SECURITIES AND EXCHANGE COMMISSION
Washington D.C.
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
Of the Securities Exchange Act of 1934
For Quarter Ended June 30, 1999
Commission File Number 0-7955
Mentor Corporation
(Exact name of registrant as specified in its charter)
Minnesota 41-0950791
(State of Incorporation) (I.R.S. Employer Identification Number)
201 Mentor Drive, Santa Barbara, California 93111
Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number: (805) 879-6000
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by section 13 of 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months or
for such shorter period that the registrant was required to file
such reports and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
The number of shares outstanding for each of the Issuer's classes
of common stock as of August 13, 1999 was:
Common stock, $.10 par value 24,377,337 shares
Mentor Corporation
INDEX
Part I. Financial Information
Item 1. Financial Statements (unaudited)
Condensed Consolidated Statements of Financial
Position -- June 30, 1999 and March 31, 1999
Consolidated Statements of Income -- Three Months
Ended June 30, 1999 and 1998
Condensed Consolidated Statements of Cash Flows --
Three Months Ended June 30, 1999 and 1998
Notes to Condensed Consolidated Financial Statements--
June 30, 1999
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Part II. Other Information
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
List of Exhibits
11. Statement Regarding Computation of Per Share Earnings
Mentor Corporation
Condensed Consolidated Statements of Financial Position
June 30, 1999 and March 31, 1999
(Unaudited)
June 30, March 31,
(dollars in thousands) 1999 1999
ASSETS
Current assets:
Cash and marketable securities $ 56,849 $ 21,621
Accounts receivable, net 38,111 37,431
Inventories 31,371 30,552
Deferred income taxes 8,619 7,919
Net assets of discontinued operations 6,158 39,899
Prepaid Expenses and Other 8,065 7,640
Total current assets 149,173 145,062
Property, plant and equipment,
net of accumulated depreciation 36,624 34,995
Other assets:
Patents, licenses and trademarks
net of accumulated amortization 2,193 2,342
Goodwill, net of accumulated
Amortization 4,746 4,885
Long term marketable securities
and investment 9,786 8,356
Other assets 371
53,348 50,949
Total assets $ 202,522 $ 196,011
See Notes to Condensed Consolidated Financial Statements
Mentor Corporation
Condensed Consolidated Statements of Financial Position
June 30, 1999 and March 31, 1999
(Unaudited)
June 30, March 31,
(dollars in thousands) 1999 1999
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,979 $ 5,726
Accrued compensation 4,822 7,049
Income taxes payable 1,400 3,770
Dividends payable 611 612
Sales returns 5,338 5,126
Self-insured retention 4,850 3,700
Accrued royalties 1,649 1,076
Other accrued liabilities 6,017 4,171
Short-term borrowings and current
Portion of long-term debt 4,000
Total current liabilities 29,666 35,230
Long-term deferred taxes 3,491 2,163
Shareholders' equity:
Common shares, $.10 par value:
Authorized 50,000,000 shares
Issued and outstanding:
24,451,837 shares at
June 30,1999
24,548,537 shares at
March 31, 1999 2,445 2,455
Capital in excess of par 19,017 21,502
Cummulative transalation
Adjustment (1,869) (1,141)
Unrealized gains on investments 1,549 880
Retained earnings 148,223 134,922
169,365 158,618
Total liabilities and shareholders'
Equity $ 202,522 $ 196,011
See Notes to Condensed Consolidated Financial Statements
Mentor Corporation
Consolidated Statements of Income
Three Months Ended June 30, 1999 and 1998
(Unaudited)
(in thousands, except per share
data) 1999 1998
Net sales $ 60,144 $ 48,084
Costs and expenses:
Cost of sales 21,520 15,191
Selling, general and
Administrative 24,531 19,054
Research and development 4,126 3,121
50,177 37,366
Operating income from continuing
Operations 9,967 10,718
Interest expense (19) (10)
Interest income 175 377
Other income (expense) 73 (67)
Income from continuing operations
before income taxes 10,196 11,018
Income taxes 3,220 3,705
Income from continuing operations 6,976 7,313
Income from discontinued 6,937 526
operations, net of tax
Net income $ 13,913 $ 7,839
Basic earnings per share:
Continuing operations .28 .29
Discontinued operations .29 .02
Basic earnings per share $ .57 $ .31
Diluted earnings per share:
Continuing operations .28 .28
Discontinued operations .28 .02
Diluted earnings per share $ .56 $ .30
See notes to consolidated financial statements
Mentor Corporation
Condensed Consolidated Statements of Cash Flows
Three Months Ended June 30, 1999 and 1998
(Unaudited)
(in thousands) 1999 1998
Cash flows from continuing operating
activities $ 5,198 $ 10,976
Cash flows from discontinued
Operating activities 2,318 1,264
Cash flows from operating activiites 7,516 12,240
Cash flows from investing activities:
Purchase of property, equipment,
and intangibles (3,453) (4,676)
Other (105) 18
Cash flows from continuing
investing activities (3,558) (4,658)
Cash flows from discontinued
investing activities 38,377 (454)
Cash flows from investing activities 34,819 (5,112)
Cash flows from financing activities:
Exercise of stock options 994 287
Dividends paid (613) (620)
Reduction of debt (4,000)
Repurchase of common stock (3,488)
(7,107) (333)
Increase (decrease) in cash, cash
equivalents, and marketable
securities 35,228 6,795
Cash at beginning of period 21,621 27,937
Cash at end of period $ 56,849 $ 34,732
See notes to consolidated financial statements
Mentor Corporation
Notes to Condensed Consolidated Financial Statements
June 30, 1999
Note A
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial information
and with instructions to Form 10-Q and Article 10 of Regulation S-
X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included.
Operating results for the three month period ended June 30, 1999
are not necessarily indicative of the results that may be
expected for the year ended March 31, 2000.
The balance sheet at March 31, 1999 has been derived from the
audited financial statements at that date but does not include
all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's annual
report on Form 10-K for the year ended March 31, 1999.
Note B
Inventories at June 30, 1999 and March 31, 1999 consisted of:
June 30 March 31
(In thousands)
Raw materials $ 8,407 $ 7,640
Work in process 8,497 6,563
Finished goods 14,467 16,349
$ 31,371 $ 30,552
Note C
Other assets at June 30, 1999 include the Company's equity
investments in its marketing partners, Intracel Corporation and
North American Scientific, Inc. (NASI). The Intracel Corporation
investment is valued at cost of $6 million. In accordance with
Financial Accounting Standards Board (FASB) statement 115
"Accounting of Certain Equity Investments in Debt and Equity
Securities", the North American Scientific investment is carried
at its fair market value of approximately $3.4 million.
Unrealized gains, net of the related tax effect, are accounted
for as a separate component of shareholders' equity.
Note D
The Company has adopted Statement of Financial Accounting
Standards No. 130 "Reporting Comprehensive Income" ("SFAS 130").
SFAS 130 establishes standards for reporting and display of an
alternative income measurement and its components (revenue,
expenses, gains and losses) in a full set of general purpose
financial statements. Total comprehensive income includes net
earnings, net unrealized currency gains and losses on translation
and net unrealized gains and losses on securities.
The components of comprehensive income for the three months ended
June 30, 1999 and 1998 are listed below:
(in thousands) 1999 1998
Net income $ 13,913 $ 7,839
Foreign currency translation adjustment (728) 71
Unrealized gains on investment activities 669 (1,100)
Comprehensive income $ 13,854 $ 6,810
Note E
The Company has adopted Statement of Financial Accounting
Standards No. 131 "Disclosures about Segments of an Enterprise
and Related Information" ("SFAS 131"). SFAS 131 establishes
standards under which companies report information about
operating segments in financial statements.
The Company's operations are principally managed on a functional
basis and reported on a product or geographic basis. As a result
there are four reportable segments: Aesthetic and General
Surgery, Surgical Urology, Clinical and Consumer Healthcare
products, and International.
The Aesthetic and General Surgery products segment consists
primarily of breast implants, tissue expanders and the Company's
Contour Genesis Ultrasonic equipment product line along with
equipment and disposables for traditional liposuction. The
Surgical urology segment includes impotence implants, surgical
incontinence products and radioactive seeds for the treatment of
prostate cancer. The Clinical and Consumer Healthcare products
segment includes catheters and other products for the management
of urinary incontinence. The International segment includes the
operations of the Company's wholly owned international sales
offices, which cover most of the Company's implantable product
lines, and a small European manufacturing and distribution
facility. Segment revenues include domestic sales, sales to
independent foreign distributors and sales to the Company's
direct international sales and offices.
Selected financial information for the Company's reportable
segments for the quarter ended June 30, 1999 and 1998 follows:
Three Months Ended
June 30,
(in thousands) 1999 1998
Revenues
Aesthetics and General Surgery $ 34,154 $ 27,591
Surgical Urology 10,473 6,531
Clinical and Consumer Healthcare 9,802 9,179
International 10,849 9,016
Total reportable segments 65,278 52,317
Elimination of inter-segment
revenues (5,134) (4,233)
Total consolidated revenues 60,144 48,084
Three Months Ended
June 30,
(in thousands) 1999 1998
Operating profit (loss) from
continuing operations
Aesthetics and General Surgery $ 11,328 $ 9,442
Surgical Urology 599 479
Clinical and Consumer Healthcare 1,204 1,812
International 1,946 1,309
Operating profit from continuing
operations of reportable
segments 15,077 13,042
Corporate operating loss (5,109) (2,324)
Interest expense (19) (10)
Interest income 175 377
Other income (loss) 72 (67)
Income from continuing operations
before taxes $ 10,196 $ 11,018
June 30,
1999 1998
Identifiable assets
Aesthetics and General Surgery $ 50,430
$ 51,079
Surgical Urology 18,752 21,416
Clinical and Consumer Healthcare 26,450 22,632
International 22,439 18,540
Total reportable segments 118,071 113,667
Corporate and other 78,293 48,113
Net assets of discontinued
operations 6,158 45,842
Consolidated assets $ 202,522 $ 207,622
Note F
In May 1999, the Company announced that its Board of Directors
had decided to divest the ophthalmology business, which accounted
for approximately 16% of sales in fiscal 1999. Consistent with
the plan to dispose of its ophthalmic business segment, the net
assets and operations of the ophthalmic segment of the business,
comprised of the intraocular lens products and ophthalmic
equipment lines have been classified as discontinued operations.
Summaries of the results of operations for discontinued
operations for the quarters ended June 30, 199 and 1998 are as
follows:
Three Months Ended
June 30,
(in thousands) 1999 1998
Revenues $ 9,078 $ 8,933
Operating profit 566 684
Gain on sale of intraocular lens assets 11,300 -
Income before income taxes 11,866 684
Income tax expense 4,929 158
Net income from discontinued
Operations $ 6,937 $ 526
The assets and liabilities of discontinued operations have been
classified in the balance sheet as net assets of discontinued
operations and consist of the following:
June 30, March 31,
(in thousands) 1999 1999
Accounts receivable, net $ 3,311 $ 7,981
Inventory 5,321 17,687
Property, plant & equipment, net 294 3,985
Intangibles and goodwill, net 7,727 12,098
Other 328 4,525
Total assets 16,981 46,276
Current liabilities 5,964 6,377
Taxes payable 4,859 -
Net assets of discontinued operations $ 6,158 $ 39,899
During the quarter ended June 30, 1999, the Company completed the
sale of the assets of the intraocular lens business, for cash
consideration of $38.4 million. The Company recorded a gain of
$7.5 million, net of $3.8 million in taxes.
Note G
The Company's three quarterly interim reporting periods are each
approximately thirteen week periods ending on the Friday nearest
the end of the third calendar month. The fiscal year end remains
March 31. To facilitate ease of presentation, each interim
period is shown as if it ended on the last day of the appropriate
calendar month. The actual dates on which each quarter ended are
shown below:
Fiscal 2000 Fiscal 1999
First Quarter July 2, 1999 June 26, 1998
Second Quarter October 1, 1999 September 25, 1998
Third Quarter December 31, 1999 January 1, 1999
Mentor Corporation
Management's Discussion and Analysis of Results of
Operations and Financial Condition
Except for the historical information contained herein, the
matters discussed in this Management's Discussion are forward-
looking statements, the accuracy of which is necessarily subject
to risks and uncertainties. Actual results may differ
significantly from the discussion of such matters in the forward
looking statements. Potential risks and uncertainties include,
without limitation, those mentioned in this report and, in
particular, the factors described under "Factors That May Affect
Future Results of Operations" in the Company's Annual Report on
Form 10-K for the fiscal year ended March 31, 1999.
In May 1999, the Company announced that its Board of Directors
had decided to divest the ophthalmology business, which accounted
for approximately 16% of sales in fiscal 1999. The Company has
completed the sale of the assets of the intraocular lens
business. The remaining parts of the ophthalmic business are
currently being actively marketed. As a result of this decision,
the Company now accounts for the ophthalmic business as a
"Discontinued Operation" under Generally Accepted Accounting
Principles (GAAP). Accordingly, all sales and expenses and other
financial information of the ophthalmic business are reported, on
a net basis, as a single line on the financials. All prior
period amounts presented in this Form 10-Q have been restated to
exclude the results of the ophthalmic business as appropriate.
RESULTS OF OPERATIONS
Sales
Sales for the three months ended June 30, 1999 increased 25% to
$60.1 million, compared to $48.1 million the prior year. Growth
was particularly strong in sales of surgical urology products,
increasing 58% compared to a year ago. Adding to urology product
sales were two new products that were introduced in the last
year, brachytherapy seeds for the treatment of prostate cancer,
and the Suspend sling for treating female urinary incontinence.
Sales of these products accounted for the majority of the
increased revenues. Sales of penile implants increased 10% from
the previous year, showing the first positive comparison since
the introduction of Viagra, a new impotence drug, last year. The
Company continues to believe that the interest created by Viagra
in treating impotence bodes well for the long term prospects of
penile implant sales, as Viagra will not work on all patients.
Sales of Aesthetics & general surgery products were also strong
in the quarter, increasing 23%. The Company is implementing a
number of programs to recapture market share in this area.
Clinical and consumer healthcare product sales, primarily for the
management of urinary incontinence, increased 8%.
Sales by Principal Product Line
For the Three Months Ended
June 30,
Percent
1999 1998 Change
Aesthetic & General Surgery Products $38,756 $31,457 23%
Surgical Urology Products 10,925 6,929 58%
Clinical & Consumer Healthcare Products 10,463 9,698 8%
$60,144 $48,084 25%
Cost of Sales
Cost of sales was 35.8% for three months ended June 30, 1999
compared to 31.6% for the same period last year. Cost of sales in
the period ended June 30, 1998 benefited from approximately $2.2
million in proceeds from the Company's insurance claim related to
the fire at its Texas facility in 1997.
