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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR THE FISCAL YEAR ENDED: SEPTEMBER 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION PERIOD FROM [ ] TO [ ]
COMMISSION FILE NUMBER: 0-11309
NETOPTIX CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 04-2526583
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
</TABLE>
STURBRIDGE BUSINESS PARK, P.O. BOX 550, STURBRIDGE, MASSACHUSETTS 01566
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (508) 347-9191
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
TITLE OF EACH CLASS
NAME OF EACH EXCHANGE ON WHICH REGISTERED
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, PAR VALUE $.01 PER SHARE
(TITLE OF CLASS)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
As of December 8, 1999, 11,408,731 shares of the Registrant's Common Stock
were outstanding, and the aggregate market value of such shares held by
non-affiliates of the Registrant on such date was $274.0 million.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Registrant's proxy statement for the 2000 Annual Meeting of
Stockholders are incorporated by reference into Part III of this report, and
portions of the Registrants Annual Report on Form 10-K for fiscal year ended
September 30, 1998, as amended, are incorporated by reference into Part I of
this report.
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PART I
ITEM 1. BUSINESS
CURRENT BUSINESS
NetOptix Corporation (the "Company" or "NetOptix"), previously known (until
September 30, 1999) as Galileo Corporation, along with its wholly-owned
subsidiaries, Optical Filter Corporation ("OFC") and Optical Filter Corporation,
GmbH ("OFC GmbH"), a German company formed in the fourth quarter of fiscal year
1999 with manufacturing operations expected to commence in the second quarter of
fiscal year 2000, develops, manufactures and markets a variety of optical
components, optical filters and other systems that incorporate recent advances
in photonic technology and optical coating. The products and business of OFC and
OFC GmbH are further discussed below. During the fiscal year covered by this
Report, which commenced October 1, 1998, through the date of this Report,
NetOptix has substantially restructured and reorganized its business operations,
including disposing of and agreeing to dispose of businesses which generated a
majority of the Company's revenue.
As a result of certain financial and business reversals suffered by the
Company commencing in its 1997 fiscal year and continuing through its 1998
fiscal year, as discussed below, the Company has gone through a substantial
restructuring process. As a part of that process, the Company has sold
businesses and terminated product lines, has accepted substantial outside
capital, has restructured the Board, has identified and disposed of certain
assets and businesses determined by the Board to be non-strategic, has
refinanced its outstanding bank loans, and has focused its resources on the
development and expansion of its optical components business, all as further
described below.
Excluding businesses and assets sold or to be disposed, the Company's
business consists principally of the design, manufacture and marketing of a
broad range of optical components and systems, including optical filters,
optical lens coatings for medical devices, laser systems, infrared thermal
imaging devices and optical analytic instruments, as well as one of the world's
largest and most technically advanced diamond point turning facilities, which
manufactures highly sophisticated optical components and systems for industrial
lasers and semiconductor instrumentation (hereinafter referred to as the
"Current Businesses"). During the fiscal year, the Company developed and readied
for commercial production optical filters for use in Dense Wavelength Division
Multiplexing ("DWDM") components of fiberoptic networks serving the
telecommunications industry. The Company believes that these technical advances
will be the basis for significant growth in its DWDM business during the fiscal
year ending September 30, 2000 and beyond. Further information concerning the
Current Businesses is set forth below.
DISCONTINUED BUSINESSES
During the fiscal year ended September 30, 1999, and since the end of such
fiscal year and through the date of this Report, the Company has sold, or has
agreed to sell, the following businesses (the "Discontinued Businesses"). In the
Consolidated Financial Statements of the Company attached hereto, Medical
Products and Scientific Detector and Spectroscopy Products are treated as
discontinued operations.
(a) Medical Products. During the fiscal year ended September 30, 1999, the
Company developed, manufactured and distributed medical products, consisting
primarily of women's health-related products. Sales of medical products
accounted for 43%, 43% and 41% of the Company's net sales before restatement for
the fiscal years 1999, 1998 and 1997, respectively.
Leisegang Medical, Inc. ("LMI"), Galenica Inc. ("Galenica") and Leisegang
Feinmechanik-Optik GmbH ("Leisegang GmbH") developed, manufactured and
distributed women's health-related medical products, primarily to the OB-GYN
market, including colposcopes, ultrasound devices, rigid and flexible
hysteroscopes, fetal monitors and a variety of surgical and diagnostic
instruments. On December 14, 1999, the Company announced that it had entered
into an agreement with The Cooper Companies, Inc. ("Cooper") for the sale of
substantially all of the women's health-related business to Cooper, as reported
on Form 8-K, filed by the Company on December 16, 1999, which is incorporated
herein by reference. The sale of the women's
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health-related medical product business is expected to close on or about January
31, 2000. Accordingly, the women's health-related business is treated as
discontinued operations. See Item 7 below, "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and Note 5 to the Consolidated
Financial Statements, "Discontinued Businesses."
(b) Scientific Detector and Spectroscopy Products ("SDP"). SDP sales,
which are described in full in the Form 10-K of the Company for the fiscal year
ended September 30, 1998, filed with the Commission on December 29, 1998, as
amended by Form 10-K(A), filed with the Commission on January 28, 1999, which
Form 10-K, as amended (the "1998 Form 10-K/A") is incorporated herein by
reference. SDP sales accounted for 23%, 29% and 37% of the Company's net sales
for the fiscal years 1999, 1998 and 1997, respectively. In July 1999, the
Company sold its SDP business pursuant to an Asset Purchase Agreement with Burle
Electro-Optics Corporation and Burle Industries, Inc., dated as of July 1, 1999,
as reported in Form 8-K filed by the Company with the Commission on July 12,
1999, and Form 10-Q filed by the Company with the Commission on August 13, 1999,
each of which is incorporated by reference herein.
(c) Telecommunications Products. As reported in the 1998 Form 10-K/A, in
October 1998 the Company determined to explore several options regarding its
telecommunications products focused on optical amplification based on fluoride
fiber technology. This business was closed in late 1998, and the intellectual
property and other assets of this telecommunications product line were sold to
IPG Photonics Corporation pursuant to an Asset Purchase Agreement dated as of
July 1, 1999, as reported in Form 8-K filed by the Company on July 12, 1999 and
Form 10-Q filed by the Company with the Commission on August 13, 1999, each of
which is incorporated by reference herein.
OPTICAL SYSTEMS AND COMPONENTS PRODUCTS
OFC, acquired in January 1998, designs, manufactures and markets a broad
range of optical filters, components and systems that incorporate recent
advances in photonic technology and optical coating. After allowing for the
accounting of discontinued operations, OFC is the only remaining operating
business. OFC's products include optical filters, optical lens coatings for
medical devices, laser systems, infrared thermal imaging devices and optical
analytical instruments.
The optical filter product line of OFC and OFC GmbH includes DWDM filters,
incorporating proprietary advances in filter technology developed by OFC. The
DWDM filters of OFC are capable, within certain portions of the light wave
spectrum, of dividing a light wave traveling through a fiberoptic network into
many separate beams of light, each capable of carrying traffic over the network.
The Company believes that there is a large and growing marketplace for DWDM
filters. Commercial production of DWDM filters began late in the fourth quarter
of fiscal year 1999 and has continued during the first quarter of fiscal year
2000, with commercial shipments commencing in the first quarter of fiscal year
2000. Commencing in the third quarter of fiscal year 1999, the Company added and
has continued to add substantial production capacity for its DWDM filter
business at its facility in Natick, Massachusetts, and has organized a new
subsidiary in Germany, OFC GmbH, which is in the process of completing a
facility in Waechtersbach, Germany for optical filter technology research and
development as well as commercial production of DWDM filters. The German
facility is expected to begin commercial production and shipments in the second
quarter of fiscal year 2000. The Company expects to continue to expand its
production capacity at its facilities in Natick, Massachusetts and in Germany
during the balance of fiscal year 2000 and has arranged financing for such
capital expenditures. See Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations," below.
OFC's operations also include a facility in Keene, New Hampshire, which
provides products and services for diamond point turning for highly
sophisticated optical components and systems for industrial lasers and for
semiconductor instrumentation.
RESEARCH AND NEW PRODUCT DEVELOPMENT
The Company's scientists and engineers currently conduct research and
development in fiberoptic and optical filter technologies, including efforts
relating to the DWDM filter technology. The Company's
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expenditures for research and development relating to its current business were
approximately $0.2 million, $3.0 million and $3.7 million for the fiscal years
1999, 1998 and 1997, respectively. In addition to the reported research and
development costs reported for fiscal year 1999, other process engineering costs
expended to develop and produce filters are included as part of manufacturing
costs.
In June 1999, the Company announced that Ralf T. Faber, an expert in
optical filter technology, had joined OFC as President, effective July 1, 1999.
Mr. Faber's previous employer, Leybold Systems GmbH, is a leading optical
manufacturing equipment company.
Information concerning the research and development efforts and
expenditures of the Discontinued Businesses is excluded as it is no longer
relevant.
MARKETING
The Company markets its current products (excluding the products of the
Discontinued Businesses) to original equipment manufacturers through marketing
partners, distributors and direct end-users. DWDM filters are sold primarily to
manufacturers of telecommunications components and equipment serving the
fiberoptics telecommunications network operators, and are incorporated into such
equipment.
Marketing information concerning the Discontinued Businesses is not
included in this Report as it is no longer relevant.
CUSTOMERS
Export sales to foreign customers (excluding sales of the Discontinued
Businesses) principally in Europe and North America, amounted to approximately
$1.0 million and $1.6 million in fiscal year 1999 and 1998, respectively During
fiscal years 1999 and 1998, one customer of the OFC business amounted to
approximately 16% and 14% of sales, respectively.
During the first quarter of fiscal year 2000, OFC began commercial
shipments of DWDM filters to three customers. The Company expects to add
additional customers for its DWDM filters as production volume increases and
additional production capacity is added.
Export information concerning the Discontinued Business is excluded as it
is no longer relevant.
RAW MATERIALS AND SUPPLIES
The principal raw materials and supplies used by the Company in the optical
components business during fiscal year 1999 (excluding raw materials and
supplies used in the Discontinued Businesses) consisted primarily of optical
substrate materials and chemicals for optical coatings. The Company's optical
components business has not experienced any shortages in the past and does not
anticipate any future shortages or unavailability of these items. Most raw
materials are available from alternative sources.
Information concerning raw materials and supplies for the Company's
Discontinued Businesses has been excluded as no longer relevant.
PATENTS AND INTELLECTUAL PROPERTY
Although the Company possesses patents related to its optical components
business, it does not believe that the protection offered by these patents is of
material importance to the success of its continuing businesses. The Company
believes that its success depends primarily on continuing research and
development, as well as its manufacturing and marketing skills. In particular,
production of DWDM filters meeting the required specifications for use in the
fiberoptic networks servicing the telecommunications industry is based on a high
degree of technology, which the Company believes to be trade secrets and
proprietary know-how.
Information concerning the patents and other intellectual property of the
Discontinued Businesses is excluded as it is no longer relevant.
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BACKLOG
At September 30, 1999 and 1998, the sales backlog of the optical components
business was $7.2 million and $8.0 million, respectively. All such backlog is or
was scheduled for shipment during the following fiscal year.
Backlog information concerning the Company's Discontinued Businesses has
been excluded as it is no longer relevant.
COMPETITION
The Company's optical components business competes with a variety of
manufacturers and suppliers of optical components and optical filters. The
Company sells a variety of optical components for defense applications. The
Company is currently evaluating the extent of its commitment of resources to the
defense market.
In fiscal year 1999, the Company re-focused its optical components business
strategy to serve the telecommunications market. The telecommunications market
has experienced rapidly accelerating demand for optical products and OFC today
is a growing part of that supply chain. During fiscal year 1999, there was a
global shortage of telecommunications filters. This shortage resulted in almost
all of the Company's competitors being "sold out," without current excess
capacity. Therefore, while there are several companies that make the same
products as the Company makes, there have only been a few competitors with
capacity to sell. However, this worldwide shortage of filters has invited new
entrants into the marketplace and has also caused the existing producers
(including OFC) to add capacity as well. Today there are several new producers
that are striving for a share of the market. OFC's success will depend on the
technological position of its products, the timing of its new product
introductions, as well as the service, price, quality and delivery lead-time
which it can offer to new customers.
Information concerning the customers and markets for the Company's
Discontinued Businesses has been excluded as no longer relevant.
EMPLOYEES
As of September 30, 1999, the Company had 291 full-time employees,
including 168 full-time employees associated with the Discontinued Businesses.
Of these employees, nine were employed at the Company's facilities in
Sturbridge, Massachusetts, 111 were employed at OFC in Natick, Massachusetts and
in Keene, New Hampshire, 90 at Galenica near Montreal, Canada, 39 at Leisegang
GmbH in Berlin, Germany and 42 at LMI, in Boca Raton, Florida. None of these
employees is currently covered by a collective bargaining agreement although the
Galenica hourly employees have recently voted to join a collective bargaining
unit. The Company believes that it has good relations with its employees.
The employees of the women's health-related medical business, consisting of
the employees of Leisegang GmbH, Galenica and LMI, constituting a total of
approximately 168 employees, will, effective upon the sale of such businesses to
Cooper, either be offered employment by Cooper or will be terminated at or
shortly after the consummation of the sale to Cooper. The anticipated employee
costs related to the period prior to the closing of the sale of such women's
health-related medical business to Cooper, as well as any severance or other
obligations arising as a result of such sale, have been reserved for in the
Consolidated Financial Statements included in this Report.
ITEM 2. PROPERTIES
The Company's current corporate headquarters and the former manufacturing
facilities associated with certain of the discontinued operations are located in
Sturbridge, Massachusetts, where the Company owns three buildings, with a total
of 197,000 square feet on a 56-acre tract. Approximately 100,000 square feet of
such facilities have been leased, under leases from one to five years, to third
parties, including a five-year lease (with a right to extend for an additional
five years) with Burle Electroptics, Inc., the purchaser of the SDP business.
The Company believes that the lease payments under all such leases are at
current market rates. The
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Company has listed the Sturbridge property for sale and such property is
included in the Assets Held for Sale reflected in the Company's Consolidated
Financial Statements included with this Report. The value of the Sturbridge
property on the Consolidated Financial Statements has been written down to $3.0
million as of September 30, 1999.
The Company's present intention is to locate office space, initially on a
lease basis, for its corporate headquarters operations, in the area of Natick,
Massachusetts, where OFC has its headquarters. No timetable has been set for
this move.
OFC, a wholly-owned subsidiary, has sales, marketing, administrative and
manufacturing facilities in Natick, Massachusetts and additional manufacturing
facilities in Keene, New Hampshire. OFC leases approximately 55,000 square feet
of space including approximately 25,000 square feet from a related party.
Galenica, a wholly-owned subsidiary, is located near Montreal, Canada where
the Company owns a facility where it manufactures a majority of the products
produced by this subsidiary and it also leases approximately 6,000 square feet
of space from a related party for sales, marketing and certain manufacturing. In
connection with the sale of the women's health-related medical business, the
purchaser will acquire title to the owned real estate in Montreal, Canada, and
will assume the balance of the lease on the leased facilities.
Leisegang GmbH, a wholly-owned subsidiary, is located in Berlin, Germany,
and leases approximately 23,000 square feet of space for sales, marketing,
administration and manufacturing. In connection with the sale of the women's
health-related medical business, the purchaser has agreed to purchase the stock
of Leisegang GmbH, in which event the real estate owned by Leisegang GmbH will
no longer be reflected as owned by a subsidiary of the Company.
LMI, a wholly-owned subsidiary, is located in Boca Raton, Florida, where it
leases approximately 13,000 square feet of space used for sales, service and
marketing and administration. In connection with the sale of the women's
health-related medical business, the purchaser has agreed to sublet
approximately 6,500 square feet of such space for the balance of the lease term,
and additional 5,000 square feet of such space for six months after the closing
anticipated to occur on or about January 31, 2000. The Company will retain
approximately 1,500 square feet for use by its own personnel and will be
responsible for the 5,000 square feet when the sublease to Cooper expires six
months after the closing.
ITEM 3. LEGAL PROCEEDINGS
The four class action lawsuits, commenced against the Company and certain
of its former officers during fiscal year 1998, alleging violations of the
federal securities laws, as reported in the 1998 Form 10-K/A, have been
consolidated into a single action pending in the United States District Court
for the District of Massachusetts. The plaintiffs seek damages based upon
certain alleged misstatements or omissions in the Company's public announcements
and filings. The Company has filed a Motion to Dismiss, to which the class
plaintiffs have responded; there has been no ruling on this motion. The Company
intends to continue to vigorously defend these lawsuits. There are no other
material pending legal proceedings to which the Company is a party or to which
any of its property is subject, which are not covered by insurance.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of the Company's security holders
during the fourth quarter of fiscal year 1999.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock is listed on the Nasdaq National Market System
under the symbol OPTX. The following table sets forth, for the periods
indicated, the high and low sales prices for the common stock as reported by
Nasdaq.
<TABLE>
<CAPTION>
LOW HIGH
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<S> <C> <C>
FISCAL YEAR 1998
1st Quarter............................................ $ 8.750 $14.750
2nd Quarter............................................ 9.750 17.500
3rd Quarter............................................ 11.125 16.500
4th Quarter............................................ 2.063 13.125
</TABLE>
<TABLE>
<CAPTION>
LOW HIGH
------- -------
<S> <C> <C>
FISCAL YEAR 1999
1st Quarter............................................ 2.750 3.813
2nd Quarter............................................ 3.625 5.750
3rd Quarter............................................ 4.375 7.438
4th Quarter............................................ 7.375 22.250
</TABLE>
The Company had 394 stockholders of record as of December 8, 1999.
The Company has not paid dividends since 1979 and does not anticipate
paying cash dividends in the foreseeable future. In fact, the Company has a
retained earnings deficit, and future earnings are expected to be retained for
use in its businesses.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- ------- -------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net sales............................. $ 14,366 $ 14,774 $ 12,816 $42,634 $40,753
Income (loss) from continuing
operations............................ (11,310) (13,735) (12,378) 5,527 1,399
Income (loss) from discontinued
operations, net..................... (1,567) 1,108 1,194 -- --
Extraordinary gain, net............... -- -- -- 158 --
Net income (loss)..................... (12,877) (12,627) (11,184) 5,685 1,399
Earnings (loss) per share from
continuing operations
Basic............................... (1.19) (1.80) (1.81) 0.81 0.21
Diluted............................. (1.19) (1.80) (1.81) 0.80 0.21
Earnings (loss) per share from
discontinued operations
Basic............................... (0.16) 0.15 0.18 -- --
Diluted............................. (0.16) 0.15 0.18 -- --
Earnings per share from extraordinary
gain
Basic............................... -- -- -- 0.02 --
Diluted............................. -- -- -- 0.02 --
</TABLE>
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<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- ------- -------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Earnings (loss) per share
Basic............................... (1.35) (1.65) (1.63) 0.83 0.21
Diluted............................. (1.35) (1.65) (1.63) 0.82 0.21
Total assets.......................... 48,365 55,654 42,727 53,064 48,173
Long-term obligations................. 1,210 1,008 956 132 716
</TABLE>
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Notes: Results of operations and earnings per share data for fiscal years 1997
through 1999 have been restated to reflect the Company's discontinued
operations. Since continuing operations principally reflect the business
of OFC, as it was acquired in January 1998, the periods ended September
30, 1996 and 1995 were not restated as such information would not be
meaningful. Balance sheet data for years prior to 1999 have not been
restated for discontinued operations. See Note 5, "Discontinued
Businesses," to the Company's Consolidated Financial Statements.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This report contains "forward-looking statements" as defined in the Private
Securities Litigation Reform Act of 1995. To identify forward-looking
statements, look for words like "believes," "expects," "may," "will," "should,"
"seeks," "approximately," "intends," "plans," "estimates" or "anticipates," and
similar words or phrases. Discussion of strategy, plans or intentions often
contain forward-looking statements. These, and all forward-looking statements,
necessarily depend on assumptions, dates or methods that may be incorrect or
imprecise.
Events, among others, that could cause actual results and future actions to
differ materially from those described by or contemplated in the forward-looking
statements include major changes in business conditions and the economy, loss of
key senior management, major disruptions in the operation of the OFC
manufacturing facilities or delays in delivery of new production equipment, new
competition or technologies, significant disruptions caused by their parties
failing to address the Year 2000 issue or by problems with the Company's Year
2000 compliance program, foreign currency exchange exposure, investments in
research and development and other start-up projects, regulatory issues,
significant environmental clean-up costs above those already accrued, litigation
costs, costs of business divestitures, and other similar factors.
During fiscal year 1999, the make-up of the Company has changed
dramatically. During the year, the SDP and telecommunications businesses were
sold, the sale proceeds being used to reduce the then outstanding bank debt. As
the Company has decided to focus on a telecommunications strategy, an agreement
was signed on December 14, 1999 to sell LMI and the related women's
health-related business and related assets. The transaction is scheduled to
close on January 31, 2000.
The Consolidated Statements of Operations of the Company for the three
years ended September 30, 1999 and the consolidated balance sheet and
consolidated statement of cash flow as of September 30, 1999 have been
reclassified to report the net assets and liabilities and result of operations
of the SDP and the LMI Medical businesses as discontinued operations in
accordance with generally accepted accounting principles. Accordingly, the
consolidated results of continuing operations reflect primarily the results of
operations of the remaining operating subsidiary, OFC, and corporate support
costs.
RESULTS OF OPERATIONS
Fiscal Year 1999 Compared to Fiscal Year 1998
After reflecting the accounting for medical products and SDP businesses as
discontinued operations during the fourth quarter of 1999, full year net sales
were $0.4 million less than 1998. That decrease was the net result of an
increase in sales at OFC of $2.2 million, offset by a reduction in sales within
previously discontinued businesses, primarily medical endoscope products ($2.2
million), which was discontinued during
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the fourth quarter of fiscal year 1998. The year over year OFC revenue increase
resulted from the inclusion of OFC revenue in the Consolidated Financial
Statements for all of 1999 as compared to nine months of fiscal year 1998, as it
was acquired in January 1998. Revenue gains (adjusted for acquisition timing)
were realized at OFC's diamond point turning facility as growth of approximately
28% occurred in its commercial sector, partially attributable to increased
capacity. Offsetting those increases was a reduction, primarily related to
government defense work, within OFC's core optical filter coating business. That
reduction was a reflection of a slow-down in defense work opportunities coupled
with a shift in focus and resources to the Company's new telecommunications
strategy and production of DWDM filters.
The 1999 gross profit (as a percentage of revenues) of the remaining
operating business (OFC) was 33.6% compared to 36.8% for 1998. While there was a
slight increase in the gross profit percentage at OFC's diamond turning business
from productivity improvements, reduced levels of production within the core
optical coating operations resulted in higher costs and an overall net decrease
in the profit percentage. For 1998, the high production costs, in addition to
the $2.9 million reduction in the carrying costs of inventories to fair market
value of its Medical Endoscope Imaging Products business (discontinued in
September, 1998), resulted in a gross loss of $0.1 million for that year.
Ongoing research and development expenses of the Company amounted to $0.2
million for fiscal year 1999 and were expended on DWDM filter development
activities or approximately $0.1 greater than 1998. In addition to the reported
research and development costs reported for fiscal year 1999, other process
engineering costs expended to develop and produce filters are included as part
of manufacturing costs. While development costs are expected to increase
moderately as DWDM filter requirements change, the Company believes it has both
the personnel and funding required for such efforts. The year over year decrease
in research and development costs resulted from the elimination of programs
associated with the discontinued Medical Endoscope and Telecom businesses.
After considering one-time operating expenses ($1.6 million) during 1999
and the inclusion of OFC selling and administrative costs for a full year ($0.7
million), the Company's actual selling and administrative spending decreased by
approximately $1.0 million year over year. Severance costs associated with the
resignation of an executive officer, increased legal fees associated with
lawsuits, environmental clean-up costs associated with the Sturbridge facility
and costs associated with the Company's name change comprised the mostly
one-time costs. Whereas selling and administrative costs would be expected to
increase with the planned growth of the DWDM filters business, reductions
realized in Corporate infrastructure costs should remain.
Included in operating results for the fiscal year ended September 30, 1998
is a charge of $0.6 million related to the potentially uncollectible receivables
(net of recoveries) from a medical endoscope customer. The customer filed for
bankruptcy during fiscal year 1999. The receivables balance as of September 30,
1999 is $0.4 million, which has been fully reserved in the balance sheet as of
that date.
The Company incurred one-time charges for costs during fiscal 1999 to
reduce the carrying value of certain buildings and equipment to estimated fair
market value. Those charges totaled $6.4 million and were related to the
write-down of the Sturbridge facility ($3.8 million) and equipment ($1.3
million) in addition to the impairment of certain OFC equipment of $1.3 million.
Impairment charges that totaled $1.5 million were incurred during fiscal year
1998.
Interest costs of $0.9 million for fiscal year 1999 were $0.4 million
greater than 1998 and resulted from borrowings under the Company's revolving
lines of credit with banks as discussed below. The increase is attributable to
borrowings associated with the Company's capital spending for DWDM filter
production equipment.
Other income for 1999 includes the gain on the sale of the
telecommunications business of $0.6 million.
For both the current and comparable prior year periods, the Company's
effective tax rate differs from the statutory rate primarily due to the
unrecognized benefit of available tax loss carryforwards. The current year
provision relates principally to foreign, state and franchise taxes.
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As mentioned previously, results associated with the SDP and Medical
businesses have been treated as discontinued segments and their results
classified as discontinued operations. For fiscal year 1999, the amount reported
was net income of $0.7 million comprised of net income from the SDP business of
$1.4 million and a loss from the Medical business of $0.7 million. The reported
net loss from disposal of discontinued operations was comprised of a net gain on
the sale of the SDP business of $2.7 million offset by an expected loss on the
sale of the Medical business of $5.0 million. Results from operations of
discontinued operations for 1998 were net income for the SDP business of $1.9
million offset by the loss from the Medical business of $0.8 million.
Fiscal Year 1998 Compared to Fiscal Year 1997
With the reclassification of the SDP and Medical (LMI) businesses to
discontinued operations as discussed earlier in this report, the comparison of
continuing operations for the period 1998 and 1997 becomes one driven by the
acquisition of OFC in January 1998, the loss of the Xerox business in the first
quarter of 1997, and the 1998 fourth quarter recognition of one-time charges
associated with exiting the medical endoscope and telecommunications businesses.
Specific comments regarding that comparison are:
Revenues for fiscal 1998 of $14.8 million increased $2.0 million, or 15.6%,
from revenues of $12.8 million in fiscal 1997. Fiscal year revenues from
acquisitions, particularly OFC of $12.2 million, offset the loss of fiscal year
1997 revenues from Xerox and a sales reduction of medical endoscopes.
Revenues for Medical Endoscope Imaging Products for fiscal year 1998 of
$2.6 million were negatively impacted by the failure to complete a marketing
relationship for an application-specific endoscope and lower than expected
product requirements by the Company's marketing partners. As a result, during
the fourth quarter of fiscal 1998, the Company terminated its Medical Endoscope
Imaging Products business.
The gross profit for the fiscal year ended September 30, 1998 had eroded to
a slight loss from fiscal year 1997 of $3.6 million or 28%, due primarily to the
impact of the reduction in the carrying costs of medical endoscope inventories
to fair market value ($2.9 million) and the loss of higher margin Xerox-related
revenues replaced by lower gross margins from the acquired OFC business.
Research and development expenses decreased to $3.0 million in fiscal year
1998 from $3.7 million in fiscal year 1997 due to reduced spending on the
Company's now terminated investments in the medical endoscope imaging and
telecommunications products businesses.
Selling and administrative expenses increased from $5.2 million in fiscal
year 1997 to $8.2 million in fiscal year 1998 due to the inclusion of operating
expenses and goodwill amortization from the OFC acquisition and increased
administrative costs associated with the discontinued medical endoscope and
telecommunications businesses.
Included in operating results for the fiscal year ended September 30, 1998,
is a charge of $0.6 million related to the potential uncollectibility of
receivables (net of recoveries) from a medical endoscope customer that had
experienced severe liquidity issues.
Interest expense amounted to $0.5 million during fiscal year 1998 compared
with interest income of $0.7 million during fiscal year 1997 due to the
liquidation of short-term investments held during fiscal year 1997 and
borrowings under the Company's revolving line of credit with a bank during
fiscal year 1998 as discussed below.
For both the current and comparable prior year periods, the Company's
effective tax rate differs from the statutory rate primarily due to the
unrecognized benefit of available tax loss carryforwards. The current year
provision relates principally to foreign, state and franchise taxes.
The income from discontinued operations of $1.1 million as of September 30,
1998 is comprised of the net income from the SDP business of $1.9 million and a
loss from the Medical business of $0.8 million as compared to 1997 results of
net incomes for the SDP business of $0.8 million and the Medical business of
$0.4 million, respectively.
9
<PAGE> 11
LIQUIDITY, CAPITAL RESOURCES AND CHANGES IN FINANCIAL CONDITION
On January 26, 1999, pursuant to a previously announced Securities Purchase
Agreement dated December 22, 1998 (the "Purchase Agreement"), Andlinger Capital
XIII LLC, a Connecticut limited liability company ("Andlinger Capital"),
purchased from the Company 2,000,000 shares of the Company's Common Stock
together with warrants to purchase an additional 2,000,000 shares of the
Company's Common Stock for an aggregate purchase price of $6.0 million in a
private transaction. On September 23, 1999, Andlinger Capital exercised its
rights to purchase 1,000,000 of the 2,000,000 shares of Common Stock covered by
the warrants for cash proceeds of $1.5 million.
