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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): JULY 22, 1996
HILLENBRAND INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
INDIANA 1-6651 35-1160484
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation) File Number) Identification No.)
700 STATE ROUTE 46 EAST
BATESVILLE, INDIANA 47006-8835
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (812) 934-7000
NOT APPLICABLE
(Former name or former address,
if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On July 22, 1996, Block Medical, Inc. ("Business"), a wholly-owned subsidiary
of Hillenbrand Industries, Inc. ("Company"), sold substantially all of its
assets to a wholly-owned subsidiary of I-FLOW Corporation ("Buyer"). The
aforementioned assets of the Business consisted primarily of goodwill,
accounts and notes receivable, inventories and property. The Buyer assumed
certain specified liabilities of the Business. In accordance with the
purchase agreement, the Buyer paid the Company $15.0 million in cash (which
is subject to a post-closing adjustment pursuant to the terms of the purchase
agreement), approximately 430,000 shares of I-FLOW common stock with a market
value of approximately $2.0 million, and five-year, noncallable warrants to
acquire 250,000 shares of I-FLOW common stock at an exercise price of $4.62.
This disposition is being reported under Item 2 of Form 8-K because the loss
before tax of the Business in 1995 (including a $20.0 million charge for the
impairment of goodwill) exceeded 10 percent of the Company's income before tax
in fiscal year 1995.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) Pro forma financial information.
The following unaudited pro forma condensed consolidated financial statements
are filed with this report:
Pro Forma Condensed Balance Sheet as at June 1, 1996. . . . . . . Page 4
Pro Forma Condensed Consolidated Statements of Income:
Year Ended December 2, 1995 . . . . . . . . . . . . . . . . . . Page 5
Six Months Ended June 1, 1996 . . . . . . . . . . . . . . . . . Page 6
Notes to Pro Forma Financial Information . . . . . . . . . . . . Page 7
The Pro Forma Condensed Consolidated Balance Sheet of the Registrant as at
June 1, 1996 reflects the financial position of the Company after giving
effect to the disposition of the assets discussed in Item 2 and assumes the
disposition took place on June 1, 1996. The Pro Forma Condensed
Consolidated Statements of Income for the fiscal year ended December 2, 1995 and
the six months ended June 1, 1996 assume that the disposition occurred on
December 3, 1994, and are based on the operations of the Company for the year
ended December 2, 1995 and the six months ended June 1, 1996.
The unaudited pro forma condensed consolidated financial statements have been
prepared by the Company based upon assumptions deemed proper by it. The
unaudited pro forma condensed consolidated financial statements presented herein
are shown for illustrative purposes only and are not necessarily indicative of
the future financial position or future results of operations of the
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Company, or the financial position or results of operations of the Company that
would have actually occurred had the transaction been in effect as of the date
or for the periods presented. In addition, it should be noted that the
Company's financial statements will reflect the disposition only from July
22, 1996.
These unaudited pro forma condensed consolidated financial statements should be
read in conjunction with the financial statements and notes thereto included in
the Company's latest annual report on Form 10-K and quarterly report on Form
10-Q.
(c) Exhibits.
Exhibit 2 Agreement for Purchase and Sale of Assets among I-FLOW
Corporation and Block Medical, Inc. and Hillenbrand Industries,
Inc. dated as of July 3, 1996. (The Company hereby agrees to
furnish supplementally to the Securities and Exchange Commission
upon request a copy of any omitted referenced schedule.)
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PRO FORMA FINANCIAL INFORMATION
HILLENBRAND INDUSTRIES, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AT JUNE 1, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Pro Forma Pro
Historical Adjustments Forma
---------- ----------- -----
(Dollars in thousands)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents . . . . $ 199,903 $ 15,000 (1) $ 214,903
Trade receivables. . . . . . . . . 300,282 (2,357)(2) 297,925
Inventories. . . . . . . . . . . . 104,142 (2,001)(2) 102,141
Other. . . . . . . . . . . . . . . 44,919 (112)(2) 44,807
. . . . . . . . . . ---------- -------- ----------
Total current assets. . . . . . . 649,246 10,530 659,776
---------- -------- ----------
Equipment leased to others . . . . . 278,485 278,485
Accumulated depreciation. . . . . . (180,443) (180,443)
Property . . . . . . . . . . . . . . 652,631 (3,504)(2) 649,127
Accumulated depreciation. . . . . . (389,917) 2,443 (2) (387,474)
---------- -------- ----------
Net equipment leased and property. 360,756 (1,061) 359,695
---------- -------- ----------
Other. . . . . . . . . . . . . . . . 210,794 (4,881)(1)(2) 205,913
---------- -------- ----------
Insurance assets:
Investments. . . . . . . . . . . . 1,455,938 1,455,938
Deferred policy acquisition costs. 368,646 368,646
Deferred income taxes. . . . . . . 65,783 65,783
Other. . . . . . . . . . . . . . . 41,895 41,895
---------- ----------
Total insurance assets. . . . . . 1,932,262 1,932,262
---------- -------- ----------
Total assets . . . . . . . . . . . . $ 3,153,058 $ 4,588 $ 3,157,646
---------- -------- ----------
---------- -------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities. . . . . . . . . $ 308,261 $ (5,284)(1)(2) $ 302,977
Non-current liabilities. . . . . . . 298,385 298,385
Insurance liabilities:
Benefit reserves . . . . . . . . . 1,333,820 1,333,820
Unearned revenue . . . . . . . . . 487,854 487,854
Other. . . . . . . . . . . . . . . 19,238 19,238
---------- ----------
Total insurance liabilities . . . 1,840,912 1,840,912
---------- -------- ----------
Total liabilities. . . . . . . . . . 2,447,558 (5,284) 2,442,274
---------- -------- ----------
Shareholders' equity:
Retained earnings. . . . . . . . . 921,419 9,872 (1) 931,291
Other, net.. . . . . . . . . . . . (215,919) (215,919)
---------- -------- ----------
Total shareholders' equity . . . . . 705,500 9,872 715,372
---------- -------- ----------
Total liabilities and shareholders'
equity . . . . . . . . . . . . . . . $ 3,153,058 $ 4,588 $ 3,157,646
---------- -------- ----------
---------- -------- ----------
</TABLE>
See Notes to Pro Forma Financial Information
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PRO FORMA FINANCIAL INFORMATION
HILLENBRAND INDUSTRIES, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 2, 1995
(UNAUDITED)
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
(Dollars in thousands)
Net revenues:
Health Care sales. . . . . . . . . $ 555,677 $ (13,518)(3) $ 542,159
Health Care rentals. . . . . . . . 367,971 367,971
Funeral Services . . . . . . . . . 515,504 515,504
Insurance . . . . . . . . . . . . 185,729 185,729
--------- -------- ---------
Total revenues . . . . . . . . . 1,624,881 (13,518) 1,611,363
--------- -------- ---------
Cost of revenues:
Health Care cost of goods sold . . 347,081 (7,496)(3) 339,585
Health Care rental expenses. . . . 246,406 246,406
Funeral Services . . . . . . . . . 277,952 277,952
Insurance . . . . . . . . . . . . 140,509 140,509
--------- -------- ---------
Total cost of revenues . . . . . 1,011,948 (7,496) 1,004,452
--------- -------- ---------
Other operating expenses . . . . . . 433,470 (29,744)(3) 403,726
--------- -------- ---------
Operating profit . . . . . . . . . . 179,463 23,722 203,185
Other expense, net . . . . . . . . . (9,679) (43)(3) (9,722)
--------- -------- ---------
Income before income taxes . . . . . 169,784 23,679 193,463
Income taxes . . . . . . . . . . . . 79,924 1,510 (3) 81,434
--------- -------- ---------
Net income . . . . . . . . . . . . . $ 89,860 $ 22,169 $ 112,029
--------- --------- ---------
--------- --------- ---------
Net income per common share. . . . . $ 1.27 $ .31 $ 1.58
--------- --------- ---------
--------- --------- ---------
Average shares outstanding . . . . . 70,758 70,758
--------- ---------
See Notes to Pro Forma Financial Information
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PRO FORMA FINANCIAL INFORMATION
HILLENBRAND INDUSTRIES, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 1, 1996
(UNAUDITED)
PRO FORMA
HISTORICAL Adjustments Pro Forma
---------- ----------- ---------
(Dollars in thousands)
Net revenues:
Health Care sales . . . . . . . . $ 292,706 $ (6,970)(4) $ 285,736
Health Care rentals. . . . . . . . 189,708 189,708
Funeral Services . . . . . . . . . 269,604 269,604
Insurance . . . . . . . . . . . . 106,039 106,039
--------- ------- --------
Total revenues . . . . . . . . . 858,057 (6,970) 851,087
--------- ------- --------
Cost of revenues:
Health Care cost of goods sold . . 175,123 (3,431)(4) 171,692
Health Care rental expenses. . . . 119,262 119,262
Funeral Services . . . . . . . . . 143,887 143,887
Insurance. . . . . . . . . . . . . 81,017 81,017
--------- ------- --------
Total cost of revenues . . . . . 519,289 (3,431) 515,858
--------- ------- --------
Other operating expenses . . . . . . 219,998 (3,644)(4) 216,354
--------- ------- --------
Operating profit . . . . . . . . . . 118,770 105 118,875
Other expense, net . . . . . . . . . (6,770) (74)(4) (6,844)
--------- ------- --------
Income before income taxes . . . . . 112,000 31 112,031
Income taxes . . . . . . . . . . . . 45,024 13 (4) 45,037
--------- ------- --------
Net income . . . . . . . . . . . . . $ 66,976 $ 18 $ 66,994
--------- ------- --------
--------- ------- --------
Net income per common share. . . . . $ .96 $ .96
--------- ------- --------
--------- ------- --------
Average shares outstanding . . . . . 69,957 69,957
--------- ------- --------
--------- ------- --------
See Notes to Pro Forma Financial Information
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PRO FORMA FINANCIAL INFORMATION
HILLENBRAND INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA FINANCIAL INFORMATION
(1) To reflect the proceeds of $17.0 million, the gain of approximately
$3.0 million before income taxes and the income tax effect of approximately
$1.1 million relative to the sale of the Business as discussed in Item 2. In
addition, the pro forma adjustments reflect the income tax benefit of
approximately $8.0 million which will be realized from the book and tax
differences in the basis of the Business. This transaction will be recorded
in the Company's third quarter and is not reflected in the pro forma income
statements.
(2) To reflect the elimination of the assets sold and liabilities assumed
of the Business as discussed in Item 2.
(3) To eliminate the operating results of the Business for the year ended
December 2, 1995, including a $20.0 million ($.28 per share) charge for the
impairment of goodwill.
(4) To eliminate the operating results of the Business for the six months
ended June 1, 1996.
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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.
HILLENBRAND INDUSTRIES, INC.
DATE: August 1, 1996 BY: /S/ Tom E. Brewer
------------------
Tom E. Brewer
Chief Financial Officer
DATE: August 1, 1996 BY: /S/ James D. Van De Velde
--------------------------
James D. Van De Velde
Controller
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EXHIBIT 2
AGREEMENT FOR PURCHASE AND SALE OF ASSETS
THIS AGREEMENT FOR PURCHASE AND SALE OF ASSETS (this "Agreement") is made
and entered into as of the 3rd day of July, 1996, by and among I-FLOW
CORPORATION, a California corporation ("I-Flow"), having its principal office at
2532 White Road, Irvine, California 92614; BLOCK MEDICAL, INC., a Delaware
corporation (including such corporation after changing its corporate name
pursuant to the provisions hereof) ("Seller"), having its principal office at
10865 Rancho Bernardo Road, San Diego, California 92127; and HILLENBRAND
INDUSTRIES, INC., an Indiana corporation and the sole shareholder of Seller
("Parent"), having its principal office at 700 State Route 46 East, Batesville,
Indiana 47006. Seller and Parent are collectively referred to in this Agreement
as the "Selling Parties."
BACKGROUND
I-Flow desires to purchase from Seller and Seller desires to sell to
I-Flow, on the terms and subject to the conditions of this Agreement,
substantially all of the assets, business, properties and goodwill of Seller in
exchange for the cash and securities of I-Flow described in SECTION 2.1. In
consideration of the mutual covenants, agreements, representations and
warranties contained in this Agreement, the parties agree as follows:
ARTICLE I
PURCHASE OF ASSETS
1.1 SALE AND TRANSFER OF ASSETS. Subject to the terms and conditions
set forth in this Agreement, Seller agrees to sell, convey, transfer, assign and
deliver to I-Flow, and I-Flow agrees to purchase from Seller, substantially all
of the assets, properties, business and goodwill of Seller of every kind,
character and description, whether tangible, intangible, real, personal or
mixed, and wherever located (collectively referred to herein as the "Assets"),
including, without limitation, the following:
(a) All property and other rights listed as assets of Seller in
SCHEDULES 1.1(a) through 1.1(h) attached to this Agreement;
(b) All of the issued and outstanding capital stock and other
securities of Block Medical de Mexico, S.A. de C.V., Seller's subsidiary
corporation in Mexico (the "Subsidiary"), it being understood that the Selling
Parties shall cause any other shareholder of the Subsidiary to concurrently
transfer its shares in the Subsidiary to I-Flow or its designee without further
payment therefor being required of I-Flow; and
(c) All other supplies, materials, work in process, finished
goods, equipment, machinery, furniture, fixtures, motor vehicles, claims and
rights under leases, contracts, notes, evidences of indebtedness, purchase and
sales orders, copyrights, service marks, trademarks, trade names, trade secrets,
patents, patent applications, licenses, royalty rights, deposits and rights and
claims to refunds and adjustments of any kind.
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1.2 EXCLUDED ASSETS. Notwithstanding anything contained in SECTION 1.1
hereof to the contrary, Seller is not selling, and I-Flow is not purchasing,
any of the assets set forth on SCHEDULES 1.2(a) through 1.2(e) hereto (the
"Excluded Assets"), all of which shall be retained by Seller.
1.3 ASSUMED OBLIGATIONS. I-Flow hereby assumes and shall hereafter pay,
discharge or perform in the ordinary course only those contracts and other
obligations (the "Assumed Obligations") listed in the Assumed Obligations
Schedules attached hereto as SCHEDULES 1.3(a) through 1.3(g). Other than as set
forth in SCHEDULES 1.3(a) through 1.3(g) or as specifically provided in this
Agreement, I-Flow shall not assume or be obligated to pay, discharge or perform
any contract, liability or obligation of Seller or Parent, whether direct or
indirect, known or unknown, absolute or contingent. Notwithstanding the
foregoing, I-Flow agrees to assume up to Five Thousand Dollars ($5,000) in
accounts payable that are received by I-Flow after the Closing Date and relate
to goods or services purchased by Seller or Subsidiary prior to the Closing
Date; provided, however that in the event the underlying goods are reflected in
the inventory or plant, property and equipment set forth on the Closing Date
Reconciliation Report (as defined herein) the accounts payable for purposes of
the Closing Date Reconciliation Report shall be increased by such amount.
1.4 NO OTHER DEBTS, OBLIGATIONS OR LIABILITIES ASSUMED. I-Flow does not
assume and shall not be liable for any and all of the employment obligations,
debts, product liability claims and other actual or contingent liabilities of
Seller or Parent of any nature whatsoever, including, without limitation, any
liability of Seller or Parent for taxes or any liability of Seller or Parent
relating to, arising from or connected with the services and/or products
provided by Seller or Parent before the Closing Date (as defined below) or any
liability of Seller or Parent relating to, arising from or connected with
Seller's previous lease for the facilities Seller occupied in Carlsbad,
California, other than the assumed obligations specifically listed in the
Assumed Obligations Schedules attached hereto as SCHEDULES 1.3(a) through 1.3(g)
or as specifically provided in this Agreement.
1.5 LEASE AGREEMENT. I-Flow assumes the obligations under the Lease (as
defined herein), subject to SECTION 11.8 hereof.