In May 1998, the Company entered into a voluntary consent decree
with the FDA in relation to the Texas facility. This resulted
from issues the FDA had had concerning the Company's validations
of this facility. The agreement required the Company to re-
validate certain of the Company's manufacturing processes,
strengthen its continuous quality improvement program, and to
contract for an independent audit on overall GMP compliance under
a schedule agreed to by the Company and the FDA. As a result of
the re-validation effort, the Company has experienced a higher
than normal level of operating expenses over the past two years.
Mentor believes that to date it has completed in a timely fashion
all the activities called for in the agreement. Specifically,
the Company has completed the re-validations of the plant and has
had a GMP expert consultant conduct the first annual inspection.
Should the Company fail to comply with the conditions of the
consent decree, under its terms, the FDA is allowed to order the
Company to stop manufacturing or distributing breast implants,
order a recall or take other corrective actions. The Company may
also be subject to penalties of $10,000 per day until the task is
completed.
Selling, General and Administrative Expenses
Selling, General and Administrative expenses were 40.8% of sales
in the quarter compared to 39.6% in the previous year. In the
first quarter, the Company began a direct consumer advertising
campaign. The purpose of the ads is to educate women about breast
augmentation and reconstruction, and to stimulate interest in
looking at these products as an effective and affordable surgical
option. The Company spent approximately $1.5 million on this
campaign. Also, in the last year the Company has increased its
selling efforts in both brachytherapy and in body contouring. In
addition, during the first quarter, the Company launched a new
brachytherapy product, the PdGold, to complement its existing
IoGold seed.
Research and Development
Research and development expenses were 6.9% of sales for the
quarter, compared to 6.5% for the prior year. The Company
continues to spend funds on its premarket approval applications
("PMAAs") for its saline breast implants, silicone gel filled
breast implants, and penile implants. The Company is committed
to a variety of clinical and laboratory studies in connection
with these products. The Company expects to complete the work on
its saline filled breast implant PMAAs and its penile implant
PMAA and submit the data to the FDA by the end of fiscal 2000.
Other major studies underway include an alternate filler breast
implant and extending the use of the Contour Genesis to include
liposuction.
Interest and Other Income and Expense
Net interest income decreased from $367 thousand last year to
$156 thousand this year, due to lower cash balances.
Income Taxes
The effective rate of corporate income taxes was 31.6% for the
quarter, compared to 33.6% in the same period a year ago. The
decrease results from tax credits in prior years not previously
provided for.
Discontinued Operations
In May 1999, the Company announced that its Board of Directors
had decided to divest the ophthalmology business, which accounted
for approximately 16% of sales in fiscal 1999. As a result of
this decision, the Company now accounts for the ophthalmic
business as a "Discontinued Operation" under Generally Accepted
Accounting Principles (GAAP).
For the quarter, the Company had a loss on discontinued
operations of $537, net of tax, compared to a gain of $526
thousand, net of tax, in the prior year. Also, during the
quarter, the Company completed the sale of the assets of the
intraocular lens business, recording a gain of $7.5 million, net
of tax.
Net Income
Diluted earnings per share from continuing operations was $0.28
for the quarter, the same as last year. The loss from
discontinued operations was $0.02 for the quarter, compared to a
gain of $0.02 a year ago. Also included in discontinued
operations was a gain of the sale of the intraocular lens
business of $0.30.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1999, the Company's working capital was $99.8 million
compared to $106.8 million at March 31, 1999. The Company's
working capital needs were provided from operations.
The Company generated $5.2 million of cash from continuing
operations during the three months ended June 30, 1999, compared
to $11.0 million the previous year. During the quarter ended
June 30, 1998, the Company received $5.0 million in insurance
proceeds related to its claim regarding the fire in its Texas
facility.
The Company anticipates investing approximately $12 million in
facilities and capital equipment in fiscal 2000. The majority of
the expenditures will be for facility upgrades at the Company's
facilities in Texas and Santa Barbara, as well as for enhancing
the Company's information technology capabilities.
The Company has a line of credit for $25 million. As a result of
the increased stock repurchases in fiscal 1999, the Company had a
balance of $4.0 million on its line of credit at March 31, 1999.
This amount was paid off during the first quarter.
For the last several years, the Company has paid a quarterly cash
dividend of $.025 per share. At the indicated rate of $.10 per
year, the aggregate annual dividend would equal approximately
$2.5 million.
The Company's Board of Directors has authorized an ongoing stock
repurchase program. The objectives of the program, among other
items, are to offset the issuance of stock options, provide
liquidity to the market and to reduce the overall number of
shares outstanding. Repurchases are subject to market conditions
and cash availability. In May 1999, the Board increased the
repurchase authorization by 4 million shares, to a total of 4.6
million. During the quarter, the Company repurchased
approximately 250 thousand shares for consideration of $3.8
million.
As discussed above, during the quarter the Company completed the
sale of the assets of the intraocular lens business, for cash
consideration of $38.4 million.
The Company's principal source of liquidity at June 30, 1999
consisted of $56.8 million in cash and marketable securities plus
$25 million available under its line of credit.
IMPACT OF YEAR 2000
General Description of the Year 2000 Issue and the Nature and
Effects of the Year 2000 on Information Technology (IT) and Non-
IT Systems
The Year 2000 Issue is the result of computer programs being
written using two digits rather than four to define the
applicable year. Any of the Company's computer programs,
hardware or embedded chips that have date-sensitive software may
recognize a date using "00" as the year 1900 rather than the year
2000. This could result in a system failure or miscalculations
causing disruptions of operations, including, among other things,
a temporary inability to process transactions, send invoices, or
engage in similar normal business activities.
Based on recent assessments, the Company determined that it will
be required to modify or replace portions of its distribution,
finance and manufacturing software and certain hardware so that
those systems will properly utilize dates beyond December 31,
1999. The Company presently believes that with modifications or
replacements of certain existing software and hardware, the Year
2000 Issue can be mitigated. However, if such modifications and
replacements are not made, or are not completed in a timely
manner, the Year 2000 Issue could have a material impact on the
operations of the Company.
The Company's plan to resolve the Year 2000 Issue involves the
following key phases: inventory, assessment and remediation. The
Company has categorized its systems into several areas: core
systems (i.e. distribution, finance and manufacturing systems),
ancillary support systems to those core systems, embedded
systems, products, and third party vendors.
Inventory and Assessment
The Company has completed its inventory and assessment of both
its domestic and international core systems, indicating most of
the core systems would be adversely affected. For the ancillary
support systems and embedded systems, the Company has completed
its inventory and assessment. This identified two items that need
to be updated. The Company has completed its inventory and
assessment of its product lines and has determined that most of
the products it has sold and will continue to sell do not require
remediation to be Year 2000 compliant. Accordingly, the Company
does not believe that the Year 2000 presents a material exposure
as it relates to the Company's products.
Status of Progress in Becoming Year 2000 Compliant
For its domestic core system exposures related to its
distribution, finance and manufacturing software, the Company has
completed all required remediation. For other domestic core
systems, such as desktop computers, networks and off-the shelf
application software, the Company is 90% complete on the
remediation phase and expects to complete upgrades and/or
replacement no later than October 31, 1999.
The remediation of the identified ancillary and embedded systems
is expected to be complete no later than October 31, 1999.
Nature and Level of Importance of Third Parties and their
Exposure to the Year 2000
Other than payroll and its banking relationships, the Company has
no other significant direct interfaces with third party vendors.
The Company is in the process of working with key third party
vendors to ensure that the Company's systems that interface
directly with third party vendors are Year 2000 compliant by
December 31, 1999. The Company understands that key vendors are
in the process of making their systems Year 2000 compliant. Each
vendor queried by the Company believed that its system would be
Year 2000 compliant by the end of 1999.
The Company is beginning to query its significant suppliers and
subcontractors that do not share information systems with the
Company (external agents). To date, the Company is not aware of
any external agent with a Year 2000 issue that would materially
impact the Company's results of operations, liquidity, or capital
resources. The Company has no means of ensuring that external
agents will be Year 2000 ready. The inability of external agents
to complete their Year 2000 resolution process in a timely
fashion could materially impact the Company. The effect of non-
compliance by external agents is not determinable at this time.
Costs
The total cost to the Company of the Year 2000 project is
estimated at $3.1 million and is being funded through operating
cash flows. To date, the Company has incurred costs of
approximately $2.4 million. This amount includes upgrading its
desktop systems and office software to the latest release, which
the Company would do in the normal course of business. The
majority of these costs relate to new hardware and software and
are being capitalized.
Risks
Management of the company believes it has an effective program in
place to resolve the Year 2000 issue in a timely manner. The
Company has not yet completed all necessary phases of the Year
2000 program. In the event that the Company does not complete
any additional phases, the Company would be constrained in taking
customer orders, and might be unable to manufacture and ship
certain products, or invoice customers. In addition, disruptions
in the economy generally resulting from Year 2000 issues could
also materially adversely affect the Company.
Contingency Plans
The Company currently has no contingency plans in place in the
event it does not complete all phases of the Year 2000 program.
The Company plans to evaluate the status of completion in August
1999 and determine whether such a plan is necessary.
PART II
Item 1. Legal Proceedings
In regards to the litigation reported in Item 3 of the
annual report on Form 10-K for the fiscal year ended March 31,
1999, there have been no material changes.
Item 2. Changes in Securities
No changes have been made in any registered securities.
Item 3. Defaults Upon Senior Securities
No event constituting a material default has occurred
respecting any senior security of the Registrant.
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
10(a) Asset Purchase Agreement, dated as of May 14, 1999
between Mentor Corporation and CIBA Vision
Corporation.
11 Statement regarding computation of Per Share
Earnings
Pursuant to the requirement of the Securities Exchange Act of
1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned thereunto duly authorized.
MENTOR CORPORATION
(Registrant)
DATE: August 16, 1999 BY: /s/ANTHONY R. GETTE
Anthony R. Gette
President and
Chief Operating Officer
DATE: August 16, 1999 BY: /s/GARY E. MISTLIN
Gary E. Mistlin
Chief Financial Officer
EXHIBIT 11
MENTOR CORPORATION AND SUBSIDIARIES
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Three Months Ended
June 30,
1999 1998
Numerator:
Net income $ 13,913 $ 7,839
Numerator for basic
earnings per share -
income available to
common stockholders
13,913 7,839
Numerator for diluted
earnings per share -
income available to
common stockholder
after assumed
conversions
$ 13,913 $ 7,839
Denominator:
Denominator for basic
earnings per share -
weighted-average
shares 24,522 25,036
Effect of dilutive
securities:
Employee stock options 507 1,252
Denominator for diluted
earnings per share -
adjusted weighted-
average shares and
assumed conversions
25,029 26,288
Basic earnings per share $ .57 $ .31
Diluted earnings per share $ .56 $ .30
Exhibit 10(a)
ASSET PURCHASE AGREEMENT
dated as of
May 14, 1999
between
Mentor Corporation
and
CIBA Vision Corporation
TURN SHOW/HIDE OFF BEFORE GENERATING TABLE
TABLE OF CONTENTS
Page No.
