<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) January 21, 1999
----------------
RADIANCE MEDICAL SYSTEMS, INC.
------------------------------
(Exact Name of Registrant as Specified in Charter)
Delaware 0-28440 68-0328265
-------- ------- ----------
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
13700 Alton Parkway, Suite 160, Irvine, California 92618
-------------------------------------------------- ------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (949) 457-9546
--------------
(Not Applicable)
----------------
(Former Name or Former Address, if Changed Since Last Report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On January 21, 1999, Radiance Medical Systems, Inc., Delaware
corporation, formerly known as CardioVascular Dynamics, Inc. (the "Company" or
"Registrant") sold substantially all of the properties and assets used
exclusively in the Company's Vascular Access division to Escalon Vascular
Access, Inc., a Delaware corporation and wholly owned subsidiary of Escalon
Medical Corp., a California corporation (collectively, "Escalon"). The Company's
Vascular Access division manufactured and distributed a vascular access system
for arterial and venous localization and catherization. Under the terms of the
Assets Sale and Purchase Agreement dated January 21, 1999 between the Company,
Escalon Vascular Access, Inc. and Escalon Medical Corp., the Company received an
initial payment of One Million One Hundred Four Thousand Four Hundred Forty Two
Dollars ($1,104,442). This payment represented One Million Dollar ($1,000,000)
consideration payment increased by the excess of the actual inventory
transferred of Seven Hundred Four Thousand Four Hundred Forty-Two Dollars
($704,442) over the contractual estimate of Six Hundred Thousand Dollars
($600,000). The Company also will receive an additional One Million Dollars
($1,000,000) upon the completion of the transfer of the assets and technology,
and royalty payments upon the sale of products for a five-year period. In
addition, the Company will continue to manufacture certain products for up to
180 days.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Not applicable
(b) Pro Forma Financial Information.
UNAUDITED PRO FORMA CONDENSED COMBINED SELECTED FINANCIAL INFORMATION
The unaudited pro forma condensed combined financial information is
provided for informational purposes only and does not purport to be indicative
of the future results or financial position of the Registrant (formerly named
Cardiovascular Dynamics, Inc.)1 or what the results of operation or financial
position would have been had the sale of the Vascular Access division been
effected on the date indicated.
The unaudited pro forma condensed combined financial information of
Registrant, RMS Acquisition and Clinitec GmbH ("Clinitec") set forth below gives
effect to the sale of the Vascular Access division, the RMS Acquisition and the
Clinitec acquisition, under the purchase accounting method, as if the
transactions had occurred as of January 1, 1997 for the sale of the Vascular
Access division, as of August 15, 1997 and January 1, 1998 for RMS Acquisition
and as of January 1, 1997 for Clinitec for the pro forma condensed combined
statements of operations for the periods ended December 31, 1997 and September
30, 1998, respectively, and as of September 30, 1998, for the pro forma
condensed combined balance sheet.
- ----------
1 On January 14, 1999, CardioVascular Dynamics, Inc., a Delaware corporation
(now named Radiance Medical Systems, Inc.)(the "Registrant") acquired Radiance
Medical Systems, Inc., a Delaware corporation ("RMS") pursuant to an Agreement
and Plan of Merger, dated as of November 3, 1998 by and among the Registrant,
CVD/RMS Acquisition Corp., a wholly owned subsidiary of Registrant (the "RMS
Acquisition"), and RMS. The acquisition was effected by the merger (the
"Merger") of RMS with and into the RMS Acquisition, with RMS Acquisition
surviving the Merger. In connection with the Merger, Registrant changed its name
to Radiance Medical Systems, Inc.
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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
RMS
REGISTRANT(A) ACQUISITION CLINITEC PRO FORMA
ACTUAL(B) ACTUAL(C) ACTUAL(D) ADJUSTMENTS(3) PRO FORMA
-------------- ------------ ---------- --------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATE:
Revenue:
Sales ............................... $ 11,332 $ -- $ 301 $ (2,419)(1) $ 9,214
License fee and other ............... -- -- 242 (2) 242
-------- -------- -------- -------- --------
Total Revenue .......................... 11,332 -- 301 (2,177) 9,456
-------- -------- -------- -------- --------
Costs and expenses:
Cost of sales ........................ 6,418 -- 560 (937)(1) 6,041
Research and development ............. 7,041 132 -- (76)(1)(4) 7,097
Marketing and sales .................. 6,691 -- 442 (506)(1) 6,627
General and administrative ........... 2,179 18 -- (465)(1) 1,732
-------- -------- -------- -------- --------
Total operating costs and expenses . 22,329 150 1,002 (1,984) 21,497
-------- -------- -------- -------- --------
Loss from operations ................... (10,997) (150) (701) (193) (12,041)
Other income ........................... 2,225 19 -- 46 (1)(5) 2,290
-------- -------- -------- -------- --------
Net loss ............................... $ (8,772) $ (131) $ (701) $ (147) $ (9,751)
======== ======== ======== ======== ========
Basic and diluted net loss per share(6) $ (0.96) $ (0.98)
======== ========
Shares used in computing basic and
diluted net loss per share(6) ........ 9,118 9,957
======== ========
</TABLE>
(a) Radiance Medical Systems, Inc. (formerly CardioVascular Dynamics, Inc.).
(b) Although not reflected in this pro forma statement, at the date of the
Merger, $3,842 was expensed for in-process research and development.
(c) Formerly Radiance Medical Systems, Inc. ("Radiance"), a development stage
company, which began operations in August of 1997. On January 14, 1999,
Registrant acquired all of the Common Stock of Radiance not held by
Registrant. In order to present pro forma operating results as if
Radiance's and Registrant's operations were combined for the year ended
December 31, 1997, the operating results from Radiance's inception in
August 1997 until year end are included.
(d) On July 29, 1997, Registrant acquired all of the Common Stock of its
independent distributor in Germany, Clinitec. In order to present pro
forma operating results as if Clinitec and Registrant's operations were
combined at the beginning of the year ended December 31, 1997, the
operating results for the seven months before the acquisition date are
included.
(1) To exclude the operating results of the Vascular Access division from the
consolidated operating results for the period.
(2) To reflect license fee income on net sales of $2,419 at a 10% royalty
rate. This assumes that Escalon would have earned the same net sales level
as Registrant actually did during the period.
(3) Although not reflected in this pro forma statement, the Company expects
to record a gain from the sale of the Vascular Access assets of $1,154.
(4) To reflect amortization of the Radiance developed technology and
identified intangible assets using lives of 3 to 7 years.
(5) To reflect reduction of interest income from cash portion of the Radiance
acquisition consideration of $692 and acquisition costs of $400 and an
increase in interest income from the proceeds from the sale of the
Vascular Access assets at an average rate of 5.5% per annum.
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(6) To reflect an increase in the weighted average shares outstanding as 91%
of the Radiance acquisition consideration was paid using Registrant Common
Stock at $3.33 and $3.43 per share based upon the election of the former
(pre-acquisition) Radiance stockholders to convert their shares at either
the average signing price or average closing price of Registrant Common
Stock:
<TABLE>
<S> <C>
9,118 Registrant shares used in computing basic and diluted net loss
per share.
839 Shares to former (pre-acquisition) Radiance stockholders,
assuming an August, 1997 acquisition date.
------
9,957 Pro forma shares used in computing pro forma basic and diluted
====== net loss per share.
</TABLE>
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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
RMS
REGISTRANT(a) ACQUISITION PRO FORMA
ACTUAL(b) ACTUAL(c) ADJUSTMENTS(7) PRO FORMA
------------- ----------- -------------- ---------
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATE:
Revenue:
Sales ................................. $ 7,031 $ -- $ (2,244)(1) $ 4,787
License fee and other ................. 1,605 -- 224 (2) 1,829
-------- -------- -------- --------
Total revenue ..................... 8,636 -- (2,020) 6,616
Costs and expenses:
Cost of sales ......................... 4,339 -- (1,086)(1) 3,253
Research and development .............. 5,038 1,025 120 (3)(4) 6,183
Marketing and sales ................... 3,801 -- (411)(1) 3,390
General and administrative ............ 1,855 45 (482)(1) 1,418
Minority interest ..................... (68) -- 68 (4) (0)
-------- -------- -------- --------
Total operating costs and expenses 14,965 1,070 (1,791) 14,244
-------- -------- -------- --------
Loss from operations ..................... (6,329) (1,070) (229) (7,628)
Other income ............................. 1,136 44 (65)(5) 1,245
-------- -------- -------- --------
Net loss ................................. $ (5,193) $ (1,026) $ (164) $ (6,383)
======== ======== ======== ========
Basic and diluted net loss per share(6) .. $ (0.59) $ (0.58)
======== ========
Shares used in computing basic and diluted
net loss per share(6) .................... 8,857 11,075
======== ========
</TABLE>
(a) Radiance Medical Systems, Inc., (formerly CardioVascular Dynamics, Inc.).
(b) Although not reflected in this pro forma statement, at the date of the
Merger, $3,842 was expensed for in-process research and development.
(c) Formerly Radiance Medical Systems, Inc., ("Radiance") a development stage
company, which began operations in August of 1997. On January 14, 1999,
Registrant acquired all of the Common Stock of Radiance not held by the
Registrant. In order to present pro forma operating results as if
Radiance's and Registrant's operations were combined for the nine months
ended September 30, 1998, the operating results of Radiance for the same
period are included.
(1) To exclude the operating results of the Vascular Access division from the
consolidated operating results for the period.
(2) To reflect license fee income on net sales of $2,244 at a 10% royalty
rate. This assumes that Escalon would have earned the same net sales level
as Registrant actually did during the period.
(3) To reflect amortization of the Radiance developed technology and
identified intangible assets using lives of 3 to 7 years.
(4) To reverse entries to record to Registrant's share of RMS Acquisition
operating results at September 10, 1998, which consisted of $136 of
research and development expenses and $68 in minority interests share of
losses.
(5) To reflect reduction of interest income from cash portion of the Radiance
acquisition consideration of $692 and acquisition costs of $400 at an
average rate of 5.5% per annum.
(6) To reflect an increase in the weighted average shares outstanding as 91%
of the Radiance acquisition consideration was paid using Registrant Common
Stock at $3.33 and $3.43 per share based upon the election of the former
(pre-acquisition) Radiance stockholders to convert their shares at either
the average signing price or average closing price, respectively, of
Registrant Common Stock:
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<TABLE>
<S> <C>
8,857 Registrant shares used in computing basic and diluted net
loss per share.
2,218 Shares to former (pre-acquisition) Radiance shareholders,
assuming an August, 1997 acquisition date.
------
11,075 Pro forma shares used in computing pro forma basic and
====== diluted net loss per share.
</TABLE>
(7) Although not reflected in this pro forma statement, the Company expects to
record a gain from the sale of the Vascular Access assets of $1,154.
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UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
REGISTRANT(a) PRO FORMA
ACTUAL(b) ADJUSTMENTS(1) PRO FORMA
------------- ------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS:
Cash and cash equivalents .................. $ 3,627 $ -- $ 3,627
Marketable securities available-for-sale ... 23,301 (192)(1)(2) 23,109
Other current assets ....................... 5,161 (600)(1) 4,561
-------- -------- --------
Total current assets .......................... 32,089 (792) 31,297
Property and equipment, net ................... 1,537 (146)(1) 1,391
Goodwill and other acquired intangibles, net .. 2,288 3,771 (2) 6,059
Other assets .................................. 378 -- 378
-------- -------- --------
Total assets ............................. $ 36,292 $ 2,833 $ 39,125
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities ........................... $ 3,532 $ -- $ 3,532
Minority interest ............................. 910 (910)(2) --
Stockholders' equity: ......................... -- -- --
Common stock ............................... 10 2 (2) 12
Additional paid-in capital ................. 60,679 7,429 (2) 68,108
Accumulated deficit ........................ (25,014) (3,688)(1)(2) (28,702)
Other stockholders' equity ................. (3,825) -- (3,825)
-------- -------- --------
Total stockholder's equity ............... 31,850 3,743 35,593
-------- -------- --------
Total liabilities and stockholder's equity $ 36,292 $ 2,833 $ 39,125
======== ======== ========
</TABLE>
(a) Radiance Medical Systems, Inc., (formerly CardioVascular Dynamics, Inc.).