ARTICLE II
PURCHASE PRICE AND PAYMENT
2.1 PURCHASE PRICE. In exchange and as consideration for the transfer
of the Assets and other obligations of the Selling Parties to I-Flow, and in
full and complete payment therefor, I-Flow shall pay to Seller the aggregate
purchase price (the "Purchase Price"), subject to any and all adjustments that
are contemplated herein, at the times and in the manner set forth below:
(a) CASH CONSIDERATION. A wire transfer of immediately
available funds, delivered at the Closing (as defined below), in the amount of
Fifteen Million Dollars ($15,000,000). The wire transfer instructions are as
follows:
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Financial Institution: First Interstate Bank, Palomar Airport
Office, Carlsbad, California
ABA Number: 122000218
For Credit: Block Medical, Inc.
Account No.: 332808756
(b) I-FLOW SHARE CONSIDERATION. That number of I-Flow Common
Shares, delivered in certificated form at the Closing, valued at the average
closing price for the period beginning fifteen (15) trading days and ending five
(5) trading days immediately preceding the Closing Date (the "Base Share
Price"), having a value of at least Two Million Dollars ($2,000,000).
(c) WARRANT CONSIDERATION. Non-transferable warrants
substantially in the form attached hereto as EXHIBIT A (the "Warrants") to
acquire Two Hundred Fifty Thousand (250,000) shares of I-Flow Common Stock at
the Base Share Price.
2.2 ADJUSTMENTS TO PURCHASE PRICE. The Purchase Price set forth in
SECTION 2.1 shall be adjusted as required pursuant to the following provisions
of this SECTION 2.2:
(a) ADJUSTMENT TO CASH CONSIDERATION. The Fifteen Million
Dollar ($15,000,000) cash portion of the Purchase Price shall be adjusted upward
or downward, on a dollar for dollar basis, to the extent that, as of the Closing
Date, Seller's inventory PLUS plant, property and equipment (both inventory and
plant, property and equipment valued at gross book value minus appropriate
reserves in accordance with generally accepted accounting principles
consistently followed and applied) PLUS gross accounts receivable LESS accounts
payable exceed or are less than Five Million Three Hundred Sixty-Nine Thousand
Dollars ($5,369,000). Within twenty (20) business days after the Closing Date,
I-Flow shall prepare and deliver to Parent a report (the "Closing Date
Reconciliation Report") setting forth Seller's inventory PLUS plant, property
and equipment (both inventory and plant, property and equipment valued at gross
book value minus appropriate reserves in accordance with generally accepted
accounting principles consistently followed and applied) PLUS gross accounts
receivable LESS accounts payable, all as of the Closing Date; provided, however
that the accounts payable for purposes of the Closing Date Reconciliation Report
is subject to adjustment as set forth in SECTION 1.3 hereof. Within ten (10)
business days of Parent's receipt thereof, Parent shall prepare and deliver to
I-Flow a written statement setting forth its agreement or disagreement, as the
case may be, with the Closing Date Reconciliation Report. If Parent agrees with
the Closing Date Reconciliation Report, then the party owing funds shall pay to
the other party the amount owed within five (5) business days via wire transfer.
If Parent disagrees with the Closing Date Reconciliation Report, it shall in its
written statement to I-Flow set forth the reasons for such disagreement. If and
to the extent that the parties are in agreement, payment shall be made for those
items agreed upon and the only payment to be withheld by either party shall be
those amounts which are disputed.
(b) ADJUSTMENT TO I-FLOW SHARE CONSIDERATION. If the value of
the I-Flow Common Shares delivered pursuant to SECTION 2.1(b) is below Two
Million Dollars ($2,000,000) as measured by the average closing price for the
ten (10) trading day period immediately before the six (6) month anniversary of
the Closing Date (the "Updated Base Share Price"), I-Flow will
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deliver to Seller, as soon as practicable and in certificated form, additional
I-Flow Common Shares so that the total value of the I-Flow Common Shares
delivered pursuant to SECTION 2.1(b) and this SECTION 2.2(b), as measured by the
Updated Base Share Price, is at least Two Million Dollars ($2,000,000) on such
six month anniversary of the Closing Date; provided, however, if I-Flow's common
stock is delisted from The Nasdaq Stock Market (and is not listed on another
national exchange) at the six-month anniversary of the Closing Date or if
trading of I-Flow's common stock has been halted for a period of at least three
(3) trading days as of the six-month anniversary of the Closing Date then either
(i) I-Flow and Seller shall retain their own independent valuation consultant to
appraise the value of I-Flow's common stock on a per share basis and, for the
purposes of this SECTION 2.2(b), the value of the I-Flow Common Shares delivered
pursuant to SECTION 2.1(b) and this SECTION 2.2(b) shall be the average of the
two appraised values, or (ii) I-Flow or its designee shall purchase from Seller
for Two Million Dollars ($2,000,000) the I-Flow Common Shares delivered to
Seller pursuant to SECTION 2.1(b). The parties agree that, in the event I-Flow
and Seller retain their own independent valuation consultants, each party shall
pay its own costs, fees and expenses in connection with retaining such valuation
consultant.
(c) ADJUSTMENT TO WARRANT CONSIDERATION. In the event the Company sets a
record date on or prior to the Closing Date for the effectuation of a split or
subdivision of I-Flow's Common Shares or the determination of holders of Common
Shares entitled to receive a dividend or other distribution payable in
additional Common Shares or other securities or rights convertible into, or
entitling the holders thereof to receive directly or indirectly additional
Common Shares ("Share Equivalents") without the payment of any consideration (or
payment of less than full fair consideration) by such holders for the additional
Common Shares or the Share Equivalents (including the additional Common Shares
issuable upon conversation or exercise thereof), then the number of shares
issuable upon exercise of the warrants issued pursuant to SECTION 2.1(c) hereof
shall be appropriately increased in proportion to such increase of outstanding
Common Shares; PROVIDED, HOWEVER, that if such record date occurs after the end
of the period pursuant to which the Base Share Price is determined, then the
equitable adjustment provisions set forth in Section 2 of the Warrant attached
hereto as EXHIBIT A shall apply.
In the event that prior to the Closing Date the number of I-Flow
Common Shares outstanding is decreased by a combination of the outstanding
Common Shares, then on the record date of such combination, the number of shares
issuable upon exercise of the warrants issued pursuant to SECTION 2.1(c) hereof
shall be appropriately decreased in proportion to such decrease in outstanding
Common Shares; PROVIDED, HOWEVER, that if such record date occurs after the end
of the period pursuant to which the Base Share Price is determined, then the
equitable adjustment provisions set forth in Section 2 of the Warrant attached
hereto as EXHIBIT A shall apply.
2.3 ALLOCATION OF PURCHASE PRICE. The parties agree to allocate the
Purchase Price as set forth in SCHEDULE 2.3 to this Agreement. The parties
shall file their respective tax returns and Internal Revenue Service Forms 8594
in accordance with such allocation and shall not take any position or action
inconsistent with such allocation.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLING PARTIES
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For purposes of Article III, it is understood and agreed that (i) when referring
to Seller and/or Subsidiary, "to the knowledge of" shall mean what the officers
of Seller or Subsidiary know or should have known after reasonable diligence;
(ii) when referring to Parent, "to the knowledge of" shall mean what the
officers of Parent actually know; and (iii) "material adverse effect" or
"material adverse change" shall mean any matter which substantially and
materially negatively impacts Seller's and Subsidiary's financial condition,
taken as a whole.
The Selling Parties, jointly and severally, represent and warrant to and
for the benefit of I-Flow that:
3.1 ORGANIZATION, STANDING AND QUALIFICATION OF THE SELLING PARTIES.
Seller is a corporation duly organized, validly existing and in good standing
under the laws of Delaware, has all necessary corporate powers to own its
properties and to carry on its business as now owned and operated by it, and is
duly qualified to do intrastate business and is in good standing in all
jurisdictions in which the nature of Seller's business or of its properties
makes such qualification necessary. Parent is a corporation duly organized,
validly existing and in good standing under the laws of Indiana, and it has all
necessary corporate powers to own its properties and to carry on its business as
now owned and operated by it.
3.2 CAPITALIZATION. All of the issued and outstanding capital stock of
Seller is owned, beneficially and of record, by Parent.
3.3 SUBSIDIARIES. Seller does not own, directly or indirectly, any
interest or investment (whether equity or debt) in any corporation, partnership,
business, trust or other entity, except Subsidiary. Subsidiary is a SOCIEDAD
ANONIMA DE CAPITAL VARIABLE duly organized, validly existing and in good
standing under the laws of the United Mexican States, has all necessary
corporate power to own its properties and to carry on its business as now owned
and operated by it, and is duly qualified to do business in all jurisdictions in
which the nature of Subsidiary's business or of its properties makes such
qualifications necessary. All of the issued and outstanding shares of capital
stock of Subsidiary (the "Subsidiary Shares") are validly issued, fully paid and
nonassessable, and are owned, beneficially and of record, as follows: 499
shares of Series One and 20,000 shares of Series Two are owned by Seller and
1 share of Series One is owned by Daniel J. Kelly. Seller has full power, right
and authority to transfer all of the Subsidiary Shares, or cause all such
Subsidiary Shares to be transferred, to I-Flow and/or its designee at the
Closing, without obtaining the consent or approval of any other person or
governmental authority. The Subsidiary Shares are owned free and clear of all
liens, encumbrances, security agreements, equities, options, claims, charges and
restrictions, and there are no outstanding subscriptions, options, rights,
warrants, convertible securities or other agreements or commitments obligating
Subsidiary or any other person or entity to issue or to transfer from treasury
any additional shares of Subsidiary's capital stock of any class.
3.4 FINANCIAL STATEMENTS. SCHEDULE 3.4(a) to this Agreement sets forth
(i) the audited consolidated balance sheets of Seller and its Subsidiary as of
December 3, 1994 and December 2, 1995, and the related consolidated statements
of operations for the fiscal years ending November 27, 1993, December 3, 1994
and December 2, 1995, and (ii) the unaudited consolidated balance sheet of
Seller and Subsidiary as of June 1, 1996, together with related
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unaudited consolidated statement of operations for the six-month period ending
on that date. The financial statements in SCHEDULE 3.4(a) are collectively
referred to in this Agreement as the "Financial Statements." The Financial
Statements have been prepared in accordance with generally accepted accounting
principles consistently followed and applied by Seller throughout the periods
indicated, and they fairly present the financial position of Seller and
Subsidiary as of the respective dates of the balance sheets included in the
Financial Statements and the results of their operations for the respective
periods indicated. Relative to the financial statements for the interim period
ended June 1, 1996, certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. Notwithstanding the
foregoing, the parties agree that SCHEDULE 3.4(a) shall be delivered at the
Closing. SCHEDULE 3.4(b) to this Agreement is (i) the unaudited consolidated
balance sheets of Seller and Subsidiary as of December 3, 1994 and December 2,
1995, and the related consolidated statements of operations for the fiscal years
ending November 27, 1993, December 3, 1994 and December 2, 1995, and (ii) the
unaudited consolidated balance sheet of Seller and Subsidiary as of June 1,
1996, together with related unaudited consolidated statement of operations for
the six-month period ending on that date. The Financial Statements shall in all
material respects reflect the same numbers as set forth on the balance sheets
and statements of operations on SCHEDULE 3.4(b), with the exception of necessary
adjustments for tax liabilities.
3.5 ABSENCE OF SPECIFIED CHANGES. Except as previously disclosed in a
writing to I-Flow or as set forth in SCHEDULE 3.5, since December 2, 1995, there
has not been any:
(a) Material transaction by Seller or Subsidiary except in the
ordinary course of business as conducted on that date;
(b) Capital expenditure by Seller or Subsidiary exceeding
$10,000 for an individual item, or $150,000 in the aggregate;
(c) Material adverse change in the financial condition,
liabilities, assets or business of Seller and Subsidiary taken as a whole;
(d) Destruction, damage to or loss of any asset of Seller or
Subsidiary (whether or not covered by insurance) that materially and adversely
affects the financial condition or business of Seller and Subsidiary taken as a
whole;
(e) Change in accounting methods or practices (including,
without limitation, any change in depreciation or amortization policies or rates
or any change in practices involving accounts payable or accounts receivable),
by Seller or Subsidiary;
(f) Revaluation by Seller or Subsidiary of any of its assets;
(g) Other than cash dividends, declaration, setting aside or
payment of a dividend or other distribution in respect to the capital stock of
Seller or Subsidiary, or any direct or indirect redemption, purchase or other
acquisition by Seller or Subsidiary of any of its shares of capital stock;
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(h) Increase in the salary or other compensation payable or to
become payable by Seller or Subsidiary to any of its officers, employees,
distributors, representatives or agents, or the declaration, payment or
commitment or obligation of any kind for the payment, by Seller or Subsidiary,
of a bonus or other additional salary or compensation to any such person, except
in the ordinary course of business;
(i) Sale or transfer of any asset of Seller or Subsidiary,
except in the ordinary course of business;
(j) Amendment or termination of any material contract, agreement
or license to which Seller or Subsidiary is a party, except in the ordinary
course of business;
(k) Loan by Seller or Subsidiary to any third-party person or
entity, or guaranty by Seller or Subsidiary of any loan;
(l) Mortgage, pledge or other encumbrance of any asset of Seller
or Subsidiary;
(m) Waiver or release of any right or claim of Seller or
Subsidiary, except in the ordinary course of business;
(n) Commencement or notice or threat of commencement of any
civil litigation or any governmental proceeding against or investigation of
Seller or Subsidiary or the affairs of either of them;
(o) Labor trouble or claim of wrongful discharge, discrimination
or other unlawful labor practice or action;
(p) Issuance or sale by Seller or Subsidiary of any shares of
their respective capital stock of any class, or of any other of their
securities;
(q) Agreement or commitment by Seller or Subsidiary to do any of
the things described in the preceding clauses (a) through (p) that may have an
impact on I-Flow; or
(r) Other event or condition of any character that has or might
reasonably have a material and adverse effect on the financial condition,
business, assets or liabilities of Seller and Subsidiary taken as a whole.
3.6 DEBTS, OBLIGATIONS AND LIABILITIES. SCHEDULE 3.6 to this Agreement
contains a true and complete list of all liabilities and obligations of Seller
and Subsidiary that exceed $50,000. Neither Seller nor Subsidiary has any
debts, liabilities or obligations, that exceed $50,000, of any nature, whether
accrued, absolute, contingent or otherwise, and whether due or to become due,
that are not set forth in SCHEDULE 3.6.
3.7 TAXES. Seller and Subsidiary, or Parent on behalf of Seller and
Subsidiary, have (i) duly and timely filed or caused to be filed all federal,
state, local and foreign tax returns required to be filed prior to the date of
this Agreement which relate to Seller and Subsidiary or
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with respect to which Seller and Subsidiary are liable or otherwise in any way
subject, and to the knowledge of the Selling Parties all such tax returns
(A) are complete and accurate in all material respects in accordance with all
legal requirements applicable thereto and (B) as of the time of filing,
correctly reflected the facts regarding the income, business assets, operations,
activities, status or other matters of Seller and Subsidiary required to be
shown thereon, (ii) paid, when due, all taxes shown to be due and payable on
such returns, or pursuant to any assessment or otherwise, and (iii) properly
accrued, charged or established adequate reserves, on the books of Parent, for
all taxes arising in respect of any fiscal year of Seller and Subsidiary or
portion thereof ended prior to the Closing; PROVIDED, HOWEVER, that
notwithstanding the foregoing, the parties agree that the Selling Parties shall
be responsible for any and all liabilities relating to, arising from or
connected with the Selling Parties' or Subsidiary's failure to take or cause to
be taken any of the actions set forth in (i) through (iii) above or the failure
of such tax returns to meet the requirements set forth in (i)(A) or (i)(B)
above; PROVIDED FURTHER, the parties agree that I-Flow shall be responsible and
the Selling Parties shall not be responsible for any liability relating to,
arising from or connected with I-Flow's tax returns after the Closing even if
the challenged tax accounting methodologies or other tax positions used or
relied upon by I-Flow were previously used or relied upon by Seller and/or
Subsidiary in connection with their respective tax returns. Except as set forth
in SCHEDULE 3.7 hereto, no tax liabilities, disallowances or assessments
relating to the business, assets or employees or independent contractors of
Seller or Subsidiary have been assessed or proposed as of the date hereof, and
to the knowledge of the Selling Parties there is no basis for any such
liabilities, disallowances or assessments. Neither Seller nor Subsidiary is
delinquent in the payment of any taxes which would result in the imposition of a
lien, claim or encumbrance on Seller or Subsidiary, their properties or their
assets. Neither Seller nor Subsidiary is a party to or bound by any tax
indemnity, tax sharing or tax allocation agreement with any person or entity
other than Parent.