ARTICLE 1 - PURCHASE AND SALE OF ASSETS 2
Section 1.1 Purchase and Sale 2
Section 1.2 Excluded Assets 6
Section 1.3 Transfer 7
Section 1.4 Transition Agreement 7
ARTICLE 2 - PURCHASE PRICE 8
Section 2.1 Purchase Price 8
Section 2.2 Accounts Receivable. 8
Section 2.3 Assumption of Liabilities. 10
Section 2.4 Purchase Price Allocation 11
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES OF THE SELLER AND
THE SUBSIDIARIES 12
Section 3.1 Organization and Corporate Standing 12
Section 3.2 Corporate Power and Authority 13
Section 3.3 Financial Statements 13
Section 3.4 Absence of Certain Changes and Events 14
Section 3.5 No Violation of Law 15
Section 3.6 Real Property 15
Section 3.7 Title to Assets/Sufficiency 16
Section 3.8 Leases 17
Section 3.9 Litigation 17
Section 3.10 Employees of the Business 18
Section 3.11Collective Bargaining; Employment Contracts 18
Section 3.12 Labor Matters 19
Section 3.13 Environmental Matters. 19
Section 3.14 Permits 23
Section 3.15 Contracts 23
Section 3.16 Required Consents, Approvals and Filings 24
Section 3.17 No Conflict 24
Section 3.18 Intellectual Property 25
Section 3.19 Taxes 25
Section 3.20 Inventory 26
Section 3.21 Key Customers and Representatives 26
Section 3.22 Equipment 27
Section 3.23 Disclosure 27
Section 3.24 Disclaimer 27
ARTICLE 4 - BUYER'S REPRESENTATIONS AND WARRANTIES 28
Section 4.1 Organization 28
Section 4.2 Corporate Power and Authority 28
Section 4.3 Required Consents, Approvals and Filings 28
Section 4.4 No Conflict 29
Section 4.5 Litigation 29
Section 4.6 Financing 30
ARTICLE 5 - COVENANTS OF THE PARTIES 30
Section 5.1 Operations Pending Closing 30
Section 5.2 Access 33
Section 5.3 Preparation of Supporting Documents 34
Section 5.4Approvals of Third Parties; Satisfaction of Conditions to
Closing 35
Section 5.5 Hart-Scott-Rodino Notification 35
Section 5.6 Financial and Tax Services 36
Section 5.7 Transfer Taxes 37
Section 5.8 Notice and Opportunity to Cure. 37
Section 5.9 Covenant Not to Compete 39
Section 5.10 Inventory 39
ARTICLE 6 - COVENANTS AS TO EMPLOYEES 39
Section 6.1 Employees and Employee Benefits. 39
Section 6.2 Seller Obligations 41
ARTICLE 7 - CONDITIONS TO SELLER'S OBLIGATIONS 41
Section 7.1Representations and Warranties True at Closing Date; Performance
of Agreements 42
Section 7.2 Litigation 42
Section 7.3 Opinion of Counsel to Buyer 42
Section 7.4 Required Governmental Approvals 43
Section 7.5 Other Necessary Consents 43
ARTICLE 8 - CONDITIONS TO BUYER'S OBLIGATIONS 43
Section 8.1Representations and Warranties True at Closing Date; Performance
of Agreements 43
Section 8.2 Litigation 44
Section 8.3 Opinion of Counsel to the Seller 44
Section 8.4 Required Governmental Approvals 44
Section 8.5 Other Necessary Consents 44
ARTICLE 9 - CLOSING 45
Section 9.1 Closing 45
Section 9.2 Termination Prior to Closing 45
Section 9.3 Termination of Obligations 47
ARTICLE 10 - INDEMNIFICATION 47
Section 10.1 Seller Indemnification. 47
Section 10.2 Buyer Indemnification 50
Section 10.3 Indemnity Claims. 51
Section 10.4 Deductible 52
Section 10.5 Notice of Claim 52
Section 10.6 Defense 52
Section 10.7 Limitation of Liability 54
Section 10.8 Exclusive Remedy; Release. 54
ARTICLE 11 - MISCELLANEOUS 55
Section 11.1 Expenses 55
Section 11.2 Entire Agreement 56
Section 11.3 Waivers 56
Section 11.4Parties Bound by Agreement; Successors and Assigns 57
Section 11.5 Counterparts 57
Section 11.6 Notices 57
Section 11.7 Brokerage 58
Section 11.8 Governing Law; Jurisdiction 59
Section 11.9 Public Announcements 59
Section 11.10 No Third-Party Beneficiaries 59
Section 11.11 Certain Definitions. 60
Section 11.12 Interpretation 61
SCHEDULES
1.1( Computer Software, Equipment and Databases
g)
1.2 Excluded Assets
3.3 Financial Statements and Exceptions to Financial
Statements
3.4 Absence of Certain Changes and Events
3.6( Real Property
a)
3.6( Permitted Liens
b)
3.7 Exceptions to Title
3.8 Equipment and Automobile Leases
3.9 Litigation
3.11 Agreements with Employees
3.12 Labor Matters
3.13 Release of Pollutants
3.14 Permits and Registrations
3.15 Contracts
3.15 Contracts Included in Assets
(b)
3.16 Seller Required Consents, Approvals and Filings
3.18 Intellectual Property
3.19 Tax Matters
3.21 Key Customers
(a)
3.21 Key Representatives
(b)
4.3 Buyer Required Consents, Approvals and Filings
5.1 Operations Pending Closing
5.1( Actions Prior to Closing
b)
DEFINITIONS
Term: First Defined in Section -
"Accounts Receivable Listing Section 2.2(a)(1)
"Adjusted Accounts Section 2.2(a)
Receivable"
"Affiliate" Section 11.11
"Agreement" First paragraph of Agreement
"Assets" Section 1.1
"Assumed Liabilities" Section 2.3(b)
"Business" Section 1.1
"Business Employees" Section 6.1(a)
"Buyer" First paragraph of Agreement
"Buyer Protected Parties" Section 10.1(a)
"Closing" Section 9.1
"Closing Date" Section 9.1
"COBRA" Section 6.1(c)
"Code" Section 2.4
"Collected Accounts Section 2.2(b)(1)
Receivable"
"Contracts" Section 1.1(d)
"Deductible" Section 10.4
"Effective Date" First paragraph of Agreement
"Environment" Section 3.13(a)(1)
"Environmental Law" Section 3.13(a)(2)
"Equipment" Section 1.1(e)
"Excluded Accounts Section 2.2(a)(1)
Receivable"
"Excluded Assets" Section 1.2
"Excluded Liabilities" Section 2.3(a)
"FTC" Section 5.5
"Financial Statements" Section 3.3
"Governmental Body" Section 3.13(a)(3)
"Gross Accounts Receivable" Section 2.2(a)(2)
"Hazardous Materials" Section 3.13(a)(5)
"hazardous waste" Section 3.13(a)(5)
"Hired Employees" Section 6.1(a)
"HSR" Section 3.16
"Inaccuracy" Section 5.8(a)
"Indemnified Party" Section 10.5
"Indemnifying Party" Section 10.5
"Intellectual Property" Section 3.18
"Justice Department" Section 5.5
"Key Customers" Section 3.21
"Key Representatives" Section 3.21
"knowledge" Section 11.11(b)
"Leases" Section 1.1(f)
"Losses" Section 10.1(a)
"Mark" Section 1.2(g)
"MCI" First paragraph of Agreement
"MemoryLens" Section 1.1(j)
"Mentor" Section 1.2(g)
"MOI" First paragraph of Agreement
"MMI" First paragraph of Agreement
"Permits" Section 1.1(c)
"Permitted Liens" Section 3.6
"pollutant or contaminant" Section 3.13(a)(5)
"Purchase Price" Section 2.1
"Real Property" Section 3.6
"Registrations" Section 1.1(b)
"Release" Section 3.13(a)(6)
"Restructuring" Section 3.4
"Retained Inventory" Section 5.1(d)
"Second Request" Section 5.5
"Seller" First paragraph of Agreement
"Subsidiary" Second paragraph of Agreement
"Subsidiaries" Second paragraph of Agreement
"Seller Protected Parties" Section 10.2
"Technical Information" Section 1.1(e)
"Transaction Agreements" Section 3.2
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), made and entered
into as of this 14th day of May, 1999 (the "Effective Date"), among
Mentor Corporation, a Minnesota corporation, having its principal place
of business at 201 Mentor Drive, Santa Barbara, CA 93111 (the "Seller"),
Mentor Ophthalmics, Inc., a Massachusetts corporation ("MOI"), Mentor
Medical, Inc., a Delaware corporation ("MMI"), Mentor Caribe, Inc., a
Delaware corporation ("MCI"), and CIBA Vision Corporation, a Delaware
corporation, having its principal place of business at 11460 Johns Creek
Parkway, Duluth, Georgia 30097, CIBA Vision AG, a Swiss corporation
having its principal place of business at Riethofstrase 1, 8442,
Hettlingen, Switzerland, CIBA Vision Puerto Rico, Inc., a Puerto Rico
corporation having its principal place of business at
________________________________________ (together with CIBA Vision
Corporation and CIBA Vision AG, collectively, the "Buyer").
WITNESSETH:
WHEREAS, the Seller is the sole shareholder of MOI and MMI and,
indirectly, of MCI (each, a "Subsidiary" and, collectively, the
"Subsidiaries"); and
WHEREAS, upon and subject to the terms and conditions of this
Agreement, the Seller and the Subsidiaries desire to sell to the Buyer,
and the Buyer desires to purchase from the Seller and the Subsidiaries,
certain assets of the Seller and of the Subsidiaries that comprise the
intraocular lens business of the Mentor Ophthalmics business division.
NOW, THEREFORE, in consideration of the mutual promises and
covenants and the terms and conditions set forth herein and other good
and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
- - PURCHASE AND SALE OF ASSETS
Purchase and Sale
. Subject to the terms of this Agreement, at the Closing (as defined in
Section 9.1), the Seller and the Subsidiaries will sell, convey,
transfer, assign and deliver to the Buyer, and the Buyer will purchase
and accept from the Seller and the Subsidiaries, all of the assets,
properties and rights of every kind, nature, character or description,
whether tangible or intangible, real, personal or mixed, wherever
located, and whether or not reflected on the books and records of the
Seller or a Subsidiary, used or held by the Seller and the Subsidiaries
as of the Effective Date primarily to develop, manufacture and market
intraocular lenses (the "Business"), including any additions to such
assets, properties and rights in the ordinary course of business between
the date hereof and the Closing, but specifically excluding (Y) the
Excluded Assets (as defined in Section 1.2) and (Z) any deletions to such
assets, properties and rights in the ordinary course of business between
the date hereof and the Closing in accordance with this Agreement. The
assets, properties and rights being sold and purchased pursuant to this
Agreement are herein referred to as the "Assets". Subject to
Section 1.2, the Assets include, but are not limited to:
(a) All originals (where originals exist, in the case of
materials used exclusively in the Business), and/or copies of
records (including copies of materials not used exclusively in the
Business), operating data and business files, including customer
lists and files, customer credit files, advertising materials and
sales literature, information relating to purchasing histories and
procedures, vendor files and financial records (including all sales
invoices and purchase order records and supporting documents with
respect to accounts receivable (other than Excluded Accounts
Receivable) and accounts payable) and other marketing information
and records, regardless of the medium in which such items may have
been created or stored, used primarily in the Business, which are in
the possession of the Seller or a Subsidiary on the Closing Date (as
defined in Section 9.1);
(b) All governmental (including both United States and
foreign) registrations, registration applications, temporary
registrations, experimental use permits, applications and emergency
use exemptions used primarily in the Business, including those
listed on Schedule 3.14 hereto (the "Registrations");
(c) All governmental authorizations, licenses and permits used
primarily in the Business, including those listed on Schedule 3.14
(collectively, the "Permits");
(d) All contracts, agreements and licenses (other than the
Leases as defined in Section 1.1(f)) which are listed on Schedule
3.15(b), together with all consignment contracts with customers, but
excluding any such contracts that expire or are terminated prior to
Closing in accordance with this Agreement and such contracts where
the Seller or a Subsidiary, as the case may be, is unable to obtain
an assignment prior to the Closing (the "Contracts");
(e) All machinery, motor vehicles, tools, furniture,
instruments, laboratory equipment, research equipment, fixtures and
personal property (i) located at the Seller's Caribe, Puerto Rico
facility or (ii) located at the Seller's Massachusetts facilities to
the extent such items are used at such facilities exclusively in
connection with the Business or (iii) refrigeration, storage and
laboratory equipment located at the Seller's Massachusetts
facilities and primarily used in connection with the Business (the
"Equipment");
(f) All leases of Real Property set forth on Schedule 3.6(a)
and leases of Equipment primarily used in the Business, including
those listed on Schedule 3.8 (the "Leases");
(g) Computer, data processing and telecommunications hardware,
software and systems, equipment and databases (i) located at the
Seller's Caribe, Puerto Rico facility or (ii) located at the
Seller's other facilities to the extent such items are used at such
facilities exclusively in connection with the Business, as set forth
on Schedule 1.1(g), except with respect to such items where the
Seller or a Subsidiary, as the case may be, is unable to obtain an
assignment;
(h) All accounts receivable of the Business (excluding
intercompany receivables, as described in Section 1.2(f), and the
Excluded Accounts Receivable) as of the Closing;
(i) All inventories of the Business, including finished goods
and products, field inventory, goods and products in process and
materials and supplies on hand and in transit, as of the Closing;
(j) All intellectual property (including patents, unpatented
know-how, copyrights, trade secrets, trade names, service marks and
trademarks), whether registered or not, including, without
limitation, all rights in and to the name "MemoryLens," applications
for the foregoing, and any and all other intangible assets used
primarily in the Business, including, without limitation, those set
forth on Schedule 3.18, together with the right to bring actions for
infringements (including for any infringement occurring before the
Closing Date) of any such intellectual property;
(k) All of the Seller's technical information and data,
including, but not limited to, know-how, trade secrets, inventions,
formulas, processes, designs, drawings, technology, software
(including source codes), data bases, manufacturing and quality
control procedures and records, product composition data and
specifications, packaging specifications, material safety data
sheets, customer specifications, product standards, competitive
samples and reports of analyses thereof, lab notebooks, records of
inventions, patent application drafts, and research and development
projects, materials, results and records, wherever located, used
primarily in the Business ("Technical Information");
(l) All manufacturers', vendors' and suppliers' warranties, to
the extent assignable, relating directly to the Assets or the
Business;
(m) All of the Seller's rights and obligations with respect to
confidentiality agreements and restrictive covenants (including, but
not limited to, the right to enforce such obligations and covenants)
in favor of the Seller or the Subsidiaries relating directly to the
Assets or the Business executed by (i) present and former officers
and employees and (ii) such other individuals and corporations as
are identified in a written notice from the Buyer to the Seller
prior to the Closing; and
(n) The goodwill of Seller relating directly to the Assets or
the Business.
Excluded Assets
. Notwithstanding anything herein to the contrary, the Assets shall not
include the following (the "Excluded Assets"):
(a) Cash;
(b) Securities;
(c) Bank deposits;
(d) Assets, properties and rights of the Seller or a
Subsidiary (i) not currently used primarily in the Business or
(ii) currently used primarily in the Business but that are ancillary
to the operation of the Business, including, without limitation, any
office equipment, furniture and fixtures of the Seller or a
Subsidiary located at Seller's facilities outside of Puerto Rico;
(e) Any and all rights and assets, including without
limitation intellectual property rights, relating to the Polytef
product line, the Contour Genesis product line, the Urethein product
line, the Phacoemulsification product line, Wet-Field diathermy
products, the tonometry product line, or the ultrasound product
line;
(f) Intercompany receivables (that is, amounts owing by the
Seller to a Subsidiary, by a Subsidiary to the Seller, or by one
Subsidiary to another Subsidiary) and Excluded Accounts Receivable;
(g) All other assets, properties, trademarks and tradenames
and rights identified on Schedule 1.2, including without limitation,
all rights in and to use the name "Mentor." Pursuant to this
Agreement, the Buyer will acquire for sale certain existing
inventory which display the "Mentor" mark. The Buyer acknowledges
that the Seller and/or one or more of the Subsidiaries is the
exclusive owner of the "Mentor" trade name and trademark (the
"Mark"). The Buyer agrees to refrain from any action which is in
any way inconsistent with the Seller's ownership of the Mark or
which could damage Seller's interest in the Mark or the Seller's
reputation. The Seller grants to the Buyer as of the Closing a
limited license to use the Mark in an informational sense only to
identify the existing inventory transferred under this Agreement and
on any related advertising and promotional materials and to refrain
from any use of the Mark in connection with any other products; and
(h) Contracts, agreements and licenses listed on Schedule 3.15
but not listed on Schedule 3.15(b).
Transfer
. The sale, conveyance, transfer, assignment and delivery of the Assets
by the Seller and the Subsidiaries to the Buyer will be effected by the
delivery from the Seller and the Subsidiaries to the Buyer at Closing all
bills of sale, endorsements, assignments and transfers as required by the
Agreement plus such other instruments of transfer and conveyance in forms
reasonably satisfactory to the parties.
Transition Agreement
. At the Closing, the Seller and the Buyer shall enter into a transition
agreement providing for Buyer's utilization of Seller's assets and
services for distribution of PMMA intraocular lenses from the Norwell
facility, order entry, accounts receivable, and credit and collections,
which assets and services are currently used in the Business on a non-
exclusive basis. The term of such transition agreement shall be agreed
upon at the Closing Date and shall be a minimum of two (2) months and a
maximum of six (6) months, extending from the Closing Date. Services
shall be provided by Seller at cost and shall not exceed a charge of
$50,000 per month to Buyer. Such transition agreement shall be one of the
Transaction Agreements.
- - PURCHASE PRICE
Purchase Price
. Subject to the purchase price adjustment pursuant to Section 2.2(b),
the purchase price for the Assets shall be the sum of (i) Thirty-Four
Million Five Hundred Thousand Dollars ($34,500,000), plus (ii) the amount
of Adjusted Accounts Receivable as determined in accordance with Section
2.2(a) (the "Purchase Price"). The Purchase Price is payable by the
Buyer to the Seller at Closing in immediately available funds by wire
transfer.
Accounts Receivable.
