.3
of the Asset Purchase Agreement relating to a breach of the representations and
warranties set forth in Section 4.4(a) or (c) of the Asset Purchase Agreement
with respect to the Fixed Assets or Inventory (as such terms are defined in the
Asset Purchase Agreement), and, in which case, Maker shall receive credit for
and shall offset under this Section 4 any interest payments to be made following
such reduction by an amount equal to any interest overpayment resulting from
such reduction.
6. Event of Default. Each of the following shall constitute an "Event of
Default" hereunder: (a) the failure of Maker to pay any amounts when due under
this Note, (b) the voluntary or involuntary bankruptcy or receivership of Maker
or the assignment for the benefit of creditors of the assets of Maker and (c)
the default of Maker under Section 11.1(a) of that certain Sublease Agreement
dated as of October 9, 2000, by and between Maker and Payee. Upon the existence
or occurrence of any Event of Default, all indebtedness evidenced by this Note,
including without limitation the principal and all accrued interest and all
costs of collection (including without limitation reasonable attorneys' fees)
actually incurred may be declared due and payable without notice or demand of
any kind.
7. Subordination. This Note shall be subordinated to the Bank Indebtedness
of Maker (as defined in Section 3.3(b) of the Asset Purchase Agreement),
pursuant to that certain Subordination Agreement, dated as of October 9, 2000,
by and between Payee and Bank of America, N.A. and any future subordination
agreements as contemplated in Section 3.3(b) of the Asset Purchase Agreement.
8. Security. The obligations of Maker under this Promissory Note are
secured pursuant to that certain Security Agreement, dated as of the date
hereof, by and between Maker and Payee.
9. Miscellaneous.
(a) It is the intent of Maker and Holder not to violate any federal or
state law, rule or regulation pertaining either to usury or to the
contracting for or charging or collecting of interest, and Maker and Holder
agree that, should any provision of this Note or any act performed
hereunder violate any such law, rule or regulation, then the excess of
interest contracted for or charged or collected over the maximum lawful
rate of interest shall be applied to the outstanding principal indebtedness
due to Holder by Maker under this Note.
(b) This Promissory Note has not been registered under the Securities
Act of 1933, as amended, or under any applicable state law. This Promissory
Note may not be offered for sale, sold, transferred or pledged except in
compliance with the Securities Act of 1933, as amended, and any applicable
state laws.
(c) Maker waives presentment and demand for payment, notice of
dishonor, protest and notice of protest of this Note, and all other notices
in connection with the delivery, acceptance, performance, default or
enforcement of this Note.
3
(d) No modification or waiver of any provision of this Note, nor any
departure by Maker therefrom, shall in any event be effective unless the
same shall be in writing and then such modification or waiver shall be
effective only in the specific instance for the specific purpose given.
(e) Should any part or provision of this Note require judicial
interpretation, Maker and Holder agree that the court interpreting such
part or provision shall not apply a presumption that the terms hereof shall
be more strictly construed against one party by reason of the rule of
construction that a document is to be more strictly construed against the
party that itself or through its agent prepared the same, it being agreed
that Maker and Holder have both participated in the preparation of this
Note.
(f) If any part or provision contained in this Note shall be invalid
or unenforceable under applicable law, then such part or provision shall be
ineffective only to the extent of such invalidity (without in any way
affecting the remaining parts of such part or provision or the other parts
or provisions of this Note).
(g) The rights, powers and remedies provided to Holder herein are
cumulative and not exclusive of any right, power or remedy provided at law
or in equity. Failure or forbearance of Holder to exercise any right
hereunder or otherwise granted at law or equity shall not affect or release
Maker from its liability hereunder and shall not constitute a waiver of
such right unless so stated by Holder in writing and then only in the
specific instance and for the specific purpose given.
(h) This Note will be governed by and construed in accordance with the
domestic laws of the State of Georgia.
(i) Time is of the essence under this Note.
IN WITNESS WHEREOF, this Note has been executed on the date first above
written.
HORIZON MEDICAL PRODUCTS, INC.
By:
----------------------------------------
Name:
Title:
Address for Notices to Payee:
Ideas for Medicine, Inc.
c/o CryoLife, Inc.
1655 Roberts Blvd., N.W.
Kennesaw, Georgia 30144
Attention: Vice President of Finance
4
Exhibit B
Form of CryoLife Guaranty
See attached.
CRYOLIFE, INC. GUARANTY
For good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, CryoLife, Inc., a Florida corporation ("CryoLife"), hereby
guarantees to Horizon Medical Products, Inc., a Georgia corporation ("Horizon"),
the complete performance and payment by Ideas for Medicine, Inc., a Florida
corporation ("IFM"), of IFM's obligations and liabilities under (i) the Asset
Purchase Agreement, dated as of October , 2000, by and between IFM and Horizon
(the "Purchase Agreement"), including without limitation any obligation of IFM
pursuant to Section 9 of the Purchase Agreement, (ii) the Sublease Agreement,
dated as of October , 2000, by and between IFM and Horizon (the "Sublease
Agreement"), and (iii) the Consent to Sublease, dated as of October , 2000, by
and among Horizon, IFM and Secret Promise, Ltd. (the "Sublease Consent," and
together with the Purchase Agreement and the Sublease, collectively, the
"Agreements").
CryoLife hereby waives notice of, and proof of reliance by Horizon upon and
acceptance of, CryoLife's guaranty herein, and of non-performance by IFM of any
of its obligations under the Agreements and of any other notices or demands of
any kind whatsoever. Horizon and IFM may enter into any amendment, assignment,
waiver, or modification of the Agreements, whether or not such amendment,
assignment, waiver, or modification would in any way increase or decrease the
extent of CryoLife's obligations hereinafter, without notice to or consent of
CryoLife and without thereby releasing CryoLife hereunder. CryoLife hereby
guarantees the performance and payment of any of IFM's obligations set forth in
any such amendment as if the provisions of such amendment were set forth in full
in the Agreements. The obligations of CryoLife under this paragraph shall not be
released or affected by voluntary or involuntary proceedings by or against IFM
in bankruptcy or for reorganization or other relief under any bankruptcy or
insolvency law. CryoLife's guaranty shall continue to be effective or shall be
reinstated automatically, as the case may be, if at any time any payment, or any
part thereof, by IFM is rescinded or must otherwise be returned by Horizon upon
the insolvency, bankruptcy, dissolution, liquidation, or reorganization of IFM
as though any such payment had not been made.
CryoLife covenants and agrees that it shall be fully bound by the
provisions of Section 11 of the Purchase Agreement.
CryoLife hereby waives any right of CryoLife under Georgia law to require
that an action be brought against IFM first before any action may be brought
against CryoLife.
CryoLife represents and warrants to Horizon that:
(a) CryoLife is a corporation duly organized, validly existing, and in
good standing under the laws of Florida, and has the requisite corporate
power and authority to execute and deliver this Guaranty and the documents,
agreements, and certificates (collectively, the "CryoLife Documents") which
are required to be executed and delivered by CryoLife pursuant to this
Guaranty and to perform in all respects its obligations hereunder and
thereunder. CryoLife is duly qualified or licensed to do business and in
good standing in each jurisdiction in which the nature of its business or
5
the character of the assets owned or leased by CryoLife makes such
qualification or licensing necessary, except where the failure to be so
qualified or licensed would not impair or otherwise adversely affect the
transactions contemplated hereunder.
(b) The execution, delivery, and performance of this Guaranty and the
CryoLife Documents have been duly authorized by all requisite corporate
action on the part of CryoLife. This Guaranty has been duly executed and
delivered by CryoLife and constitutes, and each of the CryoLife Documents
when executed and delivered will constitute, the valid and binding
obligation of CryoLife, enforceable in accordance with and subject to their
respective terms, except as limited by bankruptcy, insolvency,
reorganization, and similar laws affecting the enforcement of creditors'
rights or contractual obligations generally. The execution, delivery, and
performance by CryoLife of this Guaranty and the CryoLife Documents and the
consummation of the transactions contemplated hereby and thereby will not:
(i) violate any provision of the Certificate of Incorporation or Bylaws of
CryoLife; (ii) violate any provision of any judicial, arbitral, or
administrative order, award, judgment, or decree applicable to CryoLife;
(iii) conflict with or constitute a default under any agreement or
instrument to which CryoLife is a party or by which it is bound; (iv)
violate, in any material respect, any applicable law, rule, ordinance, or
regulation applicable to CryoLife; or (v) require CryoLife to obtain the
consent, approval, or authorization of, or require CryoLife to file any
certificate, notice, application, report, or other document with, any
federal, state, or local governmental authority or agency or other person
or entity.