(b) The accounts of RMS Acquisition are included in the consolidated balance
sheet of Registrant at September 30, 1998.
(1) To reflect sale of the Vascular Access division to Escalon, including a
$1,000 payment due and earned on the signing of the sale agreement for the
rights to the related technology, current inventory of $600 and net
property and equipment of $146 with estimated expenses of $100.
(2) To reflect the total purchase price of $8,523 which was paid 9% in cash,
or $692, and 91% by the issuance of 2,218,000 shares of Registrant Common
Stock valued at $7,431. Included in these amounts are shares of Registrant
Common Stock issuable for outstanding options for former (pre-acquisition)
Radiance Common Stock, which under the Merger Agreement fully vested upon
the closing of the transaction and were converted into options for
Registrant Common Stock. Lastly, Registrant expects to incur approximately
$400 of direct transaction costs that are also treated as part of the
purchase price.
The estimated total purchase price has been allocated as follows:
<TABLE>
<S> <C>
Book value of minority interest in the former (pre-acquisition) Radiance ................. $ 910
Estimated fair value of developed technology and related intangible assets ............... 3,072
Estimated fair value of acquired in-process research and development ..................... 3,842
Covenant not to compete .................................................................. 1,191
Reclassify amounts assigned to goodwill for previous purchases of former (pre-acquisition)
Radiance Preferred Stock ................................................................. (492)
-------
Estimated total purchase price ........................................................... $ 8,523
=======
</TABLE>
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(c) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
<S> <C>
2 Assets Sale and Purchase Agreement dated
January 21, 1999, by and between
Radiance Medical Systems, Inc., Escalon
Vascular Access, Inc. and Escalon
Medical Corp. Schedules and Exhibits
omitted. The Registrant shall furnish
supplementally to the Securities and
Exchange Commission a copy of any
omitted Schedule or Exhibit upon
request.
20 Press Release dated January 22, 1999.
</TABLE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
RADIANCE MEDICAL SYSTEMS, INC.
Date: January 28, 1999 By: /s/ Stephen R. Kroll
-----------------------------
Stephen R. Kroll
Chief Financial Officer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
<S> <C>
2 Assets Sale and Purchase Agreement dated
January 21, 1999, by and between
Radiance Medical Systems, Inc., Escalon
Vascular Access, Inc. and Escalon
Medical Corp. Schedules and Exhibits
omitted. The Registrant shall furnish
supplementally to the Securities and
Exchange Commission a copy of any
omitted Schedule or Exhibit upon
request.
20 Press Release dated January 22, 1999.
</TABLE>
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EXHIBIT 2
ASSETS SALE AND PURCHASE AGREEMENT
BY AND AMONG
ESCALON MEDICAL CORP.,
ESCALON VASCULAR ACCESS, INC.
AND
RADIANCE MEDICAL SYSTEMS, INC.
JANUARY 21, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - DEFINITIONS..........................................................1
ARTICLE II - SALE AND PURCHASE OF ASSETS AND ASSUMPTION OF CERTAIN LIABILITIES...5
2.1 Sale and Purchase of Assets....................................5
2.2 Assumption of Liabilities......................................6
2.3 Purchase Price.................................................7
2.4 Closing........................................................8
2.5 Delivery to Buyer..............................................8
2.6 Delivery to Seller.............................................9
2.7 Further Assurance..............................................9
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF SELLER
3.1 Corporate Status...............................................9
3.2 Authorization..................................................9
3.3 Consents and Approvals........................................10
3.4 Title to Purchased Assets and Related Matters.................10
3.5 Certain Personal Property.....................................10
3.6 Products......................................................10
3.7 Sales.........................................................11
3.8 Inventory.....................................................11
3.9 Liabilities...................................................11
3.10 Taxes.........................................................11
3.11 Legal Proceedings and Compliance with Law.....................11
3.12 Contracts.....................................................13
3.13 Insurance.....................................................14
3.14 Patents and Other Intellectual Property.......................14
3.15 Employee Relations............................................15
3.16 Employee Benefit Plans........................................15
3.17 Warranties....................................................15
3.18 Customers, Distributors and Suppliers.........................16
3.19 Foreign Corrupt Practices Act.................................16
3.20 Finder's Fees.................................................16
3.21 Size of Transactions..........................................16
3.22 Accuracy of Information.......................................16
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF BUYER AND ESCALON................16
4.1 Corporate Status..............................................16
4.2 Authorization.................................................17
4.3 Consents and Approvals........................................17
4.4 Legal Proceedings and Compliance with Law.....................17
4.5 Finder's Fees.................................................18
4.6 Accuracy of Information.......................................18
</TABLE>
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<TABLE>
<S> <C>
ARTICLE V - COVENANTS OF SELLER.................................................18
5.1 Operation of the Business.....................................18
5.2 Access........................................................18
5.3 No Other Negotiations.........................................18
5.4 Maintenance of the Purchased Assets...........................19
5.5 Employees and Business Relations..............................19
5.6 Confidentiality...............................................19
5.7 Expenses......................................................19
5.8 Fulfillment of Conditions.....................................20
5.9 Disclosure of Certain Matters.................................20
5.10 Satisfaction of Liabilities...................................20
5.11 Warranty Claims; Refunds and Credits..........................20
5.12 Noncompetition................................................20
ARTICLE VI - COVENANTS OF BUYER AND ESCALON.....................................21
6.1 Confidentiality...............................................21
6.2 Expenses......................................................22
6.3 Fulfillment of Conditions.....................................22
6.4 Disclosure of Certain Matters.................................22
6.5 Escalon's Obligations.........................................22
ARTICLE VII - COVENANTS OF BUYER AND SELLER.....................................22
7.1 Commercially Reasonable Efforts...............................22
7.2 Allocation of Consideration...................................23
ARTICLE VIII - CONDITIONS PRECEDENT TO THE TRANSACTIONS.........................23
8.1 Conditions to Obligations of Buyer............................23
8.2 Conditions to Obligations of Seller...........................24
ARTICLE IX - INDEMNIFICATION....................................................24
9.1 By Seller.....................................................24
9.2 By Buyer and Escalon..........................................25
9.3 Procedure for Claims..........................................26
9.4 Third Party Claims............................................26
ARTICLE X - TERMINATION.........................................................26
10.1 Grounds for Termination.......................................26
10.2 Effect of Termination.........................................27
ARTICLE XI - SURVIVAL OF REPRESENTATIONS AND WARRANTIES.........................27
ARTICLE XII - PUBLIC ANNOUNCEMENTS..............................................27
ARTICLE XIII - THE TRANSITION...................................................27
13.1 Transition....................................................27
13.2 Supply Agreement..............................................28
13.3 Employees.....................................................28
13.4 Losses; Maintenance of Insurance..............................28
ARTICLE XIV - CONTENTS OF AGREEMENT, AMENDMENT, PARTIES IN INTEREST,
ASSIGNMENT, ETC............................................................29
ARTICLE XV - INTERPRETATION.....................................................29
ARTICLE XVI - NOTICES...........................................................29
</TABLE>
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<TABLE>
<S> <C>
ARTICLE XVII - GOVERNING LAW....................................................30
17.1 Applicable Law...................................................30
17.2 Informal Dispute Resolution......................................30
17.3 Attorneys' Fee's.................................................31
ARTICLE XVIII - COUNTERPARTS....................................................31
ARTICLE XIX - REMEDIES CUMULATIVE...............................................32
ARTICLE XX - SEVERABILITY.......................................................32
</TABLE>
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ASSETS SALE AND PURCHASE AGREEMENT
THIS ASSETS SALE AND PURCHASE AGREEMENT is made as of January 21, 1999,
by and among ESCALON MEDICAL CORP., a California corporation ("Escalon"),
ESCALON VASCULAR ACCESS, INC., a Delaware corporation ("Buyer"), and RADIANCE
MEDICAL SYSTEMS, INC. (formerly CardioVascular Dynamics, Inc.), a Delaware
corporation ("Seller"). Certain terms used herein are defined below in Article I
or elsewhere in this Agreement.
BACKGROUND
Seller is engaged in business activities that include the development,
manufacture and marketing of devices for the treatment of cardiovascular
diseases and vascular access systems.
Seller desires to sell, and Buyer desires to purchase, the Seller's
Vascular Access Business (the "Business"), and, as part of such sale and
purchase, Buyer is willing to assume certain contractual obligations and
liabilities of the Business as set forth herein. Escalon owns all of the
outstanding capital stock of Buyer.
NOW, THEREFORE, in consideration of the respective covenants contained
herein and intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE I.
DEFINITIONS
For convenience, certain terms used in more than one part of this
Agreement are listed in alphabetical order and defined or referred to below
(such terms as well as any other terms defined elsewhere in this Agreement shall
be equally applicable to both the singular and plural forms of the terms
defined).
"Affiliates" means, with respect to a particular party, persons or
entities controlling, controlled by or under common control with that party,
including but not limited to any officers, directors and majority-owned entities
of that party and of its other Affiliates.
"Agreement" means this Agreement and the exhibits and schedules hereto.
"Assumed Liabilities" is defined in Section 2.2.
"Benefit Plans" means all employee benefit plans of a party within the
meaning of Section 3(3) of ERISA and any related or separate Contracts, plans,
trusts, programs, policies, arrangements, practices, customs and understandings,
in each case whether formal or informal, that provide benefits of economic value
to any present or former employee of a party, or present or former beneficiary,
dependent or assignee of any such employee or former employee.
"Business" is defined in the Background section of this Agreement.
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"Business Products" is defined in Section 2.3(c).
"Charter Documents" means an entity's certificate or articles of
incorporation, certificate defining the rights and preferences of securities,
articles of organization, general or limited partnership agreement, certificate
of limited partnership, joint venture agreement or similar document governing
the entity.
"Claim" means any allegation, claim, action, cause of action, lawsuit
or other legal proceeding, whether at law, in equity or before any governmental
agency, for damages, costs, losses or expenses incurred by any person as a
result of any actions or failure to act by any party, or its officers,
directors, employees or agents.
"Closing" means the Closing on the Transactions.
"Closing Date" is defined in Section 2.4.
"Code" means the Internal Revenue Code of 1986, as amended, and the
Regulations promulgated thereunder.
"Confidential Information" is defined in Section 3.14(b).
"Contract" means any written or oral contract, agreement, lease,
instrument or other commitment that is binding on any Person or its property
under applicable law.
"Court Order" means any judgment, decree, injunction, order or ruling
of any federal, state, local or foreign court or governmental or regulatory body
or authority that is binding on any Person or its property under applicable law.
"Default" means (i) a material breach, default or violation or (ii) the
occurrence of an event that with the passage of time or the giving of notice, or
both, would constitute a material breach, default or violation.
"Encumbrances" means any lien, mortgage, security interest, pledge,
restriction on transferability, defect of title or other Claim, charge or
encumbrance of any nature whatsoever on any property or property interest.