(a) The amount of "Adjusted Accounts Receivable" shall be
determined in accordance with this Section 2.2(a):
1) The Seller has provided to the Buyer a listing of the
accounts receivable of the Business as of the Effective
Date (the "Accounts Receivable Listing"). Within ten days
of the Effective Date, the Buyer shall identify in writing
to the Seller those specific customers (if any) shown on
the Accounts Receivable Listing, the accounts receivable
of whom the Buyer does not wish to purchase hereunder
("Excluded Accounts Receivable"); provided, however, that
the amount of the Excluded Accounts Receivable shall not
exceed $250,000. The Excluded Accounts Receivable shall
not be included in the Assets and shall be retained by the
Seller.
2) At least ten (10) days prior to the Closing Date, the
Buyer shall provide a written independent verification
summary of the accounts receivable from the customers for
the accounts with the ten largest balances outstanding for
the period ending May 1999. If the sum of the
independently verified balances for the accounts with the
ten largest balances outstanding differs by more than
$100,000.00 from the sum of the same balances provided by
the Seller for the period ending May 1999, then the Seller
and the Buyer shall renegotiate an adjusted accounts
Receivable prior to the Closing Date.
3) At the Closing, the Seller shall deliver a listing of the
accounts receivable of the Business (excluding the
Excluded Accounts Receivable) as of the last business day
preceding the Closing Date (the "Gross Accounts
Receivable"). The amount of Adjusted Accounts Receivable
shall be equal to the amount of the Gross Accounts
Receivable, less $600,000.
(b) There shall be a post-Closing adjustment to the Purchase
Price in accordance with this Section 2.2(b).
1) Within 30 days following the first anniversary of the
Closing Date, the Buyer shall deliver to the Seller a
schedule of the Gross Accounts Receivable and the amounts
collected thereon during the one year period following the
Closing; the amount of the Gross Accounts Receivable
collected during such period is referred to as the
"Collected Accounts Receivables." For the purpose of such
schedule, amounts collected during such period from a
customer shall be applied to such invoice as is specified
by the customer. The Seller shall have the right to audit
such schedule, and the Buyer shall provide access to the
relevant books and records for that purpose.
2) If the amount of the Collected Accounts Receivables
exceeds the amount of the Adjusted Accounts Receivable,
one-half of the difference shall be paid by the Buyer to
the Seller. If the amount of the Adjusted Accounts
Receivable exceeds the amount of the Collected Accounts
Receivables, one-half of the difference shall be paid by
the Seller to the Buyer. Such amount shall be promptly
paid by the Seller to the Buyer or by the Buyer to the
Seller, as the case may be, in immediately available funds
by wire transfer, and shall constitute an adjustment to
the Purchase Price.
Assumption of Liabilities.
(a) Except as specifically set forth in this Section 2.3, the
Buyer will not assume, and shall not be bound by, any obligations
and liabilities of the Seller or a Subsidiary of any kind or nature,
known or unknown, expressed, implied, contingent or otherwise (the
"Excluded Liabilities").
(b) At the Closing, pursuant to one or more written agreements
in a form reasonably satisfactory to the parties, the Buyer will
assume and agree to pay, perform and discharge, and to indemnify the
Seller and the Subsidiaries against and hold them harmless from, the
following obligations and liabilities ("Assumed Liabilities")
whether imposed by contract, by operation of law, or otherwise:
(i) all liabilities and obligations on or after the Closing Date
under the Contracts, Permits, and Leases included in the Assets;
(ii) all liabilities or obligations to third parties for personal
injury, property damage, consequential damages, punitive damages or
incidental damages arising from any injury, event or damage as a
result of any product or good of the Business manufactured on or
after the Closing Date; (iii) all obligations associated with
customer orders received by the Seller or a Subsidiary that remain
unfulfilled, and any purchase orders issued by the Seller or a
Subsidiary that remain open, on and as of the Closing Date, provided
that such customer orders or purchase orders were issued or accepted
in the ordinary course of business consistent with past practices;
(iv) the obligations with respect to the Hired Employees in
accordance with Section 6.1 of this Agreement; and (v) all
obligations and liabilities, of any nature or kind, known or
unknown, fixed, accrued, absolute or contingent, related to or based
upon the ownership or operation of the Business or the Assets on or
after the Closing Date.
Purchase Price Allocation
. The Purchase Price shall be allocated by the Buyer and the Seller in
accordance with the Internal Revenue Code of 1986, as amended (the
"Code"), including the requirements of Section 1060 of the Code, and the
Treasury Regulations promulgated thereunder. Such allocation (the
"Purchase Price Allocation") shall apply to Assets used in connection
with the Business as conducted in the United States as well as Assets
used in connection with the Business as conducted outside the United
States. The Buyer and the Seller shall negotiate in good faith to
determine the Purchase Price Allocation within 90 days following the
Closing Date. In the event that the parties are unable to reach an
agreement concerning the Purchase Price Allocation prior to the
expiration of said 90 day period, the parties shall submit the matter to
a public accounting firm with a nationally recognized tax, auditing and
appraisal expertise selected jointly by the Seller and the Buyer. The
determination of the Purchase Price Allocation by such firm shall be
binding on the parties for all tax reporting purposes. The cost of
employing any such firm shall be borne one-half by the Seller and one-
half by the Buyer. The Buyer and the Seller agree to each prepare (and
timely file) identical Internal Revenue Service Forms 8594 (Asset
Acquisition Statement Under Section 1060) based on the agreed Purchase
Price Allocation and any supplemental Forms 8594 that are required in
case of any subsequent adjustments to the Purchase Price.
- - REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE SUBSIDIARIES
The Seller and each of the Subsidiaries represent and warrant to the
Buyer as of the date hereof as follows:
Organization and Corporate Standing
. The Seller is a corporation duly organized, validly existing and in
good standing under the laws of the State of Minnesota and has all
requisite corporate power and authority to carry on and conduct the
portion of the Business it conducts and to own or lease the Assets it now
owns or leases and to convey the Assets it now owns. Each of the
Subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction in which it is organized
and has all requisite corporate power and authority to carry on and
conduct the portion of the Business it now conducts and to own or lease
the Assets it now owns or leases and to convey the Assets it now owns.
The Seller and each Subsidiary is duly qualified and in good standing in
every jurisdiction in which the conduct of the Business by it or the
ownership of the Assets by it requires it to be so qualified, and the
absence of such qualification would be material.
Corporate Power and Authority
. The Seller and each Subsidiary has the right, power and capacity to
execute, deliver and perform this Agreement and all the documents and
instruments referred to herein and contemplated hereby to which it is a
party together with all other agreements to be signed or delivered at
Closing (the "Transaction Agreements") and to consummate the transactions
contemplated by this Agreement. The execution, delivery and performance
of this Agreement and the Transaction Agreements, and the consummation of
the transactions contemplated hereby and thereby, have been duly and
validly authorized by all necessary corporate action on the part of the
Seller. This Agreement has been, and each of the Transaction Agreements
to which it is a party after execution and delivery thereof at the
Closing will have been, duly and validly executed and delivered by the
Seller and/or the Subsidiaries, as the case may be, and constitute the
legal, valid and binding obligation of the Seller and/or the
Subsidiaries, as the case may be, enforceable in accordance with its
terms.
Financial Statements
. Schedule 3.3 includes the following: (i) the unaudited balance sheets
of the Business as of December 31, 1998 and March 31, 1999, and
(ii) gross margin summaries for the 9-month period ended December 31,
1998 and the 12-month period ended March 31, 1999 (collectively the
"Financial Statements"). In addition, the Seller shall provide to the
Buyer (and the Financial Statements include) (i) the unaudited balance
sheet of the Business as of the Closing Date, and (ii) gross margin
summaries for each month (corresponding to the Seller's fiscal calendar)
beginning April 1, 1999 and continuing through and including the Closing
Date. Except as set forth on Schedule 3.3, the Financial Statements
(i) have been prepared from the books and records of the Business and
(ii) fairly present, in all material respects, the financial position of
the Business as of the dates thereof, and the gross margins of the
Business for the periods described therein; provided, however, that in
each case, the Financial Statements do not include provision of corporate
services to the Business by the Seller, including, without limitation,
expenses for research and development, marketing services, accounting and
other corporate services performed by the Seller on behalf of the
Business; and further provided that the Financial Statements reflect the
Seller's good faith effort to separate the Assets from other assets,
properties and rights of the Seller or a Subsidiary not currently used
primarily in the Business.
Absence of Certain Changes and Events
. Except (i) to the extent arising out of or relating to the
transactions contemplated by this Agreement, (ii) for matters set forth
on any Schedule to this Agreement, (iii) to the extent arising out of or
relating to the Seller's plans announced on December 14, 1998 to
restructure certain aspects of the Business, a copy of such announcement
being attached hereto on Schedule 3.4 (the "Restructuring"), or (iv) as
set forth on Schedule 3.4, since December 31, 1998, the Seller and the
Subsidiaries have conducted the Business in the ordinary course in all
material respects, and:
(a) The Business has not suffered any material damage or
destruction to the Assets (either individually or in the aggregate);
and
(b) No event has occurred with respect to the Assets or the
Business that has had a material adverse effect on the Assets or
Business . Notwithstanding the foregoing, the voluntary resignation
or termination for cause of any Employee(s) (including but not
limited to the senior managers of the Business) or any sales
representative or the election by a customer or supplier to curtail
or cease business relations with the Business, whether or not
arising out of or in connection with the transactions contemplated
by this Agreement, shall not be deemed to constitute a breach of
this Section 3.4.
No Violation of Law
. Since December 31, 1998, the Seller has not received any written
notice alleging the Seller or a Subsidiary is in material violation of
any applicable local, state, United States federal or any foreign,
including Puerto Rico, law, ordinance, regulation, order, injunction or
decree, or any other requirement of any governmental body, agency or
authority or court binding on it, relating to the Assets or the Business,
and the Seller has no knowledge of any such violation.
Real Property
. Schedule 3.6(a) lists the locations, and sets forth the approximate
square footage of the primary buildings located on all real property used
or held for use in the Business that the Seller or a Subsidiary leases,
has agreed (or has an option) to purchase, sell or lease, or may be
obligated to purchase, sell or lease, which is included in the Assets
(the "Real Property"). The Seller or a Subsidiary has a good, valid and
enforceable leasehold interest in the Real Property free and clear of
every material encumbrance other than the Permitted Liens. Neither the
Seller nor any Subsidiary owns any Real Property in fee simple for use in
the Business. The interest of the Seller and the Subsidiaries in the
Real Property is subject to the Permitted Liens. "Permitted Liens" are:
(A) the liens, mortgages or other encumbrances set forth on Schedule
3.6(b); (B) liens for taxes not yet due and payable; (C) carriers',
warehousemen's, mechanics', material men's, repairmen's or other like
liens arising in the ordinary course of business, payment for which is
not yet due or which is being contested in good faith; and (D) deposits
to secure the performance of utilities, leases, statutory obligations and
surety and appeal bonds and other obligations of a like nature incurred
in the ordinary course of business. To the Seller's knowledge, there is
no pending or threatened condemnation proceeding or similar taking, or
sale or other disposition in lieu thereof, affecting the Real Property or
any portion thereof. To the Seller's knowledge, all of the plants,
buildings, structures and other improvements included in the Real
Property are, taken as a whole, in good working order and condition and
repair, and, to Seller's knowledge, are not in material violation of any
applicable building, fire, zoning, health, safety or similar laws,
regulations or ordinances. Neither the Seller nor any Subsidiary has any
reason to believe that any of the Leases described on Schedule 3.6(a)
cannot be renewed or extended at commercially reasonable rates.
Title to Assets/Sufficiency
. The Seller or a Subsidiary has good title to all material Assets, free
and clear of all material encumbrances, or has a license with the right
to use the Assets for the benefit of the Business, except (i) as set
forth on Schedule 3.7, and (ii) Permitted Liens. The Assets include all
material assets and rights necessary for the conduct of the Business as
now conducted (except (A) as set forth on Schedule 3.7, (B) contracts,
agreements and licenses listed on Schedule 3.15 but not listed on
Schedule 3.15(b), and (C) assets not held at a Business location or not
used by the Seller or a Subsidiary primarily for the benefit of the
Business, such as administrative services used by the Seller or a
Subsidiary in providing administrative services to the Business (such as
payroll, electronic mail and certain other information services) and
corporate services used in connection with the Business (such as research
and development activities in California, Seller's quality system, and
marketing)).
Leases
. Except for the leases set forth on Schedule 3.6(a), Schedule 3.8 lists
all Leases (including any capital leases) and lease-purchases and other
arrangements, in each case with payments aggregating $25,000 or more per
year, pursuant to which the Seller or a Subsidiary leases any Assets from
third parties. Except as set forth on Schedule 3.8, (i) each Lease is in
full force and effect and has not been modified or amended, and (ii)
there are no disputes, oral agreements or forbearance programs in effect
as to any Lease. To the Seller's knowledge, there has not occurred any
default, or any event with notice or lapse of time, or both, would become
a default under any Lease.
Litigation
. Schedule 3.9 sets forth all litigation, suits, indictments or
informations, or proceedings or arbitrations pending, or to the knowledge
of the Seller, threatened, before any court, arbitration tribunal, or
judicial, governmental or administrative agency, relating to the Business
or the Assets, in each case, that is pending, or, to the knowledge of the
Seller, threatened, as of the date hereof. Further, except as set forth
in Schedule 3.9, there are no material judgments, orders, writs,
injunctions, decrees, indictments or informations, grand jury subpoenas
or civil investigative demands, or awards against the Seller or a
Subsidiary relating to the Business or the Assets, including, without
limitation, any such matter that alleged that a product of the Business
manufactured or sold by the Seller or any Subsidiary is or was defective,
improperly designed or improperly manufactured. Since August 31, 1995,
there has been no litigation or suit against the Seller or any Subsidiary
for any personal injury alleged to have been caused by any products of
the Business manufactured by Seller or any Subsidiary. There is no suit,
investigation, action or other proceeding pending, or to the Seller's
knowledge, threatened before any court, arbitration, tribunal, or
judicial, governmental or administrative agency, against the Seller or a
Subsidiary which would have a material adverse effect on the ability of
the Seller or a Subsidiary to perform its obligations hereunder or which
seeks to prevent the consummation of the transactions contemplated
herein.
Employees of the Business
. Seller has provided to Buyer a schedule setting forth the names,
positions, and current compensation of all employees of the Seller and
Subsidiaries who are assigned exclusively to the Business as of the
Effective Date.
Collective Bargaining; Employment Contracts
. There are no labor contracts or collective bargaining agreements
covering any of the Business Employees (as defined in Section 6.1) and
no collective bargaining agreement or union contract is currently being
negotiated by the Seller or a Subsidiary. None of the Business Employees
are represented by any union or labor organization. Except as set forth
in Schedule 3.15 or Schedule 3.11, neither the Seller nor any Subsidiary,
in connection with the operation of the Business, is bound by or subject
to any written employment agreements. The Seller has provided the Buyer
with copies of employee handbooks and significant written personnel
policies maintained by Seller and its Subsidiaries with reference to
employees employed primarily in the Business, in each case, to the extent
that such handbooks or policies relate only to the Business and not to
any other business of the Seller or a Subsidiary.