(c) There are no judicial, arbitral, or administrative actions, suits,
or proceedings or, to the knowledge of CryoLife, any investigations pending
against CryoLife which would, if adversely determined, prevent, hinder,
delay, or otherwise adversely affect the consummation of the transactions
contemplated hereby. CryoLife is not a party to or subject to the
provisions of any order, decree, or judgment of any court or of any
governmental agency which may prevent, hinder, or otherwise adversely
affect the consummation of the transactions contemplated by the Agreements.
This Guaranty shall be governed by and construed in accordance with the
laws of the State of Georgia without reference to its principles of conflicts of
law.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the undersigned has caused the Guaranty to be executed
and delivered as of the date of the foregoing Agreements.
CRYOLIFE, INC.
By:
---------------------------------------
Name:
Title:
Exhibit G
FORM OF MANUFACTURING, ASSEMBLY AND PACKAGING AGREEMENT
THIS MANUFACTURING, ASSEMBLY AND PACKAGING AGREEMENT (the "Agreement") is
made this _____ day of October, 2000 by and between CryoLife, Inc., having
offices at 1655 Roberts Blvd., Kennesaw, Georgia 30144 ("CryoLife"), and Horizon
Medical Products, Inc., a Georgia corporation, having offices at One Horizon
Way, Manchester, Georgia 31816 ("Horizon").
W I T N E S S E T H:
WHEREAS, CryoLife has conceived and developed unique and proprietary
medical products, including components and packaging related thereto which are
described on Exhibit A (hereinafter the "CryoLife Products");
WHEREAS, Horizon has the capabilities to manufacture, assemble, package,
and ship the CryoLife Products (hereinafter the "Services");
WHEREAS, CryoLife desires to engage Horizon to perform the Services;
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, the parties hereto agree as follows:
1. COMPENSATION
A. In consideration hereof, CryoLife hereby agrees to pay Horizon an amount
equal to the actual direct labor costs incurred by Horizon in connection with
the provision of the Services, plus overhead at a rate of $32.50 per direct
labor hour.
B. The rates set forth herein are exclusive of any federal, state, or local
taxes and CryoLife shall be responsible for the payment of all such taxes
(excluding taxes based on Horizon's income).
2. CRYOLIFE DUTIES
A. Within five business days following execution of this Agreement,
CryoLife shall provide to Horizon a purchase order (the "Purchase Order") for
the BioGlue components and allograft packaging to be manufactured, assembled,
packaged, and shipped during the term of this Agreement. For assembly of
CryoPaks, CryoLife will notify Horizon from time to time of required CryoPak
shipments via an electronic system. In the event Horizon anticipates any problem
in performing the services in accordance with the Purchase Order, Horizon shall
notify CryoLife within ten days following receipt of such Purchase Order, and
the parties shall negotiate in good faith to resolve any such problems and reach
a Purchase Order acceptable to both parties.
B. CryoLife shall provide Horizon with the raw materials required for the
performance of the Services, including, without limitation, the materials
described on Exhibit B; provided, however, Horizon shall manufacture the
connector for the BioGlue extender tips. Such materials shall be delivered to
Horizon in accordance with the Raw Materials Schedule (as defined in Section 3B
below) provided by Horizon. To the extent CryoLife fails to provide raw
materials in accordance with such Schedule, the delivery date for the items for
which the related raw materials were delayed shall be extended by an amount of
time equal to the delay in delivery of the raw materials.
C. CryoLife's Purchasing Manager shall be CryoLife's' primary
representative with respect to issues arising under this Agreement. CryoLife may
change their representative upon written notice to Horizon.
D. During the term of this Agreement and for a period of three years
following termination hereof, CryoLife shall maintain product liability
insurance of not less than $5,000,000 per occurrence and $5,000,000 in the
aggregate to cover the CryoLife Products and the distribution and sale thereof.
Such insurance policy shall name CryoLife as the named insured and Horizon as an
additional insured. CryoLife shall provide to Horizon within 15 days of the
execution of this Agreement a Certificate of Insurance evidencing such
insurance.
E. CryoLife shall be responsible for freight costs associated with
transporting the BioGlue components and allograft packaging to the company
designated by CryoLife for sterilization services (the "Sterilizing Company")
and/or CryoLife. Shipments of CryoPaks as designated by CryoLife shall be
charged to CryoLife's account with United Parcel Service. Horizon shall provide
to CryoLife reasonable documentation evidencing the freight costs to be born by
CryoLife pursuant to this Section.
F. CryoLife shall be responsible for handling, and Horizon shall direct to
CryoLife, all customer complaints in respect of the CryoLife Products. In
addition, CryoLife shall be responsible for any medical device or vigilance
reports required to be filed with the United States Food & Drug Administration
or any notified body in respect of the CryoLife Products.
3. HORIZON'S DUTIES
A. During the term of this Agreement, Horizon shall assemble and maintain
in inventory CryoPaks in the amounts described herein for distribution to the
organ and tissue procurement organizations designated by CryoLife or as
otherwise designated by CryoLife. Horizon shall maintain in inventory a number
of assembled CryoPaks equal to that number which is 15% of CryoLife's average
monthly requirements for CryoPaks during the three month period preceding the
date hereof. Horizon shall ship CryoPaks within two business days of
notification from CryoLife. Horizon shall provide CryoLife with confirmation of
such shipments as they occur.
B. Horizon shall fulfill the mutually agreed upon Purchase Order in
accordance with the terms thereof.
2
C. Within ten days following agreement with respect to the Purchase Order,
Horizon shall provide to CryoLife a written list (the "Raw Materials Schedule")
of the raw materials required to fulfill the Purchase Order and the dates by
which such raw materials are needed in order to meet the delivery date
therefore. To the extent Horizon anticipates that additional raw materials are
needed to assemble and maintain the Inventory of CryoPaks in accordance with 3A,
Horizon shall provide CryoLife with a Raw Materials Schedule describing the
items needed, the amount of items needed, and the date such items are needed.
D. Horizon shall provide to CryoLife on or before the fifth business day of
each month during the term hereof a written report on the status of the services
being performed and the quantity of raw materials, work in progress, and
finished goods, utilizing the CryoLife assembly, lot, and item numbers. The
monthly report shall describe any raw materials returned to stock during any
production run and any rejects (with explanation) for any production run. In
addition, the report shall indicate the number of quality control samples and/or
rejects associated with any production run.
E. Horizon shall manufacture, assemble, package and ship the CryoLife
Products in accordance with the processes and procedures ("CryoLife Standard
Operating Procedures") utilized by IFM prior to the date hereof and provided by
CryoLife to Horizon in writing or electronically. Any changes proposed by
Horizon to the manufacturing, assembly and packaging processes or the materials
or supplies used in connection therewith must be communicated to CryoLife and
approved by CryoLife in writing prior to the implementation of the change. To
the extent CryoLife implements a change to CryoLife's Standard Operating
Procedures, CryoLife shall be responsible for any validation or engineering
costs incurred by Horizon in connection with such change. As instructed by
CryoLife, Horizon shall ship the CryoLife Products to the Sterilizing Company
designated by CryoLife. Horizon shall prepare a packing list to accompany
shipments to the Sterilizing Company. The packing list shall include quantity,
catalog number, description and lot number of all items included in the
shipment. The packing list shall also include shipment instructions for the
CryoLife Products once sterilized.
F. During the term of this Agreement and for a period of three years
following termination hereof, Horizon shall maintain general liability insurance
(including products/completed operations liability coverage and contractual
liability coverage) of not less than $5,000,000 per occurrence and $5,000,000 in
the aggregate. Such insurance policy shall name Horizon as the named insured and
CryoLife as an additional insured. Further, Horizon shall maintain property
insurance in amounts sufficient to reimburse CryoLife for the full replacement
cost of the raw materials, work in process, and finished goods inventory of
CryoLife Products located on Horizon's premises in the event of destruction
while located on Horizon's premises as a result of fire, theft, etc. Horizon
shall provide to CryoLife within 15 days of the execution of this Agreement a
Certificate of Insurance evidencing the Insurance required hereby.