"Environmental Law" means any and all current or future statutes,
ordinances, orders, rules, regulations, judgments or any other legally
enforceable requirements of governmental authorities relating to the release,
generation, use, treatment, handling, transportation or disposal of Hazardous
Substances, or the protection of the environment or human health. Environmental
Laws include, but are not limited to, the following statutes (and their
implementing regulations):
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Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C.
9601, et seq.), the Resource Conservation and Recovery Act (42 U.S.C. 6901, et
seq.), the Federal Water Pollution Control Act (33 U.S.C. 1251, et seq.), the
Clean Air Act (42 U.S.C. 7401 et seq.), the Toxic Substance Control Act (15
U.S.C. 2601, et seq.), the Emergency Planning Community Right to Know Act (42
U.S.C. 11001, et seq.), and any other analogous present or future federal, state
or local statutes or laws, and any Regulations promulgated pursuant to any of
the foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the Regulations promulgated thereunder.
"Excluded Liabilities" is defined in Section 2.2.
"FDA" means the United States Food and Drug Administration.
"Governmental Body" means any federal, state, local or foreign
government entity or any court, administrative or regulatory agency or
commission or other governmental authority or agency.
"Governmental Permits" is defined in Section 3.11(d).
"Hazardous Substances" means any petroleum products and any chemicals,
materials, or substances at any time defined as or included in the definition of
"hazardous substances," "hazardous wastes," "hazardous materials," "extremely
hazardous waste," "acutely hazardous waste," radioactive waste," "biohazardous
waste," "pollutant," "toxic pollutant," "contaminant," "infectious waste,"
"toxic substances," or any other term or expression intended to define, list or
classify substances by reason of properties harmful to human health or the
environment under any applicable Environmental Laws.
"Initial Payment" is defined in Section 2.3(a).
"Intellectual Property" is defined in Section 3.14(a).
"IRS" means the United States Internal Revenue Service.
"Knowledge" means the actual knowledge of Seller, Buyer or Escalon, as
the case may be, or of any officer or other management employee of Seller, Buyer
or Escalon, respectively, and such knowledge as any of the foregoing should have
obtained upon reasonable inquiry.
"Liability" means any direct or indirect liability, indebtedness,
obligation, expense, Claim, loss, damage, deficiency, guaranty or endorsement of
or by any Person, absolute or
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contingent, accrued or unaccrued, due or to become due, liquidated or
unliquidated.
"Litigation" means any lawsuit, action, arbitration, administrative or
other proceeding, criminal prosecution or governmental investigation or inquiry.
"Material Adverse Effect" means a material adverse effect on the
financial condition, results of operations, liquidity, products, competitive
position, customers and customer relations of the Business or any of the
Purchased Assets.
"Minor Contracts" is defined in Section 3.12(a).
"Net Sales" is defined in Section 2.3(b).
"Notified Body" means TUV Product Service GmbH, Niederlassung Munchen/
Munich Branch, Ridlerstr.31, D-80339 Munchen, Germany.
"Ordinary Course" or "ordinary course of business" means the ordinary
course of business that is consistent with past practices.
"Person" means any natural person, corporation, partnership,
proprietorship, association, trust or other legal entity.
"Purchased Assets" is defined in Section 2.1.
"Regulation" means any statute, law, ordinance, regulation, order or
rule of any federal, state, local, foreign or other governmental agency or body
or of any other type of regulatory body, including those covering food and drug,
environmental, energy, safety, health, transportation, bribery, recordkeeping,
zoning, antidiscrimination, antitrust, wage and hour, and price and wage control
matters.
"Related Party" shall mean a Person who controls or is controlled by
Buyer or Escalon.
"Required Consents" is defined in Section 3.3.
"Returns" means all returns, reports, forms, declarations, claims for
refunds or other information required to be filed or supplied to any Person in
connection with Taxes (including without limitation information returns and
declarations of estimated Tax). (Any reference to "filed" or "file" with respect
to Taxes shall also be deemed to include "supplied" or "supply.")
"Second Payment" is defined in Section 2.3(a).
"Seller Disclosure Schedule," or individually each "Schedule," means
the disclosure
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schedule provided by Seller in connection with this Agreement.
"Tax" means all U.S. federal, state, local and non-U.S. income taxes
plus all charges, fees, levies or other assessments whether federal, state,
local or non-U.S. based upon or measured by income, capital, net worth or gain
and any other tax including but not limited to all net income, gross income,
advance corporate tax, gross receipts, value-added, sales, use ad valorem,
transfer, franchise, profits, withholding, payroll, employment, social security,
unemployment, FICA, FUTA, excise, occupation, property or other taxes, customs,
duties, fees, assessments or charges of any kind whatsoever including all
interest and penalties thereon, and additions to tax or additional amounts
imposed by any Governmental Body.
"Termination Date" is defined in Section 10.1(b).
"Transaction Documents" means this Agreement and the other agreements
and documents contemplated hereby and thereby.
"Transactions" means the transactions contemplated by the Transaction
Documents.
"Transition" is defined in Section 13.1.
ARTICLE II.
SALE AND PURCHASE OF ASSETS
AND ASSUMPTION OF CERTAIN LIABILITIES
II.1 Sale and Purchase of Assets. Subject to the terms and conditions
of this Agreement, at the Closing, Seller shall sell, transfer, convey, assign
and deliver to Buyer, and Buyer shall purchase, acquire and accept from Seller,
all the right, title and interest of Seller in and to the properties and assets
described below which are used exclusively in the manufacture or distribution of
the Business Products, free and clear of any and all liabilities, obligations,
Claims, Encumbrances, charges and restrictions of every kind nature and
description, except for the contractual obligations to be assumed by Buyer
pursuant to Section 2.2 hereof (the "Purchased Assets"):
(a) All machinery, equipment, tools and furniture;
(b) All inventories and supplies;
(c) To the extent permitted by applicable law, and except for
the accounts receivable related to the Business, all rights under any written or
oral Contract, agreement, lease, plan, instrument, registration, license, other
permit or approval of any nature, or other document, commitment, arrangement,
undertaking, practice, registration, certification, regulatory clearance or
approval or authorization;
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(d) All rights under any patent, trademark, service mark,
trade name or copyright, whether registered or unregistered, and any
applications therefor;
(e) All technologies, methods, formulations, data bases, trade
secrets, know-how, inventions and other intellectual property exclusively used
in, or under development for, the Business;
(f) All computer firmware (including documentation and related
object and source codes) embedded in the Business Products;
(g) All causes of action, claims, demands, rights against
third parties and choses in action arising out of occurrences before or after
the Closing, including without limitation all rights under express or implied
warranties relating to the Purchased Assets and other intangible rights and
assets, including goodwill associated with the Business and the Purchased
Assets; and
(h) All information, files, records, data, plans, contracts
and recorded knowledge, including customer and supplier lists, related to the
foregoing.
Schedule 2.1 hereto sets forth a list of all of the Purchased Assets.
II.2 Assumption of Liabilities. At the Closing, Buyer shall assume and
be liable and responsible only for those Liabilities of Seller that are
specified on Schedule 2.2 hereto (the "Assumed Liabilities"), as of the Closing,
and Buyer shall not be deemed to assume or to be otherwise liable for any
Liabilities of Seller other than the Assumed Liabilities. Seller shall retain
(and Buyer shall not be obligated for) any and all Liabilities of Seller of any
type that are not specified on Schedule 2.2 hereto (the "Excluded Liabilities").
Such Excluded Liabilities include (i) any Liabilities of Seller to the holders
of any of its debt or equity securities, including its shareholders, warrant
holders or option holders for any reason, (ii) any tax Liabilities, including
any such Liabilities of Seller related to consummation of the Transactions,
(iii) any Liabilities arising out of the breach by Seller of any Contract, (iv)
any Liabilities or other claims under any product warranty, (v) any product
liability or similar Claim for injury to any Person or property, (vi) any
Liabilities arising out of the violation by Seller of Environmental Law and
(vii) any Liabilities arising prior to or as a result of the Closing to any
employees, agents or independent contractors of Seller, whether or not employed
by Buyer after the Closing, or under any Benefit Plan with respect thereto.
After Closing, Buyer will perform all of its obligations relating to the Assumed
Liabilities in accordance with the terms thereof.
II.3 Purchase Price.
(a) The cash portion of the purchase price for the Purchased
Assets shall be an amount equal to $2,000,000, of which (i) $1,000,000, as
adjusted pursuant to Section 2.3(b) hereof, (the "Initial Payment") shall be
payable at Closing and (ii) $1,000,000 (the "Second
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Payment") shall be payable upon the earlier to occur of the completion of the
Transition or nine months after the Closing Date; provided, however, that,
subject to the satisfaction of its obligations under Section 13.1 hereof to
assist Buyer in establishing a fully operational production line during the
Transition, Seller shall not be obligated to complete the transfer of the
inventory and equipment constituting the Purchase Assets to Buyer's Milwaukee,
Wisconsin facility until Buyer shall have paid the Second Payment.
(b) The Initial Payment shall be adjusted as follows: within
two days prior to the Closing Date, Seller shall deliver to Buyer Seller's
determination of the value of the inventory of raw material, work in progress
and finished goods of the Business (the "Inventory Value") included in the
Purchased Assets purchased by Buyer hereunder. Buyer shall have the right to
review and approve the inventory to be transferred and the Inventory Value. In
the event that the Inventory Value, as approved by Buyer, is less than $600,000,
the purchase price shall be reduced dollar for dollar by the amount that the
Inventory Value, as approved by Buyer, is less than $600,000. In the event that
the Inventory Value, as approved by Buyer, is more than $600,000, the purchase
price shall be increased dollar for dollar by the amount that the Inventory
Value is greater than $600,000.
(c) Buyer shall also pay to Seller as part of the purchase
price for the Purchased Assets royalties in an amount equal to 10% of Net Sales
of Business Products sold by Buyer, its Related Parties, its licensees and
assignees during the five-year period following the Closing Date (the "Royalty
Period"); provided, however, that if Buyer, its licensees and/or assignees
cannot sell any Business Products in any jurisdiction because a third party
holds a patent that blocks any patent relating to such Business Products or if
any license or other royalty-bearing right is otherwise required to be obtained
by Buyer in connection with the research, development, manufacture, use and/or
sale of such Business Products in any jurisdiction, Buyer shall give written
notice thereof to Seller, and if Seller shall be unable to secure Buyer's
unrestricted right to sell the Business Products in such jurisdiction without
obtaining a license or other royalty-bearing right within 90 days after the date
of Buyer's notice, the royalty payable under this Agreement with respect to the
Net Sales of the Business Products so affected in the respective jurisdiction(s)
shall be reduced by an amount equal to the amount payable by Buyer to any third
party to obtain a license or other royalty-bearing right; but further provided,
however, that no adjustment in the royalty payable by Buyer to Seller hereunder
shall be made by reason of Buyer's obligation to pay royalties to Paul Yock,
M.D. and Alan R. Selfridge pursuant to the License Agreement dated November 1,
1989 among Paul Yock, M.D., Alan R. Selfridge and Advanced Cardiovascular
Systems, Inc., which License Agreement was assigned to Seller pursuant to an
Assignment and Assumption Agreement between Advanced Cardiovascular Systems,
Inc. and the Seller dated January 20, 1999. As used herein: (A) "Business
Products" means the Smartneedle and PDAccess products being sold by Seller on
the Closing Date, as described more particularly on Schedule 3.6, including any
improvements to these products made by Buyer during the Royalty Period as well
as any additional products whose primary function is to identify and access
veins and arteries and that incorporate the Intellectual Property that are
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developed, manufactured, distributed or sold by Buyer; and (B) "Net Sales" means
the gross price of Business Products sold by Buyer, its Related Parties, its
licensees and assignees, in arm's-length transactions to third party buyers,
including all packaging, instructional and other charges made to a purchaser,
less trade discounts, rebates and refunds or credits allowed for returns or
rejections of previously delivered Business Products, and sales or excise taxes.