During fiscal year 1999, following the restructuring of the Board of
Directors, the Company sought to re-focus its operations through a continuing
cost reduction program, the disposition of non-strategic assets and businesses
and the refinancing of its outstanding bank indebtedness. Accordingly, effective
July 1, 1999, the Company sold the assets related to its SDP business to Burle
Electro-Optics Corporation and Burle Industries, Inc. ("Burle"), and in
connection therewith, leased a substantial portion of its Sturbridge real estate
housing the SDP business to Burle on a five-year lease at market rates. Net
proceeds of the disposition, after transaction costs and retained liabilities,
of approximately $7.1 million, were applied to the reduction of indebtedness
under the then outstanding bank loan.
Also effective July 1, 1999, the Company sold the intellectual property and
other assets related to its former business in telecommunications products based
upon fluoride fiber technology to IPG Photonics Corporation ("IPG"), and leased
an additional portion of the Sturbridge real property to IPG on a short-term
basis. The transaction with IPG, net of transaction costs and retained
liabilities, produced net proceeds of approximately $1 million, which were
applied to the reduction of the outstanding bank loan.
During fiscal year 1999, the Company also evaluated its options with
respect to the Sturbridge real estate. In addition to the leases with IPG and
Burle, the Company has entered into other short-term leases with respect to
portions of the Sturbridge real property. The Company has also listed the
Sturbridge property for sale. The Consolidated Financial Statements included
with this Report reflect a reduction in the carrying value of the Sturbridge
real property to approximately $3.0 million as of September 30, 1999, to reflect
estimated realizable value of the Sturbridge real property.
In September 1999, the Company refinanced its outstanding bank loan through
a new credit facility with Deutsche Financial Services Corporation. This
facility is comprised of a term loan of up to a maximum outstanding of $13
million (of which $5.9 million was outstanding at September 30, 1999) and a
revolving credit facility of up to $12 million (of which $1.2 million was
outstanding at September 30, 1999). The term loan is available for financing
equipment and other capital expenditures for use in the Company's optical
components business in the United States and Germany. The Company believes that
the availability under the term loan and the revolving credit facilities will be
adequate to fund anticipated costs of operations and capital expenditures
through the balance of fiscal year 2000 and beyond.
The credit facility contains a number of covenants and requirements
concerning financial ratios and other indebtedness, as well as limitations
regarding the payment of dividends. The Company believes that, based upon
anticipated operations, it will meet the covenant requirements and that there
will be continued availability under the credit facility for the balance of
fiscal 2000.
In December 1999, following the close of fiscal year 1999, the Company
announced that it had entered into an agreement to sell its women's
health-related medical business to The Cooper Companies, Inc. ("Cooper"). The
sale to Cooper is expected to close on or about January 31, 2000. The net
proceeds of the sale, after transaction costs, payment of retained liabilities,
are anticipated to be approximately $6.5 million, which will be applied to
outstanding indebtedness and accordingly, such amounts have been reflected on
the Company's consolidated balance sheet as a current liability. Because of the
agreement to sell the women's health-related medical business, the results of
operations for such business for fiscal year 1999 have been included in
discontinued operations in the Consolidated Financial Statements and the related
assets of such business have been classified as Assets related to discontinued
operations.
10
<PAGE> 12
Capital expenditures for fiscal year 1999 amounted to $8.9 million versus
$2.9 for fiscal year 1998. Fiscal year 1999 capital expenditures relate
primarily to the addition of production equipment to the OFC facility in Natick,
Massachusetts, supporting the production of DWDM optical filters.
YEAR 2000
The Year 2000 issue is the result of computer programs using two digits
rather than four to define the applicable year. Such software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result in
system failures or miscalculations leading to disruptions in the Company's
activities and operations. If the Company, its significant customers, or
suppliers fail to make necessary modifications and conversions on a timely
basis, the Year 2000 issue could have a material adverse effect on Company
operations. However, the impact cannot be quantified at this time. The Company
believes that its competitors face a similar risk.
In December 1997, the Company established a corporate-wide strategy to
address and remedy technology issues relating to the Year 2000. This strategy
encompasses four areas: internal technology systems and applications used in its
business operations; manufacturing control systems; external systems of vendors
and service providers; and technology systems of existing customers.
The Company has completed an inventory and assessment of all critical
internal business systems and applications and the majority of remedies
consisting of upgrades or replacements were completed by October 31, 1999. The
Company will continue testing and verification through December 31, 1999.
The Company has completed the Year 2000 compliance status of vendors and
service providers and is attempting to minimize risk and exposure based on
responses of these critical vendors and service providers through alternative
sources and contingency plans.
In the event the Company is unable to fully meet Year 2000 compliance,
manufacturing operations will be adversely impacted. Any potential future
business interruptions, costs, damages or losses related thereto, are dependent,
to a significant degree, upon the Year 2000 compliance of third parties, both
domestic and international, such as government agencies, customers, vendors and
suppliers. While efforts will be made to minimize risk, no assurance can be made
that companies in the entire supply chain will not be affected. In that respect,
failures and disruptions of the business process remain a possibility and no
assurance can be provided that Year 2000 compliance can be achieved.
Previous costs related to Year 2000 compliance were funded through
operating cash flows and the Company's revolving debt facility. Through fiscal
year 1999, the Company expended approximately $0.3 million in remediation
efforts paid to third party consultants and vendors. Internal expenditures are
not tracked separately.
The Company believes it has taken appropriate steps to achieve Year 2000
compliance. As previously discussed, many of the compliance issues rely on the
uninterrupted delivery of products and services of third parties. Consequently,
there can be no assurance of uninterrupted business processes, or additional
costs, losses, or damages occurring as a result of the Year 2000 compliance.
SIGNIFICANT CUSTOMERS
Although sales to one OFC non-DWDM filter customer accounts for 16% and 14%
of total Company sales as of September 30, 1999 and 1998, respectively, the loss
of that customer would not have a material adverse effect on the financial
statements. Start-up of commercial shipments of DWDM filters in the first
quarter of fiscal year 2000 and the commitments made to increase manufacturing
capacity throughout that year will require the Company to identify additional
customers. Whereas the Company is in the process of qualifying its filter with
potential customers, there is no assurance that sales will materialize. Although
the demand for filters currently is strong and growth is expect to continue, the
failure to sell a significant portion of that capacity would have a significant
negative impact on the financial condition of the Company.
11
<PAGE> 13
NEW PRODUCT DEVELOPMENT
The market for the Company's products is characterized by rapidly changing
technology. The Company's future success will continue to depend upon its
ability to enhance its current products and to develop and introduce new
products that keep pace with technological developments and evolving industry
standards, respond to changes in customer requirements and achieve market
acceptance. Any failure by the Company to anticipate or respond adequately to
technological developments and customer requirements, or any significant delays
in product development or introduction, could have a material adverse effect on
the Company's business, financial condition and results of operations. In order
to develop new products successfully, the Company is dependent upon close
relationships with its customers and their willingness to share proprietary
information with the Company. There can be no assurance that the Company's
customers will continue to provide it with timely access to such information or
that the Company will be successful in developing and marketing new or enhanced
products and services in a timely manner and respond effectively to
technological changes or new product announcements by others. In addition, there
can be no assurance that the new products and services or product and service
enhancements, if any, developed by the Company will achieve market acceptance.
POTENTIAL ACQUISITIONS
The Company regularly reviews various acquisition prospects of businesses,
technologies or products complementary to the Company's business and
periodically engages in discussions regarding such possible acquisitions.
Acquisitions involve numerous risks, including difficulties in the assimilation
of the operations and products of the acquired companies, the ability
effectively to manage geographically remote units, the diversion of management's
attention from other business concerns, risks of entering markets in which the
Company has limited or no direct experience and the potential loss of key
employees of the acquired companies. In addition, acquisitions may result in the
issuance of debt and dilutive equity securities, reduction in existing cash
balances, amortization expenses related to goodwill and other intangible assets
and other charges to operations that may materially adversely affect the
Company's business, financial condition and results of operations. Although
management expects to carefully analyze any such opportunity before committing
the Company's resources, there can be no assurance that the Company will be
successful in making acquisitions, that the prices and terms of any acquisitions
will be favorable to the Company, that any completed acquisition will result in
long-term benefits to the Company or that the Company's management will be able
to manage the resulting businesses effectively.
COMPETITION
The Company's competitive position in the Current Businesses depends
primarily on the technological development of its products, as well as on
delivery schedules, service, quality and price. Some of the Company's
competitors are major corporations, or divisions of major corporations, which
have greater financial, technological and personnel resources than the Company
and may represent significant competition for the Company. Such companies may
succeed in developing technologies and products that are more effective, more
readily available, or less costly than those that may be developed by the
Company, and such companies may be more successful than the Company in
developing, manufacturing and marketing products. There can be no assurance that
the Company will be able to compete successfully in the future or that
developments by others will not render the Company's products obsolete or
non-competitive or that the Company's customers will not choose to use competing
technologies or products. Further, the entry of new competitors into the markets
for the Company's products could cause downward pressure on the prices of such
products and a material adverse effect on the Company's business, financial
condition and results of operations.
DEPENDENCE ON PROPRIETARY TECHNOLOGY
Although the Company does not believe that the success of the Current
Businesses is dependent upon the protection offered by patents, the Company
possesses a number of patents that relate to its technology. There can be no
assurance that the steps taken by the Company to protect its proprietary
technology will be adequate
12
<PAGE> 14
to prevent misappropriation of its technology by third parties or will be
adequate under the laws of some foreign countries, which may not protect the
Company's proprietary rights to the same extent as do laws of the United States.
In addition, there remains the possibility that others will "reverse engineer"
the Company's products in order to determine their method of operation and
introduce competing products or that others will develop competing technology
independently. Any such adverse circumstances could have a material adverse
effect on the Company's business, financial condition and results of operations.
Further, some of the markets in which the Company competes are characterized by
the existence of a large number of patents and frequent litigation for financial
gain that is based on patents with broad, and often questionable, application.
As the number of its products increases, the markets in which its products are
sold expands, and the functionality of those products grows and overlaps with
products offered by competitors, the Company believes that it may become
increasingly subject to infringement claims. Although the Company does not
believe any of its products or proprietary rights infringe the rights of third
parties, there can be no assurance that infringement claims will not be asserted
against the Company in the future or that any such claims will not require the
Company to enter into royalty arrangements or result in costly litigation.
The Company also relies upon trade secrets, technical know-how and
continuing technological innovation to develop and maintain its competitive
position. The Company typically requires its employees, consultants and advisors
to execute confidentiality and assignment of invention agreements in connection
with their employment, consulting or advisory relationships with the Company.
There can be no assurance, however, that these agreements will not be breached
or that the Company will have adequate remedies for any breach. Furthermore,
there can be no assurance that competitors will not independently develop
substantially equivalent proprietary information and techniques or otherwise
gain access to the Company's proprietary technology, or that the Company can
meaningfully protect its rights in unpatented proprietary technology. Several of
the Company's management and scientific personnel were formerly associated with
competitive companies. In some cases, these individuals are conducting research
in similar areas with which they were involved prior to joining the Company. As
a result, the Company, as well as these individuals, could be subject to claims
of violation of trade secrets and similar claims.
The Company intends vigorously to protect and defend its intellectual
property. Costly and time-consuming litigation brought by the Company may be
necessary to enforce patents issued to the Company, to protect trade secrets or
know-how owned by the Company, or to determine the enforceability, scope and
validity of the proprietary rights of others.
POTENTIAL PRODUCT LIABILITY EXPOSURE AND INSURANCE
The Company's products, particularly its medical products included among
the Discontinued Businesses, may expose the Company to product liability claims,
and there can be no assurance that the Company will not experience material
product liability losses in the future. In connection with sale of the SDP
business, the telecommunications business and the women's health-related medical
business, the Company has retained the obligations for private product liability
claims arising from the use of products manufactured or shipped prior to the
effective date of such transactions. Accordingly, the Company continues to have
exposure for such product liability claims, notwithstanding that the operating
businesses which produced such products have been sold. The Company currently
has product liability insurance coverage for the commercial sale of its
products. However, a successful claim brought against the Company in excess of
available insurance coverage, or a claim or product recall that results in
significant adverse publicity against the Company, may have a material adverse
effect on the Company's business, financial condition and results of operations.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk related to its credit facility as
discussed in the Notes to the Consolidated Financial Statements. The interest on
the credit facility is subject to fluctuations in the market. The Company does
not believe such market risk is material to the Company's Consolidated Financial
Statements.
13
<PAGE> 15
The Company operates in foreign countries which exposes it to market risk
associated with foreign currency exchange rate fluctuations; however, such risk
is immaterial at this time to the Company's Consolidated Financial Statements.
If the operations of OFC GmbH in Germany grow as anticipated, the market risk
associated with foreign currency exchange rate fluctuation may, during fiscal
year 2000, become material to the Company's financial results.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Financial Statements and Financial Statement Schedule filed as a part
of this Form 10-K are listed on the Index to Consolidated Financial Statements
and Consolidated Financial Statement Schedule on page 15.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
See information contained in the Company's Proxy Statement for the 2000
Annual Meeting of Stockholders (the "Proxy Statement") under the captions
"Election of Directors," "Executive Officers" and "Stock Ownership," which
information is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
See the information contained in the Proxy Statement under the captions
"Election of Directors -- Director Compensation" and "Executive Compensation,"
which information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
See the information contained in the Proxy Statement under the heading
"Stock Ownership," which information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See information contained in the Proxy Statement under the heading "Certain
Relationships and Related Transactions," which information is incorporated
herein by reference.
14
<PAGE> 16
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULE
ITEM 14(a)
<TABLE>
<S> <C>
Consolidated Financial Statements:
Report of Independent Auditors.............................. 16
Consolidated Balance Sheets at September 30, 1999 and
1998................................................... 17
Consolidated Statements of Operations for the fiscal years
ended September 30, 1999, 1998 and 1997................ 18
Consolidated Statements of Changes in Stockholders' Equity
for the fiscal years ended September 30, 1999, 1998 and
1997................................................... 19
Consolidated Statements of Cash Flows for the fiscal years
ended September 30, 1999, 1998 and 1997................ 20
Notes to Consolidated Financial Statements.................. 22
Schedule:
II. Valuation and qualifying accounts for the fiscal years
ended September 30, 1999, 1998 and 1997............... 35
Schedules Omitted:
All other schedules are omitted as they are not applicable
or the information is shown in the financial statements
or notes thereto.
</TABLE>
15
<PAGE> 17
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
NetOptix Corporation
We have audited the accompanying consolidated balance sheets of NetOptix
Corporation as of September 30, 1999 and 1998, and the related consolidated
statements of operations, changes in stockholders' equity and cash flows for
each of the three years in the period ended September 30, 1999. Our audits also
included the financial statement schedule listed in the Index at Item 14(a).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of NetOptix
Corporation at September 30, 1999 and 1998, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
September 30, 1999, in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
ERNST & YOUNG LLP
Providence, Rhode Island
December 21, 1999
16
<PAGE> 18
NETOPTIX CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------------
1999 1998
--------- ---------
(DOLLARS IN THOUSANDS
EXCEPT SHARE DATA)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 2,117 $ 710
Accounts receivable, less allowances of $507 and $1,265,
respectively........................................... 2,789 7,952
Inventories............................................... 1,593 8,828
Other current assets...................................... 389 1,092
Assets relating to discontinued operations, net........... 14,009 --
Assets held for sale...................................... 3,288 --
-------- --------
Total current assets........................................ 24,185 18,582
Property, plant and equipment, net.......................... 10,520 16,128
Excess of cost over the fair value of assets acquired,
net....................................................... 11,796 19,396
Other assets, net........................................... 1,864 1,548
-------- --------
Total assets................................................ $ 48,365 $ 55,654
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving line of credit.................................. $ 1,150 $ 11,846
Current portion of long term debt......................... 5,350 --
Current portions of other notes payable................... -- 1,458
Accounts payable.......................................... 3,148 4,283
Accrued liabilities....................................... 3,590 4,400
Accrued liabilities, relating to discontinued
operations............................................. 5,000 --
-------- --------
Total current liabilities................................... 18,238 21,987
Long-term debt.............................................. 550 --
Other liabilities........................................... 660 1,008
-------- --------
Total Liabilities........................................... 19,448 22,995
Commitments & contingencies (Note 10)
Stockholders' equity:
Common stock, $0.01 par value, 36,000,000 shares
authorized, 11,326,481 and 8,052,786 issued and
outstanding, respectively.............................. 113 81
Additional paid-in capital................................ 61,389 52,176
Accumulated deficit....................................... (32,422) (19,545)
Accumulated other comprehensive loss...................... (163) (53)
-------- --------
Total stockholders' equity.................................. 28,917 32,659
-------- --------
Total liabilities and stockholders' equity.................. $ 48,365 $ 55,654
======== ========
</TABLE>
See accompanying notes
17
<PAGE> 19
NETOPTIX CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-----------------------------------------
1999 1998 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
Net Sales.................................................. $ 14,366 $ 14,774 $ 12,816
Cost of sales.............................................. 9,536 14,919 9,160
-------- -------- --------
Gross profit (loss)........................................ 4,830 (145) 3,656
Research and development expenses.......................... 231 3,032 3,701
Selling & administrative expenses.......................... 9,637 8,154 5,237
Provision for uncollectible (recovery of) accounts
receivable............................................... (176) 569 --
Reduction in carrying value of certain long-lived assets... 6,360 1,525 2,226
Reorganization costs....................................... -- -- 5,605
-------- -------- --------
Total operating expense.................................... 16,052 13,280 16,769
-------- -------- --------
Operating loss............................................. (11,222) (13,425) (13,113)
Interest income (expense), net............................. (912) (524) 687
Other income, net.......................................... 837 162 90
-------- -------- --------
Loss from continuing operations before income tax.......... (11,297) (13,787) (12,336)
Provision for (benefit from) income taxes.................. 13 (52) 42
-------- -------- --------
Loss from continuing operations............................ (11,310) (13,735) (12,378)
Discontinued operations:
Income from operations of discontinued operations, net of
income taxes.......................................... 748 1,108 1,194
Loss on disposal of discontinued operations, net of
income taxes.......................................... (2,315) -- --
-------- -------- --------
Net loss................................................... $(12,877) $(12,627) $(11,184)
======== ======== ========
Net loss per common shares outstanding:
Loss from continuing operations.......................... $ (1.19) $ (1.80) $ (1.81)
Effect of discontinued operations........................ (0.16) 0.15 0.18
-------- -------- --------
Net loss................................................... $ (1.35) $ (1.65) $ (1.63)
======== ======== ========
</TABLE>
See accompanying notes.
18
<PAGE> 20
NETOPTIX CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
RETAINED
ADDITIONAL EARNINGS OTHER TOTAL
COMMON PAID-IN (ACCUMULATED COMPREHENSIVE STOCKHOLDERS'
STOCK CAPITAL DEFICIT) LOSS EQUITY
------ ---------- ------------ ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance, September 30, 1996........ $ 68 $42,694 $ 4,266 $ -- $ 47,028
Net loss........................... -- -- (11,184) -- (11,184)
Exercise of stock options and
related tax benefit.............. 1 257 -- -- 258
---- ------- -------- ----- --------
Balance, September 30, 1997........ 69 42,951 ( 6,918) -- 36,102
---- ------- -------- ----- --------
Net loss........................... -- -- (12,627) -- (12,627)
Currency translation adjustment.... -- -- -- (53) (53)
---- ------- -------- ----- --------
Comprehensive loss............ (12,680)
--------
Exercise of stock options and
grants and related tax
benefits......................... -- 243 -- -- 243
Issuance of 1,154,258 shares of
common stock in connection with
acquisition...................... 12 8,982 -- -- 8,994
---- ------- -------- ----- --------
Balance, September 30, 1998........ 81 52,176 (19,545) (53) 32,659
---- ------- -------- ----- --------
Net loss........................... -- -- (12,877) -- (12,877)
Currency translation adjustment.... -- -- -- (110) (110)
--------
Comprehensive loss............ (12,987)
--------
Exercise of stock options and
grants and related tax
benefits......................... 2 1,692 -- -- 1,694
Issuance of 50,000 shares of common
stock to the employee pension
plan............................. -- 623 -- -- 623
Issuance of 2,000,000 shares of
common stock in connection with
private placement, net of related
costs............................ 20 5,408 -- -- 5,428
Exercise of warrants to purchase
1,000,000 shares of common
stock............................ 10 1,490 -- -- 1,500
---- ------- -------- ----- --------
$113 $61,389 $(32,422) $(163) $ 28,917
==== ======= ======== ===== ========
</TABLE>
See accompanying notes.
19
<PAGE> 21
NETOPTIX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
--------------------------------
1999 1998 1997
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss................................................... $(12,877) $(12,627) $(11,184)
Adjustments to reconcile net loss to net cash provided
(used) by operating activities:
Net Loss on discontinued operations...................... 2,315 -- --
Depreciation and amortization............................ 1,692 3,388 2,942
Provision for uncollectible (recovery of) customer
account............................................... (176) 569 --
Provision for other uncollectible (recovery of) accounts
receivable............................................ (98) 764 100
Write down of inventory to fair market value............. -- 2,921 --
Reorganization costs..................................... -- -- 6,451
Reduction in carrying value of long-lived assets......... 6,360 1,525 2,226
Non-cash compensation.................................... 204 -- --
Other adjustments, net................................... (178) -- 100
Increase (decrease) in cash from changes in operating
assets and liabilities:
Accounts receivable...................................... 1,784 (290) (129)
Inventories.............................................. 1,309 (1,935) (1,083)
Accounts payable......................................... (939) (1,206) 1,579
Accrued liabilities...................................... (624) 1,527 (114)
Other changes, net....................................... 605 (88) (267)
-------- -------- --------
Total adjustments................................ 12,254 7,175 11,805
-------- -------- --------
Net cash provided (used) by operating
activities..................................... (623) (5,452) 621
Cash flows from investing activities:
Acquisitions, net of cash acquired....................... -- (10,290) (5,500)
Capital expenditures..................................... (8,970) (2,870) (3,828)
Proceeds from sale of assets............................. 8,730 -- --
Other investing activities, net.......................... -- -- (115)
-------- -------- --------
Net cash used in investing activities............ (240) (13,160) (9,443)
Cash flows from financing activities:
Borrowings on note payable............................... 12,298 11,846 --
Payment of notes payable................................. (18,554) (2,260) (542)
Proceeds from issuance of common stock, net of
expenses.............................................. 9,041 243 258
Payment of financing costs............................... (405) -- --
-------- -------- --------
Net cash provided (used) by financing
activities..................................... 2,380 9,829 (284)
-------- -------- --------
Effect of exchange rate changes on cash.................... (110) (53) --
-------- -------- --------
Net increase (decrease) in cash and cash equivalents....... 1,407 (8,836) (9,106)
Cash and cash equivalents at beginning of year............. 710 9,546 18,652
-------- -------- --------
Cash and cash equivalents at end of year................... $ 2,117 $ 710 $ 9,546
======== ======== ========
</TABLE>
20
<PAGE> 22
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
--------------------------------
1999 1998 1997
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Supplemental cash flow information:
Interest payments.......................................... $ 928 $ 521 $ --
Income tax payments........................................ 43 86 227
Supplemental schedule of non-cash investing and financing
activities:
</TABLE>
The Company made certain acquisitions during fiscal years 1998 and 1997 as
described more fully in Note 3 to the Notes to the Consolidated Financial
Statements. In conjunction with the acquisitions, liabilities were assumed as
follows:
<TABLE>
<S> <C> <C> <C>
Fair value of assets acquired.............................. $ -- $ 26,515 $ 5,500
Gross cash paid............................................ -- 11,003 5,500
Fair value of Company Common Stock issued.................. -- 8,994 --
-------- -------- --------
Liabilities assumed........................................ $ -- $ 6,518 $ --
======== ======== ========
</TABLE>
See accompanying notes.
21
<PAGE> 23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. ACCOUNTING POLICIES
Organization -- NetOptix Corporation (the "Company" or "NetOptix"),
previously known until September 30, 1999 as Galileo Corporation, along with its
wholly-owned subsidiary, Optical Filter Corporation ("OFC") develops,
manufactures and markets a variety of optical components, optical filters and
other systems that incorporate recent advances in photonic technology and
optical coating. During fiscal 1999 NetOptix has substantially restructured and
reorganized it business operations, including closing, disposing of and agreeing
to dispose of businesses which generated a majority of the Company's revenue for
the prior fiscal year. These businesses consist of the operations of the
Company's wholly-owned subsidiaries, Leisegang Medical Inc., Galenica Inc. and
Leisegang Feinmechanik-Optik GmbH (together "LMI") and its SDP business ("SDP").
See Note 5. The Company's continuing operations are primarily in the United
States.
Consolidation -- The Consolidated Financial Statements include the accounts
of NetOptix Corporation and its wholly-owned subsidiaries. Intercompany balances
and transactions have been eliminated.
Revenue Recognition and Credit Risk -- The Company records a sale and
recognizes revenue when title passes to the customer or when services are
performed in accordance with contracts. The Company extends credit to customers
based on evaluating financial condition, and collateral is generally not
required. Credit losses are provided for in the financial statements and
include, in fiscal year 1998, a provision of $569, net of recoveries, for an
uncollectible customer account.
Export sales relative to continuing operations to various foreign customers
amounted to approximately $977, $1,620 and $0 in fiscal years 1999, 1998 and
1997, respectively.
Two customers represented 15% and 13% of the accounts receivable balance at
September 30, 1999. One customer represented 13% of the accounts receivable
balance at September 30, 1998. One customer represented 16% and 14% of the net
sales of the Company for the fiscal years ended 1999 and 1998, respectively.
Cash Equivalents -- The Company considers all highly liquid investments
with a maturity of three months or less at the time of purchase to be cash
equivalents.
Inventories -- Inventories are valued at the lower of cost (first in, first
out) or market. Inventory costs include all direct manufacturing costs and
applied overhead.
Property, Plant and Equipment -- Property, plant and equipment is stated at
cost less accumulated depreciation. Depreciation is computed using either the
straight-line or accelerated methods. Estimated useful lives are as follows:
<TABLE>
<S> <C>
Buildings and improvements.................................. 10-30 years
Machinery, equipment and furniture.......................... 3-10 years
</TABLE>
Stock-Based Compensation -- The Company grants stock options for a fixed
number of shares of Common Stock to employees and directors with an exercise
price equal to the fair value of the shares at the date of the grant. The
Company accounts for stock option grants in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and,
accordingly, recognizes no compensation expense relating to stock options.
Goodwill -- The excess of cost over the fair value of assets acquired is
being amortized on a straight-line basis over a period of 30 years. Accumulated
amortization amounted to $740 and $537 as of September 30, 1999 and 1998,
respectively.
Comprehensive Income -- On October 1, 1997, the Company adopted SFAS No.
130, "Reporting Comprehensive Income," which establishes new rules for the
reporting and display of comprehensive income and its components. SFAS No. 130
requires items such as foreign currency translation adjustments to be
22
<PAGE> 24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
included in comprehensive income. However, the adoption of this Statement had no
impact on the Company's net loss or stockholders' equity.
Segment Reporting -- In June 1997, the Financial Accounting Standards Board
issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information", which is effective for fiscal years beginning after December 15,
1997. SFAS No. 131 establishes standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports. It also establishes standards
for related disclosures about products and services, geographical areas, and
major customers. The Company adopted the new requirements in fiscal year 1999.
However, due to the closure of several businesses and the disposal of its
scientific detector and spectroscopy and women's health businesses and the
inactive status of its German subsidiary, the Company is operating only in one
segment.
Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results may differ from those
estimates.
Reclassification -- As stated in Note 5, in December 1999, the Company
announced that it has agreed to sell its Leisegang Medical, Inc. and related
women's health businesses (LMI) and related assets, and on July 1, 1999, the
Company sold SDP. These businesses have been presented as discontinued
operations in the accompanying consolidated financial statements. For
comparative purposes, the statement of operations and related earnings per share
information, for all periods presented, have been restated to reflect the
results of operations for the discontinued businesses in "Income from operations
of discontinued operations, net of income taxes." The consolidated balance sheet
at September 30, 1999 reflects the assets related to LMI as "Assets relating to
discontinued operations, net." The liabilities, estimated loss from operations
and estimated loss on the sale of LMI are reflected on the balance sheet as
"Accrued liabilities related to discontinued operations." The Consolidated
Statements of Cash Flows for the three years ended September 30, 1999 do not
separately reflect cash flows from discontinued operations.
Certain reclassifications have been made to amounts reported in previous
years in order to conform to the current year presentation.
2. NEW DEVELOPMENTS
Private Placement -- On January 26, 1999, pursuant to a previously
announced Securities Purchase Agreement dated December 22, 1998 (the "Purchase
Agreement"), Andlinger Capital XIII LLC, a Connecticut limited liability company
("Andlinger Capital"), purchased from the Company 2,000,000 shares of the
Company's Common Stock together with warrants to purchase an additional
2,000,000 shares of the Company's Common Stock for an aggregate purchase price
of $6.0 million in a private transaction. On September 23, 1999, Andlinger
Capital exercised its right to purchase 1,000,000 of the 2,000,000 shares of
Common Stock covered by the warrants for cash proceeds of $1.5 million. The
remaining warrants are exercisable for a period of 7 1/2 years at a price of
$1.50 per share, subject to antidilutive adjustment.