Labor Matters
. Neither the Seller nor any Subsidiary has received any written notice
alleging any material violation of any applicable local, state or federal
law, ordinance, regulation, order, injunction, or decree, or any other
requirement of any governmental body, agency or authority or court
respecting employment and employment practices relating to the Business,
and the Seller has no knowledge of any such material violation. Except
as set forth in Schedule 3.12, (i) neither the Seller nor any Subsidiary
has received any written notification that any of the Employees have any
material claim against the Seller or a Subsidiary, (ii) neither the
Seller nor any Subsidiary has received written notice of any material
charge of, or action or proceedings relating to unfair labor practices by
the Seller or a Subsidiary in connection with the Business pending or
threatened before the National Labor Relations Board, the Equal
Employment Opportunity Commission, or the United States Department of
Labor, and (iii) to the knowledge of the Seller, there is no labor
organizing effort related to the Business, or any strike or other labor
trouble actually pending or threatened against the Business.
Environmental Matters.
(a) As used in the Agreement, the following terms shall have
the meanings indicated:
1) "Environment" -- The air, ground (surface and subsurface),
or water (surface and groundwater).
2) "Environmental Law" -- Any applicable federal, state,
local or other law, statute, ordinance, rule, regulation,
permit, judgment, order, decree or other binding
requirement of, or binding agreement with, any
Governmental Body, relating to Releases of Hazardous
Materials and the protection of natural resources and the
Environment.
3) "Governmental Body" -- Any domestic or foreign national,
regional, state (including the District of Columbia and
the Commonwealth of Puerto Rico) or municipal or other
local government or multi-national body, any subdivision,
agency, commission, authority or instrumentality thereof,
or any quasi-governmental or tribunal or other private
body when such tribunal or body is exercising any
regulatory or taxing authority thereunder.
4) "Governmental Permit" -- All permits, authorizations,
registrations, consents, approvals, waivers, franchises,
exceptions, variances, orders, certificates, judgments,
decrees, licenses, exemptions, or declarations of or by
any court or Governmental Body under, pursuant to or
relating to Environmental Laws.
5) "Hazardous Materials" -- Any "hazardous substance" and any
"pollutant or contaminant" as those terms are defined in
the Comprehensive Environmental Response, Compensation &
Liability Act of 1980, 42 U.S.C. 9601, et seq., as
amended; any "hazardous waste" as that term is defined in
the Resource Conservation and Recovery Act, 42 U.S.C.
6901, et seq., as amended; and any "hazardous material"
as that term is defined in the Hazardous Materials
Transportation Act, 49 U.S.C. 1801, et. seq., as amended
(including as those terms are further defined, construed,
or otherwise used in rules, regulations, standards,
guidelines and publications issued pursuant to, or
otherwise in implementation of, said Environmental Laws);
and including without limitation any petroleum product or
byproducts, solvent, flammable or explosive material,
radioactive material, asbestos, polychlorinated biphenyls
(PCBs), dioxins, dibenzofurans, heavy metals, and radon
gas; and including any other substance or material that is
reasonably determined to present a threat, hazard or risk
to human health or the Environment.
6) "Release" -- Spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping,
leaching, dumping or disposing, migration or placement
into the Environment (including the abandonment or
discarding of barrels, containers, and other closed
receptacles containing any Hazardous Material).
(b) Except as disclosed in Schedule 3.13, to Seller's knowledge:
1) The Assets and the Business are in substantial compliance
with all Environmental Laws;
2) With respect to the Assets and the Business, Seller has
not received any written notice of any alleged violation
of any Environmental Law since December 31, 1995, to the
present (whether remedied or not) nor is Seller aware of
any basis for any claim of any violation of any
Environmental Law;
3) Seller has obtained and is in substantial compliance with
all Governmental Permits, and has submitted all
applications, notices and other documents necessary to
effect renewal or reissuance of all Governmental Permits,
necessary for the continued conduct of the Business in the
manner now conducted, and Seller is not aware of any
threatened revocation or reopening of any Governmental
Permit;
4) With respect to any Environmental Law, there are no
conditions or circumstances at, or arising out of, the
Assets or the Business, that are likely to interfere with
the conduct of the Business in the manner now conducted;
5) There are no conditions or circumstances at, or arising
out of, the Assets or the Business, including but not
limited to on-site or off-site disposal or Release of any
Hazardous Materials, which are likely to give rise to:
(i) liabilities or obligations for any cleanup,
remediation or corrective action under any Environmental
Law, (ii) claims arising under any Environmental Law for
personal injury, property damage, or damage to natural
resources, (iii) liabilities or obligations incurred to
enable the Assets and the Business to comply with an
Environmental Law in effect as of the Closing Date, or
(iv) fines or penalties arising under any Environmental
Law;
6) There is no existing or threatened investigation or
judicial or administrative proceeding alleging or claiming
that the Seller or any Subsidiary or affiliated entity
with respect to the Assets or the Business may be: (i) in
violation of any Environmental Law, (ii) subject to
liabilities or obligations for any cleanup, remediation or
corrective action under any Environmental Law, (iii)
subject to claims arising under any Environmental Law,
including claims for personal injury, property damage, or
damage to natural resources, (iv) subject to liabilities
or obligations incurred to enable the Assets and the
Business to comply with any Environmental Law, or (v)
subject to any fines or penalties arising under any
Environmental Law.
Permits
. The Permits disclosed on Schedule 3.14 are all material Permits or
other authorizations of governmental authorities necessary or required
for the production of products of the Business or for the conduct of the
Business as currently conducted. There is no action pending, or to the
Seller's knowledge, threatened, seeking the revocation, cancellation,
suspension or adverse modification of any material Permit.
Contracts
. Schedule 3.15 sets forth a list of all material contracts, agreements
and licenses used in the Business. Except as set forth on Schedule 3.15,
each Contract is valid and in full force and effect and is enforceable in
accordance with its respective terms. To Seller's knowledge, neither the
Seller nor any Subsidiary has received any notice of any modification,
termination or cancellation of any Contract. Except as set forth on
Schedule 3.16, no consent, approval or authorization of any third party
is required for the assignment of each Contract to the Buyer. There are
no material disputes, oral agreements or forbearance programs in effect
as to the Contracts and there has not occurred any material default by
the Seller or a Subsidiary or, to the Seller's knowledge, any other party
of any Contracts.
Required Consents, Approvals and Filings
. Except as set forth in Schedule 3.16, no consent or approval is
required by virtue of the execution hereof by the Seller or the
consummation of any of the transactions contemplated herein by the Seller
to avoid the violation or breach of, or the default under, or the
creation of a lien or other encumbrance on the Assets pursuant to the
terms of any regulation, order, decree or award of any court or
governmental agency or any Lease or Contract to which the Seller or a
Subsidiary is a party or to which the Business or the Assets is subject.
Except for filings under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended ("HSR"), and as set forth on Schedule 3.16, there are
no filings or similar procedures required with respect to any
governmental body in connection with the consummation of the transactions
contemplated hereby.
No Conflict
. Subject to obtaining the consents and approvals and making the filings
described in Section 3.16, the execution and delivery of this Agreement
by the Seller, and the consummation of the transactions contemplated
herein by the Seller will not (with or without the giving of notice or
the lapse of time or both): (i) violate or conflict with any of the
provisions of any charter document or bylaw of the Seller; or (ii)
violate, conflict with or result in a breach or default under or cause
termination of any term or condition of any mortgage, indenture,
contract, license, permit, instrument, or other agreement, document or
instrument to which the Seller or a Subsidiary is a party or by which the
Seller, a Subsidiary or the Assets may be bound, or (iii) violate any
provision of law or any valid and enforceable court order, judgment,
decree or ruling of any governmental authority, to which the Seller or a
Subsidiary is a party or by which it or its properties may be bound, or
(iv) result in the creation or imposition of any lien or other
encumbrance upon any Asset, except as to clauses (i) through (iv) above,
any such matters that would not (X) involve or affect the Business or the
Assets, or (Y) prevent or delay the consummation of the transactions
contemplated herein.
Intellectual Property
. Schedule 3.18 sets forth a list of all material trademarks and patents
and describes the material copyrights and other intellectual property
used primarily in the Business (the "Intellectual Property"). Except as
set forth on Schedule 3.18, the Seller or a Subsidiary owns or is
licensed under a Contract to use all the Intellectual Property and the
Technical Information, free and clear of any liens or other encumbrances.
All registrations listed in Schedule 3.18 are in good standing and in
full force and effect in accordance with their terms. Unless otherwise
noted on Schedule 3.18, none of the Intellectual Property, or Seller's
ownership or use thereof, is subject to any pending or, to the knowledge
of the Seller, threatened challenge. Except as noted on Schedule 3.18,
Seller is not aware of any circumstances indicating that any person is or
has been infringing on any rights in the Intellectual Property. To the
Seller's knowledge, neither (i) the use by the Seller or any Subsidiary
of the Intellectual Property, nor (ii) the making, using, selling,
offering to sell, importing or exporting of the MemoryLens intraocular
lens, infringes or otherwise violates the rights of any other party.
Taxes
. Except as set forth in Schedule 3.19, (i) all material tax and
informational returns and related information required to be filed by or
on behalf of the Seller or any Subsidiary relating to the Assets or the
Business prior to the date hereof have been prepared and filed in
accordance with applicable law, and all taxes, interest, penalties,
assessments and deficiencies relating to the Assets or the Business that
have become due pursuant to such returns or any assessments or otherwise
have been paid in full; (ii) all such returns are true and correct in all
material respects, and there is no unresolved claim concerning any
federal, state, local or foreign tax liability; and (iii) all monies
required to be withheld by the Seller or any Subsidiary from the
employees of the Business have been collected and withheld, and either
paid to the appropriate governmental agency or will be paid by the Seller
on or before their due date.
Inventory
. A listing of inventory will be provided by the Seller to the Buyer as
of the Closing Date, and will be true and correct in all material
respects as of the date of such listing. Except for the Retained
Inventory, each item of inventory identified in the aforementioned list
has been manufactured, packaged and labeled in accordance with Good
Manufacturing Practices and all other applicable requirements of the
United States Food and Drug Administration.
Key Customers and Representatives
. Schedule 3.21(a) sets forth each customer of the Business which
accounted for ten percent (10%) or more of the worldwide net sales of the
Business in any of the last two fiscal years of the Business ("Key
Customers"). Schedule 3.21(b) sets forth each independent sales
representative who accounted for ten percent (10%) or more of the United
States net sales of the Business in any of the last two fiscal years of
the Business ("Key Representative"). To the knowledge of the Seller, no
Key Customer or Key Representative has delivered to the Seller or a
Subsidiary any notice of termination or indication or intent to terminate
or modify its relationship with the Business.
Equipment
. A listing of Equipment will be provided by the Seller to the Buyer as
of the Closing Date, and will be true and correct in all material
respects as of the date of such listing. To Seller's knowledge, the
Equipment which is material to the operation of the Business, as such
Equipment is used by the Seller and the Subsidiaries in the operation of
the Business, is in good working order and condition and repair.
Disclosure
. No representation or warranty by the Seller in this Agreement, nor any
statement, document, certificate or schedule furnished or to be furnished
by the Seller or a Subsidiary in connection with the transactions
contemplated by this Agreement, shall, as of the date furnished to the
Buyer and as of the Closing Date (other than changes in the ordinary
course of business prior to the Closing Date), contain any untrue
statement of a material fact or omit a material fact necessary to make
the statements contained therein not misleading.
Disclaimer
. EXCEPT AS SET FORTH IN THIS ARTICLE 3, (A) THE SELLER AND THE
SUBSIDIARIES MAKE NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED,
RELATING TO THE ASSETS OR THE BUSINESS, INCLUDING, WITHOUT LIMITATION,
ANY REPRESENTATION OR WARRANTY AS TO VALUE, MERCHANTABILITY, FITNESS FOR
A PARTICULAR PURPOSE OR FOR ORDINARY PURPOSES, OR ANY OTHER MATTER; AND
(B) THE ASSETS AND BUSINESS OF THE SELLER AND THE SUBSIDIARIES BEING
TRANSFERRED TO THE BUYER ARE CONVEYED ON AN "AS IS, WHERE IS" BASIS AS OF
THE CLOSING, AND THE BUYER SHALL RELY UPON ITS OWN EXAMINATION THEREOF.
- - BUYER'S REPRESENTATIONS AND WARRANTIES
The Buyer represents and warrants to the Seller as of the date
hereof as follows:
Organization
. CIBA Vision Corporation is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware,
CIBA Vision AG is a corporation duly organized validly existing and in
good standing under the laws of Switzerland and CIBA Vision Puerto Rico
is a corporation duly organized validly existing and in good standing
under the laws of Puerto Rico. The Buyer has all requisite corporate
power and authority to carry on and conduct its business as it is now
being conducted, to own or lease its assets and properties and is duly
qualified and in good standing in every jurisdiction in which the conduct
of its business or ownership of its assets requires it to be so
qualified.
Corporate Power and Authority
. The Buyer has the right, power and capacity to execute, deliver and
perform this Agreement and the Transaction Agreements and to consummate
the transactions contemplated by this Agreement. The execution, delivery
and performance of this Agreement, and the consummation of the
transactions contemplated hereby, have been duly and validly authorized
by all necessary corporate action on the part of the Buyer. This
Agreement has been, and each of the Transaction Agreements after
execution and delivery thereof at the Closing will have been, duly and
validly executed and delivered by the Buyer and constitute the Buyer's
legal, valid and binding obligation, enforceable in accordance with its
terms.
Required Consents, Approvals and Filings
. Except as set forth on Schedule 4.3, no consent or approval is
required by virtue of the execution hereof by the Buyer or the
consummation of any of the transactions contemplated herein by the Buyer
to avoid the violation or breach of, or the default under, or the
creation of a lien or other encumbrance on assets of the Buyer pursuant
to the terms of any regulation, order, decree or award of any court or
governmental agency or any lease, agreement, contract, mortgage, note,
license, or any other instrument to which the Buyer is a party or to
which it or any of its property is subject. Except for filings under HSR
and applicable securities laws, and as set forth on Schedule 4.3, there
are no filings or similar procedures required with respect to any
governmental body in connection with the consummation of the transactions
contemplated hereby.