3.8 DESCRIPTION OF REAL PROPERTY. Neither Seller nor Subsidiary own any
real property. SCHEDULE 3.8 to this Agreement is a complete and accurate list
of all real property lease agreements to which Seller or Subsidiary is a party.
Seller or Subsidiary has good and marketable title to each of the leaseholds
listed in SCHEDULE 3.8, free and clear of all mortgages, liens, encumbrances,
leases, equities, claims, charges, easements, rights-of-way, covenants,
conditions and restrictions or any adverse rights whatsoever, and neither Seller
nor Subsidiary is in default with respect to any material term or condition of
any such lease, nor has any event occurred which through the passage of time or
the giving of notice, or both, would constitute a default thereunder by Seller
or Subsidiary or would cause the acceleration of any obligation of Seller or
Subsidiary or the creation of a lien or encumbrance upon any asset of Seller or
Subsidiary.
3.9 ZONING. The zoning of each parcel of property described in
SCHEDULE 3.8 permits the currently existing improvements and the continuation of
the business currently being conducted on such parcel. Seller has not
commenced, nor have either of the Selling Parties or Subsidiary received notice
of the commencement of, any proceeding that would affect the current zoning
classification of any such parcel.
3.10 ENVIRONMENTAL LIABILITY.
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(a) For purposes of this SECTION 3.10 and SECTION 11.5, the following
terms shall be defined as follows:
"Environmental Damages" shall mean all damages, and includes, without
limitation, any and all liabilities, costs, losses, diminutions in value, fines,
penalties, demands, claims, judgments, liens, injunctions, actions, cost
recovery actions, lawsuits, administrative proceedings, orders, response action
costs, compliance costs, investigation expenses, consultant fees, actual
attorneys' fees and disbursements, and litigation expenses related to
environmental matters.
"Environmental Law" shall mean common law and all applicable statutes,
regulations, rules, ordinances, codes, licenses, permits, orders, approvals,
plans, authorizations, and similar items, of any Governmental Authority and all
applicable judicial, administrative and regulatory decrees, judgments and orders
relating to the protection of human health or the environment, including,
without limitation, all requirements pertaining to reporting, licensing,
permitting, investigation and remediation of emissions, discharges, Releases or
threatened Releases of Hazardous Materials.
"Governmental Approval" shall mean any permit, license, variance,
certificate, consent, letter, clearance, closure, exemption, decision or action
or approval of a Governmental Authority.
"Governmental Authority" shall mean any international, foreign, federal,
state, regional, county or local person or body having governmental authority or
sub-division thereof.
"Hazardous Material" shall mean any substance: (a) the presence of which
requires investigation or remediation under any Environmental Law, (b) which is
defined as a "hazardous waste," "hazardous substance," pollutant or contaminant
under any Environmental Law, (c) which is regulated by any Governmental
Authority, or (d) including, but not limited to, any petroleum hydrocarbons,
polychlorinated biphenols or asbestos.
"Hazardous Material Activity" shall mean any activity, event or occurrence
involving a Hazardous Material, including, without limitation, the manufacture,
possession, presence, use, generation, transportation, treatment, storage,
disposal, Release, threatened Release, abatement, removal, remediation, handling
of or corrective or response action to any Hazardous Material.
"Pre-Closing Conditions" means any matter, activity, omission,
circumstance, occurrence, Release, threatened Release, or condition (including
but not limited to any item set forth on SCHEDULE 3.10 hereto), that (i)
occurred or was in existence at any Property in the United States, or any other
property in the United States owned or operated by Seller, on or before the
Closing Date but only to the extent such condition was caused by Seller; or,
(ii) is attributable to the operation of Seller's business in the United States
on or before the Closing Date; or (iii) occurred or was in existence at any
Property in Mexico, or any other property in Mexico owned or operated by
Subsidiary, on or before the Closing Date, but only to the extent such condition
was caused by Subsidiary or Seller; or (iv) is attributable to the operation of
Subsidiary's business in Mexico on or before the Closing Date.
"Property" shall mean the real property subject to the leases described in
SCHEDULE 3.8.
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"Release" shall mean any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing into
the indoor or outdoor environment, including, without limitation, the
abandonment or discarding of barrels, drums, containers, tanks and other
receptacles containing or previously containing any Hazardous Material.
(b) Except as set forth in SCHEDULE 3.10, the Selling Parties,
jointly and severally, represent and warrant that:
(1) To the knowledge of the Selling Parties, Seller, Subsidiary and the
Property comply with any and all applicable Environmental Law;
(2) To the knowledge of the Selling Parties, Seller and Subsidiary have
obtained all Governmental Approvals required by any and all applicable
Environmental Law for their respective operations and the Property;
(3) To the knowledge of the Selling Parties, neither Seller nor Subsidiary
has, nor has any other person, caused any Release, threatened Release or
disposal of any Hazardous Material at the Property which has adversely affected
the Property; the Property is not adversely affected by any Release, threatened
Release or disposal of a Hazardous Material originating or emanating from any
other property;
(4) To the knowledge of the Selling Parties, the Property is not subject
to any restriction on the occupancy or use of the Property that would adversely
affect the current operations of Seller's or Subsidiary's business in connection
with any (a) Environmental Law or (b) Release, threatened Release or disposal of
a Hazardous Material;
(5) The Selling Parties have provided or otherwise made available to
I-Flow all environmental reports, studies, and assessments concerning Seller,
Subsidiary and/or the Property which either of the Selling Parties have in their
possession, custody, or control.
3.11 INVENTORY. The inventories of raw materials, work in process and
finished goods (collectively called inventories) shown on the balance sheets of
Seller as of June 1, 1996 included in the Financial Statements, adjusted to
reflect the physical inventory completed June 1, 1996, consist of items of a
quality and quantity usable and salable in the ordinary course of business by
Seller and Subsidiary, except for obsolete and slow-moving items and items below
standard quality, all of which have been written down on the books of Seller or
Subsidiary to net realizable market value or have been fully provided for by
adequate reserves. All items included in the inventories are the property of
Seller or Subsidiary, except for sales made in the ordinary course of business
since June 1, 1996; for each of these sales, either the purchaser has made full
payment or the purchaser's liability to make payment is reflected in the books
of Seller or Subsidiary. No items included in the inventories have been pledged
as collateral or are held by Seller or Subsidiary on consignment from others.
The inventories shown on all the consolidated balance sheets included in the
Financial Statements are based upon quantities determined by physical count or
measurement, taken within the preceding 12 months, and are valued at the lower
of cost
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(determined on a first-in, first-out basis) or market value and on a basis
consistent with that of prior years.
3.12 OTHER TANGIBLE PERSONAL PROPERTY. SCHEDULE 1.1(d) to this
Agreement is a complete and accurate list describing all trucks and automobiles
owned by, in the possession of or used by Seller or Subsidiary in connection
with their respective businesses. The Assets constitute all of the material
tangible personal property necessary for the conduct by Seller and Subsidiary of
their respective businesses as now conducted. All the motor vehicles listed in
SCHEDULE 1.1(d) meet all applicable California motor vehicle requirements, are
in reasonable working condition and have current smog certifications.
Except as stated in SCHEDULE 3.12, no personal property used by either
Seller or Subsidiary in connection with their respective business is held under
any lease, security agreement, conditional sales contract or other title
retention or security arrangement, or is located other than in the possession of
Seller or Subsidiary.
3.13 ACCOUNTS RECEIVABLE. SCHEDULE 1.1(a) to this Agreement is a
complete and accurate list of the accounts receivable of Seller and Subsidiary
(except intercompany receivables) as of June 18, 1996, together with an accurate
aging of these accounts. The accounts receivable, and all accounts receivable
of Seller and Subsidiary (except intercompany receivables) created after that
date, arose from valid sales in the ordinary course of business. All of such
accounts receivable have been collected in full since that date or are
collectible at their full amount, without offset or other discount, except for
normal and customary prompt payment discounts and except for intercompany
receivables. The Selling Parties agree that there has been and shall be no
payment by Subsidiary to Seller on or prior to the Closing Date with respect to
such intercompany receivables.
3.14 TRADE NAMES, TRADEMARKS AND COPYRIGHTS. SCHEDULE 3.14(a) to this
Agreement is a schedule of all trade names, trademarks, service marks and
registered copyrights and their registrations relating to Seller's or
Subsidiary's currently marketed products or products in development, owned by
Seller or Subsidiary or in which they have any rights or licenses. Neither
Seller nor Subsidiary has any knowledge of any infringement or alleged
infringement by others of any such trade name, trademark, service mark or
copyright. Neither Seller nor Subsidiary has infringed, and neither is now
infringing, on any trade name, trademark, service mark or copyright belonging to
any other person, firm or entity. Except as set forth in SCHEDULE 3.14(b),
neither Seller nor Subsidiary is a party to any license, agreement or
arrangement, whether as licensor, licensee, franchisor, franchisee or otherwise,
with respect to any trademarks, service marks, trade names or applications for
them, or any copyrights. Seller and Subsidiary own, or hold adequate licenses
or other rights to use, all trademarks, service marks, trade names and
copyrights necessary for their respective businesses as now conducted by them
(including without limitation those listed in SCHEDULE 3.14(a)), and those
licenses or rights to use do not, conflict with or otherwise violate any rights
of others. Seller and Subsidiary have the full and complete right to sell and
assign to I-Flow all such owned trademarks, trade names, service marks and
copyrights, and all such licenses or other rights.
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3.15 PATENTS AND PATENT RIGHTS. SCHEDULE 3.15 to this Agreement is a
true and complete list of all patents and applications for patents owned by
Seller or Subsidiary or in which they have any rights, licenses or immunities.
The patents and applications for patents listed in SCHEDULE 3.15 are valid and
in full force and effect and, except as set forth on SCHEDULE 3.15, are not
subject to any taxes, maintenance fees or actions falling due within 90 days
after the Closing Date. Except as set forth in SCHEDULE 3.23, there have been
no interference actions or other judicial, arbitration or other adversary
proceedings concerning the patents or applications for patents listed in
SCHEDULE 3.15. To the knowledge of the Selling Parties, each patent application
is awaiting action by its respective patent office except as otherwise indicated
in SCHEDULE 3.15. To the knowledge of the Selling Parties, the manufacture, use
or sale of the inventions, models, designs and systems covered by the patents
and applications for patents listed in SCHEDULE 3.15 does not violate or
infringe upon any patent or any proprietary or personal right of any person,
firm or corporation; and to the knowledge of the Selling Parties, neither Seller
nor Subsidiary has infringed or is now infringing upon any patent or other right
belonging to any person, firm or corporation. Except as set forth in SCHEDULE
3.14(b), neither Seller nor Subsidiary is a party to any license, agreement or
arrangement, whether as licensee, licensor or otherwise, with respect to any
patent, or application for patent and Seller and Subsidiary have the full and
complete right and authority to use and to transfer to I-Flow such license
agreements or arrangements as are necessary to enable them to conduct and to
continue to conduct all phases of their businesses in the manner currently
conducted by them, and, to the knowledge of the Selling Parties, those licenses
or rights to use do not conflict with or violate any patent or other rights of
others. Further, Seller and Subsidiary have the full and complete right and
authority to transfer to I-Flow the patents and applications for patents set
forth on SCHEDULE 3.15.
3.16 TRADE SECRETS. Seller or Subsidiary is the sole owner of their
respective trade secrets, free and clear of any and all liens, encumbrances,
restrictions or legal or equitable claims of others. SCHEDULE 3.16 provides a
description of the Selling Parties' and Subsidiary's standard security measures
taken to protect their respective trade secrets. Seller and Subsidiary have
taken security measures which, in their opinion, are reasonable to protect the
secrecy, confidentiality and value of trade secrets; any of their employees and
any other persons who, either alone or in concert with others, developed,
invented, discovered, derived, programmed or designed these secrets, or who have
knowledge of or access to information relating to them, have been put on notice
and, if appropriate, have entered into agreements that these secrets are
proprietary to Seller or Subsidiary and not to be divulged or misused.
All of the trade secrets used in the business are currently valid and
protectible and are not part of the public knowledge or literature; nor to each
of the Selling Parties' knowledge have they been used, divulged or appropriated
for the benefit of any past or present employees or other persons or entities,
or to the detriment of Seller or Subsidiary.
3.17 TITLE TO ASSETS. Seller and Subsidiary have good and marketable
title to all of their respective assets and interests in assets, whether real,
personal, mixed, tangible or intangible, which constitute all of the assets and
interests in assets that are used in the businesses of Seller and Subsidiary.
All these assets are free and clear of any and all restrictions on or conditions
to transfer or assignment, and free and clear of any and all mortgages, liens,
pledges, charges, encumbrances, equities, claims, easements, rights of way,
covenants, conditions or restrictions,
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except for (1) those disclosed in the Financial Statements; (2) the lien of
current taxes not yet due and payable; and (3) possible minor matters that, in
the aggregate, are not substantial in amount and do not materially detract from
or interfere with the current or intended use of any of these assets or
materially impair business operations. Neither Seller nor Subsidiary is in
breach, default or arrears in any material respect under any lease. All real
property, whether leased or owned, and tangible personal property of Seller and
Subsidiary material to the conduct of the business, are in good operating
condition and repair, ordinary wear and tear excepted. Seller and Subsidiary
are in possession of all premises leased to them from others. Neither any
officer, director or employee of Parent, Seller or Subsidiary, nor any spouse,
child or other relative of any of these persons, owns, or has any interest,
directly or indirectly, in any of the real or personal property owned by or
leased to Seller or Subsidiary or any copyrights, patents, trademarks, trade
names or trade secrets licensed by Seller or Subsidiary. Neither Seller nor
Subsidiary occupies any real property or uses any personal property in violation
of any law, regulation or decree.
3.18 CUSTOMERS AND SALES. SCHEDULE 3.18(a) to this Agreement is a
correct and current list of all customers of Seller and Subsidiary together with
summaries of the sales made to each customer during fiscal year 1995. SCHEDULE
3.18(b) to this Agreement is a correct and current list of all customers of
Seller and Subsidiary (for which Seller and/or Subsidiary made aggregate sales
of $100,000 or more during fiscal year 1995) together with summaries of the
sales made to each such customer during the first six (6) months of fiscal year
1995 and during the first six (6) months of fiscal year 1996. Except as
indicated in SCHEDULE 3.18(c), neither Seller nor Subsidiary nor Parent has any
actual knowledge that any of these customers (for which Seller and/or Subsidiary
made aggregate sales of $20,000 or more during fiscal year 1995) intend to cease
doing business with Seller or Subsidiary or intend to materially alter the
amount of the business they are currently doing with Seller or Subsidiary,
whether as a result of the transactions contemplated by this Agreement or
otherwise, provided that nothing herein shall be interpreted as a prediction,
covenant or guarantee that any customer will continue to do business with
I-Flow.
3.19 EMPLOYMENT CONTRACTS AND BENEFITS. SCHEDULE 3.19 to this
Agreement is a list of all employment contracts and collective bargaining
agreements, and all pension, bonus, profit-sharing, stock option and other
agreements or arrangements providing for employee remuneration or benefits to
which Seller or Subsidiary is a party or by which Seller or Subsidiary is bound.