Sale of Non-Strategic Assets -- During the first quarter of fiscal year
1999, the Company sold certain assets deemed to be non-strategic to the on-going
business operations, including assets associated with the Company's medical
endoscopes and telecommunications business. During the fourth quarter of fiscal
year 1999, the Company sold its scientific detector and endoscope business and
announced that it had entered into an agreement for the sale of substantially
all of the women's health-related products business. See further discussion in
Note 5.
Cost Reductions -- During the fourth quarter of fiscal year 1998, the
Company terminated its medical endoscope products business. As a result, the
Company instituted a reduction in force of 61 employees during fiscal year 1998.
Subsequent to September 30, 1998, the Company terminated its Telecommunications
business, and further reduced the work force by 57 employees. In connection with
these actions, the Company
23
<PAGE> 25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
incurred one-time charges of approximately $4,446 for the year ended September
30, 1998 for costs to reduce the carrying value of certain equipment ($1,525)
and inventories ($2,921) to estimated fair market value.
New Loan Agreement -- On September 30, 1999, the Company refinanced its
outstanding bank loan through a new credit facility with Deutsche Financial
Services Corporation. This facility is comprised of a term loan of up to a
maximum outstanding of $13 million (of which $5.9 million was outstanding at
September 30, 1999) and a revolving credit facility of up to $12 million (of
which $1.2 million was outstanding at September 30, 1999). The term loan is
available for financing equipment and other capital expenditures for use in the
Company's optical components business in the United States and Germany. See Note
6.
3. ACQUISITIONS
OFC CORPORATION
In January 1998, the Company acquired all of the outstanding shares of OFC
Corporation ("OFC") for approximately $6,518 in cash and 1,154,258 shares of
NetOptix Common Stock. OFC designs, manufactures and markets a broad range of
optical components and systems which incorporate the latest advances in photonic
technology and optical coatings. The acquisition was accounted for using the
purchase method of accounting, and the resulting excess of the cost over the
fair value of net assets acquired of $12,536 is being amortized over 30 years.
In fiscal years 1998 and 1997, the Company also acquired three companies
(Les Enterprises Galenica, Inc., Leisegang Feinmechanik-Optik, GmbH & Co., KG
("Leisegang GmbH") and Sani-Spec for approximately $11.2 million in cash. The
acquisitions were accounted for using the purchase method of accounting. These
businesses are to be sold as part of the discontinued operations discussed in
Note 5.
4. NONRECURRING CHARGES
Impairment of Long-Lived Assets
In fiscal year 1999, the Company recorded non-cash charges of $5,885 to
reflect a write-down of buildings and equipment which are presently held for
sale. Furthermore, an additional charge of $475 was incurred for the abandonment
of certain equipment.
The consolidated statement of operations for the year ended September 30,
1998, includes nonrecurring, pretax, non-cash charges of approximately $1,525 in
connection with the Company's termination of its Medical Endoscope Products
business.
For the year ended September 30, 1997, the Company incurred nonrecurring,
pretax, non-cash charges of $2,226, which reduced certain robotic assembly
equipment for the Company's medical products business to its estimated fair
market value.
Loss of a Major Customer and Related Reorganization
In February 1997, the Company received written notification from its then
largest customer, Xerox, that it would no longer purchase certain assemblies
from the Company. On March 12, 1997, the Company announced a reorganization plan
in response to this lost business. In connection with this plan, the Company
recorded a nonrecurring charge of $6,872, or $1.01 per share, in the three
months ended March 31, 1997. The charge included a $6,451 non-cash provision for
the impairment of related long-lived assets ($3,946), other assets ($1,238) and
inventory ($1,267), and a $421 provision for related severance and other
obligations. As of September 30, 1998 the entire charge had been utilized and/or
paid.
24
<PAGE> 26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. DISCONTINUED BUSINESSES
In December 1999, the Company announced that it has agreed to sell its LMI
and related women's health businesses and related assets. The transaction
includes the Company's operating units in Germany and Canada as well as the LMI
operation in Boca Raton, Florida. The purchase price is approximately $10
million, with a scheduled closing on January 31, 2000. The net proceeds will be
used to reduce debt and accordingly, such amounts have been reflected as a
current liability. The Company anticipates a loss on the sale of approximately
$4.6 million. The estimated loss of the operation of these businesses through
January 31, 2000 is $0.4 million.
On July 1, 1999, the Company sold its SDP business. The proceeds from the
sale, totaling approximately $7.1 million, was applied to the Company's
outstanding debt. The Company recorded a gain on the sale of approximately $2.7
million.
The tax benefit associated with the net loss on the sale has been fully
reserved at September 30, 1999.
The operating results and estimated net loss on the sale of these
businesses have been presented as discontinued operations.
Summarized information of the discontinued operations is as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30,
1999
-------------------------------
LMI SDP TOTAL
-------- ------- --------
<S> <C> <C> <C>
Income statement data:
Net sales.............................................. $14,925 $7,994 $22,919
Cost of sales........................................ 8,317 5,102 13,419
------- ------ -------
Gross profit......................................... 6,608 2,892 9,500
Other expenses....................................... 7,003 1,513 8,516
------- ------ -------
Income (loss) before taxes........................... (395) 1,379 984
Income taxes......................................... 236 -- 236
------- ------ -------
Income (loss) from discontinued operations........... $ (631) $1,379 $ 748
======= ====== =======
</TABLE>
<TABLE>
<CAPTION>
1998
-----------------------------
LMI SDP TOTAL
------- ------- -------
<S> <C> <C> <C>
Income statement data:
Net sales............................................. $16,659 $12,873 $29,532
Cost of sales....................................... 9,121 8,972 18,093
------- ------- -------
Gross profit........................................ 7,538 3,901 11,439
Other expenses...................................... 7,921 2,070 9,991
------- ------- -------
Income (loss) before taxes.......................... (383) 1,831 1,448
Income taxes (benefit).............................. 397 (57) 340
------- ------- -------
Income (loss) from discontinued operations.......... $ (780) $ 1,888 $ 1,108
======= ======= =======
</TABLE>
25
<PAGE> 27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1997
----------------------------
LMI SDP TOTAL
------ ------- -------
<S> <C> <C> <C>
Income statement data:
Net sales............................................ $8,562 $12,739 $21,301
Cost of sales........................................ 5,081 9,389 14,470
------ ------- -------
Gross profit......................................... 3,481 3,350 6,831
Other expenses....................................... 3,041 2,475 5,516
------ ------- -------
Income before taxes.................................. 440 875 1,315
Income taxes......................................... 79 42 121
------ ------- -------
Income from discontinued operations.................. $ 361 $ 833 $ 1,194
====== ======= =======
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30,
1999
-------------
<S> <C>
Balance sheet data:
Cash...................................................... $ 75
Accounts receivable....................................... 1,969
Inventories............................................... 3,521
Property, plant and equipment, net........................ 1,434
Goodwill and other........................................ 7,010
-------
Total assets of discontinued operations................... $14,009
=======
Other accrued liabilities................................. $ 414
Estimated loss on sale.................................... 4,586
-------
Total liabilities of discontinued operations.............. $ 5,000
=======
</TABLE>
6. REVOLVING CREDIT FACILITY
On September 30, 1999, the Company refinanced its outstanding bank loan
through a new credit facility ("Credit Facility"). The Credit Facility provides
for a term loan ("Term Loan") of $13.0 million, bearing interest at prime rate
plus 2.0% or LIBOR plus 3.0% (10.25% at September 30, 1999) and a revolving line
of credit ("Revolver") of $12.0 million, bearing interest at prime plus 1.5% or
LIBOR plus 2.5% (9.75% at September 30, 1999). The Term Loan is used to finance
equipment and capital expenditures for use in the Company's optical components
business in the United States and Germany. Such equipment collateralizes the
Term Loan, whereas the Revolver is secured by accounts receivables and
inventory. The borrowings under the Revolver are subject to eligible accounts
receivable and inventory. The Credit Facility includes provisions which require
the Company to remit the net cash proceeds of the LMI sale to the bank.
Therefore, $5.4 million of the $5.9 million outstanding on the Term Loan as well
as the $1.2 million outstanding on the Revolver are stated as current
liabilities as of September 30, 1999. The outstanding balance of the Term Loan
as of September 30, 2000 will become payable in 20 quarterly installments
starting November 1, 2000. The carrying value of this debt as of September 30,
1999 approximated its fair market value. The Credit Facility contains certain
covenants and requirements concerning financial ratios and other indebtedness,
as well as limitations regarding the payment of dividends in fiscal year 2000.
The Company was in violation of certain of its covenants and therefore the
loan balance of $11,846 is classified as a short-term liability at September 30,
1998.
26
<PAGE> 28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------
1999 1998
------ ------
<S> <C> <C>
Finished goods.............................................. $ 569 $5,223
Work-in-progress............................................ 819 1,819
Raw materials............................................... 205 1,786
------ ------
$1,593 $8,828
====== ======
</TABLE>
8. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------
1999 1998
-------- --------
<S> <C> <C>
Land, buildings and improvements............................ $ 2,234 $ 19,587
Machinery, equipment and furniture.......................... 14,514 28,197
Capital projects in process................................. 5,635 506
-------- --------
22,383 48,290
Less: accumulated depreciation.............................. (11,863) (32,162)
-------- --------
Property, plant and equipment, net.......................... $ 10,520 $ 16,128
======== ========
</TABLE>
9. RETIREMENT PLANS
Pension Plan -- The Company has a noncontributory pension plan covering
substantially all employees who joined the Company prior to January 1, 1995.
None of the employees of companies acquired subsequent to this date are eligible
to participate in the Pension Plan. The Plan provides pension benefits based
upon years of service and average compensation during the five years preceding
retirement. The Company's policy is to fund the maximum amount that can be
deducted for federal income tax purposes. Plan assets are invested primarily in
U.S. Government Agency obligations, equity securities of U.S. based companies,
corporate bonds and mutual funds. During fiscal year 1999, the Plan purchased
50,000 shares of the Company's common stock for $623.
27
<PAGE> 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------
1999 1998
------- ------
<S> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year..................... $ 7,948 $6,831
Service cost................................................ 199 196
Interest cost............................................... 589 537
Actuarial loss (gain)....................................... 753 820
Curtailment................................................. (1,056) (190)
Special termination benefit................................. -- 72
Benefits paid............................................... (344) (318)
------- ------
Benefit obligation at end of year........................... $ 8,089 $7,948
======= ======
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year.............. $ 8,950 $8,707
Actual return on plan assets................................ 3,299 561
Benefits paid............................................... (344) (318)
------- ------
Fair value of plan assets at end of year.................... $11,905 $8,950
======= ======
Funded status............................................... $ 3,816 $1,002
Unrecognized transition asset............................... (295) (341)
Unrecognized prior service cost............................. -- (49)
Unrecognized net actuarial loss (gain)...................... (2,214) 341
------- ------
Prepaid benefit cost........................................ $ 1,307 $ 953
======= ======
WEIGHTED AVERAGE ASSUMPTIONS
Discount rate............................................... 6.75% 6.75%
Expected return on plan assets.............................. 9.00% 9.00%
Rate of compensation increase............................... 4.50% 4.50%
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
COMPONENTS OF NET PERIODIC BENEFIT COST
Service cost................................................ $ 199 $ 196 $ 235
Interest cost............................................... 589 537 517
Expected return on plan assets.............................. (790) (769) (673)
Amortization of transition assets........................... (47) (47) (47)
Amortization of prior service cost.......................... (5) (5) (5)
Recognized net actuarial loss............................... 13 -- --
----- ----- -----
Net periodic benefit cost................................... $ (41) $ (88) $ 27
===== ===== =====
</TABLE>
Tax Deferred Savings Plan -- The Company has a tax deferred savings plan
under Section 401(k) of the Internal Revenue Code under which, subject to
certain limitations, each eligible employee may contribute up to 15% of gross
wages per year. The Company matches 50% of the first 6% of employee
contributions. Company contributions to the Plan were approximately $120, $131
and $185 in fiscal years 1999, 1998 and 1997, respectively.
Other Retirement Plans -- In addition to the Company's defined benefit
pension plan, the Company sponsors a defined benefit post-retirement medical and
life insurance plan. Employees who retire from the Company and who have attained
age 65 with 15 years of service (10 years of service for employees hired before
October 1, 1989) and who were hired prior to October 1, 1993, are eligible.
Employees who retired
28
<PAGE> 30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
prior to October 1, 1989, are not required to contribute; employees who retired
after October 1, 1989, contribute a portion of the cost beyond a Company
subsidy. The Plan is not funded.
The actuarial and recorded liabilities for the Plan were as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------
1999 1998
----- -----
<S> <C> <C>
Accumulated post-retirement benefit obligation:
Retirees.................................................... $417 $434
Active plan participants.................................... 71 146
---- ----
Accumulated post-retirement benefit obligation.............. 488 580
Plan assets at fair value................................... -- --
---- ----
Unfunded accumulated benefit obligation in excess of plan
assets.................................................... 488 580
Unrecognized net gain....................................... 114 85
---- ----
Accrued post-retirement benefit cost included in other
liabilities............................................... $602 $665
==== ====
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-------------------------
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Net periodic post-retirement benefit cost includes the
following components:
Service cost................................................ $ 4 $ 5 $ 6
Interest cost............................................... 35 41 39
Net amortization of unrecognized net gain................... (5) (7) --
--- --- ---
Net periodic post-retirement benefit cost................... $34 $39 $45
=== === ===
</TABLE>
For measurement purposes, an 8.0% annual rate of increase in the per capita
cost of covered health care benefits was assumed for fiscal year 1999. The rate
was assumed to decrease gradually down to 6.0% for fiscal year 2003 and remain
at that level thereafter. Increasing the assumed health care cost trend rate one
percentage point in each year would increase the accumulated post-retirement
benefit obligation as of September 30, 1999, by $24 and the aggregate of the
service and interest cost components of the net periodic post-retirement benefit
cost for fiscal year 1999 by $2.
The weighted average discount rate used in determining the accumulated
post-retirement benefit obligation was 6.75%. As the plan is unfunded, no
assumption was needed as to the long-term rate of return on assets.
10. COMMITMENTS AND CONTINGENCIES
Legal Proceedings -- The Company is a defendant in four class action law
suits filed in Federal District Court in the Commonwealth of Massachusetts by
stockholders of the Company alleging violations of the federal securities laws
based on alleged misleading statements regarding the Company's financial
performance and other matters. The Company believes these lawsuits are without
merit and intends to defend them vigorously.
The Company has also entered into a number of operating leases, including
two from related parties, for office and manufacturing facilities located
primarily in the United States as well as in Canada and Germany. Rent expense
paid to related parties amounted to $238 during fiscal year 1999.
29
<PAGE> 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Future minimum lease payments under operating leases as of September 30,
1999 are as follows:
<TABLE>
<S> <C>
2000........................................................ $ 520
2001........................................................ 483
2002........................................................ 483
2003........................................................ 391
2004 and thereafter......................................... 976
------
Total minimum lease obligations............................. $2,853
======
</TABLE>
Total rental expense for all operating leases was approximately $460, $413
and $118 in fiscal years 1999, 1998 and 1997, respectively.
11. COMMON STOCK
On September 23, 1999, the Company issued 1,000,000 shares of common stock
to Andlinger & Co. for $1,500 upon their exercise of certain warrants. See Note
2.
On June 30, 1999, the Company recorded $204 of non-cash compensation
related to the resignation of an officer of the Company.
Employee Stock Option Plan -- Under the Company's 1991 Stock Option Plan,
which succeeded the 1981 Stock Option Plan, the Plan Administrative Committee of
the Board of Directors may grant options to purchase common stock to officers
and key employees of the Company and its subsidiaries. The stock options are
exercisable at a price not less than the fair market value of the common stock
on the date of grant. The Plan also provides that the Committee may issue stock
appreciation rights. The exercise price of the stock appreciation rights may not
be less than the fair market value of the common stock on the date of grant or
if issued with a stock option, the exercise price of the related option. Stock
appreciation rights provide for the issuance of common stock, or the payment of
cash, or a combination of both equal to the difference between the exercise
price of the stock appreciation right and the fair market value of the common
stock on the date of exercise.
The following table summarizes stock option plan activity:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE AGGREGATE
SHARES PRICE PRICE
-------- -------- ---------
<S> <C> <C> <C>
Balance, September 30, 1996.......................... 279,000 $ 9.18 $ 2,561
Granted.............................................. 267,000 8.17 2,182
Exercised............................................ (33,000) 4.76 (157)
Forfeited............................................ (45,000) 9.38 (422)
-------- ------ -------
Balance, September 30, 1997.......................... 468,000 8.90 4,164
Granted.............................................. 211,000 10.68 2,253
Exercised............................................ (5,000) 5.20 (26)
Forfeited............................................ (42,000) 9.98 (419)
-------- ------ -------
Balance, September 30, 1998.......................... 632,000 9.45 5,972
Granted.............................................. 611,000 7.23 4,417
Exercised............................................ (171,000) 7.28 (1,245)
Forfeited............................................ (484,000) 7.46 (3,611)
-------- ------ -------
Balance, September 30, 1999.......................... 588,000 $ 9.41 $ 5,533
======== ====== =======
</TABLE>
As of September 30, 1999, no option shares were available for grant under
the 1991 Plan. As of September 30, 1999, 144,350 options, with a weighted
average fair value of $7.43 per share, were exercisable
30
<PAGE> 32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
at prices ranging from $3.88 to $13.625, aggregating approximately $1,073 under
the 1981 and 1991 Plans. The remaining outstanding options are exercisable on
various dates through 2009 at exercise prices ranging from $3.25 to $13.625. The
weighted-average remaining contractual life of outstanding options is 8.0 years.
Director Stock Option Plan -- On February 23, 1999, the Company amended the
1996 Director Stock Option Plan such that no further grants could be made
thereunder. Under the plan, the Company had granted each non-employee director
options to purchase 2,500 shares of common stock on the director's election at
each Annual Meeting of Stockholders of the Company. Options become exercisable
one year after grant or earlier upon the death or disability of the director and
upon a change in control of the Company, as defined. No option may be exercised
more than one year after the director's termination as a director for any
reason. The option is exercisable at the fair market value of the common stock
on the date of grant.
Under the Director Stock Option Plan, options to purchase 20,000 shares of
common stock, at a price of $5.25 per share, were granted in fiscal year 1999,
and as of September 30, 1999, 55,000 shares were exercisable at a weighted
average fair value of $11.84 per share, aggregating approximately $651. No
options remain available for grant under the Plan.
The Company has elected to continue to follow Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" and related
interpretations in accounting for the 1991 Plan and the Director Stock Option
Plan. Accordingly, no compensation expense has been recognized in the
Consolidated Financial Statements. Assuming compensation expense for options
granted under these Plans after September 30, 1995 had been determined based on
the estimated fair value at the grant dates for awards under the Plan, the
Company's pro forma net loss and loss per share would have been $13,192 and
$1.39, respectively for fiscal 1999, $13,107 and $1.71, respectively for fiscal
year 1998 and $11,439 and $1.67, respectively, for fiscal year 1997. The effects
of expensing the estimated fair value of stock options on pro forma net income
and earnings per share are not necessarily representative of the effects on
reported net income for future years because of the potential for issuance of
additional stock options in future years.
The fair value of options granted after September 30, 1995, under these
Plans, was estimated at the date of grant using the Black-Scholes option-pricing
model. The following weighted-average assumptions were used for fiscal year
1999, 1998 and 1997, respectively: risk-free interest rates of 5.0%, 4.9% and
6.0%; volatility factors of the expected market price of the Company's common
stock of 95%, 89% and 79%; and a weighted-average expected life of the option of
5.0 years for all three years. The Company did not assume a dividend yield for
fiscal year 1999, 1998 or 1997.
As of September 30, 1999, there are no shares of Company common stock
reserved for issuance under all stock option plans.
Employee Stock Purchase Plan -- On January 1, 1997, the Company amended the
Employee Stock Purchase Plan (the "Plan"). Under the revised Plan, 100,000
shares of Company Common Stock were made available for purchase by eligible
employees. The purchase price per share of Common Stock under the Plan may not
be less than 85% of the lower of its fair market value at the beginning of an
offering period or the applicable exercise date, payable though payroll
deductions. Since January 1, 1997, 114,026 shares have been purchased at prices
ranging from $2.76 to $10.09 per share. At September 30, 1999, there were 29,569
shares available for issuance under the Plan.
Prior to being amended, the Company had a Common Stock purchase plan under
which it contributed up to 37.5% of amounts contributed by participating
employees to a combined maximum of $1,375 per calendar year. All contributions
were made to a trust that purchased shares in the open market. The Plan held
21,349 shares, prior to being rolled forward into the amended Plan.
12. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial and tax
reporting purposes.
31
<PAGE> 33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Significant components of the Company's deferred tax liabilities and assets
as of September 30, 1999 and 1998, respectively, are as follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
--------------------------
1999 1998
----------- -----------
<S> <C> <C>
Deferred tax liabilities:
Pension cost.............................................. $ 505 $ 380
-------- --------
Total deferred tax liabilities.................... 505 380
-------- --------
Deferred tax assets:
Inventory adjustments..................................... 637 1,672
Discontinued Operations................................... 4,501 49
Restructuring accruals.................................... 233 180
Other accruals............................................ 1,341 1,330
Net operating loss carryforwards.......................... 10,124 7,865
Federal and state tax credits............................. 1,400 1,392
-------- --------
Total deferred tax assets......................... 18,236 12,488
Valuation allowance for deferred tax assets............... (17,831) (12,208)
-------- --------
Net deferred tax assets........................... 405 280
-------- --------
Net deferred tax liabilities.............................. $ 100 $ 100
======== ========
</TABLE>
The net change in the total valuation allowance for the fiscal years ended
September 30, 1999 and 1998, amounted to increases of $5,623 and $4,702,
respectively.
The components of the Company's loss before income taxes are as follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
--------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Domestic......................................... $(12,954) $(12,895) $(11,021)
Foreign.......................................... 326 556 --
-------- -------- --------
Total.................................... $(12,628) $(12,339) $(11,021)
======== ======== ========
</TABLE>
Significant components of the provision for income taxes from continuing
operations are as follows:
<TABLE>
<CAPTION>
YEARS ENDED
SEPTEMBER 30,
--------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Current:
Federal................................................... $-- $(21) $--
State..................................................... 13 21 19
Foreign................................................... -- -- --
--- ---- ---
13 -- 19
Deferred:
Federal................................................... -- (52) 23
State..................................................... -- -- --
--- ---- ---
-- (52) 23
--- ---- ---
Total....................................................... $13 $(52) $42
=== ==== ===
</TABLE>
32
<PAGE> 34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The reconciliation of the statutory federal income tax rate and the
effective tax rate from continuing operations is as follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
--------------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Income tax per statutory rate............................... (34.0)% (34.0)% (34.0)%
Utilization of net operating loss carryforwards........... -- -- --
Loss on which no income tax benefits were recognized...... 34.0 34.0 34.0
State income taxes, net of federal income tax benefit..... 0.1 -- 0.3
Other..................................................... -- (0.4) 0.4
----- ----- -----
0.1% (0.4)% 0.7%
===== ===== =====
</TABLE>
At September 30, 1999, the Company had net operating loss carryforwards of
$26,206 for federal income tax purposes that expire in years 2008 through 2019.
13. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
--------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Numerator:
Loss from continuing operations.................... $(11,310) $(13,735) $(12,378)
Denominator:
Weighted average shares -- basic................... 9,510 7,646 6,851
Dilutive employee stock options.................... -- -- --
-------- -------- --------
Weighted average shares -- assuming dilution....... 9,510 7,646 6,851
======== ======== ========
Net loss per common share -- basic and diluted
Loss from continuing operations.................... $ (1.19) $ (1.80) $ (1.81)
Effect of discontinued businesses.................. (0.16) 0.15 0.18
-------- -------- --------
$ (1.35) $ (1.65) $ (1.63)
======== ======== ========
</TABLE>
14. RELATED PARTY TRANSACTIONS
OFC leases approximately 25,000 square feet of office space from a realty
trust of which the sole beneficiary is John F. Blais, Jr., the former majority
stockholder of OFC and a director of the Company. The lease, which expires in
December 2006, provides for monthly payments of $20 subject to annual adjustment
to reflect changes in the fair market value of the real estate. The Company is
responsible for certain insurance, utilities and other operating costs. Rents
paid to the realty trust during fiscal 1999 were approximately $238.
Pursuant to a Management Advisory and Consulting Agreement (the "Management
Agreement") dated as of August 31, 1999 by and between the Company and ANC
Management Corp. ("ANC"), Gerhard R. Andlinger, the principal of ANC, serves as
President and CEO of the Company. The Management Agreement provided that ANC
will receive cash compensation at the rate of $250 per annum and non-qualified
options to purchase 100,000 shares of Common Stock at an exercise price of
$11.4375 per share, exercisable at any time until June 30, 2009, as
consideration for Consulting Services (as defined in the Management Agreement).
The Consulting Services include, but are not limited to, the services provided
to the Company by Mr. Andlinger. In addition, the Company will reimburse all
out-of-pocket expenses reasonably incurred by ANC in providing Consulting
Services. The term of the Management Agreement began on July 6, 1999 and will
expire on June 30, 2002, unless sooner terminated by the Board of Directors for
cause, by the Company
33
<PAGE> 35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
upon Mr. Andlinger's death or disability, or at ANC's election at any time upon
at least ninety days' written notice.
The Company has agreed to pay ANC Management Corp. a financial advisory fee
of $200, plus the reimbursement of out-of-pocket expenses, for the services
provided by ANC (and specifically Mr. Ball) in connection with the structuring,
negotiation, documentation and closing of the $7.1 million sale of the Company's
SDP business, consummated in July 1999. The Company has also agreed to pay ANC
an additional financial advisory fee in the aggregate amount of $200, plus the
reimbursement of out-of-pocket expenses, for the services provided by ANC (and
specifically Mr. Ball) in connection with (a) the origination, structuring,
negotiation, documentation and closing of the $25.0 million credit facility
obtained by the Company in September 1999 and (b) the structuring, negotiation,
documentation and closing of the $10.0 million sale of the Company's women's
health-related products business, announced in December 1999 and expected to
close in January 2000.
ANC is controlled by Gerhard R. Andlinger, the Chairman, President and CEO
and a director of the Company. Stephen A. Magida, Secretary of the Company, and
Charles E. Ball, both directors of the Company, are associated with ANC through
their relationships with Mr. Andlinger, Andlinger Capital and Andlinger &
Company, Inc. Neither Mr. Andlinger nor Mr. Ball receives any separate
compensation from the Company for services rendered (other than customary fees
and expenses for services as outside directors). After the end of the 1999
fiscal year, Mr. Magida was engaged by the Company to provide legal services and
services as Secretary of the Company at his customary hourly rate.
34
<PAGE> 36
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- -------- ---------- ---------- ---------- ----------- ----------
ADDITIONS ADDITIONS DEDUCTIONS
BALANCE AT CHARGED TO CHARGED TO WRITTEN OFF BALANCE AT
BEGINNING COST AND OTHER AGAINST END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS RESERVE PERIOD
- ----------- ---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
SEPTEMBER 30, 1997:
Allowance for doubtful accounts....... 184 100 -- 40 244
SEPTEMBER 30, 1998:
Allowance for doubtful accounts..... 244 1,333 -- 312 1,265
SEPTEMBER 30, 1999:
Allowance for doubtful accounts..... 1,265 (274) -- 484 507
</TABLE>
35
<PAGE> 37
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
NETOPTIX CORPORATION
/s/ GERHARD R. ANDLINGER
--------------------------------------
Gerhard R. Andlinger, President
and Chief Executive Officer
Dated: December 22, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities indicated on December 22, 1999.
/s/ GERHARD R. ANDLINGER
--------------------------------------
Gerhard R. Andlinger, President and
Chief Executive Officer and Director
(Principal Executive Officer)
/s/ THOMAS J. MATHEWS
--------------------------------------
Thomas J. Mathews, Vice President,
Finance and Chief Financial Officer
(Principal Financial and Accounting
Officer)
/s/ CHARLES E. BALL
--------------------------------------
Charles E. Ball, Director
/s/ JOHN F. BLAIS, JR.
--------------------------------------
John F. Blais, Jr., Director
/s/ TODD F. DAVENPORT
--------------------------------------
Todd F. Davenport, Director
/s/ ROBERT D. HAPP
--------------------------------------
Robert D. Happ, Director
/s/ STEPHEN A. MAGIDA
--------------------------------------
Stephen A. Magida, Director
36
<PAGE> 38
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT #
- ---------
<C> <S>
2.1 Asset Purchase Agreement dated as of July 1, 1999 between
Burle Industries, Inc. as Buyer and the Registrant as Seller
(See Table of Contents for list of omitted exhibits and
schedules) (filed as Exhibit 2.1 to the Registrant's Form
8-K dated June 30, 1999 and incorporated herein by
reference).
The Registrant hereby agrees to provide the Commission upon
request with copies of any omitted exhibits or schedules
required by Item 601(b)(2) of Regulation S-K.
2.2 Asset Purchase and Sale Agreement dated as of May 24, 1999
between the Registrant and IPG Photonics Corporation,
including a list of omitted exhibits and schedules (filed as
Exhibit 2.2 to the Registrant's Form 8-K dated June 30, 1999
and incorporated herein by reference).