G. During the term of this Agreement, Horizon shall not manufacture,
assemble or package for any third party any medical products or components which
are substantially similar in function, design or use to the CryoLife Products
without the prior written consent of CryoLife.
3
H. Horizon's Vice President of Operations shall be Horizon's primary
representative with respect to issues arising under this Agreement. Horizon may
change their representative upon written notice to CryoLife.
4. CONFIDENTIALITY
By virtue of the performance of the Services pursuant to this Agreement,
Horizon shall have access to information that is confidential and proprietary to
CryoLife ("Confidential Information"). Confidential Information shall not
include information which (a) is or becomes part of the public domain through no
act or omission of Horizon; (b) was in Horizon's lawful possession prior to the
date of this Agreement as evidenced by its written records and had not been
obtained by Horizon either directly or indirectly from CryoLife; or (c) is
lawfully disclosed to Horizon by a third party without restriction on
disclosure. Horizon agrees, both during the term of this Agreement and
thereafter, to hold the Confidential Information in confidence. Horizon agrees
not to make CryoLife's Confidential Information available in any form to any
third party or to use CryoLife's Confidential Information for any purpose other
than the implementation of this Agreement. Horizon agrees to take all reasonable
steps to ensure that CryoLife's Confidential Information is not disclosed or
distributed by its employees or agents in violation of the provisions of this
Agreement. This Section 4 shall survive for a period of two years following the
termination or expiration of this Agreement; provided, with respect to
Confidential Information that constitutes a trade secret under Georgia law,
Horizon's obligations hereunder shall survive for the longer of (i) two years,
or (ii) so long as such Confidential Information remains a trade secret.
5. EQUIPMENT AND INTELLECTUAL PROPERTY
A. During the term of this Agreement, Horizon may use the equipment
designated on Exhibit C (the "Equipment") at no charge to Horizon but only in
connection with the manufacture, assembly, packaging, and shipping of the
CryoLife Products as provided hereunder. Normal wear and tear and deterioration
are the responsibility of CryoLife. Repair or replacement of the Equipment will
be the responsibility of CryoLife.
B. CryoLife hereby grants to Horizon the license to use CryoLife's
Confidential Information, including its processes, procedures, methodologies,
know-how, trade secrets and other intellectual property rights utilized in the
manufacturing, assembly, and packaging of the CryoLife Products in connection
with the performance of the Services hereunder.
C. CryoLife retains all right, title, and interest in and to the
Confidential Information and CryoLife Products, including, without limitation,
all patent, copyright, trademark, trade dress, and trade secret right related
thereto and including all derivative works and rights to create derivative works
thereof.
4
6. REPRESENTATIONS AND WARRANTIES OF HORIZON
A. Horizon warrants that it is authorized to enter into this Agreement and
that its performance thereof will not conflict with any other agreement of
Horizon.
B. Horizon warrants that the Services will be performed (i) in a
professional and competent manner in accordance with industry standards, and
(ii) in accordance with the rules and regulations of the United States Food &
Drug Administration ("FDA"), including, without limitation, the FDA's current
good manufacturing practices and procedures and quality systems regulations, as
well is the standards of the International Organization of Standardization.
C. EXCEPT AS SET FORTH HEREIN, HORIZON MAKES NO REPRESENTATIONS OR
WARRANTIES EXPRESS OR IMPLIED, INCLUDING IMPLIED WARRANTIES OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE.
7. AUDIT FOR INVENTORIES AND QUALITY
CryoLife has the right to inspect and audit the quality of the Services
with reasonable notice to Horizon.
8. TERM OF THE AGREEMENT
This Agreement shall commence effective as of October 1, 2000 and extend
through December 31, 2000 unless sooner terminated as provided herein.
9. INDEMNIFICATION
A. Horizon agrees to indemnify and hold harmless CryoLife and its officers,
employees, agents and assigns from and against any and all liabilities, claims,
demands, suits, actions, causes of action or any other legal proceedings arising
out of, or related in any way to, (i) any grossly negligent or intentional act
or omission by Horizon arising out of or in connection with Horizon's
performance of the Services under this Agreement, (ii) any failure of Horizon to
perform the Services in accordance with CryoLife's Standard Operating Procedures
and the warranty set forth in Section 6B(ii), and (iii) the failure of Horizon
to comply with the laws, rules or regulations ("Laws") of the FDA or any other
governmental authority applicable to Horizon in connection with the manufacture,
assembly, packaging and shipment of the CryoLife Products hereunder. Horizontal
agrees to pay all losses, damages (actual and exemplary), costs, expenses,
invoices and bills (including reasonable attorneys' fees) incurred by CryoLife
and its officers, employees, agents and assigns as a result of any such
negligent or intentional act or omission by Horizon.
B. CryoLife agrees to indemnify and hold harmless Horizon and its officers,
employees, agents and assigns from and against any and all liabilities, claims,
demands, suits, actions, causes of action or any other legal proceedings arising
out of or related in any way to, (i) any grossly or intentional act or omission
by CryoLife arising out of or in connection with CryoLife performance of its
obligations under this Agreement, (ii) except for actions for which CryoLife is
entitled to indemnification under Section 8(a) hereof, the distribution,
marketing or sale of the CryoLife Products or any defect in the design or
specifications for the CryoLife Products or CryoLife's Standard Operating
5
Procedures, and (iii) the failure of CryoLife to comply with the Laws of the FDA
or any other governmental authority applicable to CryoLife in connection with
the sale of the CryoLife Products by CryoLife. CryoLife agrees to pay all
losses, damages (actual and exemplary), costs, expenses, invoices and bills
(including reasonable attorneys' fees) incurred by Horizon and its officers,
employees, agents and assigns as a result of any such negligent or intentional
act or omission by CryoLife.
C. Promptly after receipt by Horizon or CryoLife (hereinafter collectively
referred to as an "Indemnified Party") of notice by a third party of any
complaint or the commencement of any action or proceeding with respect to which
indemnification is being sought hereunder, such Indemnified Party shall notify
Horizon or CryoLife, whoever is the appropriate indemnifying party hereunder
(the "Indemnifying Party"), of such complaint or of the commencement of such
action or proceeding; provided, however, that the failure to so notify the
Indemnifying Party shall not relieve the Indemnifying Party from liability for
such claim arising otherwise than under this Agreement and such failure to so
notify the Indemnifying Party shall relieve the Indemnifying Party from
liability which the Indemnifying Party may have hereunder with respect to such
claim only to the extent that, such failure to notify the Indemnifying Party
results in the forfeiture by the Indemnifying Party of rights and defenses
otherwise available to the Indemnifying Party with respect to such claim. The
Indemnifying Party shall have the right, upon written notice to the Indemnified
Party, to assume the defense of such action or proceeding, including the
employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of the fees and disbursements of such counsel. In the event, however,
that the Indemnifying Party declines or falls to assume the defense of the
action or proceeding or to employ counsel reasonably satisfactory to the
Indemnified Party, in either case in a timely manner, then such Indemnified
Party may employ counsel to represent or defend it in any such action or
proceeding and the Indemnifying Party shall pay the reasonable fees and
disbursements of such counsel incurred; provided, however, that the Indemnifying
Party shall not be required to pay the fees and disbursements of more than one
counsel for all Indemnified Parties in any Jurisdiction in any single action or
proceeding. In any action or proceeding with respect to which indemnification is
being sought hereunder, the Indemnified Party or the Indemnifying Party,
whichever is not assuming the defense of such action, shall have the right to
participate in such litigation and to retain its own counsel at such party's own
expense. The Indemnifying Party or the Indemnified Party, as the case may be,
shall at all times use reasonable efforts to keep the Indemnifying Party or the
Indemnified Party, as the case may be, reasonably apprised of the status for the
defense of any), action the defense of which they are maintaining and to
cooperate in good faith with each other with respect to the defense of any such
action.
D. No Indemnified Party may settle or compromise any claim or consent to
the entry of any judgment with respect to which indemnification is being sought
hereunder without the prior written consent of the Indemnifying Party, unless
such settlement, compromise or consent includes all unconditional release of the
Indemnifying Party from all liability arising out of such claim. An Indemnifying
Party may not, without the prior written consent of the Indemnified Party,
settle or comprise any claim or consent to the entry of any judgment with
respect to which indemnification is being sought hereunder unless such
settlement, compromise or consent includes an unconditional release of the
Indemnified Party from all liability arising out of such claim and does not
contain any equitable order, judgment or term which in any manner affects,
restrains or interferes with the business of the Indemnified Party or any of the
Indemnified Party's respective affiliates.