All these contracts and arrangements are in full force and effect, and neither
Seller nor Subsidiary, nor any other party, is in breach or default under them.
There have been no claims of defaults and, to the knowledge of each of the
Selling Parties, there are no facts or conditions that if continued, or on
notice, will result in a breach or default under these contracts or
arrangements. There is no pending or, to the Selling Parties' knowledge,
threatened labor dispute, strike or work stoppage affecting Seller's or
Subsidiary's business. Seller and Subsidiary have complied with all applicable
laws for each of their respective employee benefit plans, including the
provisions of the Employee Retirement Income Security Act (ERISA) if and to the
extent applicable. There are no threatened or pending claims by or on behalf of
any such benefit plan, by or on behalf of any employee covered under any such
plan or otherwise involving any such benefit plan, that allege a breach of
fiduciary duties or violation of other applicable state or federal law, nor is
there, to the Selling Parties' knowledge, any basis for such a claim. Except as
set forth in SCHEDULE 3.19, neither Seller nor Subsidiary has entered into any
severance or similar arrangement in respect of any current or former employee
that will result in any obligation, absolute or contingent, of
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I-Flow, Seller or Subsidiary to make any payment to any current or former
employee following termination of employment. Also, set forth on SCHEDULE 3.19
is a list of all employees of Seller or Subsidiary, their current salary rates,
and length of service.
3.20 INSURANCE POLICIES. SCHEDULE 3.20 to this Agreement is a
description of all insurance policies held by the Selling Parties concerning the
businesses and properties of Seller or Subsidiary. All of these policies are in
the respective principal amounts set forth in SCHEDULE 3.20. The Selling
Parties have maintained and now maintain (1) insurance on all their assets and
businesses of a type customarily insured, covering property damage and loss of
income by fire or other casualty, and (2) insurance protection in customary
amounts against all liabilities, claims and risks against which it is customary
to insure, including without limitation product liability insurance. Neither
of the Selling Parties is in breach or default with respect to payment of
premiums on any such policy. Except as set forth in SCHEDULE 3.20, no claim is
pending under any such policy.
3.21 OTHER CONTRACTS. Neither Seller nor Subsidiary is a party to, nor
is the property of either bound by, any distributor's or manufacturer's
representative or agency agreement; any output or requirements agreement; any
agreement not entered into in the ordinary course of business; any indenture,
mortgage, deed of trust or lease; or any agreement requiring the performance by
Seller or Subsidiary of any obligation for a period of time extending beyond one
year from the Closing Date or calling for consideration of more than $50,000;
except the agreements listed in SCHEDULE 3.21, complete and accurate copies of
which have been furnished to I-Flow. There is no breach or default or event
that, with notice or lapse of time or both, would constitute a breach or default
by Seller or Subsidiary, as the case may be, or to the knowledge of the Selling
Parties or Subsidiary any third party to any of these agreements. Neither
Seller nor Subsidiary has received notice that any party to any of these
agreements intends to cancel or terminate any of these agreements or to exercise
or not exercise any options under any of these agreements. Neither Seller nor
Subsidiary is a party to, nor is either or the property of either bound by, any
undisclosed agreement that is materially adverse to the businesses, properties
or financial condition of Seller or Subsidiary.
3.22 COMPLIANCE WITH LAWS. Seller and Subsidiary have complied in all
material respects with all applicable federal, state, local and foreign laws and
regulations (including, without limitation, those relating to the environment),
and have not been cited for any violation of any such law or regulation. No
material capital expenditures will be required for compliance with any
applicable federal, state, local or foreign laws or regulations now in force
relating to the protection of the environment or any other matter. There is no
pending audit known to either of the Selling Parties or any of their officers by
any federal, state, local or foreign governmental authority with respect to
groundwater, soil or air monitoring; the storage, burial, release,
transportation or disposal of hazardous substances; or the use of underground
storage tanks by Seller or Subsidiary or relating to the facilities of Seller or
Subsidiary. Neither Seller nor Subsidiary has any agreement with any third
party or federal, state, local or foreign governmental authority relating to any
such environmental matter or any environmental cleanup.
Seller and Subsidiary have complied with all applicable requirements of
the Occupational Safety and Health Act and its California equivalents and
regulations promulgated under any such
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legislation, the consequences of a violation of which could have a material
adverse effect on their operations, and with all orders, judgments and decrees
of any tribunal under such legislation that apply to their businesses or
properties.
Neither Seller nor Subsidiary is in violation of any provision of the
Export Administration Amendments of 1977 or the Foreign Corrupt Practices Act of
1977.
Neither Seller nor Subsidiary has directly or indirectly paid or delivered
any fee, commission, or other money or property, however characterized, to any
finder, agent, government official or other party, in the United States or any
other country, that is in any manner related to the business or operations of
Seller or Subsidiary and that Parent, Seller or Subsidiary knows or has reason
to believe to have been illegal under any federal, state or local law of the
United States or any other country having jurisdiction. Neither Seller nor
Subsidiary has participated, directly or indirectly, in any boycott or other
similar practice affecting any of its actual or potential customers.
Seller and Subsidiary have complied in all material respects with, and
neither has received any notice of any violation of, any other applicable
federal, state, local or foreign statute, law or regulation (including, without
limitation, any applicable building, zoning, environmental protection or other
law, ordinance or regulation) affecting their properties or the operation of
their businesses.
3.23 LITIGATION. Except as set forth in SCHEDULE 3.23, there is not
pending, or, to the knowledge of the Selling Parties, threatened, any suit,
action, arbitration or legal, administrative or other proceeding or governmental
investigation against or affecting Seller, Subsidiary or any of their
businesses, assets or financial condition except for routine audits by
governmental bodies in the ordinary course of business. The matters set forth
in SCHEDULE 3.23, if decided adversely to Seller or Subsidiary will not result
in a material adverse change in the business, assets or financial condition of
Seller and Subsidiary, taken as a whole. The Selling Parties have furnished or
made available to I-Flow complete and accurate copies of all relevant court
papers and other documents relating to the matters set forth in SCHEDULE 3.23.
Neither Seller nor Subsidiary is in breach, violation or default with respect to
any order, writ, injunction or decree of any federal, state, local or foreign
court, department, agency or instrumentality. Except as set forth in SCHEDULE
3.23, neither Seller nor Subsidiary is currently engaged in any legal action to
recover moneys due to any of them or damages sustained by any of them. The
settlement agreement entered into between the Selling Parties and Gregory
Sancoff and River Medical settled all issues in dispute and does not and will
not adversely affect the value of the intellectual property rights of Seller
which are being conveyed to I-Flow as part of the Assets.
3.24 AGREEMENT WILL NOT CAUSE BREACH OR VIOLATION. The consummation of
the transactions contemplated by this Agreement will not result in or constitute
any of the following: (1) a breach of any term or provision of this Agreement;
(2) a default or an event that, with notice or lapse of time or both, would be a
default, breach or violation of the charter documents of Seller or Subsidiary or
any lease, license, promissory note, conditional sales contract, commitment,
indenture, mortgage, deed of trust or other agreement, instrument or arrangement
to which Parent, Seller or Subsidiary is a party or by which any of them or the
property of any of them is
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bound and which would have a material adverse effect on Seller or Subsidiary;
(3) an event that would permit any party to terminate any agreement or to
accelerate the maturity of any material indebtedness or other obligation of
Seller or Subsidiary; or (4) the creation or imposition of any material lien,
charge or encumbrance on any of the properties of Seller or Subsidiary.
3.25 AUTHORITY AND CONSENTS. The Selling Parties have the full and
complete right, power, legal capacity and authority to enter into, and perform
their respective obligations under, this Agreement, and no approvals or consents
of any persons other than the Selling Parties are necessary in connection with
it, other than the consent of the persons described in SCHEDULE 3.25 of this
Agreement. The execution and delivery of this Agreement and the consummation of
the transactions contemplated herein by Seller and Parent have been duly
authorized by all necessary corporate action on the part of Seller and Parent.
3.26 INTEREST IN CUSTOMERS, SUPPLIERS AND COMPETITORS. Except as set
forth in SCHEDULE 3.26, neither Parent, nor any officer, director or employee of
Seller or Subsidiary, nor any spouse or child of any of them, has any direct or
indirect material interest in any competitor, supplier or customer of Seller or
Subsidiary or in any person with whom Seller or Subsidiary is doing business.
3.27 CORPORATE DOCUMENTS. The Selling Parties have furnished to I-Flow
for its examination (1) copies of the certificate of incorporation and bylaws
(or comparable charter documents) of Seller and Subsidiary, and (2) the minute
books of Seller and Subsidiary containing all records required to be set forth
of all proceedings, consents, actions and meetings of the shareholders and
boards of directors of Seller and Subsidiary.
3.28 AUTHORITY. SCHEDULE 3.28 lists (1) the names and addresses of all
persons holding a power of attorney on behalf of Seller or Subsidiary and (2)
the names and addresses of all banks or other financial institutions in which
Seller or Subsidiary has an account, deposit or safe deposit box, with the names
of all persons authorized to draw on these accounts or deposits or to have
access to these boxes.
3.29 GOVERNMENTAL AUTHORIZATION. Except as set forth on SCHEDULE 3.29,
Seller and Subsidiary have obtained all licenses, permits and other
authorizations issued by any governmental agency that are necessary for the
conduct of their businesses except for those licenses, permits or authorizations
that the failure to obtain would have an immaterial effect on the businesses.
Such licenses, permits and authorizations are in full force and effect, and
their continuing effectiveness will not be materially adversely affected by any
of the transactions contemplated herein.
3.30 INVESTMENT INTENT. The shares of I-Flow's common stock to be
issued and delivered to Seller under this Agreement (the "Securities") are being
acquired and will be taken and received for Seller's private investment, for its
own account and with no current intention of distribution of the Securities or
any interest therein to others. Seller has no contract, undertaking, agreement
or arrangement with any person to sell, transfer or otherwise dispose of to any
person or to have any person sell, transfer or otherwise dispose of for it any
of the Securities or any interest therein and Seller is currently not engaged,
nor does it plan to engage within the currently foreseeable future, in any
discussion with any person relative to such sale, transfer or other
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distribution of any of the Securities of any interest therein. Seller fully
comprehends that, with respect to registration exemptions, I-Flow is relying to
a material degree on the representations and agreements contained in this
SECTION 3.30 and with such realization authorizes I-Flow to act as it may see
fit in full reliance hereon, including, without limitation, the placement of a
legend in substantially the form below on the certificate representing the
Securities.
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
HAVE BEEN TAKEN FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT IN ACCORDANCE WITH
THE ACT."
Seller further represents that, for purposes of the registration exemption
of all applicable state laws, it is acquiring the Securities for investment
purposes.
3.31 FULL DISCLOSURE. None of the representations and warranties made
by Parent or Seller contains any untrue statement of a material fact, or omits
to state a material fact necessary to make the statements made, in the light of
the circumstances under which they were made, not misleading.
ARTICLE IV
I-FLOW'S REPRESENTATIONS AND WARRANTIES
I-Flow represents and warrants to and for the benefit of the Selling
Parties that:
4.1 ORGANIZATION AND AUTHORIZATION. I-Flow is a corporation duly
organized, existing and in good standing under the laws of California, and has
all necessary powers to own its properties and to carry on its business as now
owned and operated by it. The execution and delivery of this Agreement and the
consummation of the transactions contemplated herein have been duly authorized
by all necessary corporate action on the part of I-Flow.
4.2 EXCHANGE ACT REPORTS. I-Flow has filed all proxy statements,
reports and other materials required to be filed by it with the Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934 and, except
as disclosed in such proxy statements, reports or other materials, I-Flow had no
undisclosed liabilities of a magnitude that would cause or result in the
initiation of any bankruptcy, insolvency, receivership, assignment for the
benefit of creditors or similar proceedings by or against I-Flow. Copies of
I-Flow's (i) proxy statement for its 1996 Annual Meeting of Shareholders, (ii)
Form 10-K for the period ended December 31, 1995, and (iii) Form 10-Q for the
period ended March 31, 1996, have been delivered to Parent.
4.3 AGREEMENT NOT IN BREACH OF OTHER INSTRUMENTS. The consummation of
the transactions contemplated by this Agreement will not result in or constitute
a default or event that, with the giving or notice or lapse of time or both,
would be a default, breach or violation of the charter documents of I-Flow or
any agreement, instrument, or arrangement to which I-Flow is a party or by which
I-Flow or any of its property is bound and which would have a material adverse
effect on I-Flow.
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4.4 LISTING ON NASDAQ. I-Flow's common stock is listed on The Nasdaq
Small Cap Market and I-Flow is not aware of any current conditions which could
lead to the delisting of such stock.
4.5 OUTSTANDING SHARES. As of May 31, 1996, 10,454,451 shares of
I-Flow's common stock were issued and outstanding.
ARTICLE V
THE SELLING PARTIES' OBLIGATIONS BEFORE CLOSING
The Selling Parties covenant to and for the benefit of I-Flow that from
the date of this Agreement until the Closing:
5.1 I-FLOW'S ACCESS TO PREMISES AND INFORMATION. The Selling Parties
shall provide to I-Flow and its affiliates, representatives and agents full and
reasonable access during normal business hours to all books, records,
properties, data and other information regarding Seller and its business,
properties, prospects and Subsidiary. The parties agree that I -Flow's access
shall be provided for the sole purpose of enabling I-Flow to conduct due
diligence in connection with the transactions contemplated hereby. I-Flow shall
use reasonable efforts to minimize interruption to the business of Seller and
Subsidiary.
5.2 CONDUCT OF BUSINESS IN ORDINARY COURSE. Except as otherwise
provided expressly by the terms of this Agreement, Seller shall, and Parent
shall cause Seller and Subsidiary to, carry on their respective businesses
diligently and in substantially the same manner as they have previously been
carried out, and Seller will not, and shall cause its Subsidiary to not, without
the prior written consent of I-Flow (which consent shall not be unreasonably
withheld):
(a) Grant or agree to grant any material increases in
compensation or benefits payable to the employees, distributors or agents of
Seller or Subsidiary including, without limitation, making any material change
in benefits payable under any bonus or pension plan or other contract or
commitment, making any material change in compensation payable or to become
payable by Seller or Subsidiary, or modifying any collective bargaining
agreement to which either of them is a party or by which either may be bound;
(b) Sell, transfer or convey (or agree to do any of the
foregoing) any of the Assets or capital stock of Seller or Subsidiary except in
the usual and ordinary course of business;
(c) Sell, transfer, convey or grant any license or option (or
agree to do any of the foregoing) as to the Voice-Link patent or related
technology;
(d) Fail to maintain levels of inventory proportionate to the
existing business of Seller or Subsidiary or alter the inventory, accounts
receivable or accounts payable practices maintained during their last fiscal
year; or
(e) Permit Seller or Subsidiary to take any other action or
enter into or amend any contract or transactional commitment, other than as
provided herein, which is not in the usual
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and ordinary course of business of Seller or Subsidiary as currently being
conducted; PROVIDED, HOWEVER, that Seller and Parent shall have the right to
settle any infringement claims in a manner that does not violate SECTION 11.7 of
this Agreement.
5.3 NO SOLICITATION.
(a) Neither Seller nor Parent shall, directly or indirectly,
through any employee, agent or representative (including, without limitation,
investment bankers, attorneys, accountants and consultants), or otherwise:
(i) solicit, initiate or further the submission of
proposals or offers from, or enter into any agreement with, any firm,
corporation, partnership, association, group (as defined in Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended) or other person or entity,
individually or collectively (including, without limitation, any managers,
employees or independent contractors of Seller or any of its affiliates), other
than I-Flow (a "Third Party"), relating to any acquisition or purchase of all or
a material portion of the Assets of, or any equity interest in, Seller or
Subsidiary, or any merger, consolidation or business combination with Seller or
Subsidiary;
(ii) except to the extent required by fiduciary
obligations under applicable law as advised by counsel to Seller, participate in
any discussions or negotiations regarding, or furnish to any Third Party any
confidential information with respect thereto; or
(iii) except to the extent required by fiduciary
obligations under applicable law as advised by counsel to Seller, otherwise
cooperate in any way with, or assist or participate in, facilitate or encourage,
any effort or attempt by any Third Party to do or seek to do any of the
foregoing.