The Registrant hereby agrees to provide the Commission upon
request with copies of any omitted exhibits or schedules
required by Item 601(b)(2) of Regulation S-K.
2.3 Stock and Asset Purchase Agreement dated as of December 14,
1999 The Cooper Companies, Inc., CooperSurgical Acquisition
Corp., the Registrant, Leisegang Medical, Inc., Galenica
Inc. and Leisegang Feinmechanik-Optik GmbH.
3.1 Registrant's Restated Certificate of Incorporation and
amendment thereto (filed as Exhibit 4.1 to the Registrant's
registration statement on Form S-2, File No. 33-13752, and
incorporated herein by reference).
3.2 Registrant's amended and restated By-Laws (filed as Exhibit
4.2 to the Registrant's registration statement on Form S-2,
File No. 33-13752, and incorporated herein by reference).
4.1 Specimen Certificate of the Registrant's Common Stock (filed
as Exhibit 4.1 to the Registrant's registration statement on
Form S-2, File No. 33-13752, and incorporated herein by
reference).
4.2 Loan and Security Agreement dated as of September 30, 1999
among the Registrant and Certain of its Subsidiaries, the
Lenders from time to time party thereto and Deutsche
Financial Services Corporation (filed as Exhibit 4.1 to the
Registrant's Form 8-K dated September 30, 1999 and
incorporated herein by reference).
The Registrant hereby agrees to provide the Commission upon
request with copies of any omitted exhibits or schedules
required by Item 601(b)(2) of Regulation S-K.
10.1 Stock Option Plan adopted October 23, 1991 (filed as an
exhibit to the Registrant's Proxy Statement dated December
17, 1991, and incorporated herein by reference).
10.2 Director Stock Option Plan adopted November 10, 1995 (filed
as an exhibit to the Registrant's Proxy Statement dated
December 11, 1995, and incorporated herein by reference).
10.3 Agreement and Plan of Merger dated July 17, 1996, among the
Registrant, a wholly-owned subsidiary of the Registrant,
Leisegang Medical, Inc., and the principal Stockholders of
Leisegang, under which the Registrant acquired Leisegang,
effective August 6, 1996 (filed as Exhibit 2.1 to the
Registrant's Form 8-K dated August 6, 1996, File No.
33-13752, and incorporated herein by reference).
10.4 Agreement and Plan of Merger dated as of December 30, 1997,
among the Registrant, a wholly-owned subsidiary of the
Registrant, OFC Corporation, and the Principal Stockholders
of OFC Corporation, under which the Registrant acquired OFC
Corporation, effective January 30, 1998 (filed as Exhibit
2.1 to the Registrant's Form 8-K dated December 30, 1997,
and incorporated herein by reference).
10.5 Employment Agreement dated January 30, 1998 between the
Registrant and John F. Blais, Jr., under which Mr. Blais
agreed to serve as President of Optical Filter Corporation
(filed as Exhibit 10.5 to the Registrant's Form 10-K405 for
fiscal year ended September 30, 1998, filed as of December
29, 1998 and incorporated herein by reference).
</TABLE>
37
<PAGE> 39
<TABLE>
<CAPTION>
EXHIBIT #
- ---------
<C> <S>
10.6 Securities Purchase Agreement dated December 22, 1998
between the Registrant and Andlinger Capital XIII LLC (filed
as Exhibit I to the Schedule 13D filed with the Commission
on December 28, 1998 by Andlinger Capital XIII LLC with
respect to the Registrant and incorporated herein by
reference).
10.7 Registration Rights Agreement dated December 22, 1998 among
the Registrant, Andlinger Capital XIII LLC, John F. Blais,
Jr. and W. Kip Speyer (filed as Exhibit II to the Schedule
13D filed with the the Commission on December 28, 1998 by
Andlinger Capital XIII LLC with respect to the Registrant
and incorporated herein by reference).
10.8 Stockholders' Agreement dated December 22, 1998 among the
Registrant, Andlinger Capital XIII LLC, John F. Blais, Jr.
and W. Kip Speyer (filed as Exhibit III to the Schedule 13D
filed with the Commission on December 28, 1998 by Andlinger
Capital XIII LLC with respect to the Registrant and
incorporated herein by reference).
10.9 Employment Agreement dated as of March 22, 1999 between the
Registrant and Ralf T. Faber, under which Mr. Faber agreed
to serve as President and Chief Executive Officer of Optical
Filter Corporation.
10.10 Employment Agreement dated as of July 6, 1999 between
Leisegang Medical, Inc. and John D. Barlow, under which Mr.
Barlow agreed to serve as President and Chief Executive
Officer of Leisegang Medical, Inc. (filed as Exhibit 2.2 to
the Registrant's Form 10-Q for the quarterly period ended
June 30, 1999 and incorporated herein by reference).
10.11 Consulting and Settlement Agreement and Full and Final
Release dated as of July 6, 1999 between the Registrant and
W. Kip Speyer (filed as Exhibit 2.1 to the Registrant's Form
10-Q for the quarterly period ended June 30, 1999 and
incorporated herein by reference).
10.12 Management Advisory and Consulting Agreement dated as of
August 31, 1999 between the Registrant and ANC Management
Corp.
21 List of Subsidiaries of the Registrant.
23 Consent of Ernst & Young LLP.
27.1 Financial Data Schedule for Fiscal Year 1999.
27.2 Restated Financial Data Schedule for Fiscal Year 1998.
27.3 Restated Financial Data Schedule for Fiscal Year 1997.
</TABLE>
38
<PAGE> 1
EXHIBIT 2.3
================================================================================
STOCK AND ASSET PURCHASE AGREEMENT
among
THE COOPER COMPANIES, INC.,
as Guarantor,
COOPERSURGICAL ACQUISITION CORP.,
as Purchaser,
and
NETOPTIX CORPORATION,
LEISEGANG MEDICAL, INC.,
GALENICA INC.
and
LEISEGANG FEINMECHANIK-OPTIK GMBH
-------------------------
Dated as of
December 14, 1999
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I PURCHASE AND SALE OF SHARES AND ASSETS; SALES TAXES............ 2
1.1 Transfer of the Share and Purchased Assets....................... 2
1.2 Assets Not Being Transferred..................................... 5
1.3 Instruments of Conveyance and Transfer, Etc...................... 6
1.4 Further Assurances............................................... 6
1.5 Assignment of Contracts, Rights, Etc............................. 6
1.6 Power of Attorney; Right of Endorsement, Etc..................... 7
1.7 Sales Taxes...................................................... 7
1.8 Definitions...................................................... 8
ARTICLE II ASSUMED LIABILITIES; EXCLUDED LIABILITIES..................... 8
2.1 Liabilities Being Assumed........................................ 8
2.2 Liabilities Not Being Assumed.................................... 8
ARTICLE III PURCHASE PRICE; PURCHASE PRICE ADJUSTMENT.................... 11
3.1 Purchase Price................................................... 11
3.2 Escrow Contribution.............................................. 11
3.3 Purchase Price Adjustment........................................ 11
3.4 Allocation of Purchase Price..................................... 14
ARTICLE IV CLOSING....................................................... 14
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE SELLERS.................. 15
5.1 Organization; Good Standing; Qualification and Power............. 15
5.2 Equity Investments of Leisegang GmbH............................. 15
5.3 Capital Stock of Leisegang GmbH; Ownership....................... 15
5.4 Authority; Noncontravention; Consents............................ 16
5.5 SEC Filings: Financial Statements................................ 16
5.6 Royalties........................................................ 17
5.7 Absence of Undisclosed Liabilities............................... 17
5.8 Absence of Changes............................................... 18
5.9 Tax Matters; Certain Definitions................................. 20
5.10 Title to Assets, Properties and Rights and Related Matters....... 22
5.11 Intellectual Property............................................ 23
5.12 Agreements, No Defaults, Etc..................................... 24
5.13 Litigation, Etc.................................................. 26
5.14 Compliance; Governmental Authorizations.......................... 26
5.15 FDA and Other Governmental Compliance............................ 27
5.16 Insurance........................................................ 28
5.17 Labor Relations: Employees....................................... 29
5.18 ERISA Compliance................................................. 29
5.19 Environmental Matters............................................ 30
5.20 Brokers.......................................................... 32
5.21 Accounts and Notes Receivable.................................... 32
5.22 Accounts and Notes Payable....................................... 32
5.23 Warranties of Products; Products Liability; Regulatory Compliance 32
5.24 Inventories...................................................... 33
5.25 Suppliers, Consultants and Vendors............................... 33
5.26 Customers........................................................ 33
5.27 Real Property-Owned or Leased.................................... 33
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
5.28 Year 2000........................................................ 34
5.29 Sufficiency of Assets........................................... 35
5.30 Disclosure....................................................... 35
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF COOPER...................... 35
6.1 Organization; Good Standing; Qualification and Power............. 36
6.2 Authority; Corporate Action; Authority; No Conflict.............. 36
6.3 Litigation, Etc.................................................. 36
6.4 Brokers.......................................................... 36
6.5 Consent.......................................................... 37
6.6 Purchase for Investment.......................................... 37
6.7 Licenses; Authorizations......................................... 37
ARTICLE VII CONDUCT AND TRANSACTIONS PRIOR TO AND AT CLOSING............. 37
7.1 Access to Information............................................ 37
7.2 Conduct of each Seller........................................... 37
7.3 Efforts to Consummate............................................ 38
7.4 Exclusivity...................................................... 38
7.5 Special Payment to Purchaser Based on Another Transaction........ 40
7.6 Public Announcements............................................. 40
7.7 Consents......................................................... 40
7.8 Notice of Prospective Breach; Supplement to Schedules............ 40
7.9 Exchange of Proceeds............................................. 41
7.10 Employee Matters................................................. 41
7.11 Sublease......................................................... 43
7.12 Quebec Bulk Sales Law............................................ 43
7.13 Products......................................................... 43
ARTICLE VIII CLOSING CONDITIONS.......................................... 43
8.1 Conditions to Obligations of Purchaser........................... 43
8.2 Conditions to Obligations of each Seller......................... 46
ARTICLE IX INDEMNIFICATION............................................... 48
9.1 Indemnification Generally; Etc................................... 48
9.2 Assertion of Claims.............................................. 50
9.3 Notice and Defense of Claims..................................... 50
9.4 Survival of Representations and Warranties....................... 51
9.5 Limitations on Indemnification................................... 52
9.6 Definitions...................................................... 52
9.7 Payments from Escrow Fund........................................ 53
ARTICLE X TERMINATION; EFFECT OF TERMINATION............................. 53
10.1 Termination...................................................... 53
10.2 Termination Procedures........................................... 54
10.3 Effect of Termination............................................ 54
ARTICLE XI POST CLOSING COVENANTS........................................ 54
11.1 Access to Records................................................ 54
11.2 Physical Transfer of Purchased Assets............................ 55
11.3 Collection of Accounts Receivable................................ 55
11.4 Sale of NetOptix Inventory....................................... 56
11.5 Escrow Agreement................................................. 57
11.6 Apportionments................................................... 58
11.7 Corporate Name Change............................................ 59
ARTICLE XII MISCELLANEOUS PROVISIONS..................................... 59
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C>
12.1 Amendment........................................................ 59
12.2 Extension; Waiver................................................ 59
12.3 Entire Agreement................................................. 59
12.4 Severability..................................................... 60
12.5 Benefits of Agreement............................................ 60
12.6 Fees and Expenses................................................ 60
12.7 Headings......................................................... 60
12.8 Notices.......................................................... 60
12.9 Counterparts..................................................... 61
12.10 Governing Law.................................................... 62
12.11 Incorporation of Exhibits and Schedules.......................... 62
12.12 Independence of Covenants and Representations and Warranties..... 62
12.13 Interpretation; Construction..................................... 62
12.14 Definitions...................................................... 63
12.15 Remedies......................................................... 65
ARTICLE XIII NETOPTIX AS REPRESENTATIVE................................... 65
ARTICLE XIV JURISDICTION.................................................. 66
14.1 Mutual Waiver of Jury Trial...................................... 66
14.2 Exclusive Jurisdiction........................................... 66
</TABLE>
-iii-
<PAGE> 5
SCHEDULES AND EXHIBITS
EXHIBITS
Exhibit A - Form of Bill of Sale of the U.S. Sellers
Exhibit B - Form of Bill of Sale of Galenica
Exhibit C - Form of Escrow Agreement
Exhibit D - Form of Opinion of counsel to the Sellers-Closing
Exhibit E - Form of Opinion of counsel to the Sellers-Delaware Law
Exhibit F - Form of Opinion of counsel to Galenica
Exhibit G - Form of Opinion of counsel to Leisegang GmbH
Exhibit H - Form of Non-Competition Agreement
Exhibit I - Form of Opinion of counsel to the Purchaser
SCHEDULES
Schedule 1.1(a)(i) - Products
Schedule 1.1(a)(iv) - Tangible Personal Property
Schedule 1.1(a)(vi) - Intellectual Property Rights
Schedule 1.1(a)(ix) - Assigned Contracts
Schedule 3.1 - Gross Margin Shortfall Calculation
Schedule 3.3(a) - Valuation of Inventory and Assumed Liabilities
Schedule 3.4 - Statement of Allocation
Schedule 5.1 - Organization; Good Standing; Qualification and Power
Schedule 5.2 - Equity Investments
Schedule 5.3 - Capital Stock of Leisegang GmbH
Schedule 5.4 - Authority; Noncontravention; Consents
Schedule 5.5 - SEC Filings; Subsidiary Financial Statements
Schedule 5.7 - Absence of Undisclosed Liabilities
Schedule 5.8 - Absence of Changes
Schedule 5.9 - Tax Matters; Certain Definitions
Schedule 5.10(a) - Title to Assets, Properties and Rights and Related
Matters
Schedule 5.10(b) - Permitted Encumbrances
Schedule 5.11 - Intellectual Property
Schedule 5.12 - Agreements, No Defaults, Etc.
Schedule 5.13 - Litigation, Etc.
Schedule 5.14 - Compliance; Governmental Authorizations
Schedule 5.15 - FDA Compliance
Schedule 5.16 - Insurance
Schedule 5.17 - Labor Relations: Employees
Schedule 5.18 - ERISA Compliance
Schedule 5.19 - Environmental Matters
Schedule 5.20 - Brokers
Schedule 5.21 - Accounts and Notes Receivable
Schedule 5.22 - Accounts and Notes Payable
Schedule 5.24 - Inventories
Schedule 5.25 - Suppliers, Consultants and Vendors
-iv-
<PAGE> 6
Schedule 5.26 - Customers
Schedule 5.27 - Real Property - Owned or Leased
Schedule 5.28 - Year 2000
Schedule 11.5 - NetOptix Inventory
-v-
<PAGE> 7
INDEX OF DEFINED TERMS
The following capitalized terms, which may be used in more than one
Section or other location of this Agreement, are defined in the following
Sections or other locations:
TERM LOCATION
- ---- --------
Accountant's Determination..............................................3.3(c)
Acquisition Expenses....................................................7.4(a)
Affiliate................................................................12.14
Agreement................................................................12.13
Another Transaction.....................................................7.4(a)
Asset Closing.......................................................ARTICLE IV
Asset Seller..........................................................Recitals
Assigned Contracts..................................................1.1(a)(ix)
Assumed Liabilities........................................................2.1
Berlin Facility.....................................................1.1(a)(ii)
Best Knowledge...........................................................12.13
Bills of Sale..............................................................1.3
Business Day.............................................................12.14
Business..............................................................Recitals
By-laws....................................................................5.1
Canadian Office Facility............................................1.1(a)(ii)
Canadian Manufacturing Facility.....................................1.1(a)(ii)
Canadian Mortgages......................................................2.1(c)
CERCLA.................................................................5.19(e)
CERCLIS................................................................5.19(e)
Charter....................................................................5.1
Claim..................................................................11.3(e)
Closing.............................................................ARTICLE IV
Closing Date........................................................ARTICLE IV
Closing Statements......................................................3.3(b)
Code.................................................................3.4(b)(i)
Company................................................................Caption
Company Employee Plans.................................................5.18(a)
Contract...............................................................5.12(a)
Control..................................................................12.14
Debtor.................................................................11.3(e)
Direct Claim............................................................9.3(e)
Disputed Receivable....................................................11.3(e)
Employee Benefit Plan..................................................5.18(b)
Encumbrances.............................................................12.14
Environmental, Health and Safety Laws..................................5.19(e)
ERISA Affiliate........................................................5.18(b)
ERISA..............................................................5.12(a)(vi)
Escrow Account.............................................................3.2
Escrow Agent...............................................................3.2
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<PAGE> 8
Escrow Agreement...........................................................3.2
Escrow Amount...........................................................3.1(a)
Escrow Fund................................................................3.2
Escrow Income..........................................................11.5(a)
Examination Period......................................................3.3(b)
Exchange Proceeds .........................................................7.9
Excluded Assets.........................................................1.2(b)
Excluded Liabilities....................................................2.2(b)
Facilities..........................................................1.1(a)(ii)
FDA....................................................................5.15(a)
FDA QSR.............................................................5.15(b)(v)
Final Decree.......................................................11.5(a)(iv)
Florida Facility....................................................1.1(a)(ii)
Florida Facility Lease...................................................12.14
Foreign Subsidiaries...................................................Caption
GAAP.....................................................................12.14
Galenica...............................................................Caption
Governmental Entity.....................................................5.4(c)
Godin..............................................................7.10(a)(ii)
Gross Margin Shortfall..................................................3.1(a)
Hazardous Materials....................................................5.19(e)
Incremental Sales Cost.................................................11.4(d)
Indemnified Persons........................................................9.6
Indemnifying Persons.......................................................9.6
Information Technology.................................................5.28(b)
Intellectual Property Rights...........................................5.11(c)
Inventory..........................................................1.1(a)(iii)
Inventory and Receivables Statement..................................3.3(a)(i)
IRS..................................................................5.9(c)(i)
Latest Seller SEC Report................................................5.5(a)
Latest Subsidiary Balance Sheet.........................................5.5(c)
Law(s)...................................................................12.14
Leased Property........................................................5.27(a)
Leisegang..............................................................Caption
Leisegang Employees.................................................7.11(a)(i)
Leisegang GmbH.........................................................Caption
Liability................................................................12.14
Licensed Requisite Rights...........................................5.11(a)(i)
Litigation Expense.......................................................12.14
Losses...................................................................12.14
Marcotte...........................................................7.10(a)(ii)
Massachusetts Facility.................................................1.1(ii)
Material Adverse Effect..................................................12.14
MDRs.............................................................5.15(b)(viii)
NetOptix...............................................................Caption
NetOptix Inventory.....................................................11.4(a)
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<PAGE> 9
Net Receivables....................................................3.3(a)(iii)
Net Receivables Amount.................................................11.3(d)
Non-Competition Agreement............................................8.1(i)(i)
Non-Subleased Premises.................................................11.2(b)
Objection Notice........................................................3.3(c)
Orders...................................................................12.14
Owned Requisite Rights..............................................5.11(a)(i)
Parent.................................................................Caption
Permits..................................................................12.14
Permitted Encumbrances...................................................12.14
Person...................................................................12.14
Physical Inventory...................................................3.3(a)(i)
PMA....................................................................5.15(a)
Pre-Closing Period.........................................................7.1
Proceedings..............................................................12.14
Products.............................................................1.1(a)(i)
Purchase Price.............................................................3.1
Purchased Assets........................................................1.1(b)
Purchaser...................................................Caption and 1.1(e)
Purchaser Indemnified Persons..............................................9.6
Purchaser Indemnifying Persons.............................................9.6
Purchaser Losses...........................................................9.6
Receivables............................................................11.3(e)
Related Documents.......................................................8.1(i)
Representatives..........................................................12.14
Requesting Party..........................................................11.1
Requisite Rights....................................................5.11(a)(i)
Sale..................................................................Recitals
Sales Return Liability..................................................2.1(b)
SEC......................................................................12.14
Securities Act...........................................................12.14
Securities Exchange Act..................................................12.14
Seller Indemnified Persons.................................................9.6
Seller Indemnifying Persons................................................9.6
Seller Losses..............................................................9.6
Seller SEC Reports......................................................5.5(a)
Sellers................................................................Caption
Settlement Agreement....................................................3.3(c)
Sellers' Inventory...................................................3.3(a)(i)
Share.................................................................Recitals
Share Closing.......................................................ARTICLE IV
Share Transfer Agreement.............................................8.1(i)(v)
Special Tax Losses......................................................9.1(b)
Statement of Allocation.................................................3.4(b)
Statement of Assets and Liabilities..................................3.3(a)(i)
Sublease.................................................................12.14
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<PAGE> 10
Subsidiary Financial Statements.........................................5.5(c)
Survival Date..............................................................9.4
Tax Return..............................................................5.9(d)
Taxes...................................................................5.9(d)
Third Party Claim..........................................................9.3
Title Commitment.......................................................5.27(b)
Transaction Taxes..........................................................1.7
U.S. Sellers...........................................................Caption
Year 2000 Compliant....................................................5.28(b)
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<PAGE> 11
STOCK AND ASSET PURCHASE AGREEMENT
dated as of December 14, 1999 among THE
COOPER COMPANIES, INC., a Delaware
corporation, as guarantor of the Purchaser's
obligations under this Agreement and each
Related Document to which the Purchaser is a
party ("Parent"), COOPERSURGICAL ACQUISITION
CORP., a Delaware corporation that is
wholly-owned by Parent (the "Purchaser"),
NETOPTIX CORPORATION, a Delaware corporation
("NetOptix"), LEISEGANG MEDICAL, INC., a
Florida corporation ("Leisegang" or the
"Company"), GALENICA INC., a company
continued under the laws of the Province of
New Brunswick, Canada ("Galenica"), and
LEISEGANG FEINMECHANIK-OPTIK GMBH, a company
organized under the laws of Germany
("Leisegang GmbH"). NetOptix, Leisegang,
Galenica and Leisegang GmbH are collectively
called the "Sellers" and individually called
a "Seller." NetOptix and Leisegang are
collectively called the "U.S. Sellers" and
individually called a "U.S. Seller."
Galenica and Leisegang GmbH are collectively
called the "Foreign Subsidiaries".
RECITALS
A. NetOptix is the record and beneficial owner of all shares of
capital stock, each with a par value of DM 50,000.00 per share, of Leisegang
GmbH (collectively, the "Share").
B. NetOptix and the other Sellers are engaged in the business of
developing, manufacturing and distributing women's health-related medical
products (the "Business") including colposcopes, ultrasound devices, rigid and
flexible hysteroscopes, fetal monitors, endoscopes, single-use vaginal specula
and a variety of surgical and diagnostic instruments and accessories.
C. The U.S. Sellers and Galenica (each, an "Asset Seller," and
together, the "Asset Sellers") desire to sell to the Purchaser, and the
Purchaser desires to purchase from the Asset Sellers, certain of the assets of
the Asset Sellers, subject to the Purchaser's assumption of certain specified
liabilities of the Asset Sellers, in each case related to the Business, on the
terms and subject to the conditions contained in this Agreement and NetOptix
desires to sell to the Purchaser, and the Purchaser desires to purchase from
NetOptix, the Share (the "Sale").
ACCORDINGLY, in consideration of the premises and the mutual
representations hereinafter set forth, the parties hereto hereby agree as
follows:
<PAGE> 12
ARTICLE I
PURCHASE AND SALE OF SHARES AND ASSETS; SALES TAXES
1.1 TRANSFER OF THE SHARE AND PURCHASED ASSETS.
(a) On the terms and subject to the conditions contained in this
Agreement, at the Closing (x) NetOptix shall sell, transfer, convey and assign
to the Purchaser, free and clear of adverse claims and all other Encumbrances,
and the Purchaser shall purchase and acquire from NetOptix, all of NetOptix'
right, title and interest to the Share and (y) the Asset Sellers shall sell,
transfer, convey and assign to the Purchaser, free and clear of all Encumbrances
except Permitted Encumbrances, and the Purchaser shall purchase and acquire from
the Asset Sellers, all of the Asset Sellers' right, title and interest in, to
and under the assets, properties, interests in properties and rights of the
Asset Sellers relating to the Business of every kind and description, whether
real, personal or mixed, tangible or intangible (other than the Excluded
Assets), wherever located, as the same shall exist immediately prior to the
Closing, including the following:
(i) the products listed on SCHEDULE 1.1(a)(i) hereto (the
"Products");
(ii) all manufacturing, production, maintenance, packaging
and/or testing machinery and equipment, tools, dies, molds, jigs,
patterns, gauges (together with all spare and maintenance parts) used in
or relating to the Products and the Business which (i) are located on, or
normally located on but temporarily removed from or in transit to the
facilities of the Business at the following locations: the facility of
NetOptix in Sturbridge, Massachusetts (the "Massachusetts Facility"), the
facility of Galenica in St.-Luboire, Quebec, Canada (the "Canadian
Manufacturing Facility"), the facility of Galenica in Mirabel, Quebec,
Canada (the "Canadian Office Facility") and the facility of Leisegang in
Boca Raton, Florida (the "Florida Facility") (collectively, with Leisegang
GmbH's facility in Berlin, Germany (the "Berlin Facility"), the
"Facilities") or (ii) are owned by the Asset Sellers and have been
furnished to any supplier, subcontractor or other Person in connection
with the manufacture, sale or servicing of the Products;
(iii) all inventory, raw materials, components,
work-in-progress, finished products, packaging materials and stores and
supplies existing as of the Closing relating to the Products and the
Business including any of the foregoing (i) located on, or normally
located on but temporarily removed from, or in transit to, the Facilities
or (ii) furnished to any supplier, subcontractor or other Person in
connection with the manufacture, sale or servicing of any Product or (iii)
which are in transit to customers, but not including the NetOptix
Inventory as hereinafter defined (collectively, the "Inventory");
(iv) the office furniture and equipment (consisting of desks,
chairs, tables, bookcases, partitions and cubicle spaces, personal
computers, printers and other equipment) which are located on the
Non-Subleased Premises and which are connected with the employees of
Leisegang hired at the Closing by the Purchasers, and all other items of
tangible personal property listed on SCHEDULE 1.1(a)(iv) hereto;
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<PAGE> 13
(v) all accounts and notes receivable of the Business;
(vi) all intellectual property relating to the Products and
the Business including know-how, proprietary processes and information,
computer software and the Intellectual Property Rights identified on
SCHEDULE 1.1(a)(vi) hereto, including the name "Leisegang" and the other
names listed on such schedule, and the goodwill connected with such names,
the Products and the Business and all software and other Intellectual
Property Rights used in connection therewith;
(vii) all prepaid expenses, advances and deposits (other than
prepaid insurance premiums) relating to the Products and the Business;
(viii) the books, records and files (including computer files
and electronic media), correspondence, supplier and customer records and
information, blue prints, drawings and other technical papers and
specifications, records and files concerning the Products, including those
related to the FDA and other Governmental Entities, product research and
test data, quality control records, service manuals, service bulletins,
training materials, product bulletins, product information booklets,
business plans, inventory records, appraisals, maintenance and asset
history and depreciation records, accounting records, ledgers and books of
original entry that primarily relate to the Business, sales, customer,
vendor and purchase history of the Business for the last four years in
computer and other formats, all technical manuals and other documents
necessary to the use of the Purchased Assets including Intellectual
Property Rights, the production of the Products by the Sellers and the
conduct of the Business by the Sellers;
(ix) all contracts, licenses, commitments, personal property
leases, purchase orders, sales orders and other agreements relating to the
Business (i) which are identified on SCHEDULE 1.1(a)(ix) hereto, (ii)
which are purchase and sales orders entered into in the ordinary course of
business of the Business consistent with past practice from the date of
this Agreement to the Closing Date and (iii) which are contracts,
licenses, commitments, personal property leases and other agreements
relating to the Business which have been disclosed by the Asset Sellers in
writing to the Purchaser and which the Purchaser, in its discretion,
consents on or prior to the Closing Date to include in the Purchased
Assets (collectively, the "Assigned Contracts");
(x) warranties and guarantees from vendors, suppliers and
manufacturers of the Purchased Assets and all rights, choses in action and
claims, known or unknown, matured or unmatured, accrued or contingent,
against third parties (including all warranty, indemnity and other
contractual claims, whether express, implied or otherwise), to the extent
relating to any Purchased Asset or any Assumed Liability (and any such
right, chose in action or claim to the extent relating to an Excluded
Asset or an Excluded Liability shall remain with the Asset Sellers);
(xi) all rights (including experience ratings) with respect to
unemployment, workers' compensation and other similar insurance reserves,
if applicable, of Galenica;
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<PAGE> 14
(xii) all transferable federal, state, local and foreign
governmental Permits, authorizations and approvals relating to the
Products and the Business, except those related to the Massachusetts
Facility and those certain portions of the Florida Facility which are not
at Closing being subleased by the Purchaser;
(xiii) all purchase orders, forms, labels, shipping materials,
catalogs, brochures, art works, photographs and advertising, sales and
promotional materials relating to the Business;
(xiv) all telephone, telex and facsimile numbers and all
listings of the Business in all telephone books and directories;
(xv) all interests in websites associated with the Business
and software and licenses connected therewith;
(xvi) the real property which is part of the Canadian
Manufacturing Facility, together with all appurtenances to such real
property and all of the Seller's interest in all of the structures,
fixtures and improvements located thereon;
(xvii) the lease for the Canadian Office Facility;
(xviii) all other goodwill associated with the Business; and
(xix) all other assets of any nature whatsoever used by the
Asset Sellers in the operation of the Business or relating to the
Purchased Assets, other than the Excluded Assets.