6
E. In the event an Indemnified Party shall claim a right to payment
pursuant to this Agreement, such Indemnified Party shall send written notice of
such claim to the appropriate Indemnifying Party. Such notice shall specify the
basis for such claim. As promptly as possible after the Indemnified Party has
given such notice, such Indemnified Party and the appropriate Indemnifying Party
shall establish the merits and amount of such claim (by mutual agreement,
litigation, arbitration or otherwise) and, within five business days of the
final determination of the merits and amount of such claim, the Indemnifying
Party shall deliver to the Indemnified Party in immediately available funds an
amount equal to such claim as determined hereunder.
10. TERMINATION RIGHTS
A. Either party may terminate this Agreement on 10 business days' written
notice to the other party in the event of a breach of any material provision of
this Agreement by such other party, provided that the breaching party fails to
cure such breach during the 10-day period.
B. Upon termination or expiration of this Agreement, Horizon shall return
to CryoLife, at CryoLife's cost, all raw materials, work in progress, and
finished goods inventory of the CryoLife Products in its possession as of the
date of such termination or expiration, along with any Equipment.
11. GENERAL
A. Amendment. This Agreement may be modified only by a written document
signed by duly authorized representatives of the parties.
B. Force Majeure. A party shall not be liable for, a failure or delay in
the performance of any of its obligations under this Agreement where such
failure or delay is the result of fire, flood, or other natural disaster, act of
God, war, embargo, riot, labor dispute, unavailability of raw materials, or the
intervention of any government authority, providing that the party failing in or
delaying its performance promptly notifies the other party of its inability to
perform and states the reason for such inability.
C. Assignment. This Agreement may not be assigned by any party hereto
without the written consent of the other party. Subject to the foregoing, all of
the terms and provisions of this Agreement shall be binding upon, and inure to
the benefit of, and shall be enforceable by, the respective successor and
assigns of the parties hereto.
D. Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
7
E. Choice of Law. This Agreement, and the rights and obligations of the
parties, shall be interpreted and governed in accordance with the laws of the
State of Georgia, without giving effect to its conflicts of law provisions.
F. Waiver. Should either of the parties fail to exercise or enforce any
provision of this Agreement, or waive any right to respect thereto, such failure
or waiver shall not be construed as constituting a waiver or a continuing waiver
of its rights to enforce any other provision or right.
G. Severability. If any provision of this Agreement or the application
thereof for any reason shall be declared invalid or unenforceable, the remainder
of this Agreement shall not be affected, and each remaining provision shall be
valid and enforceable to the fullest extent.
H. Limitation of Liability. IN NO EVENT SHALL ANY PARTY BE LIABLE FOR ANY
INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES RESULTING FROM ANOTHER
PARTY'S PERFORMANCE OR FAILURE TO PERFORM UNDER THIS AGREEMENT, OR THE
FURNISHING, PERFORMANCE, OR USE OF ANY GOODS OR SERVICES SOLD PURSUANT HERETO,
WHETHER DUE TO BREACH OF CONTRACT, BREACH OF WARRANTY, NEGLIGENCE OR OTHERWISE,
REGARDLESS OF WHETHER THE NONPERFORMING PARTY WAS ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES OR NOT. IN NO EVENT SHALL HORIZON'S LIABILITY HEREUNDER EXCEED
$5,000,000 (THE "CAP AMOUNT"); PROVIDED THE PROVISIONS OF SECTION 9A(i) AND
9A(iii) SHALL NOT BE SUBJECT TO THE CAP AMOUNT, AND THERE SHALL BE NO LIMITATION
ON THE INDEMNIFICATION OBLIGATIONS OF HORIZON ARISING UNDER OR PURSUANT TO SUCH
SECTIONS.
I. Effect. The headings and sub-headings contained herein are for
information purposes only and shall have no effect upon the intended purpose or
interpretation of the provisions of this Agreement.
J. Entire Agreement. This Agreement, the Asset Purchase Agreement of even
date herewith between Horizon and IFM, and the Exhibits hereto and thereto,
constitute the entire agreement and understanding between the parties with
respect to the subject matter of this Agreement and integrates all prior
discussions and proposals (whether oral or written) between them related to the
subject matter hereof.
K. No Partnership Or Agent Created. The relationship of Horizon and
CryoLife shall be that of independent contractors only. Nothing in this
Agreement shall be construed as ranking one party an agent or legal
representative of the other or otherwise as having the power or authority to
bind the other in any manner.
L. Binding Effect. This Agreement and the rights and obligations hereunder
shall be binding upon and inure to the benefit of the parties hereto and to
their respective successors and permitted assigns.
8
M. Notices. Any notice to be made in connection with any right or
obligation arising under this Agreement shall be provided by (a) personal
delivery (including delivery by Federal Express or similar reputable express
courier), (b) telecopy, with written confirmation of receipt received and a copy
sent by the method described in (a), or (c) registered by one party to the other
at the following addresses. Said notices shall be deemed to be effective upon
receipt by the receiving party thereof.
Horizon: Horizon Medical Products, Inc.
Seven North Parkway Square
4200 Northside Parkway, N.W.
Atlanta, Georgia 30327
Attention: Robert M. Dodge
Fax: 404/264/9919
with copies to: Nat G. Slaughter, III
Slaughter & Virgin, P.C.
400 Colony Square; Suite 1110
1201 Peachtree Street, N.E.
Atlanta, Georgia 30361
Fax: 404/872-7879
and King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303
Attention: Jon R. Harris, Jr.
Fax: 404/572-5100
CryoLife: CryoLife, Inc.
1655 Roberts Blvd., N.W.
Kennesaw, Georgia 30144
Attention: Vice President of Finance
Fax: 770/590-3754
with a copy to: Arnall Golden & Gregory, LLP
2800 One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3450
Attention: Clinton D. Richardson
Fax: 404/873-8665
Either party may change its address by written notice given to the other party
in the manner set forth above.
N. Attorneys Fees. If any action at law or in equity is necessary to
enforce the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorney fees, costs and expenses in addition to any other relief to
which such prevailing party may be entitled.
9
O. Survival. The provisions of Sections 2D, 3F, 4, 5C, 9, 10B, 11E, 11H,
11J, 11N, and 11O shall survive any termination of this Agreement.
P. Key Employee. If, the event of the termination of the employment of Rick
Howard (excluding a termination of Howard by Horizon), CryoLife shall, upon
Horizon's request, make the services of Bill Wright available to Horizon for up
to one day per week for the remaining term of the Agreement to assist Horizon in
meeting its obligations hereunder. Provided, however, that Horizon shall pay any
and all travel costs associated with the provision of such services by Bill
Wright.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have each caused to be affixed hereto its or his/her hand and seal the
day indicated.
CryoLife, Inc. Horizon Medical Products, Inc.
By: By:
-------------------------------- --------------------------------
Title: Title:
-------------------------------- --------------------------------
Date: Date:
-------------------------------- --------------------------------
10
Exhibit H
Form of Transition Services Agreement
See attached.
Exhibit H
FORM OF TRANSITION SERVICES AGREEMENT
This TRANSITION SERVICES AGREEMENT ("Agreement") is entered into this 9th
day of October, 2000 by and among Horizon Medical Products, Inc., a Georgia
corporation (the "Company"), Ideas for Medicine, Inc., a Florida corporation
(the "Seller") and wholly-owned subsidiary of CryoLife, Inc. ("Provider"). The
Seller, Provider and the Company may each be referred to herein as a "Party"
and/or the "Parties" as the case may require.
RECITALS
WHEREAS, the Company and Seller have entered into that certain Asset
Purchase Agreement, dated as of October 9, 2000 (hereinafter the "Purchase
Agreement");
WHEREAS, pursuant to the terms and conditions of the Purchase Agreement,
the Company intends to purchase the Seller's business as a going concern, and
the Company proposes to assume certain of the liabilities and obligations of the
Seller;
WHEREAS, the Seller is in the medical device manufacturing business (the
"Business");
WHEREAS, after the Closing Date, the Company will operate the Business,
WHEREAS, prior to the date hereof, the Seller, Provider and their
affiliates have provided the Business with certain services, and
WHEREAS, in order to support the continued and uninterrupted operation of
the Business following the Closing, the parties desire to enter into this
Agreement, pursuant to which the Provider will provide, for the time periods and
consideration described below, certain of the services that have been provided
by the Seller, Provider and their affiliates to the Business prior to the
Closing Date.