(b) Seller shall promptly notify I-Flow in writing if any such
proposal or offer, or any inquiry or contact with any Third Party with respect
thereto, is made, and shall in any such notice set forth in reasonable detail
the identity of the Third Party, the terms and conditions of any proposal and
any other information requested of it by the Third Party or in connection
therewith.
(c) Seller and Parent shall immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any Third
Party conducted prior to the date of this Agreement with respect to any of the
foregoing.
5.4 PRESERVATION OF BUSINESS AND RELATIONSHIPS. Seller will, and
Parent and Seller will cause Subsidiary to, use their reasonable efforts,
without making any commitments on behalf of I-Flow, to preserve their respective
business organizations intact, to keep available to Seller and Subsidiary their
current officers and employees, and to preserve their present relationships with
suppliers, customers and others having business relationships with them;
PROVIDED, HOWEVER, the Selling Parties shall not be in breach of this covenant
if I-Flow elects to reject a proposed contract or other obligation pursuant to
SECTION 5.14 hereof and, based on such election by I-Flow, Seller or Subsidiary
does not enter into such proposed contract or assume such other obligation.
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5.5 CORPORATE MATTERS. Neither Seller nor Subsidiary will (1) amend
its charter; (2) issue any shares of its capital stock; (3) issue or create any
warrants, obligations, subscriptions, options, convertible securities or other
commitments under which any additional shares of its capital stock of any class
might be directly or indirectly authorized, issued or transferred from treasury;
or (4) agree to do any of the acts listed above.
5.6 MAINTENANCE OF INSURANCE. Seller and Subsidiary will continue to
carry their existing insurance, subject to variations in amounts required by the
ordinary operations of their businesses. At the request of I-Flow and at
I-Flow's sole expense, the amount of insurance against fire and other casualties
that, at the date of this Agreement, Seller and Subsidiary carry on any of their
properties or in respect of their operations shall be increased by the amount or
amounts I-Flow shall specify.
5.7 NEW TRANSACTIONS. Neither Seller nor Subsidiary will, without
I-Flow's prior written consent (which consent shall not be unreasonably
withheld), do or agree to do any of the following acts:
(a) Enter into any material contract, commitment or
transaction not in the usual and ordinary course of its business;
(b) Enter into any contract, commitment or transaction (except
with respect to inventory purchases) in the usual and ordinary course of
business involving an amount exceeding $5,000, individually, or $50,000 in the
aggregate or enter into any contract, commitment or transaction with respect to
inventory purchases in an amount exceeding $10,000, individually, or $50,000 in
the aggregate;
(c) Make any capital expenditures in excess of $5,000 for any
single item or $20,000 in the aggregate, or enter into any leases of capital
equipment or property under which the annual lease charge is in excess of
$12,000; provided, however, that after July 31, 1996 the limits and consent
requirements with respect to capital expenditures set forth in this SUBSECTION
5.7(c) shall not apply to expenditures in connection with the Leonardo Project;
(d) Sell or dispose of any capital assets with a net book
value exceeding $5,000, individually, or $10,000 in the aggregate; or
(e) Enter into any contract with a term or a continuing
performance obligation that exceeds thirty (30) days.
5.8 DIVIDENDS, DISTRIBUTIONS AND ACQUISITIONS OF STOCK. Neither
Seller nor Subsidiary will:
(a) Declare, set aside or pay any dividend, except cash
dividends, or make any distribution in respect of its capital stock, PROVIDED,
HOWEVER, that with respect to cash dividends, Subsidiary shall not declare, set
aside or pay any cash dividend to Seller or Parent;
(b) Directly or indirectly purchase, redeem or otherwise
acquire any shares of its capital stock; or
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(c) Enter into any agreement obligating it to do any of the
foregoing prohibited acts.
5.9 WAIVER OF CLAIMS. Neither Seller nor Subsidiary will do, or agree
to do, any of the following acts: (1) waive or compromise any right or claim; or
(2) cancel, without full payment, any note, loan or other obligation owing to
either Seller or Subsidiary.
5.10 EXISTING AGREEMENTS. Neither Seller nor Subsidiary will modify,
amend, cancel or terminate any of its existing material contracts or material
agreements, or agree to do any of those acts.
5.11 CONSENTS OF OTHERS. As soon as reasonably practicable after the
execution and delivery of this Agreement, and in any event on or before the
Closing Date, the Selling Parties will use their reasonable efforts to obtain
the written consent of the persons described in SCHEDULE 3.25 to this Agreement
and will furnish to I-Flow executed copies of those consents.
5.12 DOCUMENTATION OF PROCEDURES AND TRADE SECRETS. Upon I-Flow's
reasonable written request, Seller and Subsidiary will promptly document and
describe for I-Flow any of their trade secrets, processes or business procedures
specified by I-Flow, in form and content reasonably satisfactory to I-Flow.
5.13 CORPORATE AND SHAREHOLDER APPROVALS. Seller will deliver to
I-Flow, on or before the Closing Date, a written consent of its sole shareholder
(1) authorizing and approving the sale of substantially all its property and
assets to I-Flow on the terms and conditions provided in this Agreement and (2)
approving the change of name of Seller to a name that does not include the words
"Block" or "Medical."
5.14 NEW OBLIGATIONS. The Selling Parties agree that, with respect to
any contracts or other obligations that Seller enters into or assumes after the
date hereof and prior to the Closing Date, I-Flow shall assume only those
contracts and other obligations in accordance with the provisions of this
SECTION 5.14. I-Flow agrees to assume the contracts and other obligations
entered into by Seller after the date hereof and prior to the Closing Date (i)
which do not require I-Flow's prior written consent under SECTION 5.7 hereof,
and (ii) those contracts and other obligations to which I-Flow has provided
written consent as required under SECTION 5.7 hereof. The Selling Parties agree
that they shall notify I-Flow of any contract or other obligation which requires
I-Flow's written consent under SECTION 5.7 hereof. Within five (5) days of
I-Flow's receipt thereof, I-Flow shall provide written notification to Seller of
its decision to consent to or reject such proposed contract or other obligation
of Seller. The parties agree that any contract or other obligation that is
assumed by I-Flow in accordance with the provisions of this SECTION 5.14 shall
be added to the applicable updated Assumed Obligations Schedule to be delivered
by the Selling Parties to I-Flow at the Closing pursuant to SECTION 10.2(j)
hereof. The parties further agree that if I-Flow's written consent is required,
I-Flow's election to assume or reject any such proposed contract or other
obligation shall not be unreasonably withheld.
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ARTICLE VI
I-FLOW'S OBLIGATIONS BEFORE CLOSING
6.1 RESALE CERTIFICATE. I-Flow agrees to furnish any resale
certificate or other documents reasonably requested by Seller to comply with the
provisions of the sales and use tax laws of the State of California.
6.2 BULK SALES LAW. Subject to the indemnities set forth in this
Agreement, and based upon Seller's and Parent's representations contained
herein, I-Flow and the Selling Parties agree to waive compliance with all
applicable bulk transfer laws. Seller and Parent, jointly and severally, shall
indemnify, defend and hold harmless I-Flow from and against any and all claims,
costs and liabilities arising or resulting from, or connected with, this waiver
or the failure or alleged failure of any party hereto to comply, in connection
with the transactions contemplated hereby, with the bulk transfer laws and
requirements of any jurisdiction. Nothing in this paragraph shall operate or be
construed to estop or prevent any party hereto from asserting as a bar or
defense to any action or proceeding brought under any bulk sales law that such
law does not apply to the transfer contemplated under this Agreement.
Notwithstanding the foregoing, the Selling Parties shall have no indemnification
responsibilities under this provision to the extent that the claims, costs or
liabilities resulting from the waiver of applicable bulk transfer laws are
attributable to I-Flow's failure to pay or satisfy the assumed obligations
referenced in SECTION 1.3 hereof.
ARTICLE VII
CONFIDENTIALITY
The parties acknowledge that the sharing of information during due
diligence may include the providing to a party (the "Receiving Party")
information which is the proprietary or confidential information ("Confidential
Information") of the disclosing party (the "Disclosing Party"). Except for
Confidential Information that:
(a) at the time of disclosure by the Disclosing Party is in
the public domain or is otherwise lawfully known to or in the Receiving Party's
possession;
(b) after disclosure to the Receiving Party by the Disclosing
Party, becomes a part of the public domain by publication or otherwise becomes
lawfully known to the Receiving Party, its affiliates, shareholders, officers,
directors, employees, agents or consultants; or
(c) is required to be disclosed by law or other governmental
authority,
the Receiving Party agrees that it shall treat and hold as confidential all
Confidential Information provided to it and shall not utilize the same for the
direct or indirect benefit of the Receiving Party except for the purpose of
conducting due diligence and effecting the transactions contemplated herein.
The Confidentiality Agreement previously signed by I-Flow and Parent shall
continue in full force and effect, and in the event of a conflict between that
agreement and this Agreement, that Confidentiality Agreement shall control.
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In the event that the transactions contemplated herein are not consummated
by August 21, 1996, the Receiving Party shall forthwith either (i) return to the
Disclosing Party all requested Confidential Information in the physical form
provided and shall not retain copies thereof, or (ii) destroy all such
Confidential Information (including all copies) in whatever physical form
provided.
The nondisclosure requirements of this Article VII shall apply to all of
the affiliates, officers, directors, employees, representatives, agents and
consultants of the parties, and each party shall ensure that each of its
affiliates, officers, directors, employees, representatives, agents and
consultants having access to Confidential Information shall, prior to or
concurrent with such entity's or person's receipt thereof, be made aware of the
substance of this Article VII.
ARTICLE VIII
CONDITIONS PRECEDENT TO I-FLOW'S PERFORMANCE
The obligations of I-Flow to purchase the Assets under this Agreement are
subject to the satisfaction, at or before the Closing, of all the conditions set
out below in this Article VIII. I-Flow may waive any or all of these conditions
in whole or in part without prior notice; PROVIDED, HOWEVER, that no such waiver
of a condition shall constitute a waiver by I-Flow of any of its other rights or
remedies, at law or in equity, if either of the Selling Parties shall be in
default of any of their representations, warranties or covenants under this
Agreement.
8.1 ACCURACY OF THE SELLING PARTIES' REPRESENTATIONS AND WARRANTIES.
Except as otherwise permitted by this Agreement, all representations and
warranties by each of the Selling Parties in this Agreement, or in any written
statement that shall be delivered to I-Flow by either of them under this
Agreement, shall be true in all material respects on and as of the Closing Date
as though made at that time.
8.2 PERFORMANCE BY THE SELLING PARTIES. The Selling Parties shall
have performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by them, or either of them, on or before the Closing
Date.
8.3 NO MATERIAL ADVERSE CHANGE. During the period from April 22, 1996
to the Closing Date, there shall not have been any material adverse change in
the financial condition or the results of operations of Seller and Subsidiary
taken as a whole, and Seller and Subsidiary taken as a whole, shall not have
sustained any material loss or damage to its assets, whether or not insured,
that materially affects its ability to conduct a material part of its business.
8.4 CERTIFICATION BY THE SELLING PARTIES. I-Flow shall have received
a certificate, dated the Closing Date, signed by Parent's and Seller's
respective presidents or vice presidents and their respective treasurers or
assistant treasurers, certifying, in such detail as I-Flow and its counsel may
reasonably request, that the conditions specified in SECTIONS 8.1 through 8.3
have been fulfilled.
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8.5 OPINION OF THE SELLING PARTIES' COUNSEL. I-Flow shall have
received from counsel for the Selling Parties, an opinion dated the Closing
Date, in form and substance reasonably satisfactory to I-Flow and its counsel,
to the effect that:
(a) Seller is a corporation duly organized and validly
existing and in good standing under the laws of the State of Delaware, it has
all necessary corporate power to own its properties as now owned and operate its
business as now operated and has all requisite corporate power to perform its
obligations under this Agreement. Parent is a corporation duly organized and
validly existing under the laws of the State of Indiana, it has all necessary
corporate power to own its properties as now owned and operate its business as
now operated and has all requisite corporate power to perform its obligations
under this Agreement;
(b) All of the issued and outstanding shares of capital stock
of Subsidiary are validly issued, fully paid and nonassessable, and the shares
are owned of record and beneficially by Seller, except for one (1) share owned
by Daniel J. Kelly;
(c) This Agreement has been duly and validly authorized and,
when executed and delivered by the Selling Parties, will be valid and binding on
each of them and enforceable in accordance with its terms, except as limited by
bankruptcy and insolvency laws and by other laws affecting the rights of
creditors generally;
(d) Except as set forth in SCHEDULE 3.23 to this Agreement,
such counsel does not know of any suit, action, arbitration or legal,
administrative or other proceeding or governmental investigation pending or
threatened against or affecting Seller, Subsidiary or any of their businesses or
properties; and
(e) Neither the execution nor the delivery of this Agreement
nor the consummation of the transactions contemplated in this Agreement will
constitute (i) a default or an event that would, with notice or lapse of time or
both, constitute a default under, or violation or breach of, Seller's or
Subsidiary's charter documents, or any material indenture, license, lease,
franchise, mortgage, instrument or other agreement to which Seller or Subsidiary
is a party or by which they or the properties of Seller or Subsidiary may be
bound and which has been identified by Seller as being material to it; or (ii)
to our knowledge, an event that would permit any party to any material agreement
or instrument to terminate it or to accelerate the maturity of any indebtedness
or other obligation of Seller or Subsidiary; or (iii) to our knowledge, an event
that would result in the creation or imposition of any lien, charge or
encumbrance on any asset of Seller or Subsidiary.
8.6 I-FLOW'S FINANCING. I-Flow shall have consummated a public or
private debenture and/or equity offering or loan or other financing
transaction, on commercially reasonable terms, aggregating at least Ten Million
Dollars ($10,000,000).
8.7 DUE DILIGENCE.
(a) I-Flow shall have completed a thorough due diligence
investigation of Seller and its business, facilities and Subsidiary, including
without limitation an environmental
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audit, and in the course of doing so, shall have confirmed the financial
assumptions upon which the consideration set forth in this Agreement is based
and shall have discovered no material errors, inaccuracies or omissions in the
financial statements or other information previously provided to I-Flow
(including, without limitation, those matters relating to intellectual property
rights) or as set forth in the schedules to this Agreement.
(b) I-Flow has retained qualified consultants for the purposes
of conducting an environmental audit concerning the presence of any (i)
contamination of the Property by Hazardous Materials, (ii) violations of any
Environmental Law upon or associated with activities upon the Property; or (iii)
potential Environmental Damages (collectively, "Environmental Exceptions"). If
the environmental audit reveals any Environmental Exceptions which in the sole
opinion of I-Flow should be remediated or otherwise addressed in some manner,
I-Flow shall notify Seller of such Environmental Exceptions no later than August
11, 1996. If Seller is unwilling to remediate or address such Environmental
Exceptions at its sole cost and expense, I-Flow may terminate this Agreement at
its sole discretion within five (5) days of receiving Seller's refusal to
remediate or address such Environmental Exception by delivering to Seller a
written notice of such termination.
8.8 ABSENCE OF LITIGATION. No action, suit or proceeding before any
court or any governmental body or authority, pertaining to the transactions
contemplated by this Agreement or to its consummation, shall have been
instituted or threatened on or before the Closing Date.
8.9 NON-COMPETITION AGREEMENT. Parent and Seller shall have executed
and delivered on behalf of themselves and their respective affiliates a
non-competition agreement substantially in the form attached hereto as EXHIBIT
B.
8.10 CORPORATE APPROVAL. The execution and delivery of this Agreement
by the Selling Parties, and the performance of their respective covenants and
obligations under it, shall have been duly authorized by all necessary corporate
action, and I-Flow shall have received copies of all resolutions pertaining to
that authorization, certified by the secretary of each of the Selling Parties.