(b) For convenience of reference, the assets, properties, interests
in properties and rights that are to be sold, transferred, conveyed and assigned
by the Asset Sellers to the Purchaser at the Closing pursuant to SECTION 1.1(a)
are collectively called the "Purchased Assets" in this Agreement.
(c) Anything contained in this Agreement to the contrary
notwithstanding, to the extent that any asset, property, interest in property or
right relating to, or used or held for use by, the Asset Sellers in the conduct
of, or otherwise relating to, the operation of the Business is owned by any
shareholder, any subsidiary of the Asset Sellers or any other Affiliate of the
Asset Sellers, such asset, property, interest in property or right shall be
deemed to be a Purchased Asset for all purposes of this Agreement, and the Asset
Sellers shall do, and shall cause any such shareholder, subsidiary or other
Affiliate of the Asset Sellers to do, all things required to be done by the
Asset Sellers with respect thereto, including those things set forth in SECTIONS
1.3, 1.4 and 1.5.
(d) Purchased Assets set forth on each schedule to this SECTION 1.1,
shall be separately stated on such schedule as Purchased Assets owned by each
U.S. Seller and by Galenica, respectively.
(e) The Purchaser may purchase the Share and all or part of the
Purchased Assets itself, or cause the Share and/or all or any part of the
Purchased Assets to be purchased by one or
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<PAGE> 15
more, direct or indirect, wholly-owned subsidiaries of the Parent, the identity
of which shall be designated in writing to NetOptix prior to Closing. No such
designation shall relieve the Purchaser or the Parent from any liability or
obligation hereunder. In this Agreement, "Purchaser" means the Purchaser and one
or more of such subsidiaries, or any of them.
1.2 ASSETS NOT BEING TRANSFERRED.
(a) Anything contained in SECTION 1.1 or elsewhere in this Agreement
to the contrary notwithstanding, the following are expressly excluded from the
Purchased Assets:
(i) the consideration delivered to the Asset Sellers pursuant
to this Agreement;
(ii) cash and cash equivalents of the Asset Sellers on hand
and in banks;
(iii) assets located at the Facilities but owned by third
Persons;
(iv) all right, title, and interest of the Asset Sellers in,
to, and under all Contracts which are not Assigned Contracts;
(v) insurance policies and rights and obligations thereunder,
subject to SECTION 7.9;
(vi) the minute books and ownership record books of the Asset
Sellers;
(vii) the capital stock of or other equity interests in the
Asset Sellers;
(viii) any assets relating to any Employee Benefit Plan of
NetOptix, Leisegang and Galenica;
(ix) the real property which is part of the Massachusetts and
Florida Facilities and any leases for that real property, and any related
leasehold improvements;
(x) the name "Galileo" and derivatives, and any rights thereto
or registrations thereof;
(xi) the office furniture and equipment (consisting of desks,
chairs, tables, bookcases, partitions and cubicle spaces, personal
computers, printers and other equipment) which are located on the
Non-Subleased Premises and which are not connected with the employees of
Leisegang hired at the Closing by the Purchaser; and
(xii) contracts, licenses, commitments, personal property
leases, purchases orders, sales orders and other agreements which are not
Assigned Contracts.
(b) For convenience of reference, any assets of the Asset Sellers
which are not included in the Purchased Assets are collectively called the
"Excluded Assets" in this Agreement.
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<PAGE> 16
1.3 INSTRUMENTS OF CONVEYANCE AND TRANSFER, ETC.
At the Closing:
(a) NetOptix shall assign and transfer to the Purchaser good title
in and to the Share, free and clear of all adverse claims and all other
Encumbrances, by delivering the Share Transfer Agreement, duly executed by
NetOptix, and by performing such acts and delivering to the Purchaser such items
as may be required by the Share Transfer Agreement; and
(b) each of the U.S. Sellers and Galenica shall execute and deliver
to the Purchaser bill of sale, assignment and assumption agreements in
substantially the form of EXHIBIT A and EXHIBIT B hereto, respectively
(collectively, the "Bills of Sale"), and such other deeds, endorsements,
assignments and other good and sufficient instruments of conveyance and transfer
as shall be necessary or desirable to transfer, convey and assign good and
marketable title to the Purchased Assets to the Purchaser free and clear of any
and all Encumbrances except Permitted Encumbrances. Each Asset Seller shall take
all reasonable legal steps that may be necessary to put the Purchaser in
possession and operating control of the Purchased Assets.
1.4 FURTHER ASSURANCES.
The Asset Sellers shall promptly pay or deliver to the Purchaser any
Purchased Asset which may be received by any Asset Seller after the Closing.
Each Asset Seller shall, at any time and from time to time after the Closing,
upon the request of the Purchaser, do, execute, acknowledge and deliver, and
cause to be done, executed, acknowledged or delivered, all such further acts,
deeds, assignments, transfers, conveyances, powers of attorney or assurances as
may be reasonably required to transfer, assign, convey, grant and confirm to the
Purchaser, or to aid and assist in the collection of or reducing to possession
by the Purchaser, the Purchased Assets, or to vest in the Purchaser good and
marketable title to the Purchased Assets as herein provided.
1.5 ASSIGNMENT OF CONTRACTS, RIGHTS, ETC.
Anything contained in this Agreement to the contrary notwithstanding, this
Agreement shall not constitute an agreement or an attempted agreement to sell,
transfer, sublease or assign any Assigned Contract (or any claim or right or any
benefit arising thereunder or resulting therefrom) if the attempted transfer,
sublease or assignment thereof, without the consent of any other party thereto,
would constitute a breach thereof or in any way affect the rights of the
Purchaser or any of the Asset Sellers thereunder. Each Asset Seller shall use
its commercially reasonable efforts to obtain the consent of the other party to
any Assigned Contract to the transfer, sublease or assignment thereof to the
Purchaser in all cases in which such consent is required for the transfer,
sublease or assignment of any such Assigned Contract, including any novation
required to assign contracts with certain Governmental Entities. If any such
consent is not obtained and the Closing occurs, each Asset Seller shall use its
commercially reasonable efforts (which shall not require payment of amounts to
any other party to an Assigned Contract) to provide for the Purchaser the
benefits of such Assigned Contract, including (a) adherence to reasonable
procedures established by the Purchaser for the immediate transfer to the
Purchaser of any payments or other funds received by any Asset Seller thereunder
and (b) enforcing at the expense of the Purchaser for the benefit of the
Purchaser any and all rights of each Asset Seller
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<PAGE> 17
thereunder against the other party or parties thereto arising out of the breach
or cancellation thereof by such other party or parties or otherwise.
1.6 POWER OF ATTORNEY; RIGHT OF ENDORSEMENT, ETC.
Effective as of the Closing, each Asset Seller hereby constitutes and
appoints the Purchaser as its true and lawful attorney, with full power of
substitution, in the name of the Purchaser or any of the Asset Sellers, on
behalf, for the benefit and at the expense of the Purchaser, solely (a) to
collect all Purchased Assets, (b) to endorse, without recourse, checks, notes
and other instruments in connection with or attributable to the Purchased Assets
and the Assumed Liabilities, (c) to institute and prosecute all proceedings
which the Purchaser may deem proper in order to collect, assert or enforce any
claim, right or title in, to or under or otherwise attributable to the Purchased
Assets and the Assumed Liabilities, (d) to defend and compromise all actions,
suits or proceedings with respect to any of the Purchased Assets, as well as any
Assigned Contracts, or the Assumed Liabilities and (e) to do all such reasonable
acts and things with respect to the Purchased Assets, as well as any Assigned
Contracts, or the Assumed Liabilities as the Purchaser may deem advisable. The
foregoing powers are coupled with an interest and shall not be revocable by any
Asset Seller, directly or indirectly, by the dissolution of any Asset Seller or
in any other manner. The Purchaser shall retain for its own account any amounts
collected pursuant to the foregoing powers with respect to the Purchased Assets
and the Assigned Contracts, and each Asset Seller shall promptly pay to the
Purchaser any amounts received by such Seller after the Closing with respect to
the Purchased Assets and the Assigned Contracts.
1.7 SALES TAXES.
The Asset Sellers shall bear one-half and the Purchaser shall bear
one-half of any sales taxes, use taxes, transfer taxes, documentary charges,
recording fees, costs arising from the notarial deed required under German law
to consummate the transactions contemplated hereunder and under the Share
Transfer Agreement, or similar taxes, charges or fees that may become payable in
connection with the sale of the Share and the Purchased Assets to the Purchaser
(the "Transaction Taxes"). If the Asset Sellers pay less than one-half of the
total Transaction Taxes, NetOptix shall pay to the Purchaser a sum equal to the
difference between one-half of the total Transaction Taxes and the amount of
Transaction Taxes so paid by the Asset Sellers. If the Purchaser pays less than
one-half of the total Transaction Taxes, it shall pay to NetOptix a sum equal to
the difference between one-half of the total Transaction Taxes and the amount of
Transaction Taxes so paid by the Purchaser. The Asset Sellers and the Purchaser
shall timely pay the amount of Transaction Taxes they are obligated to pay to
the appropriate Governmental Entity, and NetOptix shall thereafter send evidence
to the Purchaser and the Purchaser shall send evidence to NetOptix that such
Transaction Taxes have been paid. The Asset Sellers and the Purchaser shall use
commercially reasonable efforts to reduce the total Transaction Taxes, including
applying for any reduction, rebate or refund of the Transactions Taxes available
under applicable Law. The amount of any such reduction, rebate or refund shall
be taken into consideration when calculating the total Transaction Taxes.
-7-
<PAGE> 18
1.8 DEFINITIONS.
Certain capitalized terms used and not otherwise defined in this Agreement
have the meanings given to them in SECTION 12.14.
ARTICLE II
ASSUMED LIABILITIES; EXCLUDED LIABILITIES
2.1 LIABILITIES BEING ASSUMED.
Upon the terms and subject to the conditions of this Agreement, effective
as of the Closing, and from and after the Closing, the Purchaser shall pay or
assume, perform and discharge when due, the following, and only the following,
Liabilities of the Asset Sellers (collectively, the "Assumed Liabilities"):
(a) all Liabilities accruing from and after the Closing Date under
the Assigned Contracts in accordance with their respective terms, but in each
case only to the extent such Assigned Contracts have been effectively assigned
and transferred to the Purchaser pursuant to the provisions hereof;
(b) the amount of all product warranty obligations arising in the
ordinary course of the Business which are accrued on or before Closing to accept
sales returns and to provide allowances to customers subsequent to the Closing
Date, up to not more than a total of $150,000 (the "Sales Return Liability");
(c) an aggregate of up to $60,000 of the Liabilities under the
registered mortgages (collectively, the "Canadian Mortgages") on the Canadian
Manufacturing Facility, one in favor of the Business Development Bank of Canada
and the other in favor of Caisse Populaire de St.-Luboire;
(d) commission obligations incurred by the Asset Sellers pursuant to
its existing agreements with sales personnel and distributors for sales of the
Products shipped by the Purchaser subsequent to the Closing Date based on orders
for the Products accepted by the Seller prior to the Closing Date; and
(e) all Liabilities relating to or arising out of the operation or
conduct of the Business from and after the Closing Date.
2.2 LIABILITIES NOT BEING ASSUMED.
(a) This Agreement is intended as and shall be deemed to be an
agreement for the sale and purchase of capital stock and assets and, except as
is specifically provided for in this Agreement, none of the provisions hereof
shall be deemed to create any obligation or liability of the Purchaser to any
Person that is not a party to this Agreement, whether under a third-party
beneficiary theory, successor liability theory or otherwise. Except as is
otherwise provided in this Agreement, the Purchaser shall not, as a result of
the execution and consummation of this Agreement, assume, discharge or become
liable for any of the liabilities, obligations, debts,
-8-
<PAGE> 19
contracts or other commitments of any of the Asset Sellers of any kind or nature
whatsoever, known or unknown, fixed, approved, contingent or otherwise, existing
on the Closing Date or arising out of any transaction entered into, or any state
of facts existing, prior to, at or subsequent to the Closing Date.
(b) Anything contained in this Agreement to the contrary
notwithstanding, the Purchaser is not assuming any Liabilities of the Asset
Sellers other than the Assumed Liabilities, whether or not relating to the
Purchased Assets or the Business, all of which Liabilities shall at and after
the Closing remain the exclusive responsibility and obligation of the Asset
Sellers (collectively, the "Excluded Liabilities"). Without limiting the
generality of the foregoing, the Purchaser is not assuming any of the following
Liabilities:
(c) any Liability of any Asset Seller under this Agreement;
(d) any Liability of any Asset Seller for expenses, Taxes or fees
incident to or arising out of the negotiation, preparation, approval or
authorization of this Agreement, the Related Documents or the consummation (or
preparation for the consummation) of the transactions contemplated hereby or
thereby (including all attorneys' and accountants' fees, and brokers' or
finders' fees incurred by or imposed upon any Asset Seller);
(e) any Liability of any Asset Seller for any account payable,
indebtedness or expense;
(f) any Liability of any Asset Seller with respect to any Taxes for
any period ending on or prior to the Closing Date (or the portion ending on the
Closing Date of any period that includes but does not end on the Closing Date);
(g) any Liability of any Asset Seller (A) arising by reason of any
violation or alleged violation of any Law or any requirement of any Governmental
Entity, (B) arising under any Environmental, Health and Safety Laws, including
those with respect to any Asset Seller's operation of any business or the
Purchased Assets (including any properties previously owned, leased or occupied
by any Asset Seller) or (C) arising by reason of any breach or alleged breach by
any Asset Seller of any Contract or Order, in any such case to the extent such
Liability results from or arises out of events, facts or circumstances occurring
or existing on or prior to the Closing, notwithstanding that the date on which
any Proceeding or Claim is commenced or made is after the Closing;
(h) except as provided in SECTION 2.1(B) above, any Liability for
the return by any customer of any Asset Seller of a product manufactured or sold
by any Asset Seller on or prior to the Closing or any Liability or Claim for any
product or service manufactured, sold, distributed or performed, as the case may
be, by any Asset Seller on or prior to the Closing based on any express
warranty, oral or written, or any implied warranty arising due to the statements
or conduct of any Asset Seller or its employees or agents;
(i) any Liability of any Asset Seller for which the Purchaser may
become liable as a result of or in connection with the failure by any Asset
Seller to fully and properly comply with any applicable bulk sales or transfers
laws, including but not limited to any liability in connection with
non-compliance with the Bulk Sales Law of Quebec.
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(j) any Liability of any Asset Seller arising out of the injury to
or death of any person, or damage to or destruction of any property, whether
based on negligence, breach of warranty, strict liability, enterprise liability
or any other legal or equitable theory arising from or related to products (or
parts of components thereof) distributed or otherwise disposed of or for
services performed by any Asset Seller, to the extent any of such Liabilities
result from or arise out of events, facts or circumstances occurring or existing
on or prior to the Closing, notwithstanding that the date on which any
Proceeding or Claim is commenced or made is after the Closing;
(k) any Liability of any Asset Seller relating to any Proceeding
arising out of or in connection with its conduct of the Business or any other
business prior to the Closing or any other conduct of any Asset Seller's
officers, directors, employees, stockholders, consultants, agents or advisors,
whether or not disclosed on the Schedules hereto;
(l) except as provided in SECTION 7.10(a)(i), any Liability of any
Asset Seller for severance pay or the like with respect to any employee of any
Asset Seller;
(m) except as provided in SECTION 7.10(a)(i), any Liability relating
to a contractual obligation of any Asset Seller, whether written or oral, for
bonuses or like payments to any director, officer or employee of any Asset
Seller for the period ending on or prior to the Closing;
(n) any Liability relating to any Employee Benefit Plan of the Asset
Sellers;
(o) any Liability of any Asset Seller for worker's compensation
based on an event occurring on or prior to the Closing Date;
(p) any Liability of any Asset Seller which relates to the Excluded
Assets; and
(q) any other Liability of any Asset Seller not expressly assumed by
the Purchaser under SECTION 2.1 (including any Liabilities arising out of
transactions entered into at or prior to the Closing, any action or inaction at
or prior to the Closing or any state of facts existing at or prior to the
Closing, regardless of when asserted, which are not expressly described in
SECTION 2.2).
Each Asset Seller acknowledges that it is retaining the Excluded
Liabilities, and the Asset Sellers shall pay, discharge and perform all Excluded
Liabilities promptly when due.
In addition, the Purchaser is not responsible for any Liability of
Leisegang GmbH (i) accruing on or before the Closing which is not reflected as a
Liability on its Statement of Assets and Liabilities and (ii) any Liabilities
not included in the Statement of Assets and Liabilities with respect to the
termination by Leisegang GmbH of the nine (9) employees pursuant to SECTION
7.10(a)(iii) that accrue after the Closing. All such Liabilities described in
clauses (i) and (ii) shall be "Excluded Liabilities" for all purposes hereunder.
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ARTICLE III
PURCHASE PRICE; PURCHASE PRICE ADJUSTMENT
3.1 PURCHASE PRICE.
Subject to SECTION 3.3, as the aggregate consideration for the sale of the
Share and the Purchased Assets to the Purchaser:
(a) at the Closing, the Purchaser shall pay (i) to NetOptix by wire
transfer of immediately available funds, $9,000,000, minus an amount equal to
the Gross Margin Shortfall described on SCHEDULE 3.1, if any, and (ii) to the
Escrow Agent by wire transfer of immediately available funds, $1,000,000 (the
"Escrow Amount") which shall be deposited in escrow as hereinafter provided; and
(b) at the Closing, the Purchaser shall assume the Assumed
Liabilities.
The "Purchase Price" means $10,000,000, as adjusted pursuant to SECTION
3.3, less the Gross Margin Shortfall plus the amount of the Assumed Liabilities.
3.2 ESCROW CONTRIBUTION.
At the Closing, the Escrow Amount shall be deposited by the Purchaser into
an escrow account (the "Escrow Account") with Chase Bank, N.A. (the "Escrow
Agent") to be established and distributed in accordance with the terms and
conditions set forth in this Agreement and the escrow agreement, which shall be
in substantially the form attached hereto as EXHIBIT C (the "Escrow Agreement").
The amount in the Escrow Account is called the "Escrow Fund".
3.3 PURCHASE PRICE ADJUSTMENT.
(a) Preparation of Closing Statements.
(i) As of the Closing, the Purchaser shall (A) take a physical
inventory ("Physical Inventory") of all the Inventory and of the inventory
owned by Leisegang GmbH (collectively, the "Sellers' Inventory") in a
manner to be agreed upon by NetOptix and the Purchaser (which may be
observed by NetOptix), (B) prepare a written statement which sets forth
the value as of the Closing of the Sellers' Inventory and the Net
Receivables for each Asset Seller (the "Inventory and Receivables
Statement") and (C) prepare a statement which sets forth the value as of
the Closing of the assets and liabilities of Leisegang GmbH (the
"Statement of Assets and Liabilities"). The Purchaser shall deliver to
NetOptix within sixty (60) days of Closing the Inventory and Receivables
Statement and the Statement of Assets and Liabilities.
(ii) The Sellers' Inventory and Net Receivables and the assets
and liabilities of Leisegang GmbH on the Statement of Assets and
Liabilities shall be determined in accordance with GAAP, each as modified
in accordance with the methodology set forth on SCHEDULE 3.3(a)(i) and as
follows:
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(A) Liabilities in the Leisegang GmbH Statement of
Assets and Liabilities shall reflect all Liabilities with respect to
the employee terminations required by SECTION 7.10 that have not
been fully paid by the Sellers by the Closing Date;
(B) all intercompany Receivables and other assets and
all intercompany Liabilities shall be eliminated or released; and
(C) No Sales Return Liability shall be accrued on the
Statement of Assets and Liabilities.
(iii) "Net Receivables" means the sum of trade accounts
receivable as of the Closing included in the Purchased Assets and on the
Statement of Assets and Liabilities (determined in accordance with GAAP)
minus, in each case, reserves for doubtful trade accounts receivable (such
reserves to be calculated in accordance with GAAP based on the historical
experience of each Seller).
(b) Review of the Closing Statements.
Promptly after the Inventory and Net Receivables Statement and the
Statement of Assets and Liabilities (collectively, the "Closing Statements") are
delivered to NetOptix pursuant to SECTION 3.3(a), NetOptix shall conduct an
examination of the Closing Statements. The Purchaser shall give NetOptix and its
Representatives timely and reasonable access to such of the Purchaser's working
papers, documents, financial information and other information used in the
preparation of the Closing Statements as NetOptix reasonably deems necessary or
desirable in connection with such examination. NetOptix shall complete its
examination of the Closing Statements during the Examination Period. The
"Examination Period" shall commence upon delivery by the Purchaser to NetOptix
of the Closing Statements and end on the earliest of (i) thirty (30) days after
such delivery, (ii) the date NetOptix delivers a Closing Statement Objection
Notice to the Purchaser and (iii) the date NetOptix notifies the Purchaser that
NetOptix accepts the Closing Statements. The Closing Statements as prepared by
the Purchaser and examined by NetOptix shall be conclusive and binding on the
parties hereto for purposes of this Agreement, subject to the resolution of any
disputes in accordance with SECTION 3.3(c).
(c) Disputes.
NetOptix may object to the Closing Statements during the Examination
Period by providing the Purchaser a written notice describing in reasonable
detail NetOptix's objections to any item or valuation on the Closing Statements
(an "Objection Notice"). NetOptix's failure to deliver an Objection Notice to
the Purchaser within thirty (30) days after the Purchaser's delivery of the
Closing Statements to NetOptix shall constitute NetOptix's binding acceptance of
such statements and all matters identified therein. If NetOptix and the
Purchaser fail to resolve any objection described on an Objection Notice within
ten (10) days after the date the Objection Notice is delivered to the Purchaser,
then, at the request of either NetOptix or the Purchaser, they shall meet in an
attempt to resolve an objection described on the Objection Notice and reach a
written agreement (the "Settlement Agreement"). If the parties enter into a
Settlement Agreement, the Closing Statements shall be deemed to be as agreed
therein. If the parties are
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<PAGE> 23
unable to resolve the objection described on the Objection Notice within twenty
(20) days after receipt by Purchaser of such Objection Notice, then NetOptix and
the Purchaser shall select an independent accounting firm of recognized national
standing (or, if the parties cannot agree upon a selection, they shall select
such accounting firm by lot from among the five largest accounting firms in the
United States) which shall resolve such objection as promptly as possible. The
accounting firm selected shall not at the time of selection be performing
services for either the Purchaser or any Seller. A decision by the independent
accounting firm as to the resolution of such objection shall be (absent an
agreement of the parties regarding an error that is manifest) conclusive and
binding upon the parties for purposes of this Agreement (the "Accountant's
Determination"). The Accountant's Determination shall be (1) in writing, (2)
made in accordance with GAAP as modified by the standards provided for in this
Agreement for the Closing Statements and (3) nonappealable and incontestable by
NetOptix and the Purchaser and each of their respective Affiliates and
successors and not subject to collateral attack for any reason. All fees and
costs payable to the independent accounting firm referred to in this SECTION
3.3(c) shall be borne one-half by the Purchaser and one-half by the Asset
Sellers.
(d) Additional Payments.
(i) If the value of the Sellers' Inventory and the Net
Receivables and the cash on the Statement of Assets and Liabilities is in
the aggregate greater than $4,800,000, then the Purchaser shall pay to
NetOptix an amount equal to the excess over $4,800,000 of the value of the
Sellers' Inventory and the Net Receivables and the cash on the Statement
of Assets and Liabilities. If such value of the Sellers' Inventory and Net
Receivables and the cash on the Statement of Assets and Liabilities is in
the aggregate less than $4,800,000, then NetOptix shall pay to the
Purchaser an amount equal to the excess of $4,800,000 over such value.
(ii) If the value of all Liabilities of Leisegang GmbH on the
Statement of Assets and Liabilities is greater than $500,000, then
NetOptix shall pay to the Purchaser an amount equal to the excess over
$500,000 of the amount of such Liabilities. If such value of such
Liabilities is less than $500,000, then the Purchaser shall pay to
NetOptix an amount equal to the excess of $500,000 over such value.
(iii) Net Payments due from NetOptix under this paragraph
shall first be satisfied from any balance in the Escrow Fund to the extent
available. Any excess due over the amount available in the Escrow Fund
shall be paid by NetOptix.
(iv) Each value referred to in subparagraph (i) and (ii) above
shall be as determined in the Closing Statements or, in the case of a
dispute, as determined in a Settlement Agreement or in the Accountant's
Determination.
(v) All payments to be made pursuant to this SECTION 3.3(d)
shall be made by wire transfer of immediately available funds.
(vi) Payments due pursuant to this SECTION 3.3 shall bear
interest at the rate of 10% per annum from and after the 45th day
following the Closing Date until paid in full. Any interest payable by the
Purchaser to NetOptix under this clause (vi) shall be
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<PAGE> 24
reduced by interest accruing on the Escrow Fund for the same period as the
period during which such interest accrues.
(e) Schedule of Payments. Any payments required to be made pursuant
to SECTION 3.3(d) shall be made as follows: (i) if NetOptix shall not have
delivered an Objection Notice to the Purchaser in accordance with the provisions
of SECTION 3.3(c), then the payment required to be made pursuant to SECTION
3.3(d) shall be made no later than five (5) days after the end of the
Examination Period, and (ii) if NetOptix shall have delivered an Objection
Notice to the Purchaser in accordance with the provisions of SECTION 3.3(c),
then payment of any undisputed amounts shall be paid no later than five (5) days
after the end of the Examination Period, and the payment required to be made
pursuant to SECTION 3.3(d) with respect to any disputed amounts shall be made
within five (5) days after the resolution of the dispute, whether by the
Settlement Agreement or upon the Accountant's Determination.
3.4 ALLOCATION OF PURCHASE PRICE.
(a) $2,750,000 of the Purchase Price shall be allocated to the
Share.
(b) The portion of the Purchase Price attributable to the Purchased
Assets shall be allocated to the Purchased Assets sold by each Asset Seller in
accordance with the allocation set forth in SCHEDULE 3.4 hereto (the "Statement
of Allocation"). Within 90 days after the Closing, NetOptix shall:
(i) complete and execute a Form 8594 Asset Acquisition
Statement under Section 1060 of the Internal Revenue Code of 1986, as
amended (the "Code"), consistent with the Statement of Allocation; and
(ii) deliver a copy of such form to the Purchaser.
(c) The Purchaser and the Asset Sellers shall file a copy of such
form with their respective tax returns, as the case may be, for the period which
includes the Closing Date.
ARTICLE IV
CLOSING
(a) The closing of the sale of the Purchased Assets to the Purchaser
and the transactions contemplated hereby (the "Asset Closing") shall take place
at the offices of O'Sullivan Graev & Karabell, LLP, 30 Rockefeller Plaza, New
York, New York, on January 31, 2000 or such later date which is no later than
two days after the date that all closing conditions set forth in SECTIONS 8.1
and 8.2 have been satisfied or waived or on such other date to which NetOptix
and the Purchaser mutually agree (the "Closing Date").
(b) Simultaneously with the closing of the sale of the Purchased
Assets, the closing of the sale of the Share to the Purchaser (the "Share
Closing", and together with the Asset Closing, the "Closing") shall take place
at the offices of the notary in Germany delivering the notarial deed under the
Share Transfer Agreement.
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<PAGE> 25
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
The Sellers, jointly and severally, represent and warrant to the
Purchaser as follows:
5.1 ORGANIZATION; GOOD STANDING; QUALIFICATION AND POWER.
Each Seller is a corporation duly organized, validly existing and in good
standing under the Laws of the jurisdiction of its incorporation as set forth on
SCHEDULE 5.1, has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted and,
except as set forth on SCHEDULE 5.1, is duly qualified and in good standing to
do business in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary, each
of which jurisdictions is set forth on SCHEDULE 5.1. NetOptix has delivered to
the Purchaser true and complete copies of each Seller's certificate of
incorporation (or comparable organizational document) (each, a "Charter") and
by-laws (or comparable organization document) ("By-laws"), in each case as
amended to the date hereof.
5.2 EQUITY INVESTMENTS OF LEISEGANG GmbH.
Except as set forth on SCHEDULE 5.2, Leisegang GmbH has never had, nor
does it currently have, any subsidiaries, nor has it ever owned, nor does it
currently own or have options or rights to purchase, any capital stock or other
equity or proprietary interest, directly or indirectly, in any Person.
5.3 CAPITAL STOCK OF LEISEGANG GmbH; OWNERSHIP.
(a) The authorized capital stock or stated capital of Leisegang GmbH
consists of one share of common stock, of which only the Share is outstanding.
The Share is validly issued, fully paid and non-assessable. Except as set forth
on SCHEDULE 5.3, there are no securities presently outstanding, and on the
Closing Date there will not be any outstanding securities, which are convertible
into, exchangeable for, or carrying the right to acquire, equity securities of
Leisegang GmbH, or subscriptions, warrants, options, calls, puts, convertible
securities, registration or other rights, arrangements or commitments obligating
Leisegang GmbH to issue, sell, register, purchase or redeem any of its equity
securities or any ownership interest or rights therein. There are no voting
trusts or other agreements or understandings to which Leisegang GmbH is bound
with respect to the voting of Leisegang GmbH capital stock. There are no stock
appreciation rights, phantom stock rights or similar rights or arrangements
outstanding. Except as set forth on SCHEDULE 5.3, there are no Contracts,
commitments, arrangements, understandings, or restrictions to which Leisegang
GmbH or any other Person is bound relating to any shares of capital stock or
other securities of Leisegang GmbH.