NOW, THEREFORE, in furtherance of the foregoing premises and in
consideration of the mutual covenants and obligations hereinafter set forth the
parties hereto, intending to be legally bound hereby do agree as follows:
ARTICLE I
DEFINITIONS
1.1 The "Closing Date" shall be the date of closing of the transactions
described in the Purchase Agreement.
1.2 Capitalized terms not otherwise defined herein shall have the meaning
set forth in the Purchase Agreement.
1
ARTICLE 2
SERVICES TO BE PROVIDED BY THE SELLER AND PROVIDER
Following the Closing Date, Provider shall provide to the Company the
services (individually or collectively referred to herein as, the "Service(s)")
set forth on Exhibit A for the term of this Agreement as set forth in Section
7.1 hereof.
ARTICLE 3
TERMS OF SERVICE
3.1 The attached Exhibit A of Services are subject to change with the
Parties' mutual written consent with respect to which the Parties agree to deal
with one another in good faith in considering changes. The Parties have made
good faith efforts as of the date hereof to identify each Service and to
otherwise complete the content of Exhibit A to this Agreement.
3.2 The Company is contracting for provision of the Services on an "as-is"
basis. It will be at Provider's discretion as to whether enhancements or
modifications to these systems will be made available to the Company. Provider
shall not be obligated to make any modifications to Provider's systems at the
Company's request, except as the parties may agree in writing. To the extent
that it is necessary for the Company to provide information and/or materials to
Provider in order for Provider to perform the Services, the Company will provide
such information and/or materials in a timely manner.
3.3 The Services rendered by Provider hereunder are to be provided at no
cost to the Company in consideration for the discount provided by the Company to
Provider as reflected in that certain Manufacturing, Assembly and Packaging
Agreement, dated as of October 9, 2000, by and between the Company and Provider.
Costs to support the ultimate separation of the Company from Provider and the
implementation of the Company's own independent systems and services will be
paid entirely by the Company. Provider agrees to cooperate as reasonably
requested by the Company in order to effectuate such separation.
ARTICLE 4
ADDITIONAL SERVICES
In addition to the specific services and facilities described above, the
Parties acknowledge that there may be additional services and facilities which
have not been identified herein but which have been used by the Business prior
to the Closing Date and which shall continue to be required or desired by the
Company until December 31, 2000, or such later date as the Parties may agree
upon. If any such additional services or facilities are identified and requested
by the Company, the Seller and the Company shall negotiate with one another in
good faith over the terms and provisions of furnishing the services.
2
ARTICLE 5
LIMITATION OF LIABILITY; INDEMNIFICATION
5.1 Limitation of Liability.
(a) Provider shall not have any liability to the Company for any loss,
damage, cost, or expense, including without limitation, any special, indirect,
incidental or consequential damages, of the Company allegedly arising out of
Provider's performance of the services to be provided by Articles 2, 3 and 4
hereof or Provider's acts or omission in connection with its performance of such
services; provided, however, that this provision shall not apply if: (i) such
loss, cost or expense arises out of (A) an act of fraud, embezzlement or
criminal activity by Provider or (B) willful misconduct or gross negligence by
Provider; or (ii) such loss, cost or expense arises from the failure (other than
by reason of an event of force majeure, as provided for in Section 10.2 hereof)
or refusal of Provider to comply in any material respect with, and to perform in
any material respect its obligations under, this Agreement within ten (10)
business days after Provider receives written notice of such failure from the
Company.
(b) The liability of Provider under Section 5.1(a)(ii) shall not exceed
Fifty Thousand Dollars ($50,000). No claim under Section 5.1(a)(ii) may be
asserted by the Company after the ninetieth (90th) day following the date of
termination of this Agreement.
5.2 Indemnification. The Company shall indemnify Provider, and shall hold
Provider harmless against, any loss, damage, cost or expense (including
reasonable fees) which Provider may sustain or incur by reason of any claim,
demand, suit or recovery by any third party allegedly arising out of Provider's
performance of the services to be provided by Articles 2, 3 and 4 hereof or
Provider's acts or omissions in connection with its performance of such services
except in any instance in which Provider would have any liability under Section
5.1 hereof.
ARTICLE 6
NO WARRANTY
The level and quality of the Services shall be provided in good faith and
at a level and quality comparable to that performed by Provider prior to the
date of this Agreement. EXCEPT AS OTHERWISE SET FORTH HEREIN, PROVIDER MAKES NO
REPRESENTATION OR WARRANTY WHATSOEVER WITH RESPECT TO THE SERVICES TO BE
PROVIDED HEREUNDER INCLUDING IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE.
3
ARTICLE 7
TERM AND TERMINATION
7.1 The term of this Agreement shall begin on the Closing Date. Services
shall be provided by Provider hereunder until December 31, 2000, unless
otherwise specified herein or in Exhibit A attached hereto.
7.2 Subject to the provisions of Exhibit A attached hereto, the Company may
terminate any Service(s) provided pursuant to this Agreement on thirty (30) days
prior written notice to Provider, unless otherwise specified in such Exhibit. If
the Company elects to terminate a service, it will bear the costs of interfacing
any new system to the remaining Provider systems which it continues to use. The
Company shall be liable for any outstanding purchase orders placed with third
parties by Provider at the direction of the Company and on the Company's behalf
prior to Provider's receipt of the aforesaid written notice of termination.
7.3 Prior to termination of this Agreement, the Parties shall cooperate
with one another to maintain an orderly transfer of Services provided hereunder
and shall provide necessary assistance for an orderly transfer thereof.
7.4 Article 5 of this Agreement shall survive the termination hereof.
ARTICLE 8
PAYMENT
8.1 Any out-of-pocket expense paid to a third party, by Provider as a
result of Services provided hereunder by Provider to the Company shall be
invoiced in Provider's customary form and detail and reimbursed by the Company
to Provider; provided, however, that any such expenses which individually exceed
$1,000 must be approved in advance by the Company, except for expenses incurred
in connection with the following services which are hereby approved by the
Company: (i) continuation of AT&T long distance and TI services, (ii)
continuation of the services of GTE / Verizon, and (iii) retention of Internet
and frame relay connectivity.
8.2 Payment terms are net, thirty (30) days from date of invoice, and
payments shall be made in United States Dollars.
ARTICLE 9
CONFIDENTIALITY
The Parties acknowledge that in the course of performance of their
respective obligations pursuant to this Agreement, each may obtain certain
confidential and/or proprietary information of the other or its affiliates or
customers, including the terms and conditions of this Agreement. Each Party
hereby agrees that all information communicated to it by the other, its
affiliates or customers, whether before or after the Closing Date, was received
in strict confidence and shall be kept in strict confidence and shall be used
only in accordance with this Agreement, and shall not be disclosed by the other
4
Party, its agents or employees without the prior written consent of the first
Party. In the event that either Party either determines on the advice of its
counsel that it is required to disclose any information pursuant to applicable
law, or receives any demand under lawful process to disclose or provide
information of the other Party that is subject to the confidentiality provisions
hereof, such Party shall notify the other Party prior to disclosing and
providing such information and shall cooperate at the expense of the requesting
Party in seeking any reasonable protective arrangements requested by such other
Party. Subject to the foregoing, the Party that receives such request may
thereafter disclose or provide information to the extent required by such law
(as so advised by counsel) of by lawful process. Furthermore, the Parties shall
take reasonable steps necessary to ensure that all information and records
relating to the business of Provider and the Company are kept strictly
confidential. Notwithstanding the above, this Agreement imposes no obligation on
either Party with respect to information that is or becomes a matter of public
knowledge through no fault of that Party, is rightfully obtained by either Party
from a third party not in violation of any duty of confidentiality, or is
independently developed by either Party without reference to any proprietary or
confidential information of the other Party.
ARTICLE 10
GENERAL
10.1 Amendment. This Agreement may be modified only by a written document
signed by duly authorized representatives of the Parties.
10.2 Force Majeure. A Party shall not be liable for a failure or delay in
the performance of any of its obligations under this Agreement where such
failure or delay is the result of fire, flood, or other natural disaster, act of
God, war, embargo, riot, labor dispute, unavailability of raw materials, or the
intervention of any government authority, providing that the Party failing in or
delaying its performance promptly notifies the other Party of its inability to
perform and states the reason for such inability.