In the event Buyer transfers Business Products for consideration, in whole or in
part, other than cash, the Net Sales will be based on the weighted average of
the gross price then being invoiced by Buyer in arm's-length transactions with
similar customers. Royalty payments shall be made quarterly in arrears in U.S.
currency based on reported Net Sales, which Net Sales are subject to review and
audit by Seller at Seller's expense. If the review results in a determination of
an underpayment of royalties to Seller, such underpayment shall be promptly
remitted to Seller with interest at a rate of 7% per annum, accruing quarterly.
If such review determines that Net Sales were more than 110% of the Net Sales
reported by Buyer for the period under review, Buyer shall pay all of the
reasonable costs of such review. Royalties shall be paid to Seller free and
clear of foreign taxes, except taxes that Buyer, its licensees and/or assigns
may be required to withhold in a foreign country. With respect to Net Sales made
during each 12-month period during the Royalty Period commencing on the Closing
Date (each such period a "Royalty Year"), Buyer shall pay to Seller minimum
royalty payments under this Section 2.3(c) of not less than $300,000. In the
event that the royalties payable under this Section 2.3(c) with respect to Net
Sales made during any royalty year are less than $300,000, Buyer shall, within
30 days after the end of such Royalty Year, pay to Seller the difference between
$300,000 and the amount of such royalties actually paid by Buyer with respect to
such Royalty Year.
II.4 Closing. Unless this Agreement shall have been terminated and the
Transactions abandoned pursuant to Article X, subject to satisfaction or waiver
of the conditions to the Transactions set forth in Article VIII, the Closing
shall take place as promptly as practicable (and in any event within five
business days) after satisfaction or waiver of the conditions to the
Transactions set forth in Article VIII, at such place as the parties shall agree
in writing. The date on which the Closing occurs is referred to herein as the
"Closing Date."
II.5 Delivery to Buyer. At the Closing, Seller will deliver to Buyer
(i) a duly executed Bill of Sale in the form annexed hereto as Exhibit A; (ii)
assignments of all Contracts described in Schedule 2.1 hereto; (iii) all
documents of title necessary to transfer ownership to Buyer of the equipment and
personal property listed on Schedule 2.1 hereto; (iv) assignments of all
patents, trademarks, trade names, assumed names and copyrights and all
applications therefor that are listed on Schedule 2.1 hereto; (v) executed
copies of each of the consents referred to in Schedule 3.3; (vi) all documents
containing or exclusively relating to the Purchased Assets; (vii) all such other
endorsements, assignments and other instruments as, in the opinion of Buyer or
Buyer's counsel, are necessary to vest in Buyer good and marketable title to the
assets to be transferred to Buyer pursuant to this Agreement; and (viii) all
other previously undelivered documents required to be delivered by Seller to
Buyer at or prior to the Closing in connection with the Transactions, including
those contemplated by Article VIII.
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II.6 Delivery to Seller. At the Closing, Buyer will deliver to Seller
(i) instruments of assumption of the Assumed Liabilities; and (ii) all other
previously undelivered documents required to be delivered by Buyer to Seller at
or prior to the Closing in connection with the Closing, including those
contemplated by Article VIII.
II.7 Further Assurance. If at any time after the Closing Date any
further assignments, conveyances or assurances in law are necessary or desirable
to vest, perfect or confirm of record in Buyer the title to any of the Purchased
Assets, or to confirm the assumption by Buyer of any liability or obligation of
Seller expressly assumed by Buyer hereunder, or otherwise to carry out the
provisions hereof, the proper officers and directors of Seller or of Buyer, as
the case may be, shall execute and deliver any and all proper deeds,
assignments, instruments of assumption, powers of attorney and assurances in
law, and do all things necessary or proper to vest, perfect or confirm title to
such property or rights in Buyer or to confirm the assumption by Buyer of any
such liability or obligation of Seller, as the case may be, and otherwise to
carry out the provisions hereof.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as set forth in any Seller Disclosure Schedule, Seller hereby
represents and warrants to Buyer as follows:
III.1 Corporate Status. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite corporate power and authority to carry on its business as it is
now being conducted, and to execute, deliver and perform this Agreement and to
consummate the transactions contemplated hereby. Seller is qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
where it is required to be so qualified, except where the failure to so qualify
would not have a Material Adverse Effect.
III.2 Authorization. Seller has the requisite power and authority to
execute and deliver the Transaction Documents to which it is or will be a party
and to perform the Transactions to be performed by it. Such execution, delivery
and performance by Seller has been duly authorized by all necessary corporate
action. The Transaction Documents executed on or before the date hereof
constitute, and the Transaction Documents to be executed after the date hereof
will constitute, valid and binding obligations of Seller, enforceable against
Seller in accordance with their terms.
III.3 Consents and Approvals. Except for the consents specified in
Schedule 3.3 (the "Required Consents"), neither the execution and delivery by
Seller of the Transaction Documents to which it is or will be a party, nor the
performance of the Transactions to be performed by
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Seller, will require any filing, consent or approval or constitute a Default
under (a) any Regulation or Court Order to which Seller is subject, (b) the
Charter Documents or by-laws of Seller or (c) any Contract, Governmental Permit
or other document to which Seller is a party or to which the Purchased Assets
may be subject.
III.4 Title to Purchased Assets and Related Matters. Seller has good
and marketable title to all of the Purchased Assets, free from any Encumbrances
except those specified in Schedule 3.4; and upon consummation of the
transactions contemplated hereby, good and marketable title to the Purchased
Assets will be vested in Buyer. The use of the Purchased Assets is not subject
to any Encumbrances (other than those specified in the preceding sentence). The
Purchased Assets constitute all of the assets necessary used by Seller
exclusively in the operation of the Business. There are no outstanding
agreements, confinements or Encumbrances inconsistent with the provisions of
this Agreement, whether or not entered into by Seller or any of its predecessors
in interest with respect to the Business or the Purchased Assets or otherwise.
III.5 Certain Personal Property. Schedule 2.1 describes and specifies
the location of all items of equipment, machinery, tools and furniture used
exclusively in the manufacture and distribution of the Business Products. All of
the equipment, machinery, tools and furniture used exclusively in the
manufacture and distribution of the Business Products are in good operating
condition, reasonable wear and tear excepted.
III.6 Products. Schedule 3.6(a) sets forth a list of all of the
Business Products. Seller has not received any written complaints or, to its
knowledge any other complaints, from any customer or distributor concerning the
Business Products. There are no defects in design, construction or manufacture
of Business Products which would adversely affect performance or create an usual
risk of injury to persons or property. None of the Business Products has been
the subject of any replacement, field fix, retrofit, modification or recall
campaign and, to Seller's knowledge, no facts or conditions exist which could
reasonably be expected to result in such a recall campaign. The Business
Products have been designed and manufactured so as to meet and comply with all
governmental standards and specifications currently in effect, and have received
all governmental approvals necessary to allow their sale and use in all
jurisdictions where they are currently being sold. Schedule 3.6(b) sets forth a
list of all regulatory approvals in effect at Closing.
III.7 Sales. Schedule 3.7 sets forth a schedule of all products sold by
the Business on a quarterly basis during the past two years, the net sales price
of each product and the costs of goods sold with respect thereto.
III.8 Inventory. All inventory of Seller comprising part of the
Purchased Assets consists of items of quality and quantity saleable in the
ordinary course of business at regular sales prices of Seller. The inventory
records for the Business that have been delivered to Buyer are complete and
accurate with respect to the data contained therein.
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III.9 Liabilities. Except as specified in Schedule 3.9, none of the
Purchased Assets is subject to any Liabilities, except Liabilities under any
Contracts specifically disclosed on the Seller Disclosure Schedule.
III.10 Taxes. Except as otherwise set forth in Section 3.10 of the
Seller Disclosure Schedule:
(a) Seller, with respect to the Business, (and each
affiliated, combined or unitary group of which Seller is or was a member) has:
(a) duly and timely filed all Returns that it was required to file and each such
Return is true, complete and correct and (b) paid, or made an adequate provision
in its financial statements in accordance with generally accepted accounting
principles for, all Taxes owed by it (whether or not shown on any Return).
(b) Seller, with respect to the Business, has satisfied all
federal, state, local and foreign withholding tax requirements including but not
limited to income, social security and employment tax.
(c) There are no Encumbrances for Taxes on any of the
Purchased Assets.
(d) No transaction contemplated by this Agreement is subject
to withholding under Section 1445 of the Code.
III.11 Legal Proceedings and Compliance with Law.
(a) Except as disclosed in Schedule 3.11(a), there is no
Litigation that is pending or, to Seller's knowledge, threatened against or
related to Seller that relates to or could have a Material Adverse Effect on the
operations of the Business or any of the Purchased Assets. There has been no
Default under any Regulations applicable to Seller, including Regulations
relating to pollution or protection of the environment or Regulations
promulgated by the FDA, except for any Defaults that would not have a Material
Adverse Effect. There has been no Default with respect to any Court Order
applicable to Seller.
(b) Seller has complied in all material respects with all
federal, state, local and foreign laws, ordinances, Regulations and orders
(including, without limitation, those relating to environmental protection,
occupational safety and health, federal securities laws, equal employment
opportunity, consumer protection, medical devices, manufacturing processes,
warranties and trade practices) applicable to the Business and the sale of the
Business Products. Seller has all federal, state, local and foreign governmental
licenses and permits material to and necessary in the conduct of the Business as
presently conducted and the sale of the Business Products, and such licenses and
permits are in full force and effect; no violations are or have been recorded in
respect of any such licenses or permits, and no proceeding is pending or, to the
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best knowledge of Seller, threatened to revoke or limit any such licenses or
permits.
(c) All Business Products are and have been in all material
respects in compliance with all applicable Regulations of the FDA applicable to
such products. There is no basis known to Seller for the FDA, Seller's Notified
Body or any other Governmental Body to deny or rescind any approval or clearance
to market any of the Business' commercially distributed products for the purpose
or indication for which they are being manufactured, assembled, marketed or
sold. To Seller's knowledge, there is no action or proceeding by the FDA,
Seller's Notified Body or any other Governmental Body, including, but not
limited to, recall procedures or withdrawal of clearance to market any Business
Products, pending or threatened against Seller relating to the safety or
efficacy of any Business Products, and, to the best knowledge of Seller there is
no basis for any such action or proceeding. Seller has received the regulatory
approvals to market the Business Products in all jurisdictions where they are
currently being marketed. There are no outstanding notices of Defaults or
warning letters from the FDA or the Seller's Notified Body. Seller has
previously provided to Buyer Seller's complete file with respect to all FDA, CE
mark and other Governmental Body approvals and certifications of the Business
Products and the facility in which they are being manufactured, and such files
are being transferred to Buyer hereunder as part of the Purchased Assets.
(d) Seller has obtained and is in full compliance with all
federal, state, local and foreign governmental permits, licenses, registrations,
certificates of occupancy, approvals and other authorizations (the "Governmental
Permits"), all of which are listed in Schedule 3.11(d) along with their
respective expiration dates, that are required for the complete operation of the
Business as currently operated, except where the failure to be in full
compliance would not have a Material Adverse Effect. All of the Governmental
Permits are currently valid and in full force, and to Seller's knowledge, no
revocation, cancellation or withdrawal thereof has been threatened. Seller has
filed such timely and complete renewal applications as may be required with
respect to its Governmental Permits.
III.12 Contracts.