No Conflict
. Subject to obtaining the consent and approvals and making the filings
described in Section 4.3, the execution and delivery of this Agreement by
the Buyer, and the consummation of the transactions contemplated herein
by the Buyer will not, with or without the giving of notice or the lapse
of time, or both, (i) violate or conflict with any of the provisions of
any charter document or bylaw of the Buyer, (ii) violate, conflict with
or result in breach or default under or cause termination of any term or
condition of any mortgage, indenture, contract, license, permit,
instrument, or other agreement, document or instrument to which the Buyer
is a party or by which the Buyer or any of its properties may be bound,
or (iii) violate any provision of law or any valid and enforceable court
order, judgment, decree, or ruling of any governmental authority, to
which Buyer is a party or by which Buyer or its properties may be bound,
and except as to clause (i) through (iii) above, any such matters that
would not prevent or delay the consummation of the transaction
contemplated herein.
Litigation
. There is no suit, investigation, action or other proceeding pending,
or to the Buyer's knowledge, threatened before any court, arbitration
tribunal, or judicial, governmental or administrative agency, against the
Buyer which would have a material adverse effect on the ability of the
Buyer to perform its obligations hereunder or which seeks to prevent the
consummation of the transactions contemplated herein.
Financing
. The Buyer will have available at Closing sufficient immediately
available funds to enable the Buyer to pay the Purchase Price to the
Seller and to effect the consummation of the transactions described
herein.
- - COVENANTS OF THE PARTIES
Operations Pending Closing
. The Seller hereby agrees that, except as contemplated by the
Restructuring or as set forth on Schedule 5.1 or as consented to in
writing by the Buyer (such consent not to be unreasonably withheld),
pending the Closing, the Seller and the Subsidiaries shall operate and
conduct the Business in the ordinary course and consistent with past
practices of the Seller and the Subsidiaries. Pursuant thereto and not
in limitation of the foregoing:
(a) The Seller and the Subsidiaries will maintain, in all
material respects, the Assets in their present state of repair
(ordinary wear and tear excepted), and will use its commercially
reasonable best efforts to preserve the good will of its business
and relationships with the Employees, and customers and suppliers
with whom it has business relations. Notwithstanding the foregoing,
the voluntary resignation or termination for cause of any
Employee(s) (including but not limited to the senior managers of the
Business) or any sales representative or the election by a customer
or supplier to curtail or cease business relations with the
Business, shall not be deemed a breach of, or failure to comply
with, this Section 5.1(a).
(b) Except as set forth on Schedule 5.1(b), or in connection
with the Restructuring, or without the written consent of the Buyer
(such consent not to be unreasonably withheld), or as otherwise
contemplated by this Agreement, the Seller and the Subsidiaries will
not take any of the following actions between the Effective Date and
the Closing Date:
1) Sell, transfer or otherwise dispose of any material
Assets, except for inventory in the ordinary course of
business and other tangible personal property retired or
replaced in the ordinary course of business;
2) Enter into any material contract or commitment relating to
the Business or the Assets, except purchase orders in the
ordinary course of business;
3) Create any material mortgage, lien, security interest,
pledge or other encumbrances, on the Assets, except for
Permitted Liens;
4) Cause the Business to incur or discharge any material
obligation or liability, except in the ordinary course of
business;
5) Increase the rate or terms of the compensation payable to
the Hired Employees, or increase or amend any employee
benefit plan in which the Hired Employees participate,
except increases or amendments occurring in the ordinary
course of business, including normal periodic performance
reviews and related compensation and benefit increases, or
as required by any Contract;
6) Waive any material claims or rights;
7) Amend, terminate or assign any Contract, except in the
ordinary course of business consistent with past
practices;
8) Solicit any third party concerning the sale or transfer of
the Assets, the Business or any part thereof (except for
sale of inventory in the ordinary course of business),
whether directly or through a representative or otherwise;
9) Fail to meet any material contractual obligations of the
Business or fail to perform and pay their obligations as
they mature in the ordinary course of business;
10) Fail to make payments and filings required to continue the
Intellectual Property; or
11) Fail to comply with all laws, ordinances, regulations,
orders, injunctions or decrees, or any other requirements
of any governmental body applicable to the conduct of the
Business or the ownership or operation of the Assets, and
with the Permits; and
(c) The Seller will promptly advise Buyer in writing of any
material adverse change in the Assets or the conduct, operations,
properties or condition (financial or otherwise) of the Business,
promptly after obtaining knowledge of such change.
(d) After the Effective Date, the Seller and the Subsidiaries
will not discard, and will use their best efforts to segregate, any
inventory which would otherwise normally be discarded in the
ordinary course of business. Such inventory which would otherwise
be discarded is referred to as "Retained Inventory". The foregoing
agreement by the Seller and the Subsidiaries not to dispose of the
Retained Inventory has been included at the request of the Buyer.
THE SELLER AND THE SUBSIDIARIES MAKE NO REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED, RELATING TO THE RETAINED INVENTORY, INCLUDING,
WITHOUT LIMITATION, ANY REPRESENTATION OR WARRANTY AS TO VALUE,
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR FOR ORDINARY
PURPOSES, OR ANY OTHER MATTER. THE RETAINED INVENTORY WILL BE
TRANSFERRED ON AN "AS IS, WHERE IS" BASIS AS OF THE CLOSING.
Access
. From the Effective Date through the Closing Date, the Seller will, and
will cause the Subsidiaries to, (i) provide the Buyer with such
information as the Buyer may from time to time reasonably request with
respect to the Assets and the Business and the transactions contemplated
by this Agreement, and (ii) provide the Buyer, upon reasonable notice and
during regular business hours, access to the Real Property, books,
records, offices, counsel, accountants and employees of the Business and
those of the Seller and the Subsidiaries as such relate to the Business,
as the Buyer may from time to time reasonably request, which access shall
not be unreasonably denied. Any access will be conducted in such a
manner so as not to interfere unreasonably with the operation of the
business of the Seller and the Subsidiaries, and any representative of
the Buyer shall, at all times while in the facilities of the Seller or a
Subsidiary, be accompanied by an employee(s) or representative(s) of the
Seller. The Seller shall also have the right to require, prior to entry
onto any of the Real Property or the facilities of the Seller or a
Subsidiary by contractors acting on behalf of the Buyer, that the Buyer
provide the Seller with evidence of the contractor's insurance in form
and amount reasonably satisfactory to the Seller, including contractor's
insurance that names the Seller as an insured. At the Seller's request,
the Buyer shall furnish to the Seller at the Buyer's expense a copy of
all information obtained by the Buyer as a result of any such access by
contractors acting on behalf of the Buyer. The Buyer shall inform its
representatives and agents of the Confidentiality Agreement, dated
December 10, 1998 by and between the Seller and the Buyer, and shall
cause said representatives to abide by such Confidentiality Agreement and
the Seller's rules and regulations regarding safety, security and
operations. The Buyer shall and hereby does indemnify, defend and hold
harmless the Seller Protected Parties (as defined in Section 10.2) from
and against any and all Losses (as defined in Section 10.1) that may
arise in connection with or as a result of the Buyer's access to the Real
Property or the Business, and the Buyer further agrees to be responsible
for and bear all costs and expenses related to any of the Buyer's access
to the Real Property or the Business.
Preparation of Supporting Documents
. In addition to such actions as the parties may otherwise be required
to take under this Agreement or applicable law in order to consummate
this Agreement and the transactions contemplated hereby and by the
Transaction Agreements, the parties will take such action, furnish such
information, and prepare, or cooperate in preparing, and execute and
deliver such certificates, agreements and other instruments as the other
party may reasonably request from time to time, before, at or after the
Closing, with respect to compliance with obligations of the Buyer or the
Seller in connection with the transactions contemplated hereby or by the
Transaction Agreements. Without limiting the foregoing, the parties
agree at the Closing to execute a memorandum setting forth the control
numbers of (i) the final products of the Business manufactured by the
Seller or a Subsidiary prior to the Closing, and (ii) the products
included in the Retained Inventory.
Approvals of Third Parties; Satisfaction of Conditions to Closing
. The Seller and the Buyer will use their reasonable, good faith
efforts, and will cooperate with one another, to secure all necessary
consents, approvals, authorizations and exemptions from governmental
agencies and other third parties, including, without limitation, all
consents and approvals required by Sections 7.4, 7.5, 8.4 and 8.5. In
the event that any required consent or approval is not obtained prior to
the Closing, the Seller and the Buyer will use their reasonable good
faith efforts to obtain such consent or approval as promptly as possible
after the Closing, and until such consent or approval is obtained, to
cooperate with each other in reasonable arrangements (such as
subcontracting, sublicensing or subleasing) designed to achieve the
purposes of this Agreement. The Seller will use its reasonable, good
faith efforts to obtain the satisfaction of the conditions specified in
Article 8. The Buyer will use its reasonable, good faith efforts to
obtain the satisfaction of the conditions specified in Article 7.
Hart-Scott-Rodino Notification
. The Seller and the Buyer will each promptly prepare and file a
notification with the United States Justice Department (the "Justice
Department") and the Federal Trade Commission (the "FTC") as required by
HSR. The Seller and the Buyer will cooperate with each other in
connection with the preparation of such notification, including sharing
information concerning sales and ownership and such other information as
may be needed to complete such notification, and providing a copy of such
notification to the other prior to filing. Each of the Seller and the
Buyer will keep confidential all information about the other obtained in
connection with the preparation of such notification. The filing fee
required under the regulations promulgated pursuant to HSR shall be
shared equally by the Buyer and the Seller. The Buyer and the Seller
will cooperate to respond to all inquiries and requests for further
information associated with the HSR filing. A party receiving a Request
for Additional Information and Documentary Material ("Second Request")
from the Justice Department and/or the FTC shall notify the other party
and respond thereto as soon as reasonably possible and in any event
within seventy-five (75) days of receipt of such Second Request.
Financial and Tax Services
. It is recognized that one or more party may need tax, financial or
other data after the Closing Date with respect to the Business covering
fiscal periods prior to the Closing Date in order to facilitate the
preparation of tax returns or in connection with any audit,
investigation, litigation, amended return, claim for refund or any
proceeding in connection therewith or to comply with the rules and
regulations of the Internal Revenue Service, the Securities and Exchange
Commission or any other governmental organization or agency. The parties
will render reasonable cooperation and will afford access during normal
business hours to all books, records, data and personnel concerning use
and ownership of the Assets and the operation and conduct of the Business
with respect to periods prior to and including the Closing Date to each
other and their auditors, accountants, counsel or other authorized
representatives for such purpose. The parties will also each execute
such documents as the other may reasonably request in order to file any
required reports or tax returns and provide the other with prompt written
notice upon receipt of any written claim, notice of deficiency or
proposed or actual assessment pertaining to the Business which could
affect the tax liability of the other. The party requesting assistance
from the other party will bear all reasonable out-of-pocket costs and
expenses incurred by such assisting party (excluding salaries or wages of
its employees).
Transfer Taxes
. All sales or transfer taxes, including but not limited to, document
recording fees, real property transfer taxes, sales and excise taxes,
arising out of or in connection with the consummation of the transactions
contemplated herein shall be borne one-half by the Buyer and one-half by
the Seller. The Buyer shall furnish the Seller with any necessary
certificates of tax exemption.
Notice and Opportunity to Cure.
(a) If between the Effective Date and the Closing Date either
party becomes aware that any of the representation(s) or
warranty(ies) of the Seller and/or the Subsidiaries are or will be
untrue or inaccurate ("Inaccuracy"), such party will promptly notify
the other and the corresponding Schedule will be promptly
supplemented or amended. In any such case, even if such Inaccuracy
would be likely to be material, the Seller can elect to take any of
the following actions, in which case the Buyer shall be obligated to
close the transaction contemplated hereby if all other conditions to
Closing in Article 8 have been satisfied:
1) prior to Closing, the Seller can cure such Inaccuracy to
the reasonable satisfaction of the Buyer by correcting
such Inaccuracy without any potential Loss, risk or
adverse effect to the Buyer;
2) if the Inaccuracy can be cured to the reasonable
satisfaction of the Buyer by the Seller's assumption of,
and indemnification for, any Losses resulting from any
such Inaccuracy, the Seller can agree to the unconditional
and unlimited assumption of liability for, and
indemnification of the Buyer for, any such Loss; or
3) if the Inaccuracy cannot be cured by the Seller prior to
Closing with commercially reasonable best efforts, then
the Seller can present to the Buyer a plan, reasonably
satisfactory to the Buyer, to cure such Inaccuracy after
the Closing including the Seller's unconditional and
unlimited indemnification of the Buyer for any potential
Losses resulting from any such Inaccuracy.
If the Seller satisfies all conditions in any of clauses (1), (2) or
(3) above, then the appropriate Schedule(s) will be updated and the
Inaccuracy shall be deemed corrected for all purposes of this
Agreement (including without limitation Section 10.1 hereof);
provided, however, that except as contemplated hereby and by Section
3.10 hereof, the Seller shall not otherwise have any right to update
such Schedules. The parties acknowledge and agree that the Seller's
indemnity provided in this Section 5.8 is without regard to the
provisions of Article 10 hereof.
(b) If the parties discover an Inaccuracy between the
Effective Date and the Closing Date, but such Inaccuracy is not
material, then the parties acknowledge and agree that the condition
in Section 8.1 of this Agreement will nevertheless be satisfied
insofar as Section 8.1 relates to the required degree of accuracy of
the representations and warranties as of the Closing Date and after
the Closing the Buyer may not assert an indemnification claim
against Seller under Article 10 hereof in respect of such
Inaccuracy.
Covenant Not to Compete
. For a period of five (5) years following the Closing Date, neither the
Seller, nor any Affiliate of Seller shall, directly or indirectly, as a
shareholder, owner, partner, principal, agent, joint venturer,
consultant, advisor, independent contractor or otherwise, alone or with
any other person or entity, engage in the development, manufacture or
marketing of lenses to be surgically placed in the eye.
Inventory
. Following the Closing, all inventory included in the Assets (except
for the Retained Inventory) will be handled, packaged, labeled and
distributed by the Buyer in accordance with Good Manufacturing Practices
and all other applicable requirements of the United States Food and Drug
Administration.
- - COVENANTS AS TO EMPLOYEES
Employees and Employee Benefits.
(a) The Buyer anticipates that it will, but is under no
obligation to, offer employment, effective as of the Closing Date,
to (i) all persons who are employees of the Seller or a Subsidiary
who are assigned exclusively to the Puerto Rico facility of the
Business as of May 1, 1999 and (ii) selected employees of the Seller
or a Subsidiary located in Santa Barbara, California or elsewhere
who are assigned primarily to the Business as of May 1, 1999
(collectively, the "Business Employees"). The Buyer shall notify
the Seller at least ten (10) days prior to the Closing Date as to
which of the Business Employees in Puerto Rico, if any, it will not
offer employment, and will offer employment to all other Business
Employees in Puerto Rico at least one (1) week prior to the Closing
Date. The Buyer shall also notify the Seller at least ten (10) days
prior to the Closing Date as to which of the Business Employees in
Santa Barbara, if any, it will offer employment, and will offer
employment to such Business Employees at least one (1) week prior to
the Closing Date. Neither the Seller nor the Subsidiaries will
discourage (by active solicitation of employment or otherwise) any
Business Employee from accepting the Buyer's offer of employment.