10.3 Assignment. This Agreement may not be assigned by any Party hereto
without the written consent of the other Party. Subject to the foregoing, all of
the terms and provisions of this Agreement shall be binding upon, and inure to
the benefit of, and shall be enforceable by, the respective successor and
assigns of the Parties hereto.
10.4 Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
10.5 Choice Of Law. This Agreement, and the rights and obligations of the
Parties, shall be interpreted and governed in accordance with the laws of the
State of Georgia, without giving effect to its conflicts of law provisions.
5
10.6 Waiver. Should either of the Parties fail to exercise or enforce any
provision of this Agreement, or waive any right in respect thereto, such failure
or waiver shall not be construed as constituting a waiver or a continuing waiver
of its rights to enforce any other provision or right.
10.7 Severability. If any provision of this Agreement or the application
thereof for any reason shall be declared invalid or unenforceable, the remainder
of this Agreement shall not be affected, and each remaining provision shall be
valid and enforceable to the fullest extent.
10.8 Limitation Of Liability. EXCEPT AS SET FORTH IN SECTION 5.1, IN NO
EVENT SHALL ANY PARTY BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL OR
CONSEQUENTIAL DAMAGES RESULTING FROM ANOTHER PARTY'S PERFORMANCE OR FAILURE TO
PERFORM UNDER THIS AGREEMENT, OR THE FURNISHING, PERFORMANCE, OR USE OF ANY
GOODS OR SERVICES SOLD PURSUANT HERETO, WHETHER DUE TO BREACH OF CONTRACT,
BREACH OF WARRANTY, NEGLIGENCE OR OTHERWISE, REGARDLESS OF WHETHER THE
NONPERFORMING PARTY WAS ADVISED OF THE POSSIBILITY OF SUCH DAMAGES OR NOT.
10.9 Effect. The headings and sub-headings contained herein are for
information purposes only and shall have no effect upon the intended purpose or
interpretation of the provisions of this Agreement.
10.10 Entire Agreement. This Agreement, the Purchase Agreement and the
Exhibits and Schedules hereto and thereto, constitute the entire agreement and
understanding between the Parties with respect to the subject matter of this
Agreement and integrates all prior discussions and proposals (whether oral or
written) between them related to the subject matter hereof.
10.11 No Partnership Or Agent Created. The relationship of Provider and the
Company shall be that of independent contractors only. Nothing in this Agreement
shall be construed as ranking one party an agent or legal representative of the
other or otherwise as having the power or authority to bind the other in any
manner.
10.12 Binding Effect. This Agreement and the rights and obligations
hereunder shall be binding upon and inure to the benefit of the Parties and to
their respective successors and permitted assigns.
10.13 Notices. Any notice to be made in connection with any right or
obligation arising under this Agreement. shall be provided by (a) personal
delivery (including delivery by Federal Express or similar reputable express
courier), (b) telecopy, with written confirmation of receipt received and a copy
sent by the method described in (a), or (c) registered mail by one party to the
other at the following addresses. Said notices shall be deemed to be effective
upon receipt by the receiving party thereof.
6
Company: Horizon Medical Products, Inc.
Seven North Parkway Square
4200 Northside Parkway, N.W.
Atlanta, Georgia 30327
Attention: Robert M. Dodge
Fax: 404/264/9919
With copies to: Nat G. Slaughter, III
Slaughter & Virgin, P.C.
400 Colony Square; Suite 1110
1201 Peachtree Street, N.E.
Atlanta, Georgia 30361
Fax: 404/872-7879
and: King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303
Attention: Jon R. Harris, Jr.
Fax: 404/572-5100
Seller: Ideas for Medicine, Inc.
c/o CryoLife, Inc.
1655 Roberts Blvd., N.W.
Kennesaw, Georgia 30144
Attention: Vice President of Finance
Fax: 770/590-3754
With a copy to: Arnall Golden & Gregory, LLP
2800 One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3450
Attention: Clinton D. Richardson
Fax: 404/873-8665
Provider: CryoLife, Inc.
1655 Roberts Blvd., N.W.
Kennesaw, Georgia 30144
Attention: Vice President of Finance
Fax: 770/590-3754
Either party may change its address by written notice given to the other
Party in the manner set forth above.
[SIGNATURE PAGE FOLLOWS]
7
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
duly executed as of the day and year first above written.
HORIZON MEDICAL PRODUCTS, INC.
By:
--------------------------------
Name:
Title:
IDEAS FOR MEDICINE, INC.
By:
--------------------------------
Name:
Title:
CRYOLIFE, INC.
By:
--------------------------------
Name:
Title:
Exhibit I
Form of Security Agreement
See attached.
Exhibit I
FORM OF SECURITY AGREEMENT
THIS SECURITY AGREEMENT ("Agreement") is made as of the day of October,
2000, by HORIZON MEDICAL PRODUCTS, INC., a Georgia corporation ("Horizon") in
favor of IDEAS FOR MEDICINE, INC., a Florida corporation (together with its
successors, assigns and transferees, "IFM").
PRELIMINARY STATEMENT
This Agreement is made to secure all of the following (individually and
collectively the "Indebtedness"):
Payment of the principal balance, together with interest, costs and all
other sums, to be paid according to that certain Promissory Note ("Note"), by
Horizon to IFM, made as of the date of this Agreement by Horizon, together with
any and all extensions, renewals, modifications, substitutions or replacements
thereof; and the performance of the covenants and obligations of Horizon due or
to become due to IFM under this Agreement and/or under any and all other
documents and instruments evidencing and/or securing payment of all amounts due
under the Note (collectively, the "Loan Documents"), and the repayment of all
costs, expenses, advances and other sums incurred and/or expended by IFM in
connection with performance of those covenants and obligations.
In consideration of the above facts and the mutual promises of the parties,
and as security for the purposes stated above and elsewhere in this Agreement,
the parties agree as follows:
1. Grant of Security Interest. Horizon hereby grants IFM a security
interest in the following described property (collectively, the "Collateral"):
(i) presently existing and hereafter arising accounts, contract
rights, and all other forms of obligations owing to Borrower arising out of
the sale or lease of goods or the rendition of services by Borrower,
whether or not earned by performance, and any and all credit insurance,
guaranties, and other Security therefor, as well as all merchandise
returned to or reclaimed by Borrower relating to any of the foregoing
(collectively, "Accounts");
(ii) present and future general intangibles and other personal
property (including choses or things in action, goodwill, blueprints,
drawings, purchase orders, customer lists, monies due or recoverable from
pension funds, route lists, monies due under any royalty or licensing
agreements, infringement claims, computer programs, computer discs,
computer tapes, literature, reports, catalogs deposit accounts, insurance
premium rebates, tax refunds, and tax refund claims) other than (A) goods
and Accounts relating to any of the foregoing, or (B) patents, trade names,
trademarks, servicemarks, or copyrights (collectively, "General
Intangibles");
(iii) present and future letters of credit, notes, drafts,
instruments, certificated and uncertificated securities, documents, leases,
and chattel paper relating to any of the foregoing (collectively,
"Negotiable Collateral");
(iv) present and future inventory in which Borrower has any interest,
including goods held for sale or lease or to be furnished under a contract
of service and all of Borrower's present and future raw materials, work in
process, finished goods, and packing and shipping materials, wherever
located, and any documents of title representing any of the above, relating
to any of the foregoing (collectively, "Inventory");
(v) present and hereafter acquired machinery, machine tools, motors,
equipment, furniture, furnishings, fixtures, vehicles (including motor
vehicles and trailers), tools, parts, dies, jigs, goods (other than
consumer goods or farm products), and any interest in any of the foregoing,
and all attachments, accessories, accessions, additions, and improvements
to any of the foregoing, wherever located (collectively, "Equipment");
(vi) substitutions, replacements, additions, accessions, proceeds,
products to or of any of the foregoing (other than substitutions or
replacements of Equipment after the date hereof), including, but not
limited to, proceeds of insurance covering any of the foregoing, or any
portion thereof, and any and all Accounts, General Intangibles, Negotiable
Collateral, Inventory, Equipment, money, deposits, accounts, or other
tangible or intangible property resulting from the sale or other
disposition of the Accounts, General Intangibles, Negotiable Collateral,
Inventory, Equipment, or any portion thereof or interest therein and the
proceeds thereof.