(a) Schedule 3.12(a) lists each Contract of the following
types to which Seller is a party, or by which it is bound, that relates to the
operations of the Business or any of the Purchased Assets, except for (i) any
Contract that may be terminated by Seller on not more than 30 days' notice
without any Liability and (ii) any Contract under which the executory obligation
of Seller involves an amount less than $5,000 (such excepted Contracts are
referred to collectively as "Minor Contracts"):
(i) Contracts with any present or former stockholder,
director, officer, employee, partner or consultant of Seller or Affiliate
thereof;
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(ii) Contracts for the future purchase of, or payment
for, supplies or products, or for the lease of any asset from or the performance
of services by a third party, in excess of $5,000 in any individual case, or any
Contracts for the sale of inventory or products that involve an amount in excess
of $5,000 with respect to any one supplier or other party;
(iii) Contracts to sell or supply products or to
perform services that involve an amount in excess of $5,000 in any individual
case;
(iv) Contracts to lease to or to operate for any
other party any asset that involve an amount in excess of $5,000 in any
individual case;
(v) Any notes, debentures, bonds, conditional sale
agreements, equipment trust agreements, letter of credit agreements,
reimbursement agreements, loan agreements or other Contracts for the borrowing
or lending of money (including loans to or from officers, directors, partners,
stockholders or Affiliates of Seller or any members of their immediate
families), agreements or arrangements for a line of credit or for a guarantee
of, or other undertaking in connection with, the indebtedness of any other
Person;
(vi) Any Contracts under which any Encumbrances exist
with respect to any Purchased Assets; and
(vii) Any other Contracts (other than Minor Contracts
and those described in any of subsections (i) through (vi) above) not made in
the ordinary course of business.
(b) Except as disclosed in Section 3.12(b) of the Seller
Disclosure Schedule, to Seller's knowledge, Seller is not in Default under any
Contract that relates to or could affect the operations of the Business or any
of the Purchased Assets, which Default could result in a Liability on the part
of Seller in excess of $5,000 in any individual case, and the aggregate
Liabilities that could result from all such Defaults do not exceed $5,000.
Except as disclosed in Section 3.12(b) of the Seller Disclosure Schedule, Seller
has not received any communication from, or given any communication to, any
other party indicating that Seller or such other party, as the case may be, is
in Default under any Contract where such Default could have a Material Adverse
Effect.
III.13 Insurance. There are no policies or binders of insurance held by
or on behalf of Seller exclusively relating to the Business.
III.14 Patents and Other Intellectual Property.
(a) Seller has exclusive title to, owns, possesses, has the
sole right to use or, where necessary, has made timely and proper application
for, all copyrights, trademarks, trade
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names, service marks, franchises, certificates of public convenience and
necessity, patents, patent rights, licenses, trade secrets, information,
proprietary rights and processes, intellectual property rights listed on
Schedule 2.1 hereto (the "Intellectual Property") necessary or required to
conduct the Business as conducted. All of the Intellectual Property is owned or
otherwise lawfully used by Seller, and to Seller's knowledge, Seller is not
infringing upon, conflicting with or unlawfully or wrongfully using any patent,
trademark, trade name, service mark, copyright, trade secret or other
intellectual property right owned or claimed by another Person. Seller is not in
Default, and has not received any notice of any claim of infringement or any
other Claim or proceeding, with respect to any such patent, trademark, trade
name, service mark, copyright or trade secret. No current or former employee of
Seller and, to Seller's knowledge, no other Person owns or has any proprietary,
financial or other interest, direct or indirect, in whole or in part, in any of
the Intellectual Property, or in any application therefor.
(b) Seller has taken all appropriate measures to protect and
preserve the security, confidentiality and value of its Confidential
Information. "Confidential Information" means those items of the Intellectual
Property that are confidential and any other confidential information owned by
Seller, including personnel information, technical information, customer lists,
other customer information and supplier information. Except as disclosed in
Section 3.14(b) of the Seller Disclosure Schedule, all employees and consultants
of Seller who are involved in the design, review, evaluation or development of
products or Intellectual Property have executed a nondisclosure and assignment
of inventions agreement sufficient to protect the confidentiality and value of
the Intellectual Property and to vest in Seller exclusive ownership of such
Intellectual Property. To Seller's knowledge, all Confidential Information that
constitutes Intellectual Property is currently valid and protectable and is not
part of the public domain or knowledge, nor to the knowledge of Seller, has it
been used, divulged or appropriated for the benefit of any Person other than
Seller or otherwise to the detriment of Seller and no such employee or
consultant is subject to any contractual or legal restrictions that might
interfere with the use of their best efforts to promote the interests of Seller.
To Seller's knowledge, no employee or consultant of Seller has used any
Confidential Information of any other Person in the course of his work for
Seller.
(c) Seller has all right, title and interest in and to all of
the Intellectual Property, and the same is free and clear of all Claims,
Encumbrances and the like of any nature whatsoever. Seller has not granted any
licenses to its proprietary property and is not aware of any third parties who
are claiming any right, title or interest in or to such Intellectual Property or
who are infringing or violating any of such Intellectual Property. Seller is not
bound by or a party to any option, license or agreement of any kind with respect
to such patents, patent applications, inventions, trademarks, service marks,
trade names, licenses, franchises, copyrights, trade secrets, information and
other proprietary rights and processes or with respect to any such property and
rights of any other person or entity relating to the operation of the Business
or any of the Purchased Assets.
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(d) Except as set forth in Schedule 3.14(d), no royalties,
consulting or advisory fees or other payments are payable by Seller to any other
person by reason of the ownership or use of the Intellectual Property.
III.15 Employee Relations. Seller is not (a) a party to, involved in
or, to Seller's knowledge, threatened by, any labor dispute or unfair labor
practice charge relating to the Business or (b) currently negotiating any
collective bargaining agreement with any employees of the Business, and Seller
has not experienced any work stoppage by any employees of the Business during
the three years immediately preceding the execution of this Agreement.
III.16 Employee Benefit Plans. Except as set forth in Schedule 3.16,
the consummation of the transactions contemplated by this Agreement will not (i)
entitle any current or former employee of Seller or any other Person to
severance pay, unemployment compensation or any similar payment; or (ii)
accelerate the time of payment or vesting or increase the amount of any
compensation due to any such employee or former employee.
III.17 Warranties. All goods sold or distributed by the Business were
of merchantable quality, and Seller has not breached any express or implied
warranties in connection with the sale or distribution of such goods, except for
breaches that, individually and in the aggregate, would not have a Material
Adverse Effect. Set forth in Schedule 3.17 are true and correct copies of all
warranties (a) made by all Persons from whom Seller has obtained any goods that
have been resold or distributed by the Business, including any goods that
constituted parts included in other goods sold or distributed by the Business
and (b) made by Seller with respect to any goods that have been sold or
distributed by Seller.
III.18 Customers, Distributors and Suppliers. Seller has used
commercially reasonable efforts to maintain, and currently maintains, good
working relationships with all of the customers, distributors and suppliers to
the Business. Schedule 3.18(a) lists any Contracts relating to the operation of
the Business or any of the Purchased Assets with customers or distributors or
former customers or distributors of Seller that have been terminated or canceled
during the one-year period prior to the date hereof. Schedule 3.18(b) also
contains a list of the names of each of the major customers and distributors of
the Business. Except as disclosed in Schedule 3.18(c), none of such customers or
distributors has given Seller written notice, or to Seller's knowledge any other
notice, terminating, canceling or threatening to terminate or cancel any
Contract or relationship with Seller, and none of such customers or distributors
is, or has been during the one year period immediately preceding the execution
of this Agreement, a related party to Seller. Schedule 3.18(d) also contains a
list of the names of the major suppliers of components of and materials used in
the manufacture of the Business Products. None of such suppliers has given
Seller written notice, or to Seller's knowledge, any other notice, terminating,
canceling or threatening to terminate or cancel any Contract or relationship
with Seller.
III.19 Foreign Corrupt Practices Act. Seller has not made, offered or
agreed to offer
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anything of value to any governmental official, political party or candidate for
political office in violation of the Foreign Corrupt Practices Act of 1977, as
amended.
III.20 Finder's Fees. No Person retained by Seller is or will be
entitled to any commission or finder's or similar fee in connection with the
Transactions.
III.21 Size of Transactions. The consummation of the Transactions
will not constitute a sale by Seller of more than one-half of Seller's inventory
and equipment as measured by the fair market value of such inventory and
equipment as of the date of this Agreement.
III.22 Accuracy of Information. No representation or warranty by
Seller in any Transaction Document, and no information contained therein,
contains any untrue statement of a material fact or omits to state any material
fact necessary in order to make the statements contained herein or therein not
misleading.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF BUYER AND ESCALON
Buyer and Escalon hereby represent and warrant to Seller as follows:
IV.1 Corporate Status. Each of Buyer and Escalon is a corporation
duly organized, validly existing and in good standing under the laws of the
respective state of its incorporation and has all requisite corporate power and
authority to carry on its business as it is now being conducted, and to execute,
deliver and perform this Agreement and to consummate the transactions
contemplated hereby. Each of Buyer and Escalon is qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where it is
required to be so qualified, except where the failure to do so would not have a
Material Adverse Effect.
IV.2 Authorization. Each of Buyer and Escalon has the requisite
power and authority to execute and deliver the Transaction Documents to which it
is or will be a party and to perform the Transactions to be performed by it.
Such execution, delivery and performance by Buyer and Escalon has been duly
authorized by all necessary corporate action. The Transaction Documents executed
on or before the date hereof constitute, and the Transaction Documents to be
executed after the date hereof will constitute, valid and binding obligations of
Buyer and/or Escalon, as the case may be, enforceable against them,
respectively, in accordance with their terms.
IV.3 Consents and Approvals. Neither the execution and delivery by
Buyer or Escalon of the Transaction Documents to which it is or will be a party,
nor the performance of the Transactions to be performed by Buyer or Escalon,
will require any filing, consent or approval or constitute a Default under (a)
any Regulation or Court Order to which Buyer or Escalon is subject, (b) the
Charter Documents or by-laws of Buyer or Escalon or (c) any Contract, Government
Permit or other document to which Buyer or Escalon is a party or by which the
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properties or other assets of Buyer or Escalon may be subject.
IV.4 Legal Proceedings and Compliance with Law.
(a) Except as disclosed in Schedule 4.4, there is no
Litigation that is pending or, to the knowledge of Buyer or Escalon, threatened
against or related to Buyer or Escalon that relates to or could have a Material
Adverse Effect on the operations of the Buyer or Escalon. To the knowledge of
Buyer or Escalon, there has been no Default under any Regulations applicable to
Buyer or Escalon, including Regulations relating to pollution or protection of
the environment or Regulations promulgated by the FDA, except for any Defaults
that would not have a Material Adverse Effect. There has been no Default with
respect to any Court Order applicable to Buyer or Escalon.
(b) Each of Buyer and Escalon has complied in all material
respects with all federal, state, local and foreign laws, ordinances,
Regulations and orders (including, without limitation, those relating to
environmental protection, occupational safety and health, federal securities
laws, equal employment opportunity, consumer protection, medical devices,
manufacturing processes, warranties and trade practices) applicable to the
business of the Buyer and Escalon, respectively. Each of Buyer and Escalon has
all federal, state, local and foreign governmental licenses and permits material
to and necessary in the conduct of its business and the sale of its products,
and such licenses and permits are in full force and effect; no violations are or
have been recorded in respect of any such licenses or permits, and no proceeding
is pending or, to the best knowledge of Buyer or Escalon, threatened to revoke
or limit any such licenses or permits.
IV.5 Finder's Fees. No Person retained by Buyer or Escalon is or will
be entitled to any commission or finder's or similar fee in connection with the
Transactions.