(b) NetOptix has good and marketable title to, and is the lawful
record and beneficial owner of, the Share. NetOptix owns the Share free and
clear of all adverse claims and other Encumbrances. Upon the delivery of the
Share Transfer Agreement with respect to the Share and completion of all action
that is required thereunder in the manner contemplated under
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<PAGE> 26
SECTION 1.3(a), the Purchaser will acquire the beneficial and legal, valid and
indefeasible title to the Share, which at such time will represent all of the
issued and outstanding capital stock of Leisegang GmbH.
5.4 AUTHORITY; NONCONTRAVENTION; CONSENTS.
(a) Each Seller has all the requisite corporate power and authority
to enter into this Agreement and each Related Document to which it is a party,
to perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance of this Agreement and each Related Document to which such Seller is
a party 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 such Seller. This Agreement and each Related Document to which each
Seller is a party has been or will be at or prior to the Closing duly and
validly executed and delivered by such Seller and is or will be the valid and
binding obligation of such Seller, enforceable against each Seller in accordance
with its terms.
(b) Neither the execution, delivery and performance of this
Agreement and each Related Document to which each Seller is a party nor the
consummation by such Seller of the transactions contemplated hereby or thereby
nor compliance by such Seller with any provision hereof or thereof shall (i)
conflict with, or result in any violations of, or cause a default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, amendment, cancellation or acceleration of any obligation contained
in or the loss of any material benefit under, or result in the creation of any
Encumbrance upon any of the properties or assets of such Seller under any term,
condition or provision of (x) such Seller's Charter or the By-laws or (y) except
as set forth on SCHEDULE 5.4(b), any Contract to which such Seller is a party or
by which its properties or assets are bound, or (ii) violate any Laws applicable
to such Seller or any of its properties.
(c) Except as set forth on SCHEDULE 5.4(c), no consent, approval,
Order or authorization of, registration, declaration or filing with, or
notification to any court, administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, Federal, state
or local (a "Governmental Entity") or any other third Person is required in
connection with the execution, delivery and performance by each Seller of this
Agreement or the Related Documents to which it is a party or the consummation of
the transactions contemplated hereby or thereby.
5.5 SEC FILINGS: FINANCIAL STATEMENTS.
(a) Except as disclosed in SCHEDULE 5.5(a), all forms, reports,
statements and other documents required to be filed by NetOptix (including those
filed under its prior name, Galileo Corporation) with the SEC since September
30, 1996 (excluding the exhibits filed therewith) (the "Seller SEC Reports") (i)
were prepared in all material respects in accordance with the applicable
requirements of the Securities Act, or the Securities Exchange Act, as the case
may be, and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in
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<PAGE> 27
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. The Seller SEC Report filed on Form 10-Q
with the SEC with respect to the fiscal quarter ended June 30, 1999 is referred
to as the "Latest Seller SEC Report".
(b) The consolidated financial statements (including, in each case,
any related notes or schedules thereto) contained in the Latest Seller SEC
Report were prepared in accordance with GAAP applied on a consistent basis
throughout the periods involved (except as may be indicated therein or in the
notes thereto or, in the case of unaudited interim financial statements, as
permitted by Form 10-Q of the SEC), and fairly presented in all material
respects the consolidated financial position of NetOptix and its consolidated
subsidiaries as at the respective dates thereof and the consolidated results of
its operations and cash flows for the periods indicated, except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments.
(c) NetOptix has previously delivered to the Purchaser the unaudited
balance sheets of Leisegang, Galenica and Leisegang GmbH, each as of June 30,
1999 and September 30, 1998 and 1997, and the related statements of income,
shareholders' equity, cash flows and supplemental data for periods then ended
(collectively, the "Subsidiary Financial Statements"). The unaudited balance
sheets of Leisegang, Galenica and Leisegang GmbH, each as of June 30, 1999, are
called the "Latest Subsidiary Balance Sheet".
(d) Since June 30, 1999, except as required by applicable Law or
GAAP, there has been no change in (i) any accounting principle, procedure or
practice followed by any Seller or (ii) the method of applying any such
principle, procedure or practice.
(e) Except as set forth on SCHEDULE 5.5(e), the Subsidiary Financial
Statements (x) are in accordance with the books and records of Leisegang,
Galenica and Leisegang GmbH (which have been maintained in accordance with good
business practices and are true and complete in all material respects), fairly
present the financial condition of Leisegang, Galenica and Leisegang GmbH as at
the respective dates indicated and at the Latest Balance Sheet Date, their
liabilities, and the results of operations, shareholders' equity and cash flows
of Leisegang, Galenica and Leisegang GmbH for the respective periods indicated
and (y) have been prepared in accordance with GAAP (or with respect to Galenica
and Leisegang GmbH, the local domestic equivalent of GAAP) consistently applied
throughout the periods covered thereby except, with respect to the unaudited
Financial Statements, for normal year-end adjustments (none of which will be
material) and for the absence of footnotes.
5.6 ROYALTIES.
No Seller has any obligations to third Persons for royalties related to
the Business and the Products.
5.7 ABSENCE OF UNDISCLOSED LIABILITIES.
Except as set forth on SCHEDULE 5.7, the Sellers have no material
Liability and each of Leisegang, Galenica and Leisegang GmbH has no material
Liability, except for (i) Liabilities of the Sellers reflected on the Latest
Seller SEC Report and Liabilities of each of Leisegang, Galenica and Leisegang
GmbH reflected on its Latest Subsidiary Balance Sheet, and (ii)
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<PAGE> 28
Liabilities that have arisen since June 30, 1999 in the ordinary course of
business (none of which relates to breach of contract, breach of warranty, tort,
infringement, violation of Law, or any action, suit or Proceeding (including any
Liability under any Environmental, Health and Safety Laws)). All reserves set
forth on the Latest Seller SEC Report and each Latest Subsidiary Balance Sheet
were and are adequate for the purposes indicated therein at and after June 30,
1999. There are no loss contingencies (as such term is used in Statement of
Financial Accounting Standards No. 5 issued by the Financial Accounting
Standards Board in March 1975) that are not adequately provided for on the
Latest Seller SEC Report and each Latest Subsidiary Balance Sheet. Except as set
forth on SCHEDULE 5.7, each Seller has not, either expressly or by operation of
law, assumed or undertaken any Liability of any other Person, including, without
limitation, any obligation for corrective or remedial action relating to
Environmental, Health and Safety Laws.
5.8 ABSENCE OF CHANGES.
Except as set forth on SCHEDULE 5.8, since the date of the Latest Seller
SEC Report, each Seller has been operated in the ordinary course, consistent
with past practice, and there has not been:
(a) any change, other than an immaterial change, in the business,
operations, assets, condition (financial or otherwise), operating results,
liabilities, employee relations or business prospects of the Business or any
casualty loss or damage to the assets of any Seller, whether or not covered by
insurance;
(b) any change in the customers, suppliers or the personnel of any
Seller other than such routine changes which occur in the ordinary course of
business and consistent with past practice;
(c) any Liability including indebtedness (whether absolute, accrued,
contingent or otherwise and whether due or to become due) incurred, or any
transaction, contract or commitment entered into, amended or terminated, with
respect to any Seller, other than items incurred or entered into on an arms'
length basis in the ordinary course of business and consistent with past
practice;
(d) any acceleration, payment, discharge or satisfaction of any
Liability (including any claim) or Encumbrance by any Seller (whether fixed or
contingent, matured or unmatured), except on an arms' length basis in the
ordinary course of business and consistent with past practice;
(e) any declaration, setting aside or payment of any distribution
with respect to any shares of capital stock of any Seller, or any direct or
indirect redemption, purchase or other acquisition of any thereof, or any other
payments of any nature to any Affiliate of any Seller whether or not on or with
respect to any shares of capital stock of any Seller owned by such Affiliate;
(f) any issuance or sale, or any Contract entered into for the
issuance or sale, of any shares of capital stock of a Foreign Subsidiary or
securities convertible or exchangeable into or exercisable for such capital
stock;
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<PAGE> 29
(g) any labor trouble, problem or grievance adversely affecting the,
assets or prospects of the Business or of any Seller, or, to the Best Knowledge
of the Sellers, any basis for the occurrence of any such trouble, problem or
grievance;
(h) any license, sale, transfer, pledge, mortgage, or other
disposition of any tangible or intangible asset of Leisegang GmbH or any Asset
Seller related to the Business, except on an arms' length basis in the ordinary
course of business and consistent with past practice; (i) any write-down or
write-up of the value of any inventory of Products of any Seller or any
write-off as uncollectible of any accounts or notes receivable of any Seller
related to the Business, or any portion thereof, or any amendment or waiver or
termination of any claims or rights of value of the Business;
(j) any general uniform increase in the compensation of employees of
the Foreign Subsidiaries (including, without limitation, any increase pursuant
to any bonus, pension, profit-sharing or other plan or commitment), any increase
in any such compensation payable to any officer, employee, consultant or agent
thereof, the establishment or institution of any employee benefit plan or
arrangement, the entering into by any of the Sellers of any employment Contract
with any officer or employee, or the making of any loan to, or, engagement in
any transactions with, any officer, director or employee of Leisegang or the
Foreign Subsidiaries;
(k) any single capital expenditure of any Seller related to the
Business or commitment therefor in excess of $25,000 for additions to property,
plant or equipment;
(l) any change in the tax or other accounting methods or practices
(including any material Tax election) followed by any Seller or any change in
depreciation or amortization policies or rates previously adopted;
(m) any change in the manner in which Products or services of any
Seller related to the Business are marketed (including, without limitation, any
change in prices), or any change in the manner in which any Seller with respect
to the Business extends discounts or credit to customers or otherwise deals with
such customers;
(n) any forward purchase commitments of the Business in excess of
the requirements of any Seller's historical practices or normal operating
inventories or needs, or at prices higher than current market prices;
(o) any forward sales commitments of any Seller for the Business at
prices lower than current market prices, or commitments of any Seller for the
Business for the sale of merchandise or services in excess of the ability of a
Seller to fulfill the same at its normal profit margin;
(p) any termination of employment of any officer or key employee of
a Foreign Subsidiary or any expression of intention by any such officer or key
employee to terminate such employment with such Seller;
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(q) any failure by a Seller to operate the Business in the ordinary
course consistent with past practice, including any failure by such Seller to
make capital expenditures or investments or any failure to pay trade accounts
payable or any other obligation or liability of such Seller when due;
(r) any action or contemplated action which would or could require a
Foreign Subsidiary to pay, accrue or establish a reserve for the payment of any
severance, termination or similar obligation to any current or former employee;
(s) any account of any Seller in respect of the Business in excess
of $25,000 subsequent to the date of the Latest Seller SEC Report (i) which has
become delinquent in its payment, (ii) which has had asserted against it any
claim, refusal to pay or right of set-off, or has been made subject to
provisions for retainage of payments, (iii) the account debtor of which has
refused or threatened to refuse to pay for any reason, (iv) the account debtor
of which has become insolvent or bankrupt or (v) which has been pledged to any
third Person;
(t) any agreement by or on behalf of Leisegang GmbH to make any
charitable contribution or to incur any nonbusiness expense in excess of $1,000
in the aggregate;
(u) any other transaction entered into by any Seller other than in
the ordinary course of its business and consistent with past practice which has
had or might have an adverse effect on the Business or prospects of the Business
or which involves aggregate payments related to the Business to or by such
Seller in excess of $25,000; or
(v) any agreement, whether in writing or otherwise, to take any of
the actions specified in the foregoing clauses (a) through (u).
5.9 TAX MATTERS; CERTAIN DEFINITIONS.
(a) Except as set forth on SCHEDULE 5.9(a), the Sellers and each
other Person included in any consolidated or combined Tax Return or part of an
affiliated group, within the meaning of Section 1504 (without regard to Section
1504(b)) of the Code, of which each Seller is or has been a member,
(i) has timely paid or caused to be paid all Taxes (as defined
below) required to be paid by it through the date hereof (including any
Taxes shown due on any Tax Return (as defined below));
(ii) has filed or caused to be filed in a timely manner
(within any applicable extension periods) all Tax Returns required to be
filed by it with the appropriate Governmental Entities in all
jurisdictions in which such Tax Returns are required to be filed; and
(iii) has not requested or caused to be requested any
extension of time within which to file any Tax Return, which Tax Return
has not since been filed.
(b) True, correct and complete copies of all Tax Returns filed by or
on behalf of each of the Sellers for the three most recent completed Tax years
of the Sellers have been
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delivered to or made available to the Purchaser. As of the time of filing, such
Tax Returns were complete and correctly reflected in all respects the facts
regarding the income, business, assets, operations, activities and status of the
Sellers and any other information required to be shown therein. All Taxes shown
to be due on such Tax Returns have been timely paid in full. The Sellers'
federal, state and foreign taxpayer identification numbers are listed on
SCHEDULE 5.9(b).
(c) Except as set forth in SCHEDULE 5.9(c):
(i) no Seller has been notified by the Internal Revenue
Service (the "IRS") or any other taxing authority that any issues have
been raised (and are currently pending) by the IRS or any other taxing
authority in connection with any Tax Return of the Sellers, and no waivers
of statutes of limitations have been given or requested with respect to
the Sellers;
(ii) there are no pending Tax audits of any Tax Returns of any
of the Sellers, and no unresolved questions or claims concerning any
Sellers' Tax Liability exist;
(iii) no Tax liens exist for any Taxes upon any of the
property or assets of any of the Sellers, other than liens for Taxes not
yet due, and no deficiency or addition to Taxes, interest or penalties for
any Taxes has been proposed, asserted or assessed against any of the
Sellers or any member of any affiliated or combined group of which any of
the Sellers was or is a member;
(iv) full and adequate provision has been made (A) on the
Latest Seller SEC Report and the Latest Subsidiary Balance Sheet, and the
books and records of each Seller for all Taxes payable by the Sellers for
all periods prior to the date of the Latest Seller SEC Report, and (B) on
the books and records of the Sellers for all Taxes payable by each Seller
for all periods beginning on or after the date of the Latest Seller SEC
Report;
(v) no Seller has nor shall it incur any Tax Liability or
obligation, whether direct or indirect, from and after the date of the
Latest Seller SEC Report other than Taxes incurred in the ordinary course
of business and consistent with previous years and past practices;
(vi) no Seller (A) has made an election to be treated as a
"consenting corporation" under Section 341(f) of the Code or (B) is or has
been a "personal holding company" within the meaning of Section 542 of the
Code;
(vii) each Seller (including all predecessors thereof) has
complied in all respects with all applicable Laws relating to the
collection or withholding of Taxes (such as sales Taxes or withholding of
Taxes from the wages of employees), and no Seller has been and is liable
for any Taxes for failure to comply with such Laws;
(viii) no Seller is or has ever been a party to any Tax
sharing agreement with any Person;
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(ix) no Seller has agreed to and is required to make any
adjustments or changes to its accounting methods pursuant to Section 481
of the Code, and the IRS has not proposed any such adjustments or changes
in the accounting methods of such Seller;
(x) no claim has ever been made by any Taxing authority in a
jurisdiction in which any Seller does not file Tax Returns that any Seller
is or may be subject to taxation by that jurisdiction;
(xi) no Seller has made an election to have the provisions of
Section 1362(a) of the Code (relating to the taxation of S corporations)
made applicable to it; and
(xii) Neither NetOptix nor Leisegang is a foreign Person
within the meaning of Section 1.1445-2(b) of the rules and regulations
promulgated under Section 1445 of the Code, and the Purchaser has been or
shall at Closing be furnished with a true and accurate certificate of each
such Seller so stating which complies in all respects with
Section 1.1445-2(b)(2) of such rules and regulations; and
(xiii) Neither of the Foreign Subsidiaries is or has been (A)
a foreign personal holding company for purposes of Section 552 of the
Code, (B) a passive foreign investment company for purposes of Section
1297 of the Code, or (C) in receipt of Subpart F income as defined in
Section 952 of the Code.
(d) "Taxes" means, with respect to any Person, (i) all income taxes
(including any tax on or based upon net income, gross income, income as
specially defined, earnings, profits or selected items of income, earnings or
profits) and all gross receipts, sales, use, ad valorem, transfer, franchise,
license, withholding, payroll, employment, excise, severance, stamp, occupation,
premium, property or windfall profits taxes, alternative or add-on minimum
taxes, customs duties and other taxes, fees, assessments or charges of any kind
whatsoever, together with all interest and penalties, additions to tax and other
additional amounts imposed by any taxing authority (domestic or foreign) on such
Person (if any) and (ii) any liability for the payment of any amount of the type
described in clause (i) above as a result of (A) being a "transferee" (within
the meaning of Section 6901 of the Code or any other applicable Law) of another
Person, (B) being a member of an affiliated, combined or consolidated group or
(C) a contractual arrangement or otherwise. "Tax Return" means any return,
declaration, report, claim for refund, or information return or statement
relating to Taxes, including any schedule or attachment thereto, and including
any amendment thereof.
5.10 TITLE TO ASSETS, PROPERTIES AND RIGHTS AND RELATED MATTERS.
Each Seller has good title to the Intellectual Property Rights of such
Seller as provided in SECTION 5.11 and to all other assets, properties and
interests in properties, real, personal or mixed, reflected on the Latest Seller
SEC Report or the Latest Subsidiary Balance Sheet or acquired after the date of
the Latest Seller SEC Report which is necessary or required for their conduct of
the Business as currently conducted and as currently proposed to be conducted
(except inventory or other property sold or otherwise disposed of since the date
of the Latest Seller SEC Report in the ordinary course of business and accounts
receivable and notes receivable paid in full subsequent to such date), free and
clear of all Encumbrances, of any kind or character, except for
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Permitted Encumbrances. There does not exist any condition which materially
interferes with the economic value or use of any such assets. Except for
inventory and supplies in transit in the ordinary course of business and except
as set forth on SCHEDULE 5.10(a), all material tangible personal property is
located on the premises of each Seller.
5.11 INTELLECTUAL PROPERTY.
(a) Except in each case as set forth on SCHEDULE 5.11(a):
(i) each Seller owns, has the right to use, sell, license and
dispose of, and has the right to bring actions for the infringement of,
all Intellectual Property Rights (as defined below) (collectively, the
"Owned Requisite Rights"), other than those Intellectual Property Rights
for which such Seller has a valid license, all of which are listed on
SCHEDULE 5.11(a) (collectively, the "Licensed Requisite Rights"; and
together with the Owned Requisite Rights, the "Requisite Rights"), and
such rights to use, sell, license, dispose of and bring actions are
exclusive with respect to the Owned Requisite Rights;
(ii) each Seller's Requisite Rights, all of which are listed
on SCHEDULE 5.11(a), are sufficient for its conduct of its Business as
currently conducted;
(iii) each Seller has made timely and proper application for
issuance of letters of patent in the United States for all patentable
inventions included within its Owned Requisite Rights;
(iv) there are no royalties, honoraria, fees or other payments
payable by any Seller to any Person by reason of the ownership, use,
license, sale or disposition of each Seller's Owned Requisite Rights or
Licensed Requisite Rights;
(v) no activity, service or procedure currently conducted or
proposed to be conducted by any Seller violates or shall violate any
contract, instrument, license, commitment, lease or similar document of
any Seller with any third Person relating to any Intellectual Property
Rights, all of which are listed on SCHEDULE 5.11(a), or infringe any
Intellectual Property Rights of any other Person;
(vi) each Seller has taken the steps described on SCHEDULE
5.11(a) designed to safeguard and maintain (i) the secrecy and
confidentiality of confidential or proprietary information and (ii) the
proprietary rights of such Seller in all of its Owned Requisite Rights;
(vii) to the Best Knowledge of the Sellers, no Seller has
interfered with, infringed upon, misappropriated or otherwise come into
conflict with any Intellectual Property Rights of any Person or committed
any acts of unfair competition, and no Seller has received from any Person
in the past five years any notice, charge, complaint, claim or assertion
thereof, and no such claim is impliedly threatened by an offer to license
from another Person under a claim of use; and
(viii) no Seller has sent to any Person in the past five
years, or otherwise communicated in writing to any Person, any notice,
charge, complaint, claim or other
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assertion of any present, impending or threatened infringement by or
misappropriation of, or other conflict with, any Intellectual Property
Rights of any Seller by such other Person or any acts of unfair
competition by such other Person, nor, to the Best Knowledge of the
Sellers, is any such infringement, misappropriation, conflict or act of
unfair competition occurring or threatened.
(b) SCHEDULE 5.11(b) contains a true and complete list of all
applications, filings and other formal actions made or taken pursuant to any
Laws by each Seller to perfect or protect its interest in its Intellectual
Property Rights, including, without limitation, all patents, patent
applications, trademarks, trademark applications, servicemarks and servicemark
applications.
(c) "Intellectual Property Rights" means all intellectual property
rights, including patents, patent applications, trademarks, trademark
applications, tradenames, servicemarks, servicemark applications, domain names
and applications therefor, trade dress, logos and designs and goodwill connected
with the foregoing, copyrights and copyright rights, know-how, trade secrets,
proprietary processes and formulae, confidential information, franchises,
licenses, inventions, instructions, marketing materials and all documentation
and media constituting, describing or relating to the foregoing, including
software, manuals, memoranda and records. Intellectual Property Rights for the
Asset Sellers is limited to those related to the Business and does not include
those Intellectual Property Rights associated solely with the Excluded Assets.
5.12 AGREEMENTS, NO DEFAULTS, ETC.
(a) SCHEDULE 5.12 contains a true and complete list and brief
description of all written or oral Contracts to which each Seller is a party and
(x) which were entered into or made outside the ordinary course of the business
of Leisegang GmbH or, with respect to the Asset Sellers, outside the ordinary
course of the Business or (y) which were entered into or made in the ordinary
course and are described in clauses (i) through (xx) of this SECTION 5.12 (each,
a "Contract" and collectively, the "Contracts"). Except as set forth on SCHEDULE
5.12, neither Leisegang GmbH nor any Asset Seller in respect of the Business is
a party to any of the following:
(i) distributorship, dealer, sales, advertising, agency,
manufacturer's representative or other Contract relating to the payment of
a commission;
(ii) collective bargaining agreement or other Contract with or
commitment to any labor union or proposed labor union;
(iii) continuing Contract for the future purchase of products,
material, supplies, equipment or services in excess of $30,000 which is
not immediately terminable by such Seller without cost, forfeiture or
other liability at or at any time after the Closing;
(iv) Contract for future sales in excess of $30,000 which is
not immediately terminable by such Seller without cost or other liability
at or at any time after the Closing;
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(v) Contract or commitment for the employment of any officer,
employee or consultant or any other type of Contract or understanding with
any officer, employee or consultant, including any agreement or
understanding relating to severance payments;
(vi) formal or informal profit sharing, bonus, stock option,
pension, retirement, disability, stock purchase, hospitalization,
insurance or similar plan or agreement providing benefits to any current
or former director, officer, employee or consultant, whether or not
subject to the Employee Retirement Income Securities Act of 1974, as
amended ("ERISA"), of the Foreign Subsidiaries;
(vii) Contract or commitment for the borrowing of money, for a
line of credit or for a leasing transaction of a type required to be
capitalized in accordance with Statement of Financial Accounting Standards
No. 13 of the Financial Accounting Standards Board;
(viii) Contract or commitment for charitable contributions in
excess of $1,000;
(ix) Contract or commitment for capital expenditures in excess
of $10,000;
(x) agreement or arrangement for the sale of any assets,
properties or rights in excess of $50,000 in the aggregate other than the
sale of services or products in the ordinary course of business at normal
profit margins;
(xi) lease or other agreement pursuant to which it is a lessee
of or holds or operates any machinery, equipment, motor vehicles, office
furniture, fixtures, products, merchandise or similar personal property
owned by any other Person with rental payments in excess of $25,000 per
annum in the aggregate;
(xii) Contract with respect to the lending or investing of
funds;
(xiii) Contract or indemnification with respect to any form of
intangible property, including any Intellectual Property Rights or
confidential information;
(xiv) Contract or commitment to issue or sell any securities
of Leisegang GmbH;
(xv) Contract which restricts any Seller from engaging in any
aspect of Business anywhere in the world;
(xvi) Contract or group of related Contracts with the same
Person (excluding purchase orders entered into in the ordinary course of
business which are to be completed within three months of entering into
such purchase orders) for the purchase or sale of products or services
under which the undelivered balance thereof (including the aggregate
undelivered balance under any such Contracts between the same Person and
any Seller) has a selling price in excess of $50,000;
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(xvii) Contract (A) that is not terminable by either party
thereto without penalty upon not more than 30 days' advance notice and
involves aggregate consideration in excess of $25,000 or (B) that involves
aggregate consideration in excess of $25,000 (excluding, in the case of
clauses (A) and (B) above, any purchase order entered into in the ordinary
course of business which is to be completed within three months of
entering into such purchase order);
(xviii) confidentiality, non-disclosure or non-compete
agreement with any officer, director, employee of or consultant to any
Seller or other Person with access to or knowledge of confidential or
propriety information designed to safeguard and maintain (A) the secrecy
and confidentiality of confidential or proprietary information and (B) the
proprietary rights of each Seller in all of its Owned Requisite Rights;
(xix) Contract with any Affiliate of any Seller; or
(xx) other Contract material to the business of any Seller.
(b) All items listed on SCHEDULE 5.12 are in full force and effect,
constitute legal, valid and binding obligations of the respective parties
thereto, and are enforceable in accordance with their respective terms. Each
Seller has in all respects performed in respect of such items all of the
obligations required to be performed by it to date, and there exists no default,
or any event which upon the giving of notice or the passage of time, or both,
would give rise to a claim of a default in the performance by each Seller or any
other party to any of the foregoing of their respective obligations thereunder.
The Purchaser has been furnished with true, complete and correct copies of all
written items listed on SCHEDULE 5.12 and SCHEDULE 5.12 contains complete
descriptions of all oral items listed on SCHEDULE 5.12. No consent or approval
by, or any notification or filing with, any party to any of the agreements on
SCHEDULE 5.12 is required in connection with the execution, delivery and
performance by any Seller or any Affiliate thereof of this Agreement or any of
the Related Documents to which any such Seller or Affiliate is a party or the
consummation by any such Seller or Affiliate of the transactions contemplated
hereby or thereby, except for those consents, approvals, notifications or
filings set forth on SCHEDULE 5.12, which, except as set forth on SCHEDULE 5.12,
have been or shall be made or obtained prior to the Closing.
5.13 LITIGATION, ETC.
Except as set forth on SCHEDULE 5.13 and workers' compensation claims made
in the ordinary course of business and consistent (in frequency and cost) with
past practices, there are no (i) Proceedings pending or, to the Best Knowledge
of the Sellers, threatened against any Seller, whether at law or in equity, or
before or by any Governmental Entity or arbitrator or (ii) Orders of any
Governmental Entity or arbitrator against any Seller. Each Seller has delivered
to the Purchaser all material documents and correspondence relating to such
matters referred to on SCHEDULE 5.13.
5.14 COMPLIANCE; GOVERNMENTAL AUTHORIZATIONS.
Except as set forth on SCHEDULE 5.14, the Business has not and is not
being conducted in violation in any material respect of, and no Foreign
Subsidiary is in violation in any material
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respect of, any Law, Order or Permit, including, without limitation,
Environmental, Health and Safety Laws. Except as set forth on SCHEDULE 5.14, no
investigation or review by any Governmental Entity with respect to any Seller is
pending or, to the Best Knowledge of the Sellers, threatened, nor has any
Governmental Entity notified any Seller of its intention to conduct the same.
Each Seller has all Permits necessary for the conduct of its business, including
those required under any Environmental, Health and Safety Laws, such Permits are
in full force and effect, no violations are or have been recorded in respect
thereof and no Proceeding is pending or, to the Best Knowledge of the Sellers,
threatened, to revoke or limit any thereof. SCHEDULE 5.14 contains a true and
complete list of all such Permits under which any Seller is operating or bound,
and each Seller has furnished to the Purchaser true and complete copies thereof.
5.15 FDA AND OTHER GOVERNMENTAL COMPLIANCE.
(a) Except as set forth on SCHEDULE 5.15(a), each Seller is in
substantial compliance, in all material respects, with all Laws applicable to it
and its business including all Laws administered or issued by the United States
Food and Drug Administration (the "FDA") and the FDA Guidance Documents. All
Products, where required by Laws applicable thereto, are being manufactured and
marketed under a valid Section 510(k) clearance letter, or pre-market
application and approval ("PMA") issued by the FDA and SCHEDULE 5.15(a) hereto
lists each such 510(k) clearance letter and PMA and includes a copy thereof.
SCHEDULE 5.15(a) also lists those of the Products which are being marketed
without a valid Section 510(k) clearance letter or PMA issued by the FDA and
sets forth the reason why each such Product is being marketed without such
clearance or approval.
(b) Except as set forth on SCHEDULE 5.15(b):
(i) No false information or significant omission has been made
in any products application or products-related submission to the FDA or
any other Governmental Entity by or on behalf of any Seller or otherwise
relating to any of the Products.