8.11 LEASE ASSIGNMENTS AND ESTOPPEL CERTIFICATES. I-Flow shall have
received from the Selling Parties an assignment of lease (with corresponding
written landlord consent, if required) and an estoppel certificate signed by the
landlord in form and substance reasonably acceptable to I-Flow for each parcel
of real property leased by Seller or Subsidiary as set forth in SCHEDULE 3.8.
8.12 SALES AND USE TAX ON PRIOR SALES. Seller will provide a statement
to I-Flow, dated the Closing Date, signed by Seller's president or vice
president, stating that all sales and use tax returns of Seller have been timely
filed and any liabilities owing thereon have been timely paid. In this regard,
the Selling Parties shall be solely responsible for any and all sales, use and
property taxes of Seller and Subsidiary accruing up to and including the Closing
Date except as otherwise provided in SECTION 14.2 hereof.
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8.13 CONSENTS . All necessary agreements and consents of any parties to
the consummation of the transactions contemplated by this Agreement, or
otherwise pertaining to the matters covered by it, including, without
limitation, those persons described in SCHEDULE 3.25 to this Agreement, shall
have been obtained by the Selling Parties and delivered to I-Flow.
8.14 APPROVAL OF DOCUMENTATION. The form and substance of all
certificates, instruments, opinions and other documents delivered to I-Flow
under this Agreement shall be satisfactory in all reasonable respects to I-Flow
and its counsel.
8.15 HART-SCOTT-RODINO ACT. The premerger notification under the Hart-
Scott-Rodino Antitrust Improvements Act shall have been filed and any required
regulatory approvals, clearances and expirations of waiting periods (or early
termination) shall have been obtained.
8.16 KRATON AND DYNAFLEX SUPPLY. An agreement shall have been reached
between Shell Oil and GLS Corporation ("GLS"), and between GLS and Seller, which
provides for GLS to continue purchasing Kraton-Registered Trademark- D2104
polymer compound and Dynaflex-Registered Trademark- G2Z06 from Shell, and for
Seller to continue purchasing such products from GLS, on terms reasonably
satisfactory to I-Flow, with Seller's rights under its agreement with GLS being
fully transferable to I-Flow.
ARTICLE IX
CONDITIONS PRECEDENT TO SELLER'S PERFORMANCE
The obligations of Seller to sell and transfer the Assets under this
Agreement are subject to the satisfaction, at or before the Closing, of all the
following conditions. Seller may waive any or all of these conditions in whole
or in part without prior notice; PROVIDED, HOWEVER, that no such waiver of a
condition shall constitute a waiver by Seller of any of its other rights or
remedies, at law or in equity, if I-Flow should be in default of any of its
representations, warranties or covenants under this Agreement.
9.1 ACCURACY OF I-FLOW'S REPRESENTATIONS AND WARRANTIES. Except as
otherwise permitted by this Agreement, all representations and warranties by
I-Flow contained in this Agreement, or in any written statement delivered by
I-Flow under this Agreement, shall be true in all material respects on and as of
the Closing Date as though such representations and warranties were made at that
time.
9.2 I-FLOW'S PERFORMANCE. I-Flow shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by
I-Flow, on or before the Closing Date.
9.3 OPINION OF I-FLOW'S COUNSEL. I-Flow shall have furnished the Selling
Parties with an opinion, dated the Closing Date, of Gibson, Dunn & Crutcher LLP,
counsel for I-Flow, in form and substance satisfactory to the Selling Parties
and their counsel, to the effect that:
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(a) I-Flow is a corporation duly organized, validly existing and
in good standing under the laws of the State of California and has all requisite
corporate power to perform its obligations under this Agreement;
(b) All corporate proceedings required by law or by the
provisions of this Agreement to be taken by I-Flow on or before the Closing
Date, in connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated by this Agreement, have been duly
and validly taken;
(c) I-Flow has the corporate power and authority to acquire the
Assets for the consideration set forth in this Agreement;
(e) The shares of I-Flow's common stock to be issued and
delivered under this Agreement will be, when delivered, validly issued, fully
paid, and nonassessable; and
(f) This Agreement has been duly and validly authorized and,
when executed and delivered by I-Flow, will be valid and binding on I-Flow and
enforceable in accordance with its terms, except as limited by bankruptcy and
insolvency laws and by other laws affecting the rights of creditors generally.
9.4 I-FLOW'S CORPORATE APPROVAL. The execution and delivery of this
Agreement by I-Flow, and the performance of its covenants and obligations under
it, shall have been duly authorized by all necessary corporate action, and the
Selling Parties shall have received copies of all resolutions pertaining to that
authorization, certified by the secretary of I-Flow.
9.5 LICENSE AGREEMENT. I-Flow shall have executed and delivered a license
agreement relating to the Voice-Link technology substantially in the form of
EXHIBIT C.
9.6 LISTING OF I-FLOW'S STOCK. The shares of I-Flow's common stock to be
issued and delivered under this Agreement shall have been listed, or listed
subject to official notice of issuance, on The Nasdaq Stock Market .
9.7 ABSENCE OF LITIGATION. No action, suit or proceeding before any court
or any governmental body or authority, pertaining to the transaction
contemplated by this Agreement or to its consummation, shall have been
instituted or threatened on or before the Closing Date.
9.8 HART-SCOTT-RODINO ACT. The premerger notification under the Hart-
Scott-Rodino Antitrust Improvements Act shall have been filed if required, and
any required regulatory approvals, clearances and expirations of waiting periods
shall have been obtained.
9.9 APPROVAL OF DOCUMENTATION. The form and substance of all
certificates, instruments, opinions and other documents delivered to the Selling
Parties under this Agreement shall be satisfactory in all reasonable respects to
the Selling Parties and their counsel.
9.10 CERTIFICATION BY I-FLOW. The Selling Parties shall have received a
certificate, dated the Closing Date, signed by I-Flow's president or vice
president and treasurer or assistant
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treasurer, certifying, in such detail as the Selling Parties or their counsel
may reasonably request, that the conditions specified in SECTIONS 9.1 and 9.2
have been fulfilled.
ARTICLE X
THE CLOSING
10.1 PLACE AND DATE. The closing of the purchase and sale of the Assets
(the "Closing") shall occur as soon as practicable after the date hereof (the
"Closing Date"), at the offices of Gibson, Dunn & Crutcher LLP in Irvine,
California, or at such other date, time and place as may be mutually agreed upon
in writing by the parties. All proceedings that take place at the Closing shall
take place simultaneously, and no deliveries shall be considered to have been
made until all such proceedings have been completed.
10.2 THE SELLING PARTIES' OBLIGATIONS AT CLOSING. At the Closing, Seller
shall deliver or cause to be delivered to I-Flow:
(a) Assignments of all leaseholds, properly executed and
acknowledged by Seller or Subsidiary, and accompanied by all consents of lessors
required by this Agreement and the leases being assigned;
(b) An opinion of the Selling Parties' counsel, dated the
Closing Date, as provided for in SECTION 8.5;
(c) Certified resolutions of the Selling Parties' respective
board of directors, in form reasonably satisfactory to I-Flow, authorizing the
execution and performance of this Agreement and all actions to be taken by the
Selling Parties under this Agreement;
(d) A certificate executed by the president or vice president
and the secretary or treasurer of each of the Selling Parties certifying that
all of the Selling Parties' representations and warranties under this Agreement
are true in all material respects as of the Closing Date, as though each of
those representations and warranties had been made on that date;
(e) Certificates representing the Subsidiary Shares, registered
in the name of Seller or Daniel J. Kelly, duly endorsed by Seller or Daniel J.
Kelly, as applicable, for transfer or accompanied by an assignment of the
Subsidiary Shares duly executed by Seller or Daniel J. Kelly, as applicable,
with signatures certified by a notary public;
(f) Instruments of assignment and transfer of all other property
of Seller of every kind and description and wherever situated, including, but
not limited to, all of its interest in accounts receivable, customer lists,
business equipment, choses in action, rights under agreements, trademarks, trade
names, patents, patent applications, patent licenses, shop rights and other
property, tangible or intangible, except as expressly excluded in SCHEDULES
1.2(a) through 1.2(e) to this Agreement;
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(g) The Registration Rights Agreement, substantially in the form
attached hereto as EXHIBIT D, dated the Closing Date by and between Parent and
I-Flow, executed by Parent;
(h) A copy of the notification submitted to the Mexico Tax
Authorities to tax the sale of the Subsidiary Shares on the net fiscal profit
basis in accordance with Article 19 of the Federal Income Tax Laws of Mexico, if
such notification has been made;
(i) Updated copies of SCHEDULES 1.1(a) through 1.1(h) hereto
dated as of the Closing Date (copies of SCHEDULES 1.1(a), 1.1(b) and 1.1(d)
shall be used to prepare the Closing Date Reconciliation Report);
(j) Updated copies of SCHEDULES 1.3(a) through 1.3(g) hereto
dated as of the Closing Date (copies of SCHEDULES 1.3(a) through 1.3(c) shall be
used to prepare the Closing Date Reconciliation Report); PROVIDED, HOWEVER, that
only those contracts and other obligations to be added to SCHEDULE 1.3(g), if
any, that I-Flow agrees to assume as of the Closing Date pursuant to SECTION
5.14 hereto shall be added on such updated schedules; and
(k) SCHEDULE 3.4(a) hereto.
Simultaneously with the consummation of the transfer, Seller, through its
officers, agents and employees, will put I-Flow into full possession and
enjoyment of all properties and assets to be conveyed and transferred by this
Agreement, including those of Subsidiary; PROVIDED, HOWEVER, that I-Flow will
not have physical possession of those assets located other than in the physical
possession of Seller or Subsidiary as specified in SCHEDULE 3.12.
The Selling Parties, at any time before or after the Closing Date, will
execute, acknowledge and deliver any and all further deeds, assignments,
conveyances and other assurances, documents and instruments of transfer,
reasonably requested by I-Flow, and will take any and all other action
consistent with the terms of this Agreement that may reasonably be requested by
I-Flow for the purpose of assigning, transferring, granting, conveying and
confirming to I-Flow, or reducing to possession, any or all property to be
conveyed and transferred under this Agreement. If requested by I-Flow, Seller
further agrees to prosecute or otherwise enforce in its own name for the benefit
of I-Flow any claims, rights or benefits that are transferred to I-Flow under
this Agreement and that require prosecution or enforcement in Seller's name.
Any prosecution or enforcement of claims, rights or benefits under this
paragraph shall be solely at I-Flow's expense, unless the prosecution or
enforcement is made necessary by a breach of this Agreement by either of the
Selling Parties.
10.3 I-FLOW'S OBLIGATIONS AT CLOSING. At the Closing, I-Flow shall
deliver or cause to be delivered to Seller:
(a) Payment of the cash portion of the Purchase Price as set
forth in SECTION 2.1(a);
(b) An opinion of I-Flow's counsel, dated the Closing Date, as
provided for in SECTION 9.3;
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(c) Certified resolutions of I-Flow's board of directors, in
form reasonably satisfactory to Selling Parties, authorizing the execution and
performance of this Agreement and all actions to be taken by I-Flow under this
Agreement;
(d) A certificate executed by the president or vice president
and the secretary or treasurer of I-Flow (i) certifying that all of I-Flow's
representations and warranties under this Agreement are true in all material
respects as of the Closing Date, as though each of those representations and
warranties had been made on that date and (ii) setting forth the calculation of
the Base Share Price and the number of I-Flow Common Shares to be delivered by
I-Flow as set forth in SECTION 2.1(b);
(e) The Warrants to acquire shares of I-Flow Common Stock as set
forth in SECTION 2.1(c);
(f) Instruments of assumption of the liabilities of Seller
listed in SCHEDULES 1.3(a) through 1.3(g), executed by I-Flow;
(g) A certificate representing the total number of shares of
I-Flow's common stock to be delivered at the Closing pursuant to SECTION 2.1(b)
hereof; PROVIDED, HOWEVER, that if I-Flow's common stock is delisted from The
Nasdaq Stock Market (and is not listed on another national exchange) as of the
Closing Date or if trading of I-Flow's common stock is halted for a period of
one (1) week which is continuing at the time the parties are otherwise prepared
to close, then I-Flow shall either transfer funds or a substitute form of
security (such as a six-month promissory note), satisfactory to the Selling
Parties in their reasonable discretion, worth Two Million Dollars ($2,000,000)
to the Selling Parties in satisfaction of I-Flow's obligations under SECTION
2.1(b) hereof; PROVIDED, FURTHER, that, notwithstanding the foregoing, the
Selling Parties agree that if I-Flow offers a substitute form of security and
the Selling Parties reject such security, then the Closing will be delayed for a
period of four (4) weeks at the conclusion of which I-Flow shall pay Two Million
Dollars ($2,000,000) to the Selling Parties in satisfaction of SECTION 2.1(b)
hereof; and
(h) The Registration Rights Agreement, substantially in the form
attached hereto as EXHIBIT D, dated the Closing Date by and between Parent and
I-Flow, executed by I-Flow.
ARTICLE XI
THE SELLING PARTIES' OBLIGATIONS AFTER CLOSING
11.1 GUARANTY OF ACCOUNTS RECEIVABLE. Parent and Seller, jointly and
severally, guarantee to I-Flow that the unpaid balance of all accounts
receivable of Seller and Subsidiary outstanding on the Closing Date will be paid
during and within a collection period of one hundred eighty (180) days of the
billing date. I-Flow shall use reasonable efforts to collect the accounts
receivable it acquires as part of the Assets. If any accounts receivable remain
unpaid at the end of a relevant collection period, I-Flow shall notify Parent.
Within 10 calendar days after delivery to Parent (attention: Chief Financial
Officer) from time to time of a schedule of any accounts
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receivable unpaid at the end of the relevant collection period, Parent or Seller
will pay to I-Flow the full amount of these unpaid receivables, in cash, and the
right to collect such unpaid receivables shall be transferred to Parent and
Seller. All payments of the scheduled accounts made and received by I-Flow
after payment to I-Flow has been made by Seller or Parent shall promptly be paid
over to Parent. If more than one invoice is outstanding for any customer, the
"first-in, first-out" principle shall be applied in determining the invoice to
which a payment relates unless the payment by its terms specifies or clearly
indicates the invoice to which it relates.
11.2 RECEIPT OF PAYMENT FOR ACCOUNTS RECEIVABLE. In the event that, on or
after the Closing Date, Parent or Seller receives any payment for accounts
receivable existing at the Closing Date which are part of the Assets prior to
such receivable being transferred to Parent and Seller by I-Flow pursuant to
SECTION 11.1 hereof, Parent or Seller, as the case may be, shall hold such
payment in trust for the benefit of I-Flow and shall pay the same over to I-Flow
within five (5) business days of receipt thereof. The parties agree that any
payment required to be made by the Selling Parties pursuant to this SECTION 11.2
shall not be subject to the Indemnification Basket (as defined herein).
11.3 PAYMENT DISCOUNTS. With respect to accounts receivable existing at
the Closing Date, the Selling Parties shall reimburse I-Flow, on a dollar for
dollar basis, the amount of any and all prompt payment discounts taken by the
obligors within ninety (90) days after the Closing Date. The Selling Parties
shall make such reimbursement payments to I-Flow within five (5) business days
of receipt by the Selling Parties from I-Flow, from time to time, of a report
reflecting the amounts of such discounts. The parties agree that any
reimbursement payment required to be made by the Selling Parties pursuant to
this SECTION 11.3 shall not be subject to the Indemnification Basket (as defined
herein).