IV.6 Accuracy of Information. No representation or warranty by Buyer or
Escalon in the Transaction Document, and no information contained therein,
contains any untrue statement of a material fact or omits to state any material
fact necessary in order to make the statements contained herein or therein not
misleading.
ARTICLE V.
COVENANTS OF SELLER
V.1 Operation of the Business. From the date hereof to the Closing,
Seller shall conduct the operations and business of the Business solely in the
ordinary course, and shall refrain from the following actions in furtherance of
and in addition to such restriction (except as contemplated by this Agreement):
(a) selling or otherwise disposing of any Purchased Assets other than in the
ordinary course; (b) entering into any Contract or otherwise incurring any
Liability with respect to the Business, even if in the ordinary course, if
Seller's executory
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obligation in any such individual case, or series of related cases, exceeds
$5,000, except for a Contract relating to the sale of the Business Products in
the ordinary course; (c) discharging or satisfying any Encumbrance or paying or
satisfying any material Liability except pursuant to the terms thereof or
compromising, settling or otherwise modifying any material Claim or litigation;
or (d) making any capital expenditure involving in any individual case, or
series of related cases, more than $5,000.
V.2 Access. Seller shall give Buyer and its accountants, counsel and
other representatives full access, without unreasonably interfering with
business operations, to all properties, books, Contracts and records of Seller
relating to the Business and the Purchased Assets and shall furnish to Buyer all
such documents, records and information as Buyer shall from time to time
reasonably request.
V.3 No Other Negotiations. Until the earlier of the Closing or the
termination of this Agreement, Seller shall not (a) solicit, encourage, directly
or indirectly, any inquiries, discussions or proposals for any acquisition of
any part of the Purchased Assets or the Business, (b) continue, propose or enter
into any negotiations or discussions relating to any acquisition of any part of
the Purchased Assets or the Business or (c) enter into any agreement or
understanding providing for any acquisition of any part of the Purchased Assets
or the Business, other than as contemplated or authorized hereby, nor shall
Seller provide any information to any Person for the purpose of evaluating or
determining whether to make or pursue any such inquiries or proposals with
respect to any such acquisition. Seller shall immediately notify Buyer of any
such inquiries or proposals or requests for information for such purpose. Seller
shall use commercially reasonable efforts to cause the directors, officers,
employees, agents and other representatives of Seller to comply with the
provisions of this Section 5.3.
V.4 Maintenance of the Purchased Assets. Seller shall continue to
maintain and service the Purchased Assets consistent with past practice. Seller
shall not, directly or indirectly, sell or encumber all or any part of the
Purchased Assets, other than sales in the ordinary course of business, or
initiate or participate in any discussions or negotiations or enter into any
agreement to do any of the foregoing.
V.5 Employees and Business Relations. Seller shall use commercially
reasonable efforts to keep available the services of its current employees and
agents and to maintain its relations and goodwill with its suppliers, customers
and distributors and any other Persons having business relations with it.
V.6 Confidentiality. Prior to the Closing and for three years from any
termination of this Agreement, Seller will hold, and will use commercially
reasonable efforts to cause the officers, directors, employees, accountants,
counsel, consultants, advisors and agents of Seller to hold, in confidence,
unless compelled to disclose by judicial or administrative process or by other
requirements of law, all confidential documents and information concerning Buyer
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furnished to Seller in connection with the Transactions and all confidential
information relating to the Business, the Business Products and the Purchased
Assets, except to the extent that such information can be shown to have been (a)
previously known on a nonconfidential basis by Seller, (b) in the public domain
through no fault of Seller or (c) later acquired by Seller from sources other
than Buyer as long as, to the knowledge of Seller, such sources are not subject
to a contractual or fiduciary duty of confidentiality with respect to such
information; provided, however, that Seller may disclose such information to its
officers, directors, employees, accountants, counsel, consultants, advisors and
agents in connection with the Transactions as long as such Persons are informed
by Seller of the confidential nature of such information and are directed by
Seller to treat such information confidentially. The obligation of Seller to
hold any such information in confidence shall be satisfied if it exercises the
same care with respect to such information as it would take to preserve the
confidentiality of its own similar information. If this Agreement is terminated,
Seller will, and will use commercially reasonable efforts to cause the officers,
directors, employees, accountants, counsel, consultants, advisors and agents of
Seller to, destroy or deliver to Buyer all documents and other materials, and
all copies thereof, obtained by Seller or on its behalf from Buyer in connection
with this Agreement that are subject to such confidence.
V.7 Expenses. Seller shall pay all of the legal, accounting and other
expenses incurred by it in connection with the Transactions.
V.8 Fulfillment of Conditions. Seller shall use commercially reasonable
efforts to fulfill the conditions specified in Article VIII to the extent that
the fulfillment of such conditions is within its control. The foregoing
obligation includes (a) the execution and delivery of the Transaction Documents
and (b) taking or refraining from such actions as may be necessary to fulfill
such conditions (including conducting the business and operations of the
Business in such manner that on the Closing Date the representations and
warranties of Seller contained herein shall be accurate as though then made,
except as contemplated by the terms hereof).
V.9 Disclosure of Certain Matters. During the period from the date
hereof through the Closing Date, Seller shall give Buyer prompt written notice
of any event or development that occurs that (a) had it existed or been known on
the date hereof would have been required to be disclosed under this Agreement,
(b) would cause any of the representations and warranties of Seller contained
herein to be inaccurate or otherwise misleading, (c) gives Seller any reason to
believe that any of the conditions set forth in Article VIII will not be
satisfied prior to the Termination Date, or (d) is of a nature that is or may be
materially adverse to the operations, prospects or condition (financial or
otherwise) of the Business.
V.10 Satisfaction of Liabilities. Prior to and after the Closing,
Seller will perform all of its obligations, contractual or otherwise, and
discharge all of the Excluded Liabilities in accordance with the terms thereof.
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V.11 Warranty Claims; Refunds and Credits. Through the completion of
the Transition, Seller agrees, at its expense, to promptly respond to and honor
all claims under product warranties for the repair or replacement of Business
Products. After the completion of the Transition, Seller shall no longer be
obligated to respond to any product warranty claims but shall indemnify Buyer
and Escalon and hold them harmless, in accordance with the provisions of
Sections 2.2 and 9.1 of this Agreement, for all Liabilities and other claims
under any product warranty for any Business Product sold prior to the Closing
Date and any Business Product manufactured on behalf of Buyer during the
Transition pursuant to Section 13.2 hereof. Seller agrees, at its expense, to
promptly respond to and honor any credit or adjustment owing to any customer of
the Business with respect to accounts receivable arising prior to the Closing
Date; provided, however, that if Seller fails to make any such credit or
adjustment promptly, Buyer may elect, in its sole discretion, to do so, either
in cash or in kind, whereupon Seller shall promptly reimburse Buyer for all
costs incurred by Buyer in connection with such credit or adjustment.
V.12 Noncompetition.
(a) Subject to the Closing, and as an inducement to Buyer and
Escalon to execute this Agreement and complete the transactions contemplated
hereby, and in order to preserve the goodwill associated with the Business being
acquired, Seller will not, for a period of five years after the Closing Date,
directly or indirectly: (i) engage in, continue in or carry on any business that
competes with the Business or is substantially similar thereto, including
controlling any financial interest in any Person that is so engaged, except as
contemplated by Section 13.2 hereof; or (ii) consult with, advise or assist in
any way with respect to any business that competes with the Business, whether or
not for consideration, including but not limited to, advertising or otherwise
endorsing any product of any such competitor, soliciting customers or otherwise
serving as an intermediary for any such competitor, or render any form of
financial assistance to or engage in any form of business transaction with any
such competitor.
(b) If Seller is acquired by any Person that is engaged in a
business that competes with the Business, or after an acquisition of Seller the
acquiring Person engages in a business that competes with the Business, Seller
shall promptly notify Buyer in writing, in which event: (i) upon Buyer's receipt
of such notice, Seller shall not be deemed to be in violation of Section 5.12(a)
solely by reason thereof and (ii) Buyer shall be immediately relieved from any
obligation to pay any royalties pursuant to Section 2.3(c) hereof on Business
Products sold from and after the date on which Buyer receives such notice.
ARTICLE VI.
COVENANTS OF BUYER AND ESCALON
VI.1 Confidentiality. Prior to the Closing and for three years from any
termination of this Agreement, Buyer and Escalon will hold, and will use
commercially reasonable efforts to
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cause its respective officers, directors, employees, accountants, counsel,
consultants, advisors and agents to hold, in confidence, unless compelled to
disclose by judicial or administrative process or by other requirements of law,
all confidential documents and information concerning Seller furnished to Buyer
and Escalon in connection with the Transactions, except to the extent that such
information can be shown to have been (a) previously known on a nonconfidential
basis by Buyer or Escalon, (b) in the public domain through no fault of Buyer or
Escalon or (c) later acquired by Buyer or Escalon from sources other than Seller
as long as, to the knowledge of any Buyer or Escalon, such sources are not
subject to a contractual or fiduciary duty of confidentiality with respect to
such information; provided that Buyer and Escalon may disclose such information
to their officers, directors, employees, accountants, counsel, consultants,
advisors and agents in connection with the Transaction as long as such Persons
are informed by Buyer or Escalon of the confidential nature of such information
and are directed by Buyer or Escalon to treat such information confidentially.
The respective obligation of Buyer and Escalon to hold any such information in
confidence shall be satisfied if it exercises the same care with respect to such
information as it would take to preserve the confidentiality of its own similar
information. If this Agreement is terminated, Buyer and Escalon will, and will
use commercially reasonable efforts to cause its respective officers, directors,
employees, accountants, counsel, consultants, advisors and agents to, destroy or
deliver to Seller all documents and other materials, and all copies thereof,
obtained by Buyer or Escalon on or in their behalf from Seller in connection
with this Agreement that are subject to such confidence.
VI.2 Expenses. Buyer and Escalon shall pay all of the legal, accounting
and other expenses incurred by it in connection with the Transactions.
VI.3 Fulfillment of Conditions. From the date hereof to the Closing,
Buyer and Escalon shall use commercially reasonable efforts to fulfill the
conditions specified in Article VIII to the extent that the fulfillment of such
conditions is within their control. The foregoing obligation includes (a) the
execution and delivery of the Transaction Documents and (b) taking or refraining
from such actions as may be necessary to fulfill such conditions (including
conducting the business and operations of the Buyer and Escalon in such manner
that on the Closing Date the representations and warranties of Buyer and Escalon
contained herein shall be accurate as though then made, except as contemplated
by the terms hereof).
VI.4 Disclosure of Certain Matters. During the period from the date
hereof through the Closing Date, Buyer and Escalon shall give Seller prompt
written notice of any event or development that occurs that (a) had it existed
or been known on the date hereof would have been required to be disclosed by it
under this Agreement, (b) would cause any of the representations and warranties
of Buyer or Escalon contained herein to be inaccurate or otherwise misleading,
(c) gives Buyer or Escalon any reason to believe that any of the conditions set
forth in Article VIII will not be satisfied prior to the Termination Date, or
(d) is of a nature that is or may be materially adverse to the operations,
prospects or condition (financial or otherwise) of the business of Buyer or
Escalon.
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VI.5 Escalon's Obligations. Escalon agrees to cause Buyer to fully
perform and discharge its obligations to Seller under this Agreement and
guarantees to Seller the punctual payment and performance when due of all of
Buyer's obligations pursuant to this Agreement and any extensions, renewals,
modifications, amendments and replacements thereof. The obligations of Escalon
hereunder are independent of the obligations of Buyer, and a separate action or
actions may be brought and prosecuted against Escalon, whether action is brought
against Buyer or any other Person or whether Buyer or any other Person is joined
in any such action or actions. Escalon waives any right to require Seller to
make any presentments or demands for performance, or give any notices of
non-performance, protests, notices of protest or notices of dishonor of this
guaranty.