(ii) Any PMA or 510(k) documents and related documents
(including any equivalent documents that are required outside of the
United States) for each Product are in compliance, in all material
respects, with applicable Laws administered or promulgated by the FDA or
any other Governmental Entity and to the Best Knowledge of the Sellers,
neither the FDA nor any other Governmental Entity is considering limiting,
suspending, or revoking such approvals/clearances or changing the
marketing classification or labeling of any Product.
(iii) All preclinical and clinical studies, if any, have been
conducted by each Seller in accordance with recognized good clinical and
good laboratory practices in all material respects, and are in compliance
with applicable Laws administered or promulgated by the FDA or any other
Governmental Entity regarding preclinical and clinical studies in all
material respects.
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(iv) Each Seller has obtained all regulatory approvals from
any Governmental Entities (whether foreign or domestic) related to the
Products required in any jurisdiction where the Products are manufactured,
marketed or sold.
(v) SCHEDULE 5.15(b) sets forth an accurate list of written
information regarding internal audits concerning whether each Seller
complies with current good manufacturing practices including FDA Quality
System Regulation (the "FDA QSR"), ISO 9000 and Canadian standards and all
written reports or written information regarding the FDA QSR audits
conducted for each Seller by an outside auditor.
(vi) Each Seller is in substantial compliance with the FDA QSR
and any Laws of any other Governmental Entity regarding the testing of
incoming components and in process product, equipment validation and
maintenance, complaint file requirements, process validation, document
retention, change controls, and master file and device history file
documentation.
(vii) Each Seller has signed up-to-date written policies that
reflect its actual FDA QSR procedures.
(viii) Each Seller has, in a timely manner, filed all medical
device reports ("MDRs") for deaths, serious injuries, and reportable
malfunctions required by the FDA and any other Governmental Entity. A list
of such reports and each Seller's written policy regarding MDR reporting
is attached as part of SCHEDULE 5.15(b).
(ix) No Seller has knowledge of any acts that furnish a
reasonable basis for a Warning Letter, Section 305 Notice, or other
similar communications from the FDA or any other Governmental Entity, and
there have been no recalls, field notifications, safety alerts (whether
voluntary or otherwise) or seizures requested or threatened, related to
any Products.
(x) Each Seller has established a corporate compliance program
which is described as part of SCHEDULE 5.15(b) hereto.
5.16 INSURANCE.
(a) SCHEDULE 5.16(a) contains a true and complete list of all
policies of liability, theft, fidelity, life, fire, product liability, workers'
compensation, health and other forms of insurance held by any Seller for the
benefit of itself or any other Seller (specifying the insurer, amount of
coverage, type of insurance, policy number, Best's rating of the insurer and any
pending claims thereunder). Such insurance coverage has been maintained at all
times during the course of the operation of the business of each Seller insured
thereby, and such insurance coverage has been maintained on an occurrence (as
opposed to a claims made) basis. Each Seller is insured against all risks
usually insured against by Persons conducting similar businesses and operating
similar properties in the localities where the business of each Seller is
conducted and the properties of each Seller are located, under policies of such
types as are customarily carried by such Persons. The amounts of coverage under
such policies of insurance are adequate for the assets and properties of each
Seller insured thereby.
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(b) Except as set forth on SCHEDULE 5.16(b), with respect to each
policy of insurance listed on SCHEDULE 5.16(a):
(i) such policy is a valid and enforceable policy and is
outstanding and in full force and effect, all premiums with respect
thereto are currently paid and are not subject to adjustment, and no
Seller is in default in any respect with respect to its obligations under
such policy, and no basis exists that would give any insurer under any
such policy the right to cancel or unilaterally reduce or limit the stated
coverage's contained in such policy;
(ii) there are no outstanding claims currently pending under
such policy that could be expected to cause an increase in the insurance
rates of each Seller, and no facts or circumstances exist that might
relieve the insurer under such policy of its obligations to satisfy in
full any claim thereunder; and
(iii) no Seller has received any notice that such policy has
been or shall be canceled or terminated or will not be renewed on
substantially the same terms as are now in effect or the premium on such
policy shall be increased on the renewal thereof.
5.17 LABOR RELATIONS: EMPLOYEES.
(a) Except as set forth on SCHEDULE 5.17(a), (i) neither Leisegang
nor either of the Foreign Subsidiaries is delinquent in payments to any of its
employees for any wages, salaries, commissions, bonuses or other direct
compensation for any services performed by them to date or amounts required to
be reimbursed to such employees, (ii) upon termination of the employment of any
such employees, neither Leisegang nor either of the Foreign Subsidiaries will by
reason of anything done prior to the Closing be liable to any of such employees
for severance pay or any other payments, (iii) Leisegang and each Foreign
Subsidiary is in compliance in all material respects with all applicable Laws
respecting labor, employment and employment practices, terms and conditions of
employment and wages and hours, (iv) there is no unfair labor practice complaint
against either Leisegang or either of the Foreign Subsidiaries pending before
the National Labor Relations Board or any other Governmental Entity, (v) there
is no labor strike, material dispute or grievance, slowdown or stoppage actually
pending or, to the Best Knowledge of the Sellers , threatened against or
involving either of the Foreign Subsidiaries, (vi) no labor union currently
represents the employees of either of the Foreign Subsidiaries and, to the Best
Knowledge of the Sellers, no labor union has taken any action with respect to
organizing the employees of Leisegang GmbH and (vii) no workers' council exists
with respect to Leisegang GmbH.
(b) The severance payments that Leisegang is required by its
corporate policies in effect at the time of the Closing to make upon termination
without cause of employment of its employees (if such termination occurred at
the Closing) is set forth accurately on SCHEDULE 5.17(b).
5.18 ERISA COMPLIANCE.
(a) SCHEDULE 5.18(a) contains a true, complete and correct list of
all Employee Benefit Plans of Leisegang and the Foreign Subsidiaries
(collectively, the "Company Employee
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Plans") (i) that cover any employees of Leisegang and the Foreign Subsidiaries
(A) that are maintained, sponsored or contributed to by the Leisegang and the
Foreign Subsidiaries or (B) with respect to which Leisegang and the Foreign
Subsidiaries are obligated to contribute or has any actual or potential
liability or obligation, whether direct or indirect, or (ii) with respect to
which Leisegang and the Foreign Subsidiaries have any actual or potential
liability or obligation on account of the maintenance or sponsorship thereof or
contribution thereto by any present or former ERISA Affiliate (as defined below)
of Leisegang and the Foreign Subsidiaries. Except as set forth on SCHEDULE
5.18(b), each Company Employee Plan has been established, maintained, operated
and administered in accordance with its terms and in compliance in all respects
with the applicable Laws of each Governmental Entity having jurisdiction.;
(b) "Employee Benefit Plan" means (i) any qualified or non-qualified
Employee Pension Benefit Plan (as defined in Section 3(2) of ERISA), including
any Multiemployer Plan or Multiple Employer Plan, (ii) any Employee Welfare
Benefit Plan (as defined in Section 3(1) of ERISA), or (iii) any employee
benefit, fringe benefit, compensation, incentive, bonus or other plan, program
or arrangement, whether or not subject to ERISA and whether or not funded.
"ERISA Affiliate" means, with respect to any Person, any other Person that is a
member of a "controlled group of corporations" with, or is under "common
control" with, or is a member of the same "affiliated service group" with such
Person as defined in Section 414(b), 414(c), or 414(m) or 414(o) of the Code.
5.19 ENVIRONMENTAL MATTERS.
(a) Except for NetOptix with respect to the Massachusetts Facility
and the operations of unrelated businesses conducted there, and except as set
forth on SCHEDULE 5.19(a), no Seller is nor, to the Best Knowledge of the
Sellers, is or any of its past property or operations, subject to or the subject
of, any Proceeding, Order, settlement, or other Contract arising under any
Environmental, Health and Safety Laws, nor, to the Best Knowledge of the
Sellers, has any investigation been commenced or is any Proceeding threatened
against any Seller under any Environmental, Health and Safety Laws with regard
to either Foreign Subsidiary or the Business.
(b) Except as set forth on SCHEDULE 5.19(b), no Seller has received
any written or oral notice, report or other information that any Seller is
potentially responsible under any Environmental, Health and Safety Laws for
response costs or natural resource damages, as those terms are defined under the
Environmental, Health and Safety Laws, at any location and no Seller has
transported or disposed of, or allowed or arranged for any third party to
transport to or dispose of, any Hazardous Materials at any location included on
the National Priorities List, as defined under CERCLA, or any location proposed
for inclusion on that List, or any location included on the CERCLIS database
prepared under CERCLA or on any analogous list prepared by any Governmental
Entity.
(c) SCHEDULE 5.19(c) sets forth a complete and accurate list of all
properties and facilities previously owned or operated by each Seller or any
predecessor of such Seller. Except with respect to the Massachusetts Facility, a
location at which no operations related to the Business have been conducted
within the last three months and which is not commercially necessary for the
future operation of the Business, and except as set forth on SCHEDULE 5.19(c),
there has not been any release on any such properties or facilities or on the
leased property of
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Hazardous Materials in an amount exceeding a reportable quantity as defined
under, or in a manner that would support an Order by a Governmental Entity
under, any Environmental, Health and Safety Laws. There were and are no
hazardous waste treatment, storage or disposal facilities, as those terms are
defined under the Environmental, Health and Safety Laws, located on any such
properties or facilities or on the leased property. Neither is there now, nor to
the Best Knowledge of the Sellers, has there ever been, any asbestos-containing
material, underground storage tanks, above-ground storage tanks, landfill, waste
pile, surface impoundment, or article or equipment containing polychemical
biphenyls on or at any of the facilities used in the Business. No facts, events
or conditions relating to the past or present property, operations or the
Facilities (or any other Person for whom any Seller has assumed
environmental-related Liabilities) would prevent compliance by any Seller with,
or give rise to any Liability or corrective or remedial obligation of such
company under, any Environmental, Health and Safety Laws.
(d) Each Seller has provided the Purchaser with correct and complete
copies of all reports and studies within the possession or control of any Seller
with respect to past or present environmental conditions or events at any
properties or facilities previously owned or operated by any Seller or any
predecessor of any Seller including the leased property and to the Best
Knowledge of the Sellers but excluding the Massachusetts Facility and other
unrelated businesses of NetOptix, there are no other environmental reports or
studies with respect thereto, other than as contemplated hereby.
(e) As used herein, the following terms have the following meanings:
"Environmental, Health and Safety Laws" means all Laws, Permits and
Contracts with Governmental Entities relating to or addressing pollution or
protection of the environment, public health and safety, or employee health and
safety, including, if applicable, the Solid Waste Disposal Act, as amended, 42
U.S.C. Section 6901, et seq., the Clean Air Act, as amended, 42 U.S.C. Section
7401 et seq., the Federal Water Pollution Control Act, as amended, 33 U.S.C.
Section 1251 et seq., the Emergency Planning and Community Right-to-Know Act, as
amended, 42 U.S.C. Section 11001 et seq., the Comprehensive Environmental
Response, Compensation, and Liability Act ("CERCLA"), as amended, 42 U.S.C.
Section 9601 et seq., the Hazardous Materials Transportation Uniform Safety Act,
as amended, 49 U.S.C. Section 1804 et seq., the Occupational Safety and Health
Act of 1970, as amended, the regulations promulgated thereunder, and any similar
Laws and other requirements having the force or effect of Law, and all Orders
issued or promulgated thereunder, and all related common law theories.
"CERCLIS" means the Comprehensive Environmental Response,
Compensation, and Liability Information System.
"Hazardous Materials" means any hazardous or toxic chemicals,
materials or substances, pollutants, contaminants, or crude oil or any fraction
thereof (as such terms are defined under any Environmental, Health and Safety
Law).
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5.20 BROKERS.
Except as set forth on SCHEDULE 5.20, no Seller nor any of its officers,
directors, shareholders or employees has employed any broker or finder or
incurred any Liability for any brokerage fees, commissions or finders' fees in
connection with the transactions contemplated hereby. To the extent any Seller
has, based upon its acts, any Liability to pay for any brokerage fees,
commissions or finder's fees in connection with the transactions contemplated
hereby, it will be solely responsible for the payment of such commission or fee.
5.21 ACCOUNTS AND NOTES RECEIVABLE.
Except as set forth on SCHEDULE 5.21, all the accounts receivable and
notes receivable of the Sellers related to the Business owing to each Seller as
of the date hereof constitute, and as of the Closing shall constitute, valid and
enforceable claims arising from bona fide transactions in the ordinary course of
business, and there are no known or asserted claims, refusals to pay or other
rights of set-off against any thereof. Except as set forth on SCHEDULE 5.21,
there is (i) no account debtor or note debtor delinquent in its payment by more
than 90 days, (ii) no account debtor or note debtor that has refused or, to the
Best Knowledge of the Sellers, threatened to refuse to pay its obligations to
each Seller for any reason, (iii) to the Best Knowledge of the Sellers, no
account debtor or note debtor that is insolvent or bankrupt and (iv) no account
receivable or note receivable pledged to any third party by each Seller.
5.22 ACCOUNTS AND NOTES PAYABLE.
Except as set forth on SCHEDULE 5.22, all accounts payable and notes
payable by each Seller to third parties as of the date hereof arose, and as of
the Closing shall have arisen, in the ordinary course of business, and, except
as set forth on SCHEDULE 5.22, there is no such account payable or note payable
delinquent in its payment, except those contested in good faith and already
disclosed on SCHEDULE 5.22.
5.23 WARRANTIES OF PRODUCTS; PRODUCTS LIABILITY; REGULATORY COMPLIANCE.
(a) Except to the extent written down on the books of account of any
Seller or reserved against thereon, each group of products manufactured, sold,
distributed, used or held in inventory by any Seller (including, without
limitation, all documentation furnished in connection therewith) is, subject to
customary and reasonable tolerances, free from any significant defects in
workmanship and materials, and conforms in all material respects with all
customary and reasonable standards for products of such type.
(b) No Seller has become aware or otherwise been notified of or been
responsible for, subject to or does now have any actual or potential liability
or obligation, whether direct or indirect, arising out of, any injury to Persons
or property as a result of the ownership, possession or use of any product
manufactured, sold or distributed by any Seller.
(c) Neither the FDA nor any other Governmental Entity regulating the
marketing, testing or advertising of any of the Products currently manufactured,
sold, distributed or used in connection with the Business has requested that any
such product be removed from the market, that substantial new product testing be
undertaken as a condition to the continued manufacturing,
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selling, distribution or use of any such product or that such product be
modified in a way likely to have a Material Adverse Effect.
5.24 INVENTORIES.
Except as set forth on SCHEDULE 5.24, (i) the inventories of the Products
as of the date hereof are of good, useable and merchantable quality, and (ii)
such inventory includes no items which are below customary quality control
standards of the medical device industry and any applicable quality control of
any Governmental Entity and has been manufactured in compliance with current
good manufacturing practices including FDA QSR, ISO 9000 and Canadian standards,
or of a quantity not usable or salable in the normal course of business, the
aggregate value of which has not been written down on the Sellers' books of
account to realizable market value or with respect to which adequate reserves
have not been provided in accordance with GAAP.
5.25 SUPPLIERS, CONSULTANTS AND VENDORS.
Except in the ordinary course of business and except as set forth on
SCHEDULE 5.25, no material supplier, consultant or vendor to any Seller in
respect of the Business has canceled or otherwise terminated, or threatened to
cancel or otherwise terminate, its relationship with any Seller or has
decreased, limited or otherwise modified, or threatened to decrease, limit or
otherwise modify, the services, supplies or materials it provides to any Seller
and, to the Best Knowledge of the Sellers, the transactions contemplated by this
Agreement shall not affect the relationship of each Seller with any such
supplier, consultant or vendor.
5.26 CUSTOMERS.
Except to the extent any such business relationship is impaired solely by
virtue of an account or note receivable past 90 days due as disclosed on
SCHEDULE 5.26, the business relationship between each Seller and its customers
of the Business is generally good and no material disagreement or problem exists
between each Seller and any such customer. No such customer to which more than
$50,000 of annual sales are attributable has threatened, or has notified any
Seller that it intends, to terminate its relationship and dealings with any
Seller, whether as a result of the transactions contemplated by this Agreement
or otherwise.
5.27 REAL PROPERTY-OWNED OR LEASED.
(a) SCHEDULE 5.27(a) contains a list of all of the Facilities,
except for the Massachusetts Facility, and the name of the Seller which owns,
leases, subleases or otherwise occupies each such Facility is set forth opposite
the name of such Facility. The Facilities are all owned, leased, subleased or
otherwise occupied by the Sellers in the conduct of the Business. The
description of each such Facility subject to one or more leases (the "Leased
Property") includes the names of the lessor and the lessee and the basic terms
thereof. The real property listed on SCHEDULE 5.27(a) constitutes all real
property used or occupied by the Sellers in connection with the Business.
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(b) Except for the facts revealed in Schedule B of the Title
Commitment dated ________, 1999 (the "Title Commitment") issued by First
American Title Insurance Company to the Purchaser which is identified on
SCHEDULE 5.27(b):
(i) no portion of the Canadian Manufacturing Facility is
subject to any pending condemnation Proceeding or Proceeding by any public
or quasi-public authority and, to the Best Knowledge of the Sellers, there
is no threatened condemnation or Proceeding with respect thereto;
(ii) the physical condition of the Canadian Manufacturing
Facility is sufficient to permit the continued conduct of the Business as
presently conducted thereon and as presently proposed to be conducted,
subject to the provision of usual and customary maintenance and repair
performed in the ordinary course with respect to similar properties of
like age and construction;
(iii) Galenica has good, valid and marketable title to the
Canadian Manufacturing Facility free and clear of all Encumbrances;
(iv) Leisegang and the Foreign Subsidiaries are tenants under
the leasehold estates purported to be granted by leases to the Florida,
Canadian Office and the Berlin Facilities, as applicable;
(v) there are no Contracts, written or oral, to which the
Sellers or any of their respective Affiliates is a party, granting to any
party or parties the right of use or occupancy of any portion of any of
the Facilities;
(vi) there are no parties (other than the Sellers) in
possession of the Facilities; and
(vii) no notice of any increase in the assessed valuation of
the Canadian Manufacturing Facility and no notice of any contemplated
special assessment thereof has been received by any Seller, and to the
Best Knowledge of the Sellers, there is no threatened increase in assessed
valuation or threatened special assessment pertaining to such Facility.
5.28 YEAR 2000.
(a) Each Seller has made reasonable investigation into whether its
Information Technology is Year 2000 Compliant, including the following: each
Seller has taken inventory of all such material Information Technology of such
Seller and assessed, to the extent reasonably ascertainable, whether such
Information Technology is Year 2000 Compliant. Except as set forth on SCHEDULE
5.28, each Seller's Information Technology is Year 2000 Compliant. The failure
of any Seller's or its suppliers' or customers' Information Technology to be
Year 2000 Compliant will not have a Material Adverse Effect.
(b) Capitalized terms used in paragraph (a) above have the following
definitions:
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"Year 2000 Compliant" with respect to any Information Technology of
each Seller means that such Information Technology is designed to be used prior
to, during, and after the calendar year 2000, and such Information Technology
used during each such time period, when unmodified by the end user and used in
accordance with its documentation, will accurately receive, provide and process
date/time data (including calculating, comparing and sequencing such data) from,
into and between the 20th and 21st centuries, including the years 1999 and 2000,
and leap year calculations during such periods, and will not malfunction, cease
to function, or provide invalid or incorrect results as a result of date/time
data, to the extent that products or Information Technology of third parties,
used in combination with any Seller's Information Technology, properly exchange
date/time data with such Information Technology.
"Information Technology" means computer software, computer firmware,
computer hardware (whether general or specific purpose) or equipment or systems
with components comprised of any of the foregoing, and other similar or related
items of automated, computerized and/or software systems, whether leased or
owned (other than standard "shrink wrapped, off the shelf," commercially
available, third party software), used by any Seller in the conduct of the
Business.
5.29 SUFFICIENCY OF ASSETS.
The sale of the Purchased Assets by the Asset Sellers and the Share by
NetOptix to the Purchaser pursuant to this Agreement will effectively convey to,
or provide the license to, the Purchaser the entire Business of, and all of the
tangible and intangible property used in the conduct of the Business by the
Sellers (whether owned, leased or held under license by any Seller) and
necessary to, the conduct of the Business as conducted by the Sellers except for
the Excluded Assets.
5.30 DISCLOSURE.
Neither this Agreement, including the schedules, attachments or exhibits,
nor any other written material delivered to the Purchaser or any of their
respective directors, officers, employees, representatives or agents contains
any untrue statement of a material fact or omits a material fact necessary to
make the statements contained herein or therein, taken as a whole, in light of
the circumstances in which they were made, not misleading. There is no fact that
has not been disclosed to the parties referred to above of which each Seller or
any of the officers or directors of any Seller is aware and which constitutes or
could reasonably be anticipated to result in a Material Adverse Effect. Each
schedule to this SECTION 5 separately sets forth the disclosure of information
for each Seller.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF COOPER.
The Purchaser represents and warrants to the Sellers as follows:
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6.1 ORGANIZATION; GOOD STANDING; QUALIFICATION AND POWER.
The Purchaser is a corporation duly organized, validly existing and in
good standing under the Laws of the jurisdiction of its incorporation, has all
requisite corporate power and authority to own, lease and operate its assets and
properties and to carry on its business as is now being conducted.
6.2 AUTHORITY; CORPORATE ACTION; AUTHORITY; NO CONFLICT.
The Purchaser and the Parent each have all the requisite corporate power
and authority to enter into this Agreement and each Related Document to which it
is a party, to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance by the Purchaser and the Parent of this Agreement and
each Related Document to which it is a party, and the consummation of the
transactions contemplated hereby and thereby by the Purchaser and the Parent
have been duly and validly authorized by all necessary corporate action on the
part of the Purchaser and the Parent. This Agreement and each Related Document
to which each of the Purchaser and the Parent is a party have been duly and
validly executed and delivered by each of the Purchase and the Parent and is the
valid and binding obligation of each of the Purchaser and the Parent,
enforceable against each of the Purchaser and the Parent in accordance with its
terms. The execution and delivery of this Agreement, the consummation of the
transactions contemplated hereby and thereby will not (i) conflict with or
result in any violation of, or cause a default (with or without notice or lapse
of time, or both) under, or give rise to any right of termination, amendment,
cancellation or acceleration of any obligation contained in, or the loss of any
benefit under, or result in the creation of any Encumbrance upon any of the
respective assets or properties of the Purchaser or the Parent under any term,
condition or provision of the Charter or By-laws of the Purchaser or the Parent
or (ii) violate any Law applicable to the Purchaser or the Parent or any of its
respective properties or assets.
6.3 LITIGATION, ETC.
Except for workers' compensation claims made in the ordinary course of
business and Proceedings involving claims covered by insurance, since the filing
of the Parent's SEC report on Form 10-Q for the fiscal quarter ended September
30, 1999 and any Form 8-K filed thereafter, there are no (i) Proceedings pending
or, to the Best Knowledge of the Purchaser, threatened against the Parent or any
of its subsidiaries, whether at law or in equity, or before or by any
Governmental Entity or arbitrator or (ii) Orders of any Governmental Entity or
arbitrator against the Parent or any of its subsidiaries, in each case which is
likely to have a material adverse effect on the financial condition or results
of operations of the consolidated business of the Parent and its subsidiaries
taken as a whole.
6.4 BROKERS.
Neither the Purchaser nor any of its respective officers, directors,
shareholders or employees (or any Affiliate of any of the foregoing) has
employed any broker or finder or incurred any Liability for any brokerage fees,
commissions or finders' fees in connection with the transactions contemplated
hereby, except for Oliver, Lipman & Associates. To the extent the
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Purchaser has, based upon its acts, any Liability to pay any brokerage fees,
commissions or finder's fees in connection with the transactions contemplated
hereby, it will be solely responsible for the payment of such commission or fee,
including any such commission or fee payable to Oliver, Lipman & Associates.
6.5 CONSENT.
No provision of the Charter or By-laws of the Purchaser or the Parent or
any Contract to which the Purchaser or the Parent is a party or by which any of
its properties is bound, requires the consent or authorization of any other
Person as a condition precedent to the consummation of the transactions
contemplated by this Agreement or any of the Related Documents to which the
Purchaser or the Parent is a party, which consent or authorization, if not
obtained, would have a material adverse effect on the consummation by the
Purchaser or the Parent of the transactions contemplated by this Agreement or
any of such Related Documents.
6.6 PURCHASE FOR INVESTMENT.
The Share will be acquired by the Purchaser for its own account, for
investment and not with any present intention of distributing the Share.
6.7 LICENSES; AUTHORIZATIONS
Prior to the Closing, the Purchaser shall have obtained all material
licenses or other material authorizations required for its conduct of the
Business and the operation of the Purchased Assets, including the licenses
required under the Canadian Goods and Services Tax and Quebec Sales Tax laws.
ARTICLE VII
CONDUCT AND TRANSACTIONS PRIOR TO AND AT CLOSING
7.1 ACCESS TO INFORMATION.
From and after the date hereof until the Closing (the "Pre-Closing
Period"), each Seller shall afford to the Purchaser and its Representatives free
and full access upon reasonable notice and during normal business hours (but
without interruption of the business of each Seller) to the customers, suppliers
and vendors of the each Seller and to all of the books and records, tax Returns,
work papers and other documents and information and to the Facilities and
personnel of each Seller related to the Business and the Purchased Assets as may
be reasonably requested.
7.2 CONDUCT OF EACH SELLER.
During the Pre-Closing Period, each Seller shall:
(a) conduct its business only in the ordinary course consistent with
past practice;
(b) not dispose of any of the Purchased Assets or, with respect to
Leisegang GmbH, any assets, except sales of inventories or other assets in the
ordinary course of business;
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(c) use reasonable efforts to maintain its business, assets,
relations with employees, customers and suppliers, licenses and operations in
accordance with past custom and practice;
(d) except with the written consent of the Purchaser, not increase
or promise to increase the compensation payable to employees of Leisegang and
the Foreign Subsidiaries (other than normal compensation reviews and raises
consistent with past practices) or form or support formation of a workers'
council with respect to Leisegang GmbH;
(e) not reclassify, combine, split, subdivide or redeem or otherwise
repurchase any capital stock, or issue, deliver, pledge or encumber any
additional capital stock or other securities equivalent to or exchangeable for
capital stock of Leisegang GmbH;
(f) not acquire or agree to acquire by merging or consolidating
with, or by purchasing any material portion of the capital stock, partnership
interests or assets of, or by any other manner, any business or any Person,
except in the case of NetOptix;
(g) not pay, discharge or satisfy any material claims, Liabilities
or obligations of Leisegang or the Foreign Subsidiaries (whether absolute,
accrued, contingent or otherwise), other than the payment, discharge or
satisfaction of Liabilities in the ordinary course of business consistent with
its past practice;
(h) not change in any material respect the accounting methods or
practices followed by it, including any material change in any assumption
underlying, or method of calculating, any bad debt, contingency or other
reserve, except as may be required by changes in GAAP;
(i) not amend or modify in any way the Charter or By-laws or similar
documents of Leisegang or the Foreign Subsidiaries; and
(j) not pay any dividend or distribution with respect to the capital
stock of Leisegang GmbH; and
(k) with respect to Leisegang GmbH, enter into any contract or
Liability except in the ordinary course of business.
7.3 EFFORTS TO CONSUMMATE.
Subject to the terms and conditions of this Agreement, each party shall
use reasonable efforts to take or cause to be taken all actions and do or cause
to be done all things required under all applicable Laws or this Agreement, in
order to consummate the transactions contemplated hereby.
7.4 EXCLUSIVITY.
(a) The Sellers acknowledges that substantial time of the Purchaser
and substantial out-of-pocket expenses (including attorneys' and accountants'
fees and expenses) have been and will continue to be expended and incurred in
connection with conducting legal,
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business and financial due diligence investigations of the Business, drafting
and negotiating this Agreement and the Related Documents and other related
expenses (collectively, "Acquisition Expenses"). Until the Closing Date (unless
this Agreement is sooner terminated), each Seller shall not, and shall use its
best efforts to not permit any of the Representatives of any Seller to: (i)
unless following consultation with outside legal counsel, NetOptix's Board of
Directors determines in good faith that it is required to do so in order to
discharge properly its fiduciary duties, enter into any written or oral
agreement or understanding with any Person (other than the Purchaser) regarding
Another Transaction (as defined below); (ii) unless following consultation with
outside legal counsel, NetOptix's Board of Directors determines in good faith
that it is required to do so in order to discharge properly its fiduciary
duties, enter into or continue any negotiations or discussions with any Person
(other than the Purchaser) regarding the possibility of Another Transaction; or
(iii) unless following consultation with outside legal counsel, NetOptix's Board
of Directors determines in good faith that it is required to do so in order to
discharge properly its fiduciary duties, provide any non-public financial or
other confidential or proprietary information regarding the Business or the
Purchased Assets (including this Agreement and any other materials containing
the Purchaser's proposed terms and any other financial information, projections
or proposals regarding the Business or the Purchased Assets) to any Person
(other than to the Purchaser or its Representatives) who any Seller knows, or
has reason to believe, would have any interest in participating in Another
Transaction. Nothing contained in this SECTION 7.4 shall (i) prevent NetOptix's
Board of Directors from taking and disclosing to its stockholders a position
with regard to a tender offer or exchange offer contemplated by Rules 14d-9 and
14e-2(a) promulgated under the Securities Exchange Act, and making such
disclosure to the stockholders as may be required under applicable Law;
provided, that the Board of Directors shall not recommend that such stockholders
tender their shares of NetOptix's common stock in connection with such tender or
exchange offer unless the Board of Directors determines in good faith, after
consultation with outside legal counsel, that making such recommendation is
required in order to discharge properly its fiduciary duties, or (ii) prevent
NetOptix from negotiating or discussing with third parties the merger of
NetOptix or sale of capital stock of NetOptix. As used herein, the term "Another
Transaction" means (A) the sale of the Share, the Business or any of the
Purchased Assets, other than the sale of inventories in the ordinary course
consistent with past practice, or (B) the sale (whether by sale of stock,
merger, consolidation or otherwise) of more than 50% of the voting securities of
any Seller. Each Seller represents that it is not a party to, or bound by, any
agreement with respect to Another Transaction other than this Agreement.