Business Employees who accept the Buyer's offer of employment are
herein referred to as the "Hired Employees."
(b) The Buyer and its Affiliates will treat service and
employment of Hired Employees with the Seller, the Subsidiaries,
their Affiliates and any predecessor employers prior to the Closing
Date as service and employment with the Buyer for purposes of
Buyer's vacation policies.
(c) The Buyer shall offer group health care plan coverage to
all Hired Employees, their spouses and eligible dependents. The
Seller shall offer continuation health care plan coverage to all
Hired Employees, their spouses and eligible dependents as required
by the Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA") and other applicable laws. The Buyer shall reimburse the
Seller for all premiums and other out-of-pocket expenses incurred by
the Seller or any Subsidiary in connection with the provision of
such continuation coverage during the 60 day waiting period for
Hired Employees, their spouses and eligible dependents under the
Buyer's group health care plans.
(d) The Seller and the Subsidiaries hereby waive, as of the
Closing Date, all confidentiality obligations in their favor to
which any of the Hired Employees are subject to the extent the Hired
Employees need to use or disclose confidential information solely
concerning the Business in connection with the continued operation
of the Business after the Closing Date.
Seller Obligations
. The Seller shall retain all liabilities and claims for salary,
bonuses, back-pay, commissions, employee plans, benefit arrangements or
other employment-based claims due employees or former employees of the
Seller or a Subsidiary arising prior to the Closing, including, but not
limited to, obligations to any employee of the Seller or a Subsidiary and
to such individual's spouse and eligible dependents under any group
health care plan subject to the requirements of COBRA (subject to the
provisions of Section 6.1(c)), for the payment of any severance to any
Business Employee not employed by the Buyer following the Closing Date,
and for any claims brought by any such Business Employee relating to any
termination of employment by the Seller or any Subsidiary. The Seller
shall comply with any applicable laws relating to the termination by the
Seller or the Subsidiaries of any employees thereof.
- - CONDITIONS TO SELLER'S OBLIGATIONS
Each of the obligations of the Seller to consummate the transactions
contemplated hereby will be subject to the satisfaction (or written
waiver by the Seller) at or prior to the Closing Date of each of the
following conditions.
Representations and Warranties True at Closing Date; Performance of
Agreements
. Except for changes as may be contemplated by this Agreement, each of
the representations and warranties of the Buyer contained in this
Agreement must be true in all material respects on and as of the Closing
Date with the same force and effect as though made on and as of such date
unless the representation and warranty is made as of a specified date and
except to the extent that the failure of such representations and
warranties to be true as of the Closing Date would not, in the aggregate,
have a material adverse effect on the Seller; the Buyer must have
performed and complied in all material respects with the covenants and
agreements set forth herein to be performed or complied with by it on or
before the Closing Date, including execution and delivery of the
Transaction Agreements; and the Buyer must have delivered to the Seller a
certificate dated the Closing Date and signed by its duly authorized
officer to all such effects.
Litigation
. No suit, investigation, action or other proceeding is pending, or
overtly threatened, against the Buyer or the Seller, a Subsidiary or
their Affiliates before any court or governmental agency which has
resulted, or in the reasonable opinion of counsel for the Seller is
likely to result, in the restraint or prohibition of the consummation of
the transactions contemplated hereby or in a material adverse effect on
the Business, the Assets, the Seller or a Subsidiary.
Opinion of Counsel to Buyer
. The Seller shall have received from counsel to the Buyer an opinion,
dated the Closing Date, reasonably satisfactory in form and substance to
the Seller.
Required Governmental Approvals
. All governmental authorizations, consents and approvals necessary for
the valid consummation of the transactions contemplated hereby must have
been obtained and must be in full force and effect. All applicable
governmental pre-acquisition filing, information furnishing and waiting
period requirements, including expiration of all applicable waiting
periods pursuant to HSR, the absence of which would be material, must
have been met or such compliance must have been waived by the
governmental authority having authority to grant such waivers.
Other Necessary Consents
. The parties must have obtained all consents and approvals listed on
Schedule 3.16 and Schedule 4.3, or, if any required consent or approval
has not been obtained, the parties must have agreed to an alternative
arrangement as contemplated by the second sentence of Section 5.4.
- - CONDITIONS TO BUYER'S OBLIGATIONS
Each of the obligations of the Buyer to consummate the transactions
contemplated hereby is subject to the satisfaction (or written waiver by
the Buyer) at or prior to the Closing Date of each of the following
conditions.
Representations and Warranties True at Closing Date; Performance of
Agreements
. Except for changes as may be contemplated by this Agreement, each of
the representations and warranties of the Seller contained in this
Agreement must be true in all material respects on and as of the Closing
Date with the same force and effect as though made on and as of such
date, unless the representation or warranty is made as of a specified
date; the Seller must have performed and complied in all material
respects with the respective covenants and agreements set forth herein to
be performed or complied with by it on or before the Closing Date,
including execution and delivery of the Transaction Agreements; and the
Seller must have delivered to the Buyer a certificate dated the Closing
Date and signed by its duly authorized officer to all such effects.
Litigation
. No suit, investigation, action or other proceeding is pending, or
overtly threatened, against the Buyer or the Seller, a Subsidiary or
their Affiliates before any court or governmental agency which has
resulted, or in the reasonable opinion of counsel for the Buyer is likely
to result, in restraint or the prohibition of the consummation of the
transactions contemplated hereby or in a material adverse effect on the
Business, the Assets or the Buyer.
Opinion of Counsel to the Seller
. The Buyer shall have received from Chief Counsel of the Seller an
opinion, dated the Closing Date, reasonably satisfactory in form and
substance to the Buyer.
Required Governmental Approvals
. All governmental authorizations, consents and approvals necessary for
the valid consummation of the transactions contemplated hereby must have
been obtained and must be in full force and effect. All applicable
governmental pre-acquisition filing, information furnishing and waiting
period requirements, including expiration of all applicable waiting
periods pursuant to HSR, must have been met or such compliance must have
been waived by the governmental authority having authority to grant such
waivers.
Other Necessary Consents
. The parties must have obtained all consents and approvals listed on
Schedule 3.16 and Schedule 4.3, or, if any required consent or approval
has not been obtained, the parties must have agreed to an alternative
arrangement as contemplated by the second sentence of Section 5.4.
- - CLOSING
Closing
. The closing of the transactions contemplated hereby (the "'Closing")
will take place at 9:00 a.m. Pacific Time on the "Closing Date," at the
offices of the Seller located at 201 Mentor Drive, Santa Barbara, CA
93111, or at such other place as may be mutually agreeable. Subject to
Section 10.5, and subject to satisfaction or waiver of the conditions to
the Seller's and the Buyer's obligations set forth in Articles 7 and 8,
respectively, the Closing Date will be June 30, 1999 or on the second
business day following expiration of all applicable waiting periods
pursuant to HSR, which date shall be selected at the Buyer's option, or
such other date as the parties may mutually agree. At the Closing, the
parties hereto will duly execute and deliver all documents and
instruments required to be delivered, and the Buyer will make all
payments to the Seller required to be paid at the Closing as provided in
this Agreement.
Termination Prior to Closing
. Notwithstanding the foregoing, the parties will be relieved of the
obligation to consummate the Closing and purchase or sell the Assets:
(a) By the mutual written consent of the Buyer and the Seller;
(b) By the Seller in writing, without liability, if the Buyer
(i) fails to perform in any material respect its agreements
contained herein required to be performed by it on or prior to the
Closing Date, or (ii) materially breaches any of its
representations, warranties or covenants contained herein, which
failure or breach is not cured, to the reasonable satisfaction of
the Seller, within twenty (20) days after the Seller has notified in
writing the Buyer of such failure or breach and of its intent to
terminate this Agreement pursuant to this subparagraph;
(c) By the Buyer in writing, without liability, if the Seller
(i) fails to perform in any material respect its agreements
contained herein required to be performed on or prior to the Closing
Date, or (ii) materially breaches any of its representations,
warranties or covenants contained herein, which failure or breach is
not cured, to the reasonable satisfaction of the Buyer, within
twenty (20) days after the Buyer has notified in writing the Seller
of such failure or breach and of its intent to terminate this
Agreement pursuant to this subparagraph;
(d) By either the Seller or the Buyer in writing, without
liability, if there is issued any order, writ, injunction or decree
of any court or governmental or regulatory agency binding on the
Buyer or the Seller or a Subsidiary which prohibits or restrains the
Buyer or the Seller from consummating the transactions contemplated
hereby; provided that the Buyer and the Seller have used their
reasonable, good faith efforts to have any such order, writ,
injunction or decree lifted and the same has not been lifted within
sixty (60) days after entry, by any such court or governmental or
regulatory agency;
(e) By either the Seller or the Buyer in writing, without
liability, if for any reason the Closing has not occurred by July
15, 1999 other than as a result of the breach of this Agreement by
the party attempting to terminate this Agreement; provided, however,
that in the event that a Second Request is received by a party, such
deadline of July 15, 1999 shall be extended by the number of days
(not to exceed seventy-five (75)) elapsed between the receipt of the
Second Request and the submission of the party's response thereto.
Termination of Obligations
. Termination of this Agreement pursuant to Section 9.2 will terminate
all obligations of the parties hereunder, except for the obligations
under Article 10 (Indemnity Claims), and this Section, and Sections 5.2
(Indemnification and Confidentiality Obligations Regarding Access), 11.1
(Expenses), 11.7 (Brokerage) and 11.9 (Public Announcements); provided
that termination pursuant to subparagraphs (b), (c), or (e) of
Section 9.2 will not relieve a defaulting or breaching party from any
liability to the other party hereto.
- - INDEMNIFICATION
Seller Indemnification.
(a) Except as otherwise provided in this Article 10, and in
Article 6 and Sections 2.3, 5.1(d), 5.2 and 11.7, the Seller and
each Subsidiary will indemnify and reimburse the Buyer for any and
all claims, losses, liabilities, damages, penalties, fines, costs
and expenses (including reasonable attorneys' fees and court costs)
(collectively, "Losses") incurred by the Buyer and its Affiliates
and their successors or assigns, and their respective directors,
officers, employees, consultants and agents (the "Buyer Protected
Parties"), to the extent such Losses are a result of or arise out
of:
1) any material breach or inaccuracy of any representation or
warranty of the Seller or any Subsidiary set forth in this
Agreement;
2) any material breach of, or noncompliance by the Seller or
any Subsidiary with, any covenant or agreement of the
Seller contained in this Agreement to be performed after
the Closing;
3) the Excluded Assets or the Excluded Liabilities;
4) any liabilities or obligations for which the Seller has
assumed responsibility under Section 6.2 hereof;
5) any product liability claim alleged to have been caused by
any products (except Retained Inventory) of the Business
manufactured by the Seller or any Subsidiary prior to the
Closing Date;
6) any and all orders, notices, claims, suits, proceedings,
investigations (including, without limitation, by
Governmental Bodies) or actions at law or in equity under
any Environmental Law (including, without limitation,
changes in law) by third parties relating to:
(i) conditions associated with the Equipment,
the Real Property or the Business and any related
acts or omissions of Seller or any Subsidiary or
predecessor entities at or prior to the Closing Date;
(ii) the manufacture, generation, processing,
distribution, labeling, use, presence, treatment,
removal, handling, storage, disposal, transport or
abandoning of any Hazardous Materials at or prior to
the Closing Date from, on, at, around or under the
Real Property, or properties currently or previously
owned, operated or leased by Seller or any Subsidiary
or predecessor, or by any third party acting on
Seller's or a Subsidiary's behalf;
(iii) the Release of any Hazardous
Materials, or the threat of the same, on or prior to
the Closing Date, into the Environment from, on, at,
around or under the Real Property, or properties
currently or previously owned, operated or leased by
Seller or any Subsidiary or predecessor entities, or
by any third party acting on Seller's behalf;
(iv) worker exposure to Hazardous Materials or
other personal injury or property damages relating to
releases of Hazardous Materials from, on, at, around
or under the Real Property prior to the Closing Date;
(v) any failure by Seller or any Subsidiary or
predecessor entities to obtain any Permit required to
be obtained under Environmental Law prior to or as of
the Closing Date.
7) any material breach of the representations and warranties
provided under Section 3.19 [taxes]; and
8) the Seller's or a Subsidiary's ownership or operation of
the Business or the Assets prior to the Closing Date.
provided, however, that, in each case, the Seller has no
obligation to indemnify the Buyer for any Loss arising from,
with respect to, or resulting from Retained Inventory.
(b) Notwithstanding anything in the foregoing to the contrary,
subject to Section 10.3(b) (Time to Assert Claims) and Section 10.4
(Deductible), the Seller's obligation for indemnity under
Section 10.1 shall be only up to a maximum aggregate liability for
the Seller and the Subsidiaries as follows:
(i) For claims described in clauses 5) [product liability],
6) [environmental] or 7) [taxes] of Section 10.1, there
shall be no maximum aggregate liability;
(ii) For claims arising out of any fraudulent misrepresentation
or fraudulent breach of warranty or covenant or agreement
by Seller or any Subsidiary, the maximum aggregate
liability shall be the Purchase Price;
(iii) For all claims not described in clause (i) or (ii)
above, the maximum aggregate liability shall be
$5,000,000.
Buyer Indemnification
. Except as otherwise provided in this Article 10 and in Article 6 and
Sections 5.2 and 11.7, the Buyer will indemnify and reimburse the Seller
for any and all Losses incurred by the Seller, a Subsidiary and their
Affiliates and their successors or assigns, and their respective
directors, officers, employees, consultants and agents (the "Seller
Protected Parties"), to the extent such Losses are a result of or arise
out of:
1) any material breach or inaccuracy of any representation or
warranty of the Buyer set forth in this Agreement;
2) any material breach of, or noncompliance by the Buyer
with, any covenant or agreement of the Buyer contained in
this Agreement to be performed after the Closing;
3) the Assumed Liabilities;
4) the ownership or operation of the Business or the Assets
on or after the Closing Date; and
5) the retention, sale or use of the Retained Inventory.
Indemnity Claims.
(a) Survival. The representations, warranties, covenants and
agreements contained herein, except for covenants and agreements to
be performed by the parties prior to the Closing, will not be
extinguished by the Closing but will survive the Closing, subject to
the limitations set forth in subsection (b) below with respect to
the time periods within which claims for indemnity must be asserted.
The covenants and agreements to be performed by the parties prior to
the Closing shall expire at the Closing.