ARTICLE VII.
COVENANTS OF BUYER AND SELLER
VII.1 Commercially Reasonable Efforts. Subject to the terms and
conditions of this Agreement, each party shall use commercially reasonably
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable under applicable Regulations to
consummate the Transactions, including the execution and delivery of any
additional instruments necessary to consummate the Transactions.
VII.2 Allocation of Consideration. Buyer and Seller agree that the
purchase price for the Purchased Assets, including any adjustment thereto under
this Agreement, shall be allocated among the Purchased Assets as set forth in
Schedule 7.2 hereto. Buyer and Seller shall each report the federal, state and
local income and other tax consequences of the transactions contemplated by this
Agreement in a manner consistent with such allocation, including but not limited
to the preparation and filing of Form 8594 under Section 1060 of the Code (or
any successor form or successor provision) with their respective federal income
tax returns for the taxable year that includes the transaction contemplated
herein, and neither Buyer nor Seller will take any position inconsistent with
such allocation unless otherwise required by applicable law.
ARTICLE VIII.
CONDITIONS PRECEDENT TO THE TRANSACTIONS
VIII.1 Conditions to Obligations of Buyer. The obligations of Buyer
to consummate the Transactions shall be subject to the satisfaction or waiver,
on or before the Closing, of each of the following conditions:
(a) Representations and Warranties True. The representations
and warranties of Seller contained herein shall be true and correct in all
material respects at and as of the date hereof and at and as of the Closing as
though such representations and warranties were made again at and as of the
Closing, except for changes contemplated by this Agreement.
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(b) Performance. Seller shall have performed and complied in
all material respects with the agreements contained in this Agreement required
to be performed or complied with by it on or prior to the Closing.
(c) Consents and Approvals. Seller shall have obtained all
governmental and third party consents and approvals necessary, proper or
advisable to consummate the Transactions, except for those which would not have
a Material Adverse Effect. Such third party consents shall include the Required
Consents.
(d) No Governmental Order or Regulation. There shall not be in
effect any order, decree or injunction (whether preliminary, final or
appealable) of a Governmental Body of competent jurisdiction, and no Regulation
shall have been enacted or promulgated by any Governmental Body that prohibits
consummation of the Transactions.
(e) Legal Opinion. Buyer shall have received an opinion of
Stradling, Yocca, Carlson & Rauth, counsel to Seller, dated as of the Closing,
in the form and substance reasonably satisfactory to Buyer.
(f) Other Documents. Buyer shall have received executed copies
of all Transaction Documents to which Seller is a party to the extent that they
shall not have been received prior to the Closing. Buyer shall have received all
other documents required under the terms of any of the Transaction Documents and
any other documents reasonably requested on or prior to the Closing Date.
VIII.2 Conditions to Obligations of Seller. The obligations of Seller
to consummate the Transactions shall be subject to the satisfaction or waiver,
on or before the Closing, of each of the following conditions:
(a) Representations and Warranties True. The representations
and warranties of Buyer contained herein shall be true and correct in all
material respects at and as of the date when made and at and as of the Closing
as though such representations and warranties were made again at and as of the
Closing, except for changes contemplated by this Agreement.
(b) Performance. Buyer shall have performed and complied in
all material respects with the agreements contained in this Agreement required
to be performed or complied with by it on or prior to the Closing.
(c) No Governmental Order or Regulation. There shall not be in
effect any order, decree or injunction (whether preliminary, final or
appealable) of a Governmental Body of competent jurisdiction, and no Regulation
shall have been enacted or promulgated by any Governmental Body that prohibits
consummation of the Transactions.
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(d) Legal Opinion. Seller shall have received an opinion of
Duane, Morris & Heckscher LLP, counsel to Buyer, dated as of the Closing in the
form and substance reasonably satisfactory to Seller.
(e) Other Documents. Seller shall have received executed
copies of all Transaction Documents to which Buyer is a party to the extent that
they shall not have been received prior to the Closing. Seller shall have
received all other documents required under the terms of any of the Transaction
Documents and any other documents reasonably requested on or prior to the
Closing Date.
ARTICLE IX.
INDEMNIFICATION
IX.1 By Seller. From and after the Closing Date, to the extent provided
in this Article IX, Seller shall indemnify and hold harmless Buyer, Escalon and
each Affiliate and agent of Buyer and Escalon from and against any Damages that
any such indemnified party may sustain, suffer or incur and that result from,
arise out of or relate to (a) any breach of any representation, warranty,
covenant or agreement of Seller contained in any Transaction Document; (b) any
Tax Claim asserted against Buyer with respect to any Taxes of Seller or any of
its affiliates (i) relating to the Transactions, and (ii) relating to operations
of Seller or any of its affiliates through Closing; (c) any costs or Claims
including, but not limited to, Claims made by private parties, Persons or
entities and Claims made by a Governmental Body or agency relating to the
pre-Closing generation, use or disposal of Hazardous Substances or other wastes
by Seller; (d) any costs or Claims under any Environmental Law arising from the
failure of Seller prior to the Closing Date to operate its business in
compliance with Environmental Law; (e) any costs or Claims arising under any
product warranty; and (f) any other Excluded Liability, whether arising before,
on or after the Closing. As used in this Article IX, the term "Damages" shall
include (i) all losses, damages (including, without limitation, consequential
damages), judgments, awards, penalties and settlements; (ii) all demands,
claims, suits, actions, causes of action, proceedings and assessments, whether
or not ultimately determined to be valid; and (iii) all costs and expenses
(including, without limitation, interest (including prejudgment interest in any
litigated or arbitrated matter), penalties, court costs and fees and expenses of
attorneys and expert witnesses) of investigating, defending or asserting any of
the foregoing or of enforcing this Agreement. Anything to the contrary
notwithstanding: (i) Buyer and Escalon shall not be indemnified and held
harmless for any Claims or Damages arising under clause (a) of this Section 9.1
unless such claim is made within 18 months after the Closing Date; (ii) Buyer
shall not be indemnified and held harmless for any Claims or Damages arising
under clause (a) or clause (e) of this Section 9.1 unless and until the
aggregate amount of such Claims and Damages exceeds $50,000, in which event
Buyer and Escalon shall be indemnified and held harmless in respect of all
Claims and Damages arising under such clauses; (iii) Buyer shall not be
indemnified and held harmless in respect of any Claims and Damages that are
covered by insurance owned by Buyer to the extent that any net Damages is
reduced by the proceeds paid to
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Buyer under such insurance; and (iv) the liability of Seller to Buyer and
Escalon hereunder with respect to all matters other than Excluded Liabilities
shall be limited to an amount equal to the amount of the purchase price received
by such Seller pursuant to Section 2.3, but in no event greater than the
purchase price.
IX.2 By Buyer and Escalon. From and after the Closing Date, to the
extent provided in this Article IX, Buyer and Escalon shall indemnify and hold
harmless Seller and each Affiliate and agent of Seller from and against any
Damages that any such indemnified party may sustain, suffer or incur and that
result from, arise out of or relate to (a) any breach of any representation,
warranty, covenant or agreement of Buyer or Escalon contained in this Agreement;
(b) all Claims against Seller with respect to any Assumed Liability; and (c) the
operation of the Business after the Closing Date.
IX.3 Procedure for Claims. A party seeking indemnification under this
Article IX (an "Indemnified Party") shall give notice of the Claim for Damages
and a brief explanation of the basis thereof to the party alleged to be
responsible for indemnification hereunder (an "Indemnitor"). The Indemnitor
shall promptly pay the Indemnified Party any amount due under this Article IX.
The Indemnified Party may pursue whatever legal remedies may be available for
recovery of the Damages claimed from any Indemnitor.
IX.4 Third Party Claims. An Indemnified Party shall give any indemnitor
prompt notice of the institution by a third party of any actions, suits or other
administrative or judicial proceedings if the Indemnified Party would be
entitled to claim indemnification under this Article IX in connection with any
such action, suit or other proceeding. After such notice, any Indemnitor may, or
if so requested by the Indemnified Party, any Indemnitor shall, participate in
any such action, suit or other proceeding or assume the defense thereof, with
counsel satisfactory to the Indemnified Party; provided, however, that the
Indemnified Party shall have the right to participate at its own expense in the
defense of any such action, suit or other proceeding; and provided, further,
that the Indemnitor shall not consent to the entry of any judgment or enter into
any settlement, except with the written consent of the Indemnified Party, that
(a) fails to include as an unconditional term thereof the giving by the claimant
or plaintiff to the Indemnified Party of a release from all liability in respect
of any such action, suit or other proceeding or (b) grants the claimant or
plaintiff any injunctive relief against the Indemnified Party. Any failure to
give prompt notice under this Section 9.4 shall not bar an Indemnified Party's
right to claim indemnification under this Section 9, except to the extent that
an Indemnified Party shall have been harmed by such failure.
ARTICLE X.
TERMINATION
X.1 Grounds for Termination. This Agreement may be terminated at any
time prior to the Closing Date:
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(a) by mutual written consent of Buyer and Seller;
(b) by either Buyer or Seller, if the Closing has not occurred
by January 31, 1999 (such date, as it may be extended from time to time by the
written agreement of Buyer and Seller, is referred to herein as the "Termination
Date"); provided, however, that the right to terminate this Agreement under this
Section 10.1(b) shall not be available to any party that has breached any of its
covenants, representations or warranties in this Agreement;
(c) by Seller, if Buyer shall have breached any of its
covenants hereunder in any material respect or if the representations and
warranties of Buyer contained in this Agreement shall not be true and correct,
except for such changes as are contemplated by this Agreement, in all material
respects, and in either event, if such breach is subject to cure, Buyer has not
cured such breach within 10 business days of Seller's notice of an intent to
terminate; or
(d) by Buyer, if Seller shall have breached any of its
covenants hereunder in any material respect or if the representations and
warranties of Seller contained in this Agreement shall not be true and correct,
except for such changes as are contemplated by this Agreement, in all material
respects, and in either event, if such breach is subject to cure, Seller has not
cured such breach within 10 business days of Buyer's notice of an intent to
terminate.
X.2 Effect of Termination. If this Agreement is terminated pursuant to
Section 10.1, the agreements contained in Sections 5.6, 5.7, 6.1 and 6.2 shall
survive the termination hereof. In addition, any party may pursue any legal or
equitable remedies that may be available if such termination is based on a
breach of another party.
ARTICLE XI.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
Except as otherwise provided in this Agreement, all representations and
warranties made in this Agreement shall survive the consummation of the
transactions contemplated hereby for a period of 18 months following the Closing
and after 18 months shall be terminated and extinguished (except for the
representations and warranties made in Sections 3.1, 3.2, 3.4, 3.10, 4.1 and
4.2, which shall not expire), except insofar as the damaged party shall have
asserted in writing a specific claim setting forth the specific facts and
circumstances relating thereto with respect to such representations, warranties,
covenants and agreements prior to the expiration of such rights, in which event
the party liable shall remain liable with respect to such claim.
ARTICLE XII.
PUBLIC ANNOUNCEMENTS
Buyer and Seller will consult with each other before issuing any press
release or making any public statement with respect to this Agreement and the
Transactions and, except as may be
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required by applicable law or stock exchange regulations, will not issue any
such press release or make any such public statement prior to such consultation.
ARTICLE XIII.