11.4 RIGHT TO HIRE EMPLOYEES AND PAYMENT FOR ACCRUED VACATION. The
Selling Parties agree that I-Flow shall have the right, but not the obligation,
to hire employees of Seller and Subsidiary after the Closing. The parties agree
that I-Flow shall assume the accrued but unused vacation time and associated
payment obligation as of the Closing Date of each U.S. employee of Seller that
I-Flow hires, if any, after the Closing. The Selling Parties agree that they
shall pay the entire amount of such assumed accrued vacation time and associated
payment obligation to I-Flow within five (5) business days of receipt of
notification from I-Flow of I-Flow's hiring of any such employee(s). The
parties further agree that any payments required to be made by the Selling
Parties pursuant to this SECTION 11.4 shall not be subject to the
Indemnification Basket (as defined herein).
11.5 INDEMNIFICATION OF I-FLOW.
(a) Subject to I-Flow's indemnification obligations set forth in
SECTION 12.3 hereof, the Selling Parties shall, jointly and severally,
indemnify, defend and hold harmless I-Flow against and in respect of any and all
claims, demands, losses, costs, expenses, obligations, liabilities, damages,
recoveries and deficiencies, including, without limitation, interest, penalties
and actual attorneys' fees and disbursements (collectively, the "Claims" and
individually a "Claim") and Environmental Damages that I-Flow shall incur or
suffer, that arise, result from, or relate in any way to: (i) any breach of, or
failure by the Selling Parties to perform, any of their
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representations, warranties, covenants or agreements in this Agreement or in any
schedule, certificate, exhibit or other instrument furnished or to be furnished
by the Selling Parties under this Agreement; (ii) any and all employment
obligations, debts, product liability claims and other liabilities of the
Selling Parties which are not specifically assumed by I-Flow under this
Agreement; (iii) any liability associated with employee terminations by (1)
Seller or Subsidiary or an employee of Seller or Subsidiary prior to the
Closing, or (2) Seller or an employee of Seller after the Closing, or (3)
Subsidiary or an employee of Subsidiary after the Closing if such termination
relates to unlawful or improper conduct occurring prior to the Closing, subject
to certain reimbursements from I-Flow as set forth in SECTION 12.2; (iv) a Pre-
Closing Condition related to (1) any Release, threatened Release, or disposal of
any Hazardous Material, (2) the operation or violation of any Environmental Law,
or (3) any Hazardous Material Activity; (v) Seller's previous lease for the
facilities Seller occupied in Carlsbad, California, or (vi) the potential
matters described on SCHEDULE 11.5 hereto. Notwithstanding the foregoing, and
except as otherwise provided in this Agreement, I-Flow shall not be entitled to
any indemnification by Seller or Parent under this Agreement unless and until
such time that all indemnifiable claims, whether below, equal to, or above One
Thousand Dollars ($1,000) per claim, shall aggregate at least One Hundred
Seventy Thousand Dollars ($170,000) (the "Indemnification Basket") but shall
thereafter be entitled to full indemnification for any indemnifiable claim equal
to or greater than One Thousand Dollars ($1,000). The maximum indemnification
obligation of Seller and Parent shall, in the aggregate, be limited to Five
Million Dollars ($5,000,000) (the "Primary Cap"); PROVIDED, HOWEVER, that the
maximum indemnification obligation of Seller and Parent shall be increased to
Seventeen Million Dollars ($17,000,000) to the extent that the Primary Cap is
exceeded as a result of indemnifiable claims arising out of (a) environmental
issues pursuant to the terms of this Agreement which relate to environmental
matters, (b) intellectual property rights related to the Homepump or the Eclipse
(unless the infringement claim asserted by Secure Medical existing as of the
date hereof concerning these products is fully settled by the Closing Date), (c)
antitrust violations, (d) knowing breaches of representations, warranties or
covenants contained in this Agreement, and/or (e) the potential matters
described on SCHEDULE 11.5 hereto. Additionally, indemnification with respect
to environmental issues or the potential matters described on SCHEDULE 11.5
hereto shall not be subject to the Indemnification Basket.
(b) Whenever any Claim or Environmental Damages shall arise for
indemnification of I-Flow under this SECTION 11.5, I-Flow shall notify the
Selling Parties of the Claim or Environmental Damages, within thirty (30) days
of I-Flow's knowledge of the Claim or Environmental Damages, and, when known,
the facts constituting the basis for such Claim or Environmental Damages. In
the event of any Claim or Environmental Damages for indemnification hereunder
resulting from or in connection with any Claim or Environmental Damages or legal
proceedings by a third party, such notice shall also specify, if known, the
amount or an estimate of the amount of the liability arising therefrom. I-Flow
shall give the Selling Parties a reasonable opportunity to defend any such Claim
or Environmental Damages at their own expense and with counsel of their own
selection, provided that I-Flow shall at all times also have the right to fully
participate in the defense at its own expense. Without limitation, the Selling
Parties shall specifically have the right to participate in any FDA inquiries or
challenges relating to Section 510K approvals. If the Selling Parties shall,
within a reasonable time after notice, fail to defend a Claim or Environmental
Damages, I-Flow shall have the right, but not the
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obligation, to undertake the defense of, and to compromise or settle (exercising
reasonable business judgment) the Claim or Environmental Damages on behalf, for
the account and at the risk of the Selling Parties. I-Flow shall notify the
Selling Parties in writing of the existence of any Claim or Environmental
Damages to which the indemnification provided in SECTION 11.5(a) would apply,
but failure to so notify the Selling Parties shall not relieve the Selling
Parties of any liability hereunder unless (and then to the extent) such failure
causes the Selling Parties to lose the right to assert a meritorious defense to
such Claim or Environmental Damages.
(c) Indemnification by the Selling Parties under this SECTION 11.5
shall be effected by the delivery of a cashier's or certified check to I-Flow
not later than (i) fifteen (15) business days from the date the notice of such
Claim or Environmental Damages was given to the Selling Parties, if such Claim
or Environmental Damages arises, results from or relates in any way to a default
under or a breach of this Agreement by the Selling Parties and (ii) fifteen (15)
business days after the date on which I-Flow incurs an out-of-pocket expense
with respect to a third-party Claim or Environmental Damages.
(d) Notwithstanding any other terms or conditions of this SECTION
11.5 of this Agreement, I-Flow reserves and does not waive or release any right
it has or may have to assert a claim or bring an action against either of the
Selling Parties under any federal or state law, common law, or foreign law in
connection with any environmental matter. Accordingly, while the Selling
Parties may have no contractual obligation to indemnify I-Flow in certain
circumstances, each of the Selling Parties may nonetheless be sued by I-Flow
under any federal or state law, common law, or foreign law and I-Flow hereby
expressly reserves and does not waive or release this right.
(e) Notwithstanding any other terms or conditions of this SECTION
11.5 of this Agreement, the Selling Parties, jointly and severally, shall fully
and completely indemnify and reimburse I-Flow for any and all losses, damages,
costs and expenses incurred or suffered by I-Flow as the result of the shut-
down, closure or suspension of operations of Subsidiary if such shut-down,
closure or suspension is a direct result of the non-compliance or absence (prior
to the Closing Date) of Subsidiary's tax returns, payroll withholding, payroll
filings or permits identified during due diligence.
11.6 CHANGE OF SELLER'S NAME. Seller agrees that after the Closing Date
it shall not use or employ in any manner directly or indirectly the words
"Block" or "Medical," provided that the limitation on the use of the word
"Medical" shall not be applicable to Parent or any of its affiliated companies
except Seller. Seller will take and cause to be taken all necessary action by
its board of directors, stockholders and any other persons in order to make this
change in Seller's name on or before the Closing Date.
11.7 SETTLEMENT AGREEMENT AFFECTING INTELLECTUAL PROPERTY RIGHTS. The
Selling Parties agree that they will not enter and have not entered into a
settlement agreement or stipulation as to any infringement claim that contains
terms or provisions that adversely affect the value of the intellectual property
rights of Seller which are being conveyed to I-Flow as part of the Assets.
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11.8 LEASE AGREEMENT. Parent and Seller agree that they shall be
responsible for one-half (1/2) of the obligations under Seller's current lease
agreement (the "Lease") set forth on SCHEDULE 3.8 hereto for Seller's existing
facilities in San Diego, California for the period beginning on the later of (i)
nine (9) months after the Closing Date, or (ii) the date on which I-Flow vacates
such existing facilities, and continuing until the termination of the Lease
(including without limitation any shortage owed to the landlord as a result of
subleasing or other arrangements). Parent and Seller agree to work closely and
cooperatively with I-Flow in an effort to sublet the leased premises and to take
whatever other actions are required with respect to the Lease.
11.9 RETURNED PRODUCTS. The Selling Parties agree that if the dollar
amount paid or credited by I-Flow to customers for products sold by Seller prior
to the Closing Date and returned to I-Flow within the ninety (90) day period
immediately following the Closing Date is greater than 1.5% of gross sales for
such ninety (90) day period, then the Selling Parties shall (within ten (10)
business days of receipt of a documented request) reimburse I-Flow (i) the full
amount that I-Flow paid or credited to the customer for the returned product if
I-Flow determines that the product is in a condition that cannot be resold, or
(ii) the difference between the amount I-Flow paid or credited to the customer
for the returned product and the amount at which I-Flow will reprice the
returned product, according to its standard pricing policies, if I-Flow
determines that the product is in a condition that it may be resold; PROVIDED,
HOWEVER, the Selling Parties shall reimburse I-Flow only with respect to those
products returned after the dollar amount paid or credited by I-Flow for returns
is greater than 1.5% of gross sales during the ninety (90) day period
immediately following the Closing Date. The parties agree that I-Flow's
acceptance of a returned product and the determination as to the condition of
any returned product shall be made in accordance with I-Flow's standard
practices and policies with respect to returned goods. The parties further
agree that any payments required to be made by the Selling Parties to I-Flow
pursuant to this SECTION 11.9 shall not be subject to the Indemnification
Basket.
11.10 SALES AND USE TAX ON PRIOR SALES. Seller agrees to furnish to
I-Flow a clearance certificate from the California Board of Equalization and any
related certificates that I-Flow may reasonably request as evidence that all
sales and use tax liabilities of Seller accruing before the Closing Date have
been fully satisfied or provided for.
11.11 MEXICAN TAX LIABILITIES, PAYROLL WITHHOLDINGS AND PERMITS. The
Selling Parties shall file or refile, as the case may be, any tax returns,
payroll withholding and other payroll filings, and permits of Subsidiary
necessary to correct any current noncompliance. The Selling Parties agree that
any liabilities related to such amended or new filings shall be the sole
responsibility of the Selling Parties.
ARTICLE XII
I-FLOW'S OBLIGATIONS AFTER CLOSING
12.1 EMPLOYMENT OF CERTAIN INDIVIDUAL. I-Flow agrees that it will, prior
to or on the Closing Date, offer employment to the individual listed on SCHEDULE
12.1 hereto (the "Certain Individual") that provides for a salary, the payment
of commissions and I-Flow stock options which, when valued in the aggregate and
with the assumption that the amount of commission
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income will be based upon achieving the plan for relevant sales, will
approximate the Certain Individual's salary level received from Seller in effect
on April 23, 1996.
12.2 SEVERANCE PAYMENT COSTS.
(a) I-Flow agrees to reimburse Seller for certain severance
payment costs which would otherwise fall under the Selling Parties' indemnity
provision of SECTION 11.5(a). For purposes of this SECTION 12.2, "Covered
Employee" shall refer to each of the five individuals listed on SCHEDULE 12.2(a)
(collectively, "Covered Employees").
(b) I-Flow shall have the right, but not the obligation, to
extend an offer of employment to each of the Covered Employees at or prior to
the Closing Date. An offer to a Covered Employee which is at a salary rate at
least equal to the Covered Employee's salary rate in effect on April 22, 1996,
which includes a provision that, should the Covered Employee be terminated by
I-Flow without cause within six (6) months of the Closing Date, I-Flow will pay
six (6) months salary as severance payment, and which provides for the Covered
Employee's participation in I-Flow's employee benefit plans on the same basis
as other similarly situated employees of I-Flow shall be defined for purposes of
this Agreement as a "Qualifying Employment Offer."
(c) For purposes of determining any reimbursement obligations of
I-Flow, Seller, or Parent specified in this SECTION 12.2, any severance-related
payment made to the two individuals listed on SCHEDULE 12.2(b) and/or any
Covered Employee to whom a Qualifying Employment Offer is made and who elects to
decline the offer, shall be excluded and the party making such severance-related
payment shall be solely responsible therefor.
(d) In the event I-Flow does not extend a Qualifying Employment
Offer to a Covered Employee at or prior to the Closing Date, I-Flow agrees to
reimburse Seller for up to six (6) months salary (based on the salary rate in
effect for such Covered Employee on April 22, 1996) for such Covered Employee
incurred and actually paid by Seller to such Covered Employee. Further, I-Flow
agrees to reimburse Seller for salary-based severance payments, as determined by
the Seller's standard employee severance policy in effect on April 22, 1996,
incurred and actually paid by Seller to any non-Covered Employee terminated by
Seller on or prior to the Closing Date to the extent such salary-based severance
payments are as a result of employment terminations directly related to the
transactions contemplated hereby; provided, however, that I-Flow shall have no
reimbursement obligation whatsoever as to salary-based severance payments made
to a non-Covered Employee who is offered employment by I-Flow at or prior to the
Closing Date. Further, I-Flow's obligation to reimburse Seller is only to the
extent that the aggregate of such reimbursable payments made by Seller to all
employees provided for in this SECTION 12.2(d) exceed $100,000 (the
"Reimbursement Cap").
(e) If, within six (6) months of the Closing Date, or twelve
(12) months of the Closing Date with respect to the last-listed individual on
SCHEDULE 12.2(a), I-Flow terminates, for reasons other than cause, a former
employee of the Seller who accepted employment with I-Flow on or after the
Closing Date, to the extent the Reimbursement Cap has not been exceeded, Seller
or Parent will reimburse I-Flow for the aggregate of, (i) in the case of non-
Covered Employees,
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the lesser of (1) the severance amount actually paid by I-Flow to such
employees, or (2) the salary-based severance amount such employees would have
received had the Seller terminated the employees on the same dates (assuming
that such terminated employees had been retained by Seller post-Closing) under
the terms of its standard employee severance policy in effect on April 22, 1996,
PLUS (ii) in the case of Covered Employees, the lesser of (1) the severance
amount actually paid to such Covered Employees, or (2) the six (6) months
salary-based severance obligation contained in the Covered Employees' employment
contract with Seller. It is understood between the parties that Seller's and
Parent's obligation under this SECTION 12.2(e) is limited to the amount the
Reimbursement Cap was not exceeded in SECTION 12.2(d).
(f) Further, should I-Flow terminate the last-listed individual
on SCHEDULE 12.2(a), for reasons other than cause, within twelve (12) months of
the Closing Date, and if such last-listed individual's severance agreement with
I-Flow calls for more than six (6) months of continued salary, Seller and/or
Parent shall reimbursement I-Flow for the amount of such salary-based severance
payment actually paid by I-Flow in excess of six (6) months salary without
regard to the Reimbursement Cap or the Indemnification Basket. It is understood
between the parties that Seller's and Parent's obligation under this SECTION
12.2(f) is limited to up to an additional six (6) months salary.
12.3 INDEMNIFICATION OF THE SELLING PARTIES.
(a) Subject to the Selling Parties' indemnification obligations set
forth in SECTION 11.5 hereof, I-Flow shall indemnify, defend and hold harmless
the Selling Parties against and in respect of any and all Claims that the
Selling Parties shall incur or suffer, that arise, result from, or relate in any
way to (i) any breach of, or failure by I-Flow to perform, any of its
representations, warranties, covenants or agreements in this Agreement or in any
schedule, certificate, exhibit or other instrument furnished or to be furnished
by I-Flow under this Agreement, (ii) the Assets after the Closing Date, or (iii)
the operation of either Subsidiary or the business of Seller purchased by I-Flow
after the Closing Date (including, without limitation, employment-related
disputes).