Notwithstanding anything to the contrary contained herein, Horizon's grant of a
security interest is only as to (i) the Accounts, Negotiable Collateral,
Inventory, and Equipment acquired pursuant to that certain Asset Purchase
Agreement between Horizon and IFM dated as of May 19, 1998 (the "First Purchase
Agreement"), that certain Asset Purchase Agreement between Horizon and IFM dated
as of September 30, 1998 (the "Second Purchase Agreement"), (ii) the Accounts,
General Intangibles, Negotiable Collateral, Inventory, and Equipment acquired
pursuant to that certain Asset Purchase Agreement between Horizon and IFM of
even date herewith (the "Third Purchase Agreement"), and (iii) substitutions,
replacements, additions, accessions, proceeds, products to or of any of the
foregoing (other than substitutions or replacements of Equipment after the date
hereof) (the "Pledged Assets"). IFM's security interest shall not attach to any
property of Horizon other than the Pledged Assets.
2. WARRANTIES AND REPRESENTATIONS. Horizon warrants and covenants to IFM as
follows:
(a) Payment of Indebtedness. Horizon will pay the Indebtedness and perform
all obligations related to the Indebtedness when due, whether by maturity,
acceleration or otherwise.
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(b) Authority. This Agreement is the valid and binding obligation of
Horizon, enforceable in accordance with its terms except as limited by
creditors' rights and equity. Horizon is organized and validly existing and in
good standing under the laws of the State of Georgia and the execution, delivery
and performance of this Agreement has been duly authorized by all necessary
action of Horizon's board of directors, and will not violate Horizon's governing
instruments or other material agreements.
(c) Name; Address; Location of Collateral. Horizon's name and address and
the location of the Collateral are accurately set forth on the signature page of
this Agreement.
(d) Title to Collateral. Horizon has good and marketable title to the
Collateral. Horizon will keep the Collateral free of all other liens,
encumbrances and security interests and will defend title to the Collateral
against all claims and demands of all persons at any time claiming any interest
in the Collateral except for the security interest associated with the Bank
Indebtedness (as defined in the Third Asset Purchase Agreement as set forth in
(a) that certain Subordination Agreement ("Subordination Agreement"), dated of
even date herewith, by and between Bank of America, N.A. and IFM, and (b) any
future subordination agreements entered into in connection therewith
(collectively, the "Security Interest").
(e) Priority of Security Interest. The execution and delivery of this
Agreement creates a valid security interest in the Collateral, and upon the
filing of a UCC-1 financing statement with (i) the Clerk of the Superior Court
of any county in the State of Georgia and (ii) the Secretary of State of the
State of Florida, IFM will have a perfected second security interest in the
Collateral, subject to no other lien, encumbrance or security interest except
for the Security Interest to the extent one can perfect by filing a financing
statement under Article 9 of the UCC and except for rights of Landlord under the
Commercial Lease Agreement or Florida law.
(f) Financing Statements. Horizon will execute financing statement(s) in
form acceptable to IFM and will pay the cost of filing financing statement(s) in
all public offices wherever filing is deemed reasonably necessary by IFM. A
carbon, photographic or other reproduction of this Agreement shall be sufficient
as a financing statement under the UCC and may be filed by IFM in any filing
office.
(g) Payment of Taxes and Insurance Premiums. Horizon shall pay when due and
before any interest, collection fees or penalties accrue, all taxes, expenses,
assessments, liens or other charges (collectively, "Taxes") which may now or
hereafter be levied or assessed against the Collateral unless Horizon is
contesting such Taxes in good faith and has maintained adequate reserves with
respect to the payment thereof. Horizon shall also obtain and pay for insurance
for the Collateral in an amount consistent with industry standards and/or
reasonably acceptable to IFM. Horizon shall furnish proof of payment of taxes or
insurance upon request of IFM.
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(h) Maintenance of Collateral. Horizon will maintain the Equipment in good
condition and repair, ordinary wear and tear excepted. Horizon will promptly
inform IFM of any material loss or diminution in value of the Collateral.
3. PROHIBITION ON TRANSFER OR MODIFICATION. Horizon shall not transfer,
sell, assign, lease or modify the Collateral or any interest therein, any part
thereof without the prior written consent of IFM, except for the transfer set
forth in the Third Asset Purchase Agreement. Notwithstanding the foregoing,
Horizon may use and/or sell the Collateral if the same is in the ordinary Course
of Horizon's business and on customary terms and at usual prices.
4. PROHIBITION ON CHANGE OF NAME, ORGANIZATION OR LOCATION. Horizon shall
not assume a different name, conduct its business at any location other than as
appears in this Agreement, nor change the location of any of the Collateral
without, in each instance, obtaining the prior written consent of IFM thirty
(30) days prior to any such event. Horizon agrees to execute any amendments to
financing statement(s) required in connection with this Section 4 in form
acceptable to IFM, and will pay the filing fees and costs actually incurred by
IFM in connection with any such amendments.
5. EXAMINATION OF RECORDS AND COLLATERAL. Horizon shall keep full and
accurate records related to the Collateral, and such records shall be open to
inspection and duplication by IFM at all reasonable times upon reasonable prior
notice. Upon reasonable notice to Horizon and at reasonable times, IFM may enter
upon any property owned by or in the possession of Horizon to examine and
inspect the Collateral. Horizon shall provide IFM as soon as practicable with
any information concerning the Collateral as IFM may reasonably request at any
time.
6. REIMBURSEMENT OF EXPENSES. Horizon shall reimburse IFM for all
reasonable costs and expenses, including reasonable attorneys' fees, actually
incurred by IFM in enforcing the rights of IFM under this Agreement except for
inspection of records. All costs, expenses and fees of any nature for which
Horizon is obligated to reimburse or indemnify IFM are part of the Indebtedness
secured by this Agreement and are payable upon demand, unless expressly provided
otherwise, with interest until repaid at the highest rate charged on any of the
Indebtedness (but not to exceed the maximum rate permitted by law).
7. RIGHTS AND OBLIGATIONS OF IFM. In the event that Horizon fails to pay
taxes, maintain insurance or perform any other obligation arising under this
Agreement, IFM may pay or perform such obligation(s) for the account of Horizon
and the same shall be added to the Indebtedness and shall be immediately due and
payable together with interest at the highest rate charged by IFM on any of the
Indebtedness (but not to exceed the maximum rate permitted by law). IFM shall
not be liable for any loss to the Collateral nor shall such loss reduce the
balance due.
8. INDEMNIFICATION. Horizon shall indemnify and save IFM harmless from all
claims, obligations, costs, expenses, including attorneys' fees, and causes of
action or other rights asserted against IFM and relating to breach of this
Agreement by Horizon.
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9. EVENTS OF DEFAULT AND REMEDIES.
(a) Events of Default. Any of the following events shall, for purposes of
this Agreement, constitute an "Event of Default":
(i) Failure by Horizon to pay any amount owing on or with respect to
the Indebtedness when due, whether by maturity, acceleration or otherwise,
which failure continues for ten (10) days after the due date of such
amount.
(ii) Any failure by Horizon to comply with, or breach by Horizon of,
any of the non-monetary terms, provisions, warranties or covenants of any
Note, this Agreement or the other Loan Documents, which failure continues
for thirty (30) days after the date of written notice to Horizon (or any
Guarantor) from IFM of such failure.
(iii) The insolvency of Horizon or the admission in writing of
Horizon's or any guarantor's inability to pay debts as they mature.
(iv) Any material statement, representation or information made or
furnished by or on behalf of Horizon to IFM in connection with or to induce
IFM to provide any of the Indebtedness shall prove to be false or
materially misleading when made or furnished.
(v) Institution of bankruptcy, reorganization, insolvency or other
similar proceedings by or against Horizon, unless, in the case of a
petition filed against Horizon, the same is dismissed within sixty (60)
days of filing.
(vi) The issuance or filing of any judgment, attachment, levy,
garnishment or the commencement of any related proceeding upon or in
respect to Horizon or the Collateral in which the amount of such judgment,
attachment, levy, garnishment or the amount in controversy in any related
proceeding exceed $50,000.
(vii) Dissolution, merger or consolidation in which Horizon is not the
surviving entity, termination of existence, insolvency, or assignment for
the benefit of creditors of or by Horizon.
(viii) Any failure by Horizon to comply with or breach by Horizon
(after giving of any required notice) and expiration of an applicable cure
period) Sublease Agreement (the "Sublease"), by and between IFM of event
date herewith.