(b) Time to Assert Claims. Except for (i) claims described in
clauses 5) [product liability], or 7) [taxes] of Section 10.1, which
must be asserted prior to the expiration of the applicable statute
of limitations, or (ii) claims described in clause 4) [employees],
which must be asserted prior to the expiration of the applicable
statute of limitations or five years after the Closing Date,
whichever is earlier, or (iii) claims described in clause
6) [environmental] of Section 10.1, which shall have no time limit
for assertion, all claims for indemnification under this Article 10
which are not extinguished by or at the Closing in accordance with
Section 10.3(a) must be asserted no later than two years after the
Closing Date.
Deductible
. The Buyer Protected Parties may make no claim against the Seller for
indemnification pursuant to Section 10.1 unless and until the aggregate
amount of such claims exceeds $100,000 (the "Deductible"), in which event
the Buyer Protected Parties may claim indemnification for the amount of
such claims in excess of the Deductible.
Notice of Claim
. The Buyer Protected Party or the Seller Protected Party, as the case
may be (the "Indemnified Party"), will notify the party against whom
indemnification under this Agreement is sought (the "Indemnifying
Party"), in writing, of any claim for indemnification, specifying in
reasonable detail the nature of the Loss, and, if known, the amount, or
an estimate of the amount, of the liability arising therefrom. The
Indemnified Party's failure or delay in providing such notice shall not
relieve the Indemnifying Party of its obligations hereunder unless (and
then only to the extent that) such failure or delay prejudiced the
Indemnifying Party's ability to defend such claim. The Indemnified Party
will provide to the Indemnifying Party, as promptly as practicable
thereafter, such information and documentation as may be reasonably
requested by the Indemnifying Party to support and verify the claim
asserted, so long as such disclosure would not violate the attorney-
client privilege of the Indemnified Party.
Defense
. If the facts pertaining to a Loss arise out of the claim of any third
party, or if there is any claim against a third party (other than a Buyer
Protected Party or a Seller Protected Party) available by virtue of the
circumstances of the Loss, the Indemnifying Party shall assume the
defense or the prosecution thereof by prompt written notice to the
Indemnified Party, including the employment of counsel or accountants, at
the Indemnifying Party's cost and expense. If the Indemnifying Party
does not assume the defense or prosecution of a claim as provided above
within thirty days after notice thereof from any Indemnified Party (or
within such shorter period, if any, as may be necessary to avoid default
judgment or other prejudice to the Indemnified Party), the Indemnified
Party may retain counsel and defend or prosecute such claim at the
Indemnifying Party's cost and expense. The Indemnified Party will have
the right to employ counsel separate from counsel employed by the
Indemnifying Party in any such action and to participate therein, but the
fees and expenses of such counsel employed by Indemnified Party will be
at its expense. The Indemnifying Party will not be liable for any
settlement of any such claim effected without its prior written consent,
which will not be unreasonably withheld; provided that if the
Indemnifying Party does not assume the defense or prosecution of a claim
as provided above within thirty days after notice thereof from any
Indemnified Party (or within such shorter period, if any, as may be
necessary to avoid default judgment or other prejudice to the Indemnified
Party), the Indemnified Party may settle such claim without the
Indemnifying Party's consent. The Indemnifying Party will not agree to a
settlement of any claim which provides for any relief other than the
payment of monetary damages or which could have a material precedential
impact or effect on the business or financial condition of any
Indemnified Party without the Indemnified Party's prior written consent.
Whether or not the Indemnifying Party chooses to so defend or prosecute
such claim, the Indemnifying Party and the Indemnified Party will
cooperate in the defense or prosecution thereof and will furnish such
records, information and testimony, and attend such conferences,
discovery proceedings, hearings, trials and appeals, as may be reasonably
requested in connection therewith. The Indemnifying Party will be
subrogated to all rights and remedies of' any Indemnified Party, except
to the extent they apply against another Indemnified Party.
Limitation of Liability
. In calculating any amount of damages to be paid by the Indemnifying
Party pursuant to this Agreement, the amount of such damages will be
reduced by all reimbursements credited to or received by the Indemnified
Party, relating to such damages, and will be net of any tax benefits and
insurance proceeds (after giving effect to any premium increases or
deductibles) received by the Indemnified Party with respect to the matter
for which indemnification is claimed.
Exclusive Remedy; Release.
(a) The indemnification provided pursuant to this Agreement
shall be the sole and exclusive remedy hereto for any Losses as a
result of, with respect to or arising out of the breach of this
Agreement, or any of the transactions or other agreements or
instruments contemplated or entered into in connection herewith
(including, but not limited to, all Exhibits attached or referenced
herein); provided, however, that such indemnification shall not be
the sole and exclusive remedy, and shall in no way limit the rights
of the parties for fraud or willful breach or misconduct.
(b) Except as specifically provided in this Article 10 and
Section 11.7, neither party nor its Affiliates or representatives
shall be liable to the other party for, and (except as so provided
each party) hereby releases and discharges the other party and its
Affiliates and representatives from, any and all Losses incurred as
a result of, with respect to or arising out of the ownership or
operation of the Assets or the Business.
(c) Without limiting the generality of this Section 10.8, the
Buyer understands and agrees that the rights accorded under this
Article 10 are the sole and exclusive remedy of the Buyer against
the Seller, the Subsidiaries or their Affiliates with respect to any
matters relating to Environmental Laws and Intellectual Property
laws. The Buyer hereby waives any right to seek contribution or
other recovery from the Seller, the Subsidiaries or their Affiliates
under such Environmental Laws and Intellectual Property laws, and
the Buyer hereby releases the Seller, the Subsidiaries and their
Affiliates from any claims, demands or causes of actions that the
Buyer has or may have in the future against Seller, the Subsidiaries
or their Affiliates under the Environmental Laws or Intellectual
Property laws.
- - MISCELLANEOUS
Expenses
. Except as otherwise provided herein, the Seller and the Buyer will
each pay all costs and expenses incurred by each of them, or on their
behalf respectively, in connection with this Agreement and the
transactions contemplated hereby, including fees and expenses of their
own financial consultants, accountants and counsel. Any and all real
property taxes, personal property taxes, assessments, security deposits,
lease rentals, utility, fuel, and other charges applicable to the Assets
or the Business will be pro-rated to the Closing Date and allocated
between the parties by adjustment at Closing, or as soon thereafter as
shall be reasonably practicable.
Entire Agreement
. Other than the Confidentiality Agreement, dated December 10, 1998 by
and between the Seller and the Buyer, the terms and provisions of which
shall survive the execution of this Agreement and the Closing, this
Agreement (including the Schedules and Exhibits) and all other agreements
to be signed or delivered at Closing constitute the full understanding of
the parties, a complete allocation of risks between them and a complete
and exclusive statement of the terms and conditions of their agreement
relating to the subject matter hereof and supersede any and all prior
agreements, whether written or oral, that may exist between the parties
with respect thereto; provided that this provision is not intended to
abrogate any Transaction Agreements executed with or after this
Agreement. Except as otherwise specifically provided in this Agreement,
no conditions, usage of trade, course of dealing or performance,
understanding or agreement purporting to modify, vary, explain or
supplement the terms or conditions of this Agreement will be binding
unless hereafter made in writing and signed by the party to be bound, and
no modification will be effected by the acknowledgment or acceptance of
documents containing terms or conditions at variance with or in addition
to those set forth in this Agreement. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and are
made a part hereof.
Waivers
. No waiver by a party with respect to any breach or default or of any
right or remedy and no course of dealing or performance, will be deemed
to constitute a continuing waiver of any other breach or default or of
any other right or remedy, unless such waiver is expressed in writing
signed by the party to be bound. Failure of a party to exercise any
right will not be deemed a waiver of such right or rights in the future.
Parties Bound by Agreement; Successors and Assigns
. The terms, conditions and obligations of this Agreement will inure to
the benefit of and be binding upon the parties hereto and the respective
successors and assigns thereof. No Party shall transfer or assign its
rights, duties or obligations hereunder or any part thereof to any other
person or entity without the prior written consent of the other Party.
Counterparts
. This Agreement may be executed in one or more counterparts, each of
which will for all purposes be deemed to be an original and all of which
will constitute the same instrument.
Notices
. Any notice, request, instruction or other document to be given
hereunder by any party hereto to any other party hereto must be in
writing and delivered personally (including by overnight courier or
express mail service) or sent by registered or certified mail, postage or
fees prepaid,
If to the Buyer: CIBA Vision Corporation
11460 Johns Creek Parkway
Duluth, GA 30097-1556
Attention: General Counsel
Telephone: (770) 418-3054
Facsimile: (770) 418-3018
If to the Seller: Mentor Corporation
201 Mentor Drive
Santa Barbara, CA 93111
Attention: Vice President and General
Counsel
Telephone: (805) 879-6000
Facsimile: (805) 681-6006
With a copy to: Arnold & Porter
777 South Figueroa Street
Los Angeles, CA 90017-2513
Attention: Gregory Fant, Esq.
Telephone: (213) 243-4000
Facsimile: (213) 243-4199
or to such other address as may be specified from time to time in a
notice given by such party. Any notice which is delivered personally in
the manner provided herein will be deemed to have been duly given to the
party to whom it is directed upon actual receipt by such party or the
office of such party. Any notice which is addressed and mailed in the
manner herein provided will be conclusively presumed to have been duly
given to the party to which it is addressed at the close of business,
local time of the recipient, on the fourth business day after the day it
is so placed in the mail or, if earlier, the time of actual receipt.
Brokerage
. The Seller and the Buyer do hereby expressly warrant and represent,
each to the other, that except Piper Jaffray Inc., in the case of the
Seller, no broker, agent, or finder has rendered services to such party
in connection with the transaction contemplated under this Agreement.
The Seller shall be solely responsible for any claims for compensation or
otherwise brought by Piper Jaffray, Inc. relating to the transactions
contemplated hereby and hereby indemnifies and agrees to hold harmless
the Buyer from and against any and all Losses arising or resulting, or
sustained or incurred by the Buyer, by reason of any claim by any broker,
agent, finder, or other person or entity based upon any arrangement or
agreement made or alleged to have been made by the Seller in connection
with the transaction contemplated by this Agreement. The Buyer hereby
indemnifies and agrees to hold harmless the Seller from and against any
and all Losses arising or resulting, or sustained or incurred by the
Seller, by reason of any claim by any broker, agent, finder, or other
person or entity based upon any arrangement or agreement made or alleged
to have been made by the Buyer in connection with the transaction
contemplated by this Agreement.
Governing Law; Jurisdiction
. The validity, interpretation and performance of this agreement and any
dispute connected with this agreement will be governed by and determined
in accordance with the statutory, regulatory and decisional law of the
State of New York (exclusive of such state's choice or conflicts of laws
rules) and, to the extent applicable, the federal statutory, regulatory
and decisional law of the United States (except for the U.N. Convention
on Contracts for the International Sale of Goods, April 10, 1980, U.N.
Doc. A/Conf. 97/18, 19 I.L.M. 668, 671 (1980) reprinted in Public
Notice, 52 Fed. Reg. 66280 (1987), which is hereby specifically
disclaimed and excluded).
Public Announcements
. No public announcement may be made by any person with regard to the
transactions contemplated by this Agreement without the prior consent of
the Seller and the Buyer; provided that either party may make such
disclosure to the extent required if advised by counsel that it is
required to do so by applicable law or regulation of any governmental
agency or stock exchange upon which securities of such party are
registered. The Seller and the Buyer will discuss any public
announcements or disclosures concerning the transactions contemplated by
this Agreement with the other parties prior to making such announcements
or disclosures.
No Third-Party Beneficiaries
. With the exception of the parties to this Agreement and the Seller
Protected Parties or Buyer Protected Parties, there exists no right of
any person to claim a beneficial interest in this Agreement or any rights
occurring by virtue of this Agreement.
Certain Definitions.
(a) As used in this Agreement, "Affiliate" of a person or
entity shall mean: (i) any other person or entity directly, or
indirectly through one or more intermediaries, controlling,
controlled by, or under common control with such person or entity,
(ii) any officer, director, partner, employee, or direct or indirect
beneficial owner of any 10% or greater of the equity or voting
interests of such person or entity, or (iii) any other person or
entity for which a person or entity described in clause (ii) acts in
such capacity.
(b) As used in the Agreement, the "knowledge" of the Seller
shall mean the actual knowledge as of the date hereof of the
following officers and managers of the Seller: (A) the following
corporate officers and managers of Seller: (i) Chief Executive
Officer, (ii) President and Chief Operating Officer, (iii) Senior
Vice President and Chief Financial Officer, (iv) Corporate Counsel,
(v) Vice President of IOLs and Biomaterials, (vi) Senior Vice
President of Science and Technology, (vii) Vice President,
Regulatory Affairs/Quality Assurance, corporate; and (B) the
following officers and managers of the Seller or the Subsidiaries
primarily assigned to Ophthalmics: (i) Senior Vice President,
Ophthalmics, (ii) Vice President and General Manager of
Manufacturing Operations, Ophthalmics, (iii) Vice President of
Worldwide Sales, Ophthalmics, (iv) Vice President, Regulatory
Affairs, Ophthalmics, and (v) Plant Manager - Puerto Rico.
Interpretation
. Words of the masculine gender will be deemed and construed to include
correlative words of the feminine and neuter genders. Words importing
the singular number will include the plural number and vice versa unless
the context will otherwise indicate. References to Articles, Sections
and other subdivisions of this Agreement are to the Articles, Sections
and other subdivisions of this Agreement as originally executed. The
headings of this Agreement are for convenience and do not define or limit
the provisions hereof. Words importing persons include firms,
associations and corporations. The terms "herein," "hereunder,"
"hereby," "hereto," "hereof" and any similar terms refer to this
Agreement; the term "heretofore" means before the date of execution of
this Agreement; and the term "hereafter" means after the
date of execution of this Agreement and the word "including" shall be
deemed to be followed by the words "without limitation." The terms
"ordinary course of business" or "ordinary course" means the ordinary
course of business consistent with past custom and practice (including
with respect to quantity and frequency).
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives in the United States of
America as of the date first above written.
MENTOR CORPORATION
By: /s/CHRISTOPHER CONWAY
Name: Christopher Conway
Title: Chief Executive Officer
MENTOR OPHTHALMICS, INC.
By: /s/GARY E. MISTLIN
Name: Gary E. Mistlin
Title: Secretary/Treasurer
MENTOR MEDICAL, INC.
By: /s/GARY E. MISTLIN
Name: Gary E. Mistlin
Title: Secretary/Treasurer
MENTOR CARIBE, INC.
By: /s/GARY E. MISTLIN
Name: Gary E. Mistlin
Title: Secretary/Treasurer
CIBA VISION CORPORATION, as the Buyer
By: /s/C. Glen Bradley
Name: C. Glen Bradley
Title: Chief Executive Officer
CIBA VISION AG
By: /s/L. VonBidder
Name: L. VonBidder
Title: President
CIBA VISION PUERTO RICO, INC.
By: /s/C. Glen Bradley
Name: C. Glen Bradley
Title: Chief Executive Officer
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