(b) Whenever any Claim shall arise for indemnification of the Selling
Parties under this SECTION 12.3, the Selling Parties shall notify I-Flow of the
Claim, within thirty (30) days of the Selling Parties' knowledge of the Claim,
and, when known, the facts constituting the basis for such Claim. In the event
of any Claim for indemnification hereunder resulting from or in connection with
any Claim or legal proceedings by a third party, such notice shall also specify,
if known, the amount or an estimate of the amount of the liability arising
therefrom. The Selling Parties shall give I-Flow a reasonable opportunity to
defend any such Claim at its own expense and with counsel of its own selection,
provided that Selling Parties shall at all times also have the right to fully
participate in the defense at their own expense. If I-Flow shall, within a
reasonable time after notice, fail to defend a Claim, the Selling Parties shall
have the right, but not the obligation, to undertake the defense of, and to
compromise or settle (exercising reasonable business judgment) the Claim on
behalf, for the account, and at the risk of I-Flow. The Selling Parties shall
notify I-Flow in writing of the existence of any Claim to which I-Flow's
indemnification provided in SECTION 12.3(a) would apply, but failure to so
notify I-Flow shall not
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relieve I-Flow of any liability hereunder unless (and then to the extent) such
failure causes I-Flow to lose the right to assert a meritorious defense to such
Claim.
(c) Indemnification by I-Flow under this SECTION 12.3 shall be
effected by the delivery of a cashier's or certified check to the Selling
Parties not later than (i) fifteen (15) business days from the date the notice
of such Claim was given to I-Flow if such Claim arises, results from or relates
in any way to a default under or a breach of this Agreement by I-Flow, and (ii)
fifteen (15) business days after the date on which the Selling Parties incur
out-of-pocket expense with respect to a thirty-party Claim.
(d) Notwithstanding any other terms or conditions of this SECTION
12.3 of this Agreement, the Selling Parties reserve and do not waive or release
any right they have or may have to assert a claim or bring an action against
I-Flow under any federal or state law, common law, or foreign law in connection
with any environmental matter. Accordingly, while I-Flow may have no
contractual obligation to indemnify the Selling Parties in certain
circumstances, I-Flow may nonetheless be sued by the Selling Parties under any
federal or state law, common law, or foreign law and the Selling Parties hereby
expressly reserve and do not waive or release this right.
(e) I-Flow shall maintain Comprehensive/Commercial General Liability
insurance for a minimum of five (5) years following the Closing Date. Such
insurance shall include products/completed operations liability, contractual
liability, personal liability and broad form property damage coverage with
limits of at least the amounts set forth on SCHEDULE 12.3 per occurrence
combined single limit. Such insurance limits may be satisfied by a combination
of primary and excess/umbrella policies. Evidence of this insurance shall be
provided to the Selling Parties by a Certificate of Insurance to be supplied at
or before the Closing.
12.4 HIRING SELLER'S EMPLOYEES. I-Flow agrees that, at the Closing, it
shall offer employment, as to Seller's U.S. employees, to at least that number
equaling the number of Seller's U.S. employees as of the Closing Date minus
forty-nine (49).
12.5 WARRANTY REPAIRS. I-Flow agrees to provide warranty service repairs
for and on behalf of Seller with respect to products sold by Seller prior to the
Closing that are covered by warranty and the Selling Parties, jointly and
severally, agree to compensate I-Flow for such warranty service repairs at
Seller's non-warranty service repair rate as of the Closing Date. The parties
further agree that any payments required to be made by the Selling Parties to
I-Flow pursuant to this SECTION 12.5 shall not be subject to the Indemnification
Basket.
ARTICLE XIII
PUBLICITY
If any party to this Agreement reasonably believes that a public
announcement or statement relating to the transactions contemplated herein is
required by law, I-Flow and Parent will cooperate in drafting and issuing any
such public announcement or otherwise making such a public statement.
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ARTICLE XIV
COSTS
14.1 FINDER'S FEES OR BROKER'S COMMISSIONS. Each party represents and
warrants that it has not engaged the services of any finder, agent or broker
that would be entitled to a commission or other fee from any other party in
respect of the consummation of the transactions contemplated hereby.
14.2 COSTS, FEES, EXPENSES AND TAXES. I-Flow shall bear and be solely
responsible for all costs, fees and expenses (including income taxes) incurred
by it in connection with the transactions hereby. Parent or Seller shall bear
and be solely responsible for all costs, fees and expenses (including income
taxes) incurred by Parent or Seller in connection with the transactions
contemplated hereby. Parent and I-Flow shall each be responsible for one-half
(1/2) of the sales, use and transfer taxes attributable to the purchase and sale
of the assets contemplated herein.
The parties will agree to take all actions required by the tax laws of
Mexico including, if required, withholding by I-Flow of a portion of the
Purchase Price. Such actions may include withholding a portion of the Purchase
Price allocated to the Subsidiary Shares unless Seller provides notification
that it is electing the net fiscal profit method to compute tax due on the sale
of the Subsidiary Shares, if any. Seller shall notify I-Flow of its decision
prior to the Closing, and provide such documentation as required by SECTION 10.2
hereof, if applicable.
Seller shall pay its portion, prorated as of the Closing Date, of real and
personal property taxes of Seller or Subsidiary with I-Flow responsible for the
portion attributable to the Assets after the Closing Date.
ARTICLE XV
TERMINATION, LIQUIDATED DAMAGES AND WAIVER
15.1 TERMINATION. This Agreement may be terminated at any time prior to
the Closing Date:
(a) BY MUTUAL CONSENT. By mutual consent of I-Flow and the
Selling Parties;
(b) BY I-FLOW OR THE SELLING PARTIES. By either I-Flow or the
Selling Parties:
(i) if the transactions contemplated by this Agreement
shall not have been consummated on or before August 21, 1996; provided that the
failure of the transactions to be consummated by such date is not caused by any
delay or breach of this Agreement by the party seeking such termination;
(ii) if a court of competent jurisdiction or other
governmental or regulatory authority shall have issued an order, decree or
ruling or taken any other action, in each case permanently restraining,
enjoining or otherwise prohibiting the consummation of the
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transactions contemplated by this Agreement and such order, decree, ruling or
other action shall have become final and not appealable; or
(iii) if any statute, rule or regulation is enacted,
promulgated or deemed applicable to the transactions contemplated by this
Agreement by any competent governmental or regulatory authority which makes the
consummation of the transactions illegal.
(c) BY I-FLOW. By I-Flow, (i) if a material default under or a
material breach of this Agreement by either or both of the Selling
Parties shall have occurred and be continuing ten (10) business days
after receipt of notice thereof from I-Flow, or (ii) upon written
notice, if one or more of the conditions set forth in ARTICLE VIII
(including without limitation clearance under the Hart-Scott-Rodino
Act) have not been satisfied by the Closing Date.
(d) BY THE SELLING PARTIES. By the Selling Parties, (i) if a
material default under or a material breach of this Agreement by
I-Flow shall have occurred and be continuing ten (10) business days
after receipt of notice thereof from the Selling Parties, or (ii)
upon written notice, if one or more of the conditions set forth in
ARTICLE IX (including without limitation clearance under the
Hart-Scott-Rodino Act) have not been satisfied by the Closing Date.
Any action taken to terminate this Agreement pursuant to this SECTION 15.1
shall become effective when notice of such termination is delivered by the
terminating party or parties to the other party or parties in accordance with
the provisions of SECTION 16.7 below.
15.2 LIQUIDATED DAMAGES. If I-Flow does not acquire the Assets (through
no fault of either of the Selling Parties) solely as a result of I-Flow's
inability to consummate the financing transaction referred to in SECTION 8.6
hereof or as a result of I-Flow's breach of its obligations to consummate the
transactions as provided herein, in consideration of the Selling Parties'
obligations hereunder, I-Flow shall pay Parent, as full and complete liquidated
damages, the sum of One Million Dollars ($1,000,000) (the "Liquidated Damage
Amount") and Parent's actual attorneys' fees and other costs of collection
incurred by Parent in enforcing its rights to recover the Liquidated Damage
Amount. The parties hereto acknowledge and agree that Parent's receipt of the
Liquidated Damage Amount shall constitute full payment of all damages hereunder
and not a penalty and that the Liquidated Damage Amount is reasonable in light
of the substantial but indeterminate harm anticipated to be caused to the
Selling Parties, the difficulty of proof of loss and damages, the inconvenience
and nonfeasibility of otherwise obtaining an adequate remedy and the
indeterminate value of the transaction to be consummated hereunder.
15.3 EXTENSION; WAIVER. At any time prior to the Closing Date, to the
extent legally allowed, any party hereto (a) may extend the time for the
performance of any of the obligations owed to such party by the other parties
hereto, (b) may waive any inaccuracies in the representations and warranties
made to such party contained herein or in any document delivered pursuant hereto
or (c) may waive compliance with any of the agreements or conditions for the
benefit of such party contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid if set forth in an
instrument in writing signed on behalf of such party and shall be effective only
to the extent set forth in such instrument. No extension or waiver of any
single condition, covenant, agreement, representation, warranty, breach, default
or other
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matter hereunder shall be deemed an extension or waiver of such or any other
condition, covenant, agreement, representation, warranty, breach, default or
other matter theretofore or thereafter occurring. The rights, remedies, powers
and privileges herein provided are cumulative and not exclusive of any rights,
remedies, powers and privileges provided by law. The failure of any party to
insist upon a strict performance of any of the terms or provisions of this
Agreement, or to exercise any option, right or remedy herein contained, shall
not be construed as a waiver or as a relinquishment for the future of such term,
provision, option, right or remedy, but the same shall continue and remain in
full force and effect.
ARTICLE XVI
GENERAL PROVISIONS
16.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by the parties shall survive the Closing until the later of one
(1) annual audit cycle or eighteen (18) months, except that those
representations and warranties of the Selling Parties relating to antitrust laws
and environmental laws shall not terminate but will survive indefinitely.
16.2 EFFECT OF HEADINGS. The subject headings of the articles, paragraphs
and subparagraphs of this Agreement are included for convenience only and shall
not affect the construction or interpretation of any of its provisions.
16.3 MODIFICATION; WAIVER. No supplement, modification or amendment of
this Agreement shall be binding unless executed in writing by all of the
parties. No waiver of any of the provisions of this Agreement shall be deemed,
or shall constitute, a waiver of any other provision, whether or not similar,
nor shall any waiver constitute a continuing waiver. No waiver shall be binding
unless executed in writing by the party making the waiver.
16.4 COUNTERPARTS. This Agreement may be executed simultaneously in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
16.5 PARTIES IN INTEREST. Nothing in this Agreement, whether express or
implied, is intended to confer any rights or remedies under or by reason of this
Agreement on any persons other than the parties to it and their respective
successors and assigns, nor is anything in this Agreement intended to relieve or
discharge the obligation or liability of any third persons to any party to this
Agreement, nor shall any provision give any third persons any right of
subrogation or action over against any party to this Agreement.
16.6 ASSIGNMENT; I-FLOW'S WHOLLY-OWNED SUBSIDIARY. This Agreement and the
rights hereunder may not be assigned by I-Flow or the Selling Parties without
the prior written consent of the other parties, which may be given or withheld
in each party's discretion, except that I-Flow may (i) exercise any or all
rights and/or fulfill any or all obligations under this Agreement in conjunction
with or through a wholly-owned subsidiary of I-Flow, and/or (ii) assign this
Agreement, or any of the benefits hereof, to any entity that, directly or
indirectly, through one or
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more intermediaries, controls, or is controlled by, or is under common control
with I-Flow; PROVIDED that I-Flow shall remain liable for all of its obligations
under this Agreement not fully performed by its subsidiaries or assignees.
16.7 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given upon personal delivery or delivery by a
reputable overnight commercial delivery service (delivery, postage or freight
charges prepaid), or on the fourth day following deposit in the United States
mail (if sent by registered or certified mail, return receipt requested,
delivery, postage or freight charges prepaid), addressed to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) if to I-Flow, to: with a copy to:
I-Flow Corporation Gibson, Dunn & Crutcher LLP
2532 White Road Jamboree Center
Irvine, CA 92614 4 Park Plaza, Suite 1700
Attention: President Irvine, CA 92614
Attention: Mark W. Shurtleff, Esq.
(b) if to Seller, to: with a copy to:
Block Medical, Inc. Hillenbrand Industries, Inc.
c/o Hillenbrand Industries, Inc. 700 State Route 46 East
700 State Route 46 East Batesville, IN 47006
Batesville, IN 47006 Attention: General Counsel
Attention: Vice President-
Corporate Development
(c) if to Parent, to: with a copy to:
Hillenbrand Industries, Inc. Hillenbrand Industries, Inc.
700 State Route 46 East 700 State Route 46 East
Batesville, IN 47006 Batesville, IN 47006
Attention: Vice President- Attention: General Counsel
Corporate Development
16.8 GOVERNING LAW; CONSENT TO JURISDICTION. This Agreement shall be
governed by the internal laws of the State of California. Any and all disputes
arising out of this Agreement shall be resolved in the State or Federal Courts
located in San Diego County, California, and the parties hereto consent to the
jurisdiction and proper venue of such courts.
16.9 SEVERABILITY. If any provision of this Agreement is held invalid or
unenforceable by any court of final jurisdiction, it is the intent of the
parties that all other provisions of this Agreement be construed to remain fully
valid, enforceable and binding on the parties.
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16.10 FURTHER ASSURANCES. The parties agree to do such further acts and
things and to execute and deliver such additional agreements and instruments as
any other party may reasonably require or request to consummate, evidence or
confirm the agreements contained herein in the manner contemplated hereby. In
this regard, I-Flow agrees to fully cooperate in making available corporate
records as may be reasonably needed by the Selling Parties for preparation of
income tax returns and other such purposes and, for a period of five (5) years
immediately following the Closing Date, to retain the books and records which
were the books and records of Seller prior to the Closing Date. I-Flow further
agrees to notify the Selling Parties of any tax inquiries or claims made by tax
authorities against Seller (or Subsidiary for years up to and including the
Closing Date) within thirty (30) days of I-Flow's knowledge of the inquiry or
claim. In addition, the parties agree to closely cooperate in corresponding
with outside vendors that have, or will have as of the Closing Date, physical
possession of any of the Assets.
16.11 ENTIRE AGREEMENT. The terms of this Agreement are intended by the
parties as a final expression of their agreement with respect to such terms as
are included in this Agreement and may not be contradicted by evidence of any
prior or contemporaneous agreement. The parties further intend that this
Agreement constitutes the complete and exclusive statement of their terms and
that no extrinsic evidence whatsoever may be introduced in any judicial or
arbitration proceeding, if any, involving this Agreement or any of its included
provisions.
16.12 CONSTRUCTION. The language in all parts of this Agreement shall in
all cases be construed simply, according to its fair meaning, and shall not be
construed strictly for or against any of the parties hereto.
16.13 ATTORNEYS' FEES. If any party to this Agreement shall bring any
action, suit, counterclaim or appeal for any relief against any other party,
declaratory or otherwise, to enforce the terms hereof or to declare rights
hereunder (collectively, an "Action"), the prevailing party shall be entitled to
recover as part of any such Action its actual attorneys' fees, disbursements and
costs, including any fees and costs incurred in bringing and prosecuting such
Action and/or enforcing any order, judgment, ruling or award granted as part of
such Action. "Prevailing party" shall mean, in the case of a claimant, one who
is successful in obtaining substantially all the relief sought, and in the case
of a defendant or respondent, one who is successful in denying substantially all
the relief sought by the claimant.
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IN WITNESS WHEREOF, the parties to this Agreement have duly executed it on
the day and year first above written.
BLOCK MEDICAL, INC., I-FLOW CORPORATION,
a Delaware corporation a California corporation
By:/s/ Mark R. Lindenmeyer By:/s/ Donald M. Earhart
-------------------------------- --------------------------------
Mark R. Lindenmeyer Donald M. Earhart
Secretary Chairman, CEO and President
HILLENBRAND INDUSTRIES, INC.,
an Indiana corporation
By:/s/ W August Hillenbrand
--------------------------------
W August Hillenbrand
President and CEO
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