(b) Remedies Upon Event of Default. Upon the occurrence of any Event of
Default, IFM shall have the following rights:
(i) Declare all or part of the Indebtedness immediately due and
payable.
(ii) Horizon agrees, upon request of IFM, to assemble the Collateral
and make it available to IFM at any place which is reasonably convenient
for Horizon and IFM. Horizon grants IFM permission to enter upon any
premises owned or occupied by Horizon for the purpose of taking possession
of the Collateral.
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(iii) Subject to the rights of Bank of America, N.A. under the
Subordination Agreement, IFM shall have the right to take possession of the
Collateral, with or without demand, and with or without process of law.
Subject to the rights of Bank of America, N.A. under the Subordination
Agreement, IFM shall have the right to sell and dispose of the Collateral
and to distribute the proceeds according to law. In connection with the
right of IFM to take possession of the Collateral, IFM may take possession
of any other items of property in or on the Collateral at the time of
taking possession and hold them for Horizon without liability on the part
of IFM. If there is any statutory requirement for notice, that requirement
shall be met if IFM shall send notice to Horizon at least ten (10) days
prior to the date of sale, disposition or other event giving rise to the
required notice. Horizon shall be liable for any deficiency remaining after
disposition of the Collateral.
(iv) IFM shall also have any one or more of the rights and remedies
under the UCC or at law or equity to enforce the payment of the
Indebtedness.
(c) Remedies Generally.
(i) All remedies provided for in Section 9(b) shall be available to
the extent not prohibited by law. Each remedy shall be cumulative and
additional to any other remedy of IFM at law, in equity or by statute. No
delay or omission to exercise any right or power accruing upon any default
or Event of Default shall impair any such right or power or shall be
construed to be a waiver of, or acquiescence in, any such default or Event
of Default.
(ii) IFM may waive any Event of Default and may rescind any
declaration of maturity of payments on the Indebtedness. In case of such
waiver or rescission Horizon and IFM shall be restored to their respective
former positions and rights under this Agreement. Any waiver by IFM of any
default or Event of Default shall be in writing and shall be limited to the
particular default waived and shall not be deemed to waive any other
default.
(d) Application of Proceeds. Any proceeds received by IFM from the exercise
of remedies pursuant to Section 9(b) of this Agreement shall be applied as
follows:
(i) First, to pay all costs and expenses incidental to the leasing,
foreclosure, sale or other disposition of the Collateral. These costs and
expenses shall include, without limit, any costs and expenses incurred by
IFM (including, without limit, attorneys' fees and disbursements actually
incurred), and any taxes and assessments or other liens and encumbrances
prior to the lien of this Agreement.
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(ii) Second, to all sums expended or incurred by IFM, directly or
indirectly in carrying out any term, covenant or agreement under this
Agreement or any related document, together with interest as provided in
this Agreement.
(iii) Third, to the payment of the Indebtedness. If the proceeds are
insufficient to fully pay the Indebtedness, then application shall be made
first to late charges and interest accrued and unpaid, then to any
applicable prepayment premium, and then to unpaid fees and other charges,
then to the outstanding principal balance.
(iv) Fourth, any surplus remaining shall be paid to Horizon or to
whomsoever may be lawfully entitled.
(e) Further Actions. Promptly upon the request of IFM, Horizon shall
execute, acknowledge and deliver any and all further documents, security
agreements, financing statements and assurances, and do or cause to be done all
further acts as IFM may acquire to confirm and protect the lien of this
Agreement or otherwise to accomplish the purposes of this Agreement.
(f) Attorneys Fees. Any reference in this Agreement to attorneys' fees
shall refer to reasonable fees, charges, costs and expenses of outside attorneys
and paralegals actually incurred, whether or not a suit or proceeding is
instituted, and whether incurred at the trial court level, on appeal, in a
bankruptcy, administrative or probate proceeding, in consultation with counsel,
or otherwise.
10. TERMINATION OF FINANCING STATEMENTS. IFM shall execute and deliver to
Horizon, within ten (10) business days after the written request of Horizon, UCC
termination statements with respect to the Collateral secured hereunder,
provided that (a) Horizon shall not be in default under any of the terms,
covenants or conditions of any document or instrument evidencing or securing the
Indebtedness; (b) the outstanding principal balance of any Note, together with
interest, premiums, costs and all other sums on that amount, shall be paid in
full; and (c) all termination statements shall be prepared by IFM at Horizon's
expense. Upon the filing of such termination statements in accordance with the
applicable provisions of the UCC, this Agreement shall be terminated.
11. MISCELLANEOUS.
(a) Governing Law. This Agreement shall be construed according to the laws
of the State of Georgia.
(b) Successors and Assigns. This Agreement shall be binding upon the
successors and assigns of Horizon including, without limit, any Horizon in
possession or trustee in bankruptcy for Horizon, and the rights and privileges
of IFM under this Agreement shall inure to the benefit of its successors and
assigns. This shall not be deemed a consent by IFM to a conveyance by Horizon of
all or any part of the Collateral or of any ownership interest in Horizon.
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(c) Notices. Notice from one party to another relating to this Agreement
shall be made pursuant to the Note.
(d) Entire Agreements; Amendments. This Agreement. the Subordination
Agreement, and the Third Asset Purchase Agreement, and any agreement to which it
refers state all rights and obligations of the parties and supersede all other
agreements (oral or written) with respect to the security interests granted by
this Agreement. Any amendment of this Agreement shall be in writing and shall
require the signature of Horizon and IFM.
(e) Partial Invalidity. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of the
remaining provisions of this Agreement.
(f) Inspections. Any inspection, audit, appraisal or examination by IFM or
its agents of the Collateral or of information or documents pertaining to the
Collateral is for the sole purpose of protecting IFM's interest under this
Agreement and is not for the benefit or protection of Horizon or any third
party.
(g) Automatic Reinstatement. Notwithstanding any prior revocation,
termination, surrender or discharge of this Agreement, the effectiveness of this
Agreement shall automatically continue or be reinstated, as the case may be, in
the event that:
(i) Any payment received or credit given by IFM in respect of the
Indebtedness is determined to be a preference, impermissible setoff,
fraudulent conveyance, diversion of trust funds, or otherwise required to
be returned to Horizon or any third party under any applicable state or
federal law, including, without limit, laws pertaining to bankruptcy or
insolvency, in which case this Agreement shall be enforceable as if any
such payment or credit had not been received or given, whether or not IFM
relied upon this payment or credit or changed its position as a consequence
of it.
(ii) In the event of continuation or reinstatement of this Agreement,
Horizon agrees upon demand by IFM to execute and deliver to IFM those
documents which IFM determines are appropriate to further evidence (in the
public records or otherwise) this continuation or reinstatement, although
the failure of Horizon to do so shall not affect in any way the
reinstatement or continuation. If Horizon does not execute and deliver to
IFM such documents upon demand, IFM and each officer of IFM is irrevocably
appointed (which appointment is coupled with an interest) the true and
lawful attorney of Horizon (with full power of substitution) to execute and
deliver such documents in the name and on behalf of Horizon.
(h) Assignment. This Agreement is freely assignable, in whole or in part,
by IFM without notice to or consent of Horizon. IFM shall be fully discharged
from all responsibility accruing hereunder from and after the effective date of
any such assignment. IFM's assignee shall, to the extent of the assignment, be
vested with all the powers and rights of IFM hereunder (including those granted
under Section 9 hereof or otherwise with respect to the Collateral), and to the
extent of such assignment the assignee may fully enforce such rights and powers,
and all references to IFM shall mean and refer to such assignee. IFM shall
retain all rights and powers hereby given not so assigned, transferred and/or
delivered. Horizon hereby waives all defenses which Horizon may be entitled to
assert against IFM's assignee with respect to liability accruing hereunder prior
to the effective date of any assignment of IFM's interest herein. Horizon may
not, in whole or in part, directly or indirectly, assign this Agreement or its
rights hereunder or delegate its duties hereunder without, in each instance, the
specific prior written consent of IFM, which consent may be withheld or delayed
in IFM's sole discretion.
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Horizon has executed this Agreement on the day and year first above
written.
Horizon's principal place of business is located in the County of
Meriwether, State of Georgia.
Collateral is located at: 3101 37th Avenue North, St. Petersburg, Florida.
HORIZON:
HORIZON MEDICAL PRODUCTS, INC.
By:
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Its:
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