THE TRANSITION
XIII.1 Transition. Buyer agrees to cooperate with Seller in effecting
the transfer of the Purchased Assets to, and the establishment of a fully
operational manufacturing operation for the needle assemblies portion of the
Business Products at, Buyer's facility in Milwaukee, Wisconsin (the
"Transition"). During the Transition, Seller shall make available to Buyer
appropriate personnel of Seller to answer questions, to assist in manufacturing
orders and to assist in handling all warranty and service Claims. Seller shall
use reasonable efforts to ensure that the services of S. Jay Crane and Robert
Kinsman are available to Buyer during the Transition. Seller shall lend its full
cooperation and endorsement in assisting Buyer in retaining the current
customers, distributors and suppliers of the Business. Buyer shall be
responsible for the costs of travel and lodging for all travel of Seller's
employees to Buyer's Milwaukee facility at Buyer's request. Upon the
commencement of the Transition, Seller shall transfer a sufficient portion of
the inventory and equipment comprising the Purchased Assets to permit Buyer to
produce, at its Milwaukee facility, sufficient quantities of each of the
Business Products so as to continue the marketing and sale of the Business
Products without interruption upon the completion of the Transition. Buyer shall
be responsible for all shipping expenses relating to the transfer of the
Purchased Assets to Buyer's facility.
XIII.2 Supply Agreement. During the Transition, Seller shall continue
to manufacture the Business Products for a period of 90 days after the Closing
Date for and on behalf of Buyer, for which Buyer shall pay Seller the amounts
set forth on Schedule 13.2 hereto. Within one month after the Closing Date,
Buyer, upon consultation with Seller, shall deliver to Seller a forecast of
Buyer's requirements for the succeeding three-month period. Upon prior written
notice given to Seller prior to the expiration of the 90-day period referred to
in the preceding sentence, Buyer may require Seller to continue such supply
arrangement for an additional period up to 90 days, during which period Seller
shall continue to supply Buyer with its requirements, but at the amounts set
forth on Schedule 13.2 hereto plus a 15% profit allowance. At Closing, Buyer
shall acquire title to all of the raw materials, work in progress and finished
goods relating to the Business. Seller shall use those raw materials and work in
progress owned by Buyer as of the Closing Date in the manufacture and assembly
of the Business Products pursuant to this Section 13.2. If any additional raw
materials are required by Seller during the Transition, upon the consent of
Buyer, Seller will be responsible for accepting the delivery and managing the
delivery schedule of the raw materials and Buyer will be responsible for
remitting to the vendor or supplier, the costs of such raw materials. Buyer
agrees to maintain the CE mark for the Business Products for as long as Seller
is manufacturing the Business Products on Buyer's behalf.
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XIII.3 Employees. Buyer shall have the right to offer employment to any
employees of the Business determined by Buyer during the course of its due
diligence investigation.
XIII.4 Losses; Maintenance of Insurance. Seller agrees to continue to
maintain property, casualty, product liability and business interruption
insurance on the Business and the Purchased Assets through the completion of the
Transition and to reimburse Buyer and Escalon for all losses and damages arising
from Seller's failure to fulfill its obligations under this Section 13 and for
any damages to the Purchased Assets while they are in Seller's custody or under
its control.
ARTICLE XIV.
CONTENTS OF AGREEMENT, AMENDMENT,
PARTIES IN INTEREST, ASSIGNMENT, ETC.
This Agreement sets forth the entire understanding of the parties
hereto with respect to the subject matter hereof. This Agreement may be amended,
modified or supplemented only by a written instrument duly executed by each of
the parties hereto. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective heirs, legal representatives,
successors and permitted assigns of the parties hereto. No party hereto shall
assign this Agreement or any right, benefit or obligation hereunder, provided,
however, that, after Closing, Seller may assign its rights to receive the
balance of the purchase price and royalty payments. Any term or provision of
this Agreement may be waived at any time by the party entitled to the benefit
thereof by a written instrument duly executed by such party. The parties hereto
shall execute and deliver any and all documents and take any and all other
actions that may be deemed reasonably necessary by their respective counsel to
complete the Transactions.
ARTICLE XV.
INTERPRETATION
Unless the context of this Agreement clearly requires otherwise, (a)
references to the plural include the singular, the singular the plural, the part
the whole, (b) "or" has the inclusive meaning frequently identified with the
phrase "and/or" and (c) "including" has the inclusive meaning frequently
identified with the phrase "but not limited to." The section and other headings
contained in this Agreement are for reference purposes only and shall not
control or affect the construction of this Agreement or the interpretation
thereof in any respect. Section, subsection, Schedule and exhibit references are
to this Agreement unless otherwise specified.
ARTICLE XVI.
NOTICES
All notices that are required or permitted hereunder shall be in
writing and shall be sufficient if personally delivered or sent by mail,
facsimile message or national overnight courier. Any notices shall be deemed
given upon the earlier of the date when received at, or the third day after the
date when sent by registered or certified mail or the day after the date when
sent by
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national overnight courier to, the address or fax number set forth below, unless
such address or fax number is changed by written notice to the other party
hereto:
If to Buyer or Escalon:
Escalon Medical Corp.
351 East Conestoga Road
Wayne, PA 19087
Attention: Richard J. DePiano, Chief Executive Officer
Tel. No. (610) 688-6830
Fax No. (610) 254-8958
with a copy to:
Duane, Morris & Heckscher LLP
One Liberty Place
Suite 4200
Philadelphia, PA 19103-7396
Attention: Kathleen M. Shay, Esquire
Tel. No. (215) 979-1210
Fax No. (215) 979-1020
If to Seller:
Radiance Medical Systems, Inc.
13700 Alton Parkway
Irvine, CA 92618
Attention: Stephen R. Kroll
Vice President Finance and Administration
Tel. No. (949) 457-9546
Fax No. (949) 457-9561
with a copy to:
Stradling Yocca Carlson & Rauth
660 Newport Center Drive
Suite 1600
Newport Beach, CA 92660
Attention: Lawrence B. Cohn
Tel. No. (949) 725-4132
Fax No. (949) 725-4100
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ARTICLE XVII.
GOVERNING LAW
XVII.1 Applicable Law. This Agreement shall be construed and
interpreted in accordance with the laws of the State of Delaware, without regard
to its provisions concerning conflict of laws.
17.2 Informal Dispute Resolution. In an effort to resolve informally
and amicably any claim, controversy or dispute arising out of or related to the
interpretation, performance or breach of this Agreement (a "Dispute") without
resorting to litigation, each party shall notify the other party to the Dispute
in writing of any Dispute hereunder that requires resolution. Such notice shall
set forth the nature of the Dispute, the amount involved, if any, and the remedy
sought. Each party shall promptly designate an executive-level employee to
investigate, discuss and seek to settle the matter between them. If the two
designated representatives are unable to settle the matter within 30 days after
such notification, the matter shall be submitted to the parties' respective
Chief Executive Officers for consideration. If settlement cannot be reached
through their efforts within an additional 30 days (or such longer time period
as they shall agree upon in writing), the dispute shall be finally settled by
arbitration conducted in Wilmington, Delaware in accordance with the Commercial
Arbitration Rules of the American Arbitration Association ("AAA") by three
independent and impartial arbitrators, chosen in accordance with the rules of
the AAA. The judgment upon the award rendered by the arbitrator(s) shall be
entered by any court having jurisdiction thereof. The arbitrators shall award to
one or more parties in the arbitration all or so much of such party's or
parties' expenses for attorneys' fees and costs as the arbitrators deem
appropriate, taking into account the relative merits of the positions asserted
by the parties and any arbitration offers of settlement or compromise.
The statute of limitations of the State of Delaware applicable to the
commencement of a lawsuit shall be tolled as of initial written notification of
a dispute to the other party as set forth above 60 days (or such longer time as
the parties agree in writing) if all interim deadlines have been complied with
by the notifying party.
17.3 Attorneys' Fees. Except as otherwise provided herein, each party
shall bear its own legal fees incurred in connection with the transactions
contemplated hereby, provided, however, that if any party to this Agreement
seeks to enforce its rights under this Agreement by legal proceedings or
otherwise, subject to Section 17.2, the non-prevailing party shall pay all costs
and expenses incurred by the prevailing party, including, without limitation,
all reasonable attorneys' fees.
ARTICLE XVIII.
COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of
which shall be binding as of the date first written above, and all of which
shall constitute one and the same instrument. Each such copy shall be deemed an
original, and it shall not be necessary in making
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proof of this Agreement to produce or account for more than one such
counterpart.
ARTICLE XIX.
REMEDIES CUMULATIVE
The remedies provided herein shall be cumulative and shall not preclude
a party from asserting any other rights or seeking any other remedies against
the other party or its successors or assigns.
ARTICLE XX.
SEVERABILITY
The invalidity of any one or more of the words, phrases, sentences,
clauses or sections contained in this Agreement shall not affect the
enforceability of the remaining portions of this Agreement or any part thereof,
all of which are inserted conditionally on their being valid in law, and, in the
event that any one or more of the words, phrases, sentences, clause or sections
contained in this Agreement shall be declared invalid, this Agreement shall be
construed as if such invalid word or words, phrase or phrases, sentence or
sentences, clause or clauses, or section or sections had not been inserted. If
such invalidity is caused by length of time or size of area, or both, the
otherwise invalid provision will be considered to be reduced to a period or area
which would cure such invalidity.
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IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto as of the day and year first written above.
RADIANCE MEDICAL SYSTEMS, INC.
By:_____________________________________
Title:_______________________________
ESCALON VASCULAR ACCESS, INC.
By:_____________________________________
Title:_______________________________
ESCALON MEDICAL CORP.
By:_____________________________________
Title:_______________________________
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EXHIBIT 20
RADIANCE MEDICAL SYSTEMS COMPLETES SALE
OF VASCULAR ACCESS BUSINESS UNIT
TO ESCALON MEDICAL CORPORATION
Irvine, CA -- Friday, January 22, 1999 -- Radiance Medical Systems,
Inc., (formerly Cardiovascular Dynamics, Inc.) (Nasdaq: CCVD) today said it has
sold the assets and operations of its Vascular Access Business Unit to Escalon
Medical Corporation. The company entered into a letter of intent to sell the
business unit in October 1998.
"The completion of this transaction truly represents a win-win
situation for both companies," said Michael R. Henson, Chairman of Radiance
Medical Systems. "The Vascular Access Business Unit provides growth and
diversification opportunities for Escalon in target niche markets. For Radiance,
it enables us to better focus our resources on innovative technologies aimed at
the interventional cardiology market. To this end, with the recently approved
combination of Radiance Medical Systems and CardioVascular Dynamics, we expect
to capitalize on the growing interest in radiation therapy for the treatment of
restenosis, considered by many thought leaders to be among the most promising
technologies in the cardiovascular field."
Under the terms of the agreement, Radiance will receive an initial
payment, a second payment upon the transferring of the assets and technology,
and royalties on net sales of the former Radiance products for a period of five
years. Further terms were not disclosed.
The Vascular Access technology involves the use of a tiny Doppler
ultrasound circuit placed at the tip of a specially-designed vascular access
needle on a catheter.
Founded in 1987, Escalon develops, markets and distributes ophthalmic
surgical and pharmaceutical products which provide a base of positive cash flow
to fund a targeted research and development effort. The company utilizes
strategic partnerships to help finance its development programs and is also
seeking acquisitions to further diversify its product line to achieve critical
mass in sales and take better advantage of the company's distribution
capabilities. Escalon has headquarters in Wayne, Pa. and manufacturing
operations near Milwaukee, Wisconsin.
Radiance Medical Systems, Inc., develops peripheral and coronary
stents, coronary stent delivery systems, balloon dilatation catheters for
coronary and peripheral vascular use, and site-specific delivery catheters for
the delivery of radiation to prevent restenosis following the interventional
treatment of atherosclerosis.