(b) NetOptix shall disclose to the Purchaser the terms of Another
Transaction that any Seller negotiates or discusses, as permitted under this
SECTION 7.4, with any Person other than the Purchaser (including the identity of
such Person).
(c) Each party recognizes and acknowledges that a breach of this
SECTION 7.4 will cause irreparable and material loss and damage for the
Purchaser, which cannot be adequately compensated for in damages by an action at
law. Therefore, each Seller agrees that the Purchaser shall be entitled, in
addition to any other remedies and damages available, to the equitable remedies
of injunction and specific performance with respect to each Seller's obligations
hereunder
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7.5 SPECIAL PAYMENT TO PURCHASER BASED ON ANOTHER TRANSACTION.
In the event that NetOptix's Board of Directors determines in good faith,
after consultation with outside legal counsel, that it is required, in order to
discharge properly its fiduciary duties, to consider the unsolicited offer of a
Person (other than the Purchaser or any of its Affiliates or Representatives) to
enter into Another Transaction, NetOptix may terminate this Agreement pursuant
to ARTICLE 10 under circumstances not involving a breach by the Sellers of the
provisions of this Agreement solely for the purpose of entering into Another
Transaction with such Person. At the time and as a condition to such termination
by NetOptix of this Agreement, the Sellers shall pay $300,000 to the Purchaser
and, conditioned upon there not having been a breach by any Seller of the
provisions of this Agreement including without limitation the provisions of
SECTION 7.4, such payments shall fully satisfy the Sellers' obligations to the
Purchaser under this Agreement
7.6 PUBLIC ANNOUNCEMENTS.
The Purchaser and NetOptix will consult with each other before issuing
and, to the extent reasonably practicable, give each other the opportunity to
review and comment upon, any press release or other public statements with
respect to the transactions contemplated by this Agreement or any Related
Document and no party to this Agreement shall issue any such press release or
make any such public statement prior to such consultation, except as may be
required by applicable Law, court process or by obligations pursuant to any
listing agreement with any national securities exchange or national securities
quotation system. The initial press release to be issued with respect to the
Sale shall be in the form heretofore agreed to by the Purchaser and NetOptix.
7.7 CONSENTS.
Each party shall use its best efforts, and the other parties shall
cooperate with such efforts, to obtain any consents and approvals of, or effect
the notification of or filing with, each Person, whether private or
governmental, whose consent or approval is required in order to permit the
consummation of the transactions contemplated hereby.
7.8 NOTICE OF PROSPECTIVE BREACH; SUPPLEMENT TO SCHEDULES.
(a) NetOptix shall immediately notify the Purchaser in writing upon
the occurrence, or failure to occur, of any event, which occurrence or failure
to occur would be reasonably likely to cause (i) any representation or warranty
of any Seller contained in this Agreement to be untrue or inaccurate in any
material respect at any time from the date of this Agreement to the Closing as
if such representation and warranty were made at
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such time or (y) any material failure of the Purchaser to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by it
under this Agreement.
(b) From time to time prior to the Closing, the Sellers will
supplement or amend with reasonable frequency the information contained in the
Schedules hereto with respect to any matter hereafter arising, which, if
existing or occurring at the date of this Agreement, would have been required to
be set forth or described in any Schedule hereto.
7.9 EXCHANGE OF PROCEEDS.
If during the Pre-Closing Period any Asset Seller receives any proceeds in
consideration for the exchange of any of its assets that constitute Purchased
Assets or Leisegang GmbH receives any proceeds in consideration for the exchange
of any of its assets, whether from the sale of any such assets (other than sales
of inventory in the ordinary course of business consistent with past practice),
from insurance proceeds payable on account of any loss or casualty to such
assets, any proceeds from the taking of such assets pursuant to the power of
eminent domain, or any other proceeds from whatever source relating to the
disposition of such assets (the "Exchange Proceeds"), NetOptix shall promptly
notify the Purchaser of such receipt of Exchange Proceeds and shall consult with
the Purchaser with respect to the application of any such Exchange Proceeds.
7.10 EMPLOYEE MATTERS.
(a) (i) The Purchaser shall offer employment as of the Closing Date
to no less than ten (10) employees of Leisegang working in the Florida Facility,
on terms and conditions that are comparable to similarly situated employees of
the Purchaser. On or prior to the Closing, the Purchaser shall provide NetOptix
with a list of such employees of Leisegang to whom the Purchaser plans to offer
employment (the "Leisegang Employees"). Effective as of the Closing, NetOptix
shall terminate, or cause Leisegang to terminate within 60 days of the Closing
Date, the employment of the Leisegang Employees. The Purchaser shall credit
employees of Leisegang hired at the Closing by the Purchaser with past service
at Leisegang for purposes of the severance payments specified on SCHEDULE
5.17(b). The Purchaser shall be responsible for the severance payments specified
on SCHEDULE 5.17(b) for those employees of Leisegang not offered employment with
the Purchaser commencing at the Closing, but only if employment of such
employees by Leisegang is terminated within 60 days of the Closing by Leisegang.
Leisegang shall pay a retention bonus to each Leisegang Employee in an amount
determined in consultation with the Purchaser. Leisegang shall pay up to a
maximum amount of $192,000 of the amount of retention bonus up to $250,000 and
any excess of such retention bonus over $250,000 and the Purchaser shall pay up
to $58,000 of such retention bonus of $250,000. Leisegang shall pay 30% of each
employee's retention bonus prior to the Closing and agree with its employees in
a manner reasonably approved by the Purchaser, to pay the remaining 70% of each
employee's retention bonus within 90 days after the Closing. Leisegang shall
submit an invoice to the Purchaser at the end of such 90 day period after the
Closing setting forth the actual amount of the retention bonus paid to such
employees and, if applicable, requesting reimbursement of up to $58,000. The
Purchaser shall pay such balance promptly after receipt of such invoice.
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(ii) Except as hereafter provided, the Purchaser shall offer
employment as of the Closing Date to the employees of Galenica working in
its Canadian Manufacturing and Office Facilities on terms and conditions
comparable to similarly situated employees of the Purchaser. Galenica
shall terminate as of the Closing Date the employment of those employees
the Purchaser is employing, other than Marcotte and Godin. The employment
agreements with (i) Jacques Marcotte ("Marcotte") dated February 1, 1998
and (ii) Michel Godin ("Godin") dated February 1, 1998 shall be Assigned
Contracts, subject to such agreements being modified to delete Section 2.2
and all other provisions respecting equity or option based compensation
and the confirmation of Marcotte and Godin, respectively, as to the
assignment thereof to the Purchaser. NetOptix shall reimburse the
Purchaser for one-half of the amount accruing from and after the Closing
to be paid by the Purchaser to Marcotte under such employment agreement,
including compensation, benefits (including employee benefit plans,
vacation and car allowance) and termination costs. The Purchaser shall
submit monthly invoices setting forth the amount actually paid and
requesting for reimbursement one-half of such amount. NetOptix shall,
prior to the Closing, enter into agreements reasonably acceptable to the
Purchaser and at the sole cost and expense of NetOptix, with Marcotte,
Godin and Jurgen Scheiblich, which shall provide for incentives for each
such individual to renew with the Purchaser through July 31, 2000.
(iii) Leisegang represents and warrants that it has
terminated, is terminating or will terminate by the Closing Date nine (9)
employees of Leisegang GmbH listed on SCHEDULE 7.10(a)(iii). Leisegang
GmbH shall, after the Closing, inform NetOptix of any negotiations and/or
court proceedings in connection with such terminations and shall consult
with NetOptix in connection therewith.
(b) As of the Closing Date, employees of Leisegang to whom the
Purchaser has offered employment and who have accepted such offer of employment
shall be eligible to participate in each of the Purchaser's Employee Welfare
Benefit Plans and its 401(k) retirement plan in the same manner and to the same
extent as other similarly situated employees of the Purchaser. Such employees
hired by the Purchaser shall be given credit for service with Leisegang for
purposes of eligibility, vesting and benefits to participate in the Purchaser's
Employee Welfare Benefit Plans (as defined in Section 3(1) of ERISA), other than
the Purchaser's post-retirement medical benefits program. The Purchaser shall
waive (or cause to be waived) any pre-existing condition limitations under its
Employee Welfare Benefit Plans that would otherwise apply to an employee hired
by the Purchaser.
(c) To the extent employees of Leisegang GmbH are covered by any
existing Employee Benefit Plans of NetOptix, such coverage shall be terminated
as of the Closing.
(d) Notwithstanding any action or inaction of the Sellers, the
Purchaser shall have no obligation with respect to any Employee Benefit Plans
maintained by the Sellers or any ERISA Affiliate thereof.
(e) NetOptix, Leisegang and Galenica will cooperate with the
Purchaser in the Purchaser's efforts to employ the employees of Leisegang which
Purchaser has designated and
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the Galenica employees, provided that Seller makes no representation as to
whether any of such persons will accept such employment.
7.11 SUBLEASE.
Leisegang and the Purchaser shall, prior to Closing, agree upon the form
of Sublease to be entered into at the Closing
7.12 QUEBEC BULK SALES LAW.
Subject to the provisions set forth in SECTION 9.1(a)(vii), the parties
hereto agree not to comply with Quebec Bulk Sales Law.
7.13 PRODUCTS.
The list of Products on SCHEDULE 1.1(a)(i) shall be amended to provide
greater detail based on catalogues and the Sellers' numbering of the Products.
ARTICLE VIII
CLOSING CONDITIONS.
8.1 CONDITIONS TO OBLIGATIONS OF PURCHASER.
The obligations of Purchaser under this Agreement to purchase the Share
and the Purchased Assets and to assume the Assumed Liabilities are subject to
the satisfaction, on or prior the Closing, of the following conditions unless
waived (to the extent such conditions can be waived) by Purchaser:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made by the Sellers and each of them in this Agreement and the
Related Documents (without giving effect to any qualification contained therein
as to materiality, including without limitation, the phrases "material", "in all
material respects", and "Material Adverse Effect") shall be true and correct in
all material respects on and as of the Closing Date with the same effect as if
such representations and warranties had been made at and as of the Closing Date,
except for those representations and warranties which address matters only as of
a particular date (which shall be true and correct as of such date).
(b) PERFORMANCE OF OBLIGATIONS. Each Seller shall have performed or
complied in all material respects with all agreements, obligations and covenants
required to be performed by it under this Agreement and the Related Documents on
or as of the Closing Date.
(c) AUTHORIZATION. All action necessary to authorize the execution,
delivery and performance of this Agreement and the Related Documents by each
Seller and the consummation of the transactions contemplated hereby and thereby,
including requisite stockholder approvals, shall have been duly and validly
taken by each Seller and each Seller shall have full power and right to
consummate the transactions contemplated hereby and thereby on the terms
provided herein.
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(d) OPINION OF THE SELLER'S COUNSEL. The Purchaser shall have
received the following opinions dated the Closing Date: (i) opinions of Edwards
& Angell, LLP, counsel to the Sellers, substantially in the form of EXHIBIT D
and EXHIBIT E hereto, (ii) an opinion of Goodman Philips & Vineberg, counsel to
Galenica, substantially in the form of EXHIBIT F hereto and (iii) an opinion of
CMS Hasche Sigle Eschenlohr Peltzer, counsel to Leisegang GmbH, substantially in
the form of EXHIBIT G hereto.
(e) CONSENTS AND APPROVALS. The Purchaser shall have received duly
executed copies of all consents and approvals required for or in connection with
the execution and delivery by each Seller of this Agreement and each of the
Related Documents to which any of them may be parties, the consummation of the
transactions contemplated hereby and thereby, and the continued conduct of the
Business as previously conducted, in form and substance satisfactory to
Purchaser.
(f) GOVERNMENT CONSENTS, AUTHORIZATIONS, ETC. All consents,
authorizations, Orders and approvals of, filings or registrations with and the
expiration of all waiting periods imposed by, any third Person, including any
Governmental Entity which are required for or in connection with the execution
and delivery by the parties of this Agreement and the Related Documents to which
they may be parties and the consummation by the parties of the transactions
contemplated hereby and thereby and in order to permit or enable the Purchaser
to conduct the Business after the Closing in substantially the same manner as
previously conducted by the Sellers shall have been obtained or made, in form
and substance reasonably satisfactory to the Purchaser, and shall be in full
force and effect.
(g) ACTIONS AND PROCEEDINGS. No Proceeding shall be pending before
any court or other Governmental Entity, or threatened, which may result in the
restraint or prohibition of the consummation of any of the transactions
contemplated by this Agreement or any of the Related Documents or which could
result in damages payable by the Purchaser in connection therewith or which
could adversely affect any Seller or result in a divestiture by the Purchaser of
all or a substantial part of the capital stock of Leisegang GmbH or assets of
any Seller, and no court of competent jurisdiction shall have issued an
injunction with respect to the consummation of the transactions contemplated by
this Agreement and the Related Documents that shall not be stayed or dissolved
at the time of Closing.
(h) STATUTES. No action shall have been taken or threatened, and no
Law shall have been enacted, promulgated or issued or deemed applicable to the
transactions contemplated hereby by any Governmental Entity that would (i) make
the consummation of the transactions contemplated hereby illegal or
substantially delay the consummation of any material aspect of the transactions
contemplated hereby, (ii) render any party unable to consummate the transactions
contemplated hereby, or (iii) impair the ability of the Purchaser to own or
conduct the Business as previously conducted, whether directly or indirectly.
(i) RELATED DOCUMENTS. Each of the documents set forth below (each,
a "Related Document", and collectively, the "Related Documents") shall have been
executed and delivered by the following parties thereto:
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(i) NON-COMPETITION AGREEMENT. NetOptix, Leisegang and
Galenica shall have executed and delivered a non-competition agreement
substantially in the form of EXHIBIT H hereto (the "Non-Competition
Agreement");
(ii) ESCROW AGREEMENT. NetOptix, Leisegang and Galenica shall
have executed and delivered the Escrow Agreement;
(iii) BILLS OF SALE. Each U.S. Seller and Galenica shall have
executed and delivered the Bills of Sale;
(iv) SUBLEASE. Leisegang shall have executed and delivered the
Sublease and the landlord of the subleased premises shall have consented
thereto;
(v) SHARE TRANSFER AGREEMENT. NetOptix shall have executed and
delivered in Germany a separate share transfer agreement to be delivered
at the Closing substantially in a form acceptable to all of the parties
hereto (the "Share Transfer Agreement"), to transfer the Share and the
Purchaser shall have received the related transfer instruments as
contemplated by SECTION 1.3(a); and
(vi) DEED AND TITLE REPORT, ETC. Galenica shall have delivered
to the Purchaser a deed of sale in customary form for the Canadian
Manufacturing Facility and a survey for such facility and the Purchaser
shall have received at the Seller's expense an owner's title insurance
policy from the company issuing the Title Commitment showing no change in
the conditions of title of such Facility from the conditions of such title
in the Title Commitment and containing no survey exception.
(j) CONSENT OF LENDER; RELEASE OF ENCUMBRANCES. The Purchaser shall
have received from NetOptix (i) evidence satisfactory to the Purchaser that
NetOptix's lender, Deutsche Financial Services Corporation, has consented to the
Sale and released its Encumbrance on the Purchased Assets and Share and any
pledge with respect to the Share shall also be released, (ii) evidence
satisfactory to the Purchaser that NetOptix's former lenders, BankBoston, N.A.
and BancBoston Leasing Inc., have consented to the Sale and released their
Encumbrances on the Purchased Assets, (iii) a release from each Seller of all
Liabilities owing to it from any other Seller, including a release from NetOptix
of any indebtedness owing between Leisegang GmbH and Galileo Corporation (the
prior name of NetOptix), (iv) the consent of each of Business Development Bank
of Canada and Caisse Populaire de St.-Luboire to the Purchaser's assumption of
each of the mortgages on the Canadian Manufacturing Facility with no change
therein to the extent that the amount of such assumption does not exceed the
limitation set forth in SECTION 2.1(c) and an estoppel certificate from holders
of such Canadian Mortgages indicating the amount due thereon, and (v) evidence
satisfactory to the Purchaser of the release or termination of all other
Encumbrances on the Purchased Assets, other than Permitted Encumbrances (except
as set forth above), including all UCC-3 termination statements.
(k) RELATED CERTIFICATES. Each of the following certificates shall
have been executed and/or delivered, as the case may be, by the Person who or
which is the subject thereof:
(i) a certificate of the secretary of each Seller dated as of
the Closing Date, certifying (A) that true and complete copies of each
Seller's Charter and By-laws as
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in effect on the Closing Date are attached thereto, (B) as to the
incumbency and genuineness of the signatures of each officer of each
Seller executing this Agreement or any of the Related Documents on behalf
of each Seller; and (C) the genuineness of the resolutions (attached
thereto) of the board of directors of each Seller authorizing the
execution, delivery and performance of this Agreement and the Related
Documents to which each Seller is a party and the consummation of the
transactions contemplated hereby and thereby;
(ii) certificates of the secretaries of state or other
appropriate officers of the states or other jurisdictions in which each
Seller is organized or qualified to do business dated as of the Closing
Date, certifying as to the good standing and, to the extent available,
nondelinquent tax status of each Seller; and
(iii) a certificate of the principal executive officer of each
Seller dated as of the Closing Date, certifying as to (A) the accuracy of
the representations and warranties of each Seller contained herein, as
contemplated by SECTION 8.1(a), and (B) the performance of the covenants
of each Seller contained herein, as contemplated by SECTION 8.1(b).
(iv) a certificate jointly executed by a principal executive
officer of NetOptix and Leisegang, dated as of the Closing Date,
certifying that such Seller is not a foreign person within the meaning of
Section 1445 of the Code.
(l) ENVIRONMENTAL REPORTS. The Purchaser shall have received a Phase
I report from an environmental consultant satisfactory to it that there is, in
connection with the Canadian Manufacturing Facility and the Berlin Facility, no
violation of Environmental Health and Safety Laws and no Hazardous Materials
which could, in the judgement of the Purchaser, have a Material Adverse Effect.
(m) RESIGNATION OF OFFICERS AND DIRECTORS. The Purchaser shall have
received such resignations as it may request prior to Closing of all officers,
directors and statutory auditors of Leisegang GmbH.
8.2 CONDITIONS TO OBLIGATIONS OF EACH SELLER.
The obligations of NetOptix to sell the Share, the Asset Sellers to sell
the Purchased Assets and the Sellers to take the other actions required to be
taken by each Seller at the Closing are subject to the satisfaction, at or prior
the Closing, of the following conditions unless waived (to the extent such
conditions can be waived) by NetOptix:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made by the Purchaser in this Agreement and the Related Documents
(without giving effect to any qualification contained therein as to materiality,
including without limitation, the phrases "material", "in all material
respects", and "Material Adverse Effect") shall be true and correct in all
material respects on and as of the Closing Date with the same effect as if such
representations and warranties had been made at and as of the Closing Date,
except for those representations and warranties which address matters only as of
a particular date (which shall be true and correct as of such date).
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(b) PERFORMANCE OF OBLIGATIONS. The Purchaser shall have performed
in all material respects its respective agreements, obligations and covenants
required to be performed by it under this Agreement on or as of the Closing
Date.
(c) AUTHORIZATION. All action necessary to authorize the execution,
delivery and performance of this Agreement and the Related Documents by the
Purchaser and the Parent and the consummation of the transactions contemplated
hereby and thereby, shall have been duly and validly taken by the Purchaser and
the Parent and the Purchaser shall have full power and right to consummate the
transactions contemplated hereby and thereby on the terms provided herein.
(d) OPINION OF THE PURCHASER'S COUNSEL. The Sellers shall have
received an opinion of O'Sullivan Graev & Karabell, LLP, counsel for the
Purchaser, dated the Closing Date substantially in the form of EXHIBIT I hereto.
(e) CONSENTS AND APPROVALS. Each Seller shall have received duly
executed copies of all consents and approvals required for or in connection with
the execution and delivery by the Purchaser and the Parent of this Agreement and
each of the Related Documents to which any of them may be parties and the
consummation of the transactions contemplated hereby and thereby, in form and
substance satisfactory to NetOptix.
(f) GOVERNMENT CONSENTS, AUTHORIZATIONS, ETC. All consents,
authorizations, Orders and approvals of, filings or registrations with and the
expiration of all waiting periods imposed by, any third Person, including any
Governmental Entity, which are required for or in connection with the execution
and delivery by the parties of this Agreement and the Related Documents to which
they may be parties and the consummation by the parties of the transactions
contemplated hereby and thereby shall have been obtained or made and shall be in
full force and effect.
(g) ACTIONS AND PROCEEDINGS. No Proceeding shall be pending before
any court or other Governmental Entity, or threatened, which may result in the
restraint or prohibition of the consummation of any of the transactions
contemplated by this Agreement or any of the Related Documents or which could
result in damages payable to the Sellers in connection therewith or which could
adversely affect the Sellers and no court of competent jurisdiction shall have
issued an injunction with respect to the consummation of the transactions
contemplated by this Agreement and the Related Documents that shall not be
stayed or dissolved at the time of Closing.
(h) STATUTES. No action shall have been taken or threatened, and no
Law shall have been enacted, promulgated or issued or deemed applicable to the
transactions contemplated hereby by any Governmental Entity that would (i) make
the consummation of the transactions contemplated hereby illegal or
substantially delay the consummation of any material aspect of the transactions
contemplated hereby, (ii) render any party unable to consummate the transactions
contemplated hereby, or (iii) impair the ability of the Purchaser to own or
conduct the Business as previously conducted, whether directly or indirectly.
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(i) RELATED DOCUMENTS. Each of the documents to be executed and
delivered by the Purchaser shall have been so executed and delivered and the
transactions contemplated thereby consummated or effected, as the case may be,
in accordance with the terms thereof.
(j) RELATED CERTIFICATES. Each of the following certificates shall
have been executed and/or delivered, as the case may be, by the Person who or
which is the subject thereof.
(i) a certificate of the secretary of the Purchaser dated as
of the Closing Date, certifying (A) that true and complete copies of the
respective Charters and By-laws of the Purchaser as in effect on the
Closing Date are attached thereto, (B) as to the incumbency and
genuineness of the signatures of each officer of the Purchaser executing
this Agreement or any of the Related Documents on behalf of the Purchaser;
and (C) the genuineness of the resolutions (attached thereto) of the board
of directors of the Purchaser and the Parent authorizing the execution,
delivery and performance of this Agreement and the Related Documents to
which the Purchaser or the Parent is a party and the consummation of the
transactions contemplated hereby and thereby;
(ii) certificates of the secretary of state of the states in
which the Purchaser is organized dated as of the Closing Date, certifying
as to the good standing and nondelinquent tax status of the Purchaser;
(iii) a certificate signed by an officer of the Purchaser,
dated as of the Closing Date, certifying as to (A) the accuracy of the
representations and warranties of the Purchaser contained herein, as
contemplated by SECTION 8.2(a), and (B) the performance of the covenants
of the Purchaser contained herein, as contemplated in SECTION 8.2(b).
ARTICLE IX
INDEMNIFICATION.
9.1 INDEMNIFICATION GENERALLY; ETC.
(a) The Seller Indemnifying Persons, jointly and severally, shall
indemnify the Purchaser Indemnified Persons for, and hold each of them harmless
from and against, any and all Purchaser Losses arising from or in connection
with any of the following:
(i) the untruth, inaccuracy or breach of any representation or
warranty of any Seller contained in SECTION 5, or in the Schedules, any
Exhibit hereto or any certificate delivered in connection herewith on or
before the Closing Date (or any facts or circumstances constituting any
such untruth, inaccuracy or breach);
(ii) the breach of any agreement or covenant of any Seller
contained in this Agreement (including the Schedules and the Exhibits
attached hereto);
(iii) the Excluded Assets;
(iv) the Excluded Liabilities;
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(v) notwithstanding the disclosure of any such Liability in
this Agreement, on any Schedule, or otherwise, all Liabilities (contingent
or otherwise and including Liability for response costs, personal injury,
property damage or natural resource damage), other than the Assumed
Liabilities and Liabilities reflected on the Statement of Assets and
Liabilities, which arise out of events that occurred, or products sold or
services performed by any Seller prior to the Closing (notwithstanding
that the date on which such Liability arose or became manifest is after
the Closing), including the assertion of any claim, demand or Liability
against the Purchaser arising from or in connection with the assertion
against the Purchaser by any stockholder of any claim with respect to any
actions or the transactions of or involving any Seller prior to or at
Closing (including the actions and transactions contemplated by this
Agreement);
(vi) assertion of any claim, demand or Liability against the
Purchaser arising from or in connection with Environmental, Health and
Safety Laws, including those relating to the handling, treatment, storage,
disposal, release or threatened release of Hazardous Substances at, onto
or from any real property, or any offsite waste treatment or storage
disposal facility associated with the Business (including any such
property or facility associated with Leisegang GmbH), except for any such
Liabilities reflected in the Statement of Assets and Liabilities the facts
or circumstances underlying which are caused solely by the operation of
the Business after the Closing Date;
(vii) non-compliance by any Seller with any applicable "bulk
sales laws";
(viii) assertion of any claim, demand or Liability against the
Purchaser arising from or in connection with the NetOptix Inventory (as
defined in SECTION 11.4);
(ix) any Special Tax Losses.
(b) "Special Tax Losses" means and includes any and all Losses
sustained, suffered or incurred by any Purchaser Indemnified Persons arising
from or in connection with Taxes payable by any Seller or any Affiliate thereof
with respect to any period ending on or prior to the Closing Date (or the
portion ending on the Closing Date of any period that includes but does not end
on the Closing Date) which is not reflected on the Statement of Assets and
Liabilities or the inaccuracy or breach of the representations and warranties of
any Seller contained in SECTION 5.9.
(c) The Purchaser Indemnifying Persons shall indemnify the Seller
Indemnified Persons for, and hold each of them harmless from and against, any
and all Seller Losses arising from or in connection with any of the following:
(i) the untruth, inaccuracy or breach of any representation or
warranty of the Purchaser contained in SECTION 6 or any certificate
delivered in connection herewith on or prior to the Closing Date (or any
facts or circumstances constituting any such untruth, inaccuracy or
breach);
(ii) the breach of any agreement or covenant of the Purchaser
contained in this Agreement;
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(iii) the Assumed Liabilities; and
(iv) the conduct by the Purchaser of the Business or the
ownership or use of the Purchased Assets after the Closing.
9.2 ASSERTION OF CLAIMS.
No claim shall be brought under SECTION 9.1 hereof unless the Indemnified
Persons, or any of them, at any time prior to the applicable Survival Date, give
the Indemnifying Persons (a) written notice of the existence of any such claim,
specifying the nature and basis of such claim and the amount thereof, to the
extent known or (b) written notice pursuant to SECTION 9.3 of any third party
claim, the existence of which might give rise to such a claim. Upon the giving
of such written notice as aforesaid, the Indemnified Persons, or any of them,
shall have the right to commence legal proceedings subsequent to the Survival
Date for the enforcement of their rights under SECTION 9.1.
9.3 NOTICE AND DEFENSE OF CLAIMS.
The obligations and liabilities of an Indemnifying Person with respect to
Losses resulting from the assertion of liability by third parties (each, a
"Third Party Claim") shall be subject to the following terms and conditions:
(a) The Indemnified Persons shall promptly give written notice to
the Indemnifying Persons of any Third Party Claim which might give rise to any
Loss by the Indemnified Persons, stating the nature and basis of such Third
Party Claim, and the amount thereof to the extent known. Such notice shall be
accompanied by copies of all relevant documentation with respect to such Third
Party Claim, including, without limitation, any summons, complaint or other
pleading which may have been served, any written demand or any other document or
instrument.
(b) If the Indemnifying Persons shall acknowledge in a writing
delivered to the Indemnified Persons that the Indemnifying Persons shall be
obligated under the terms of their indemnification obligations hereunder in
connection with such Third Party Claim, then the Indemnifying Persons shall have
the right to assume the defense of any Third Party Claim at their own expense
and by their own counsel, which counsel shall be reasonably satisfactory to the
Indemnified Persons; provided, however, that the Indemnifying Persons shall not
have the right to assume the defense of any Third Party Claim, notwithstanding
the giving of such written acknowledgment, if (i) the Indemnified Persons shall
have been advised by counsel that there are one or more legal or equitable
defenses available to them which are different from or in addition to those
available to the Indemnifying Persons, and, in the reasonable opinion of the
Indemnified Persons, counsel for the Indemnifying Persons could not adequately
represent the interests of the Indemnified Persons because such interests could
be in conflict with those of the Indemnifying Persons or (ii) such action or
proceeding involves, or could have a material effect on, any material matter
beyond the scope of the indemnification obligation of the Indemnifying Persons.
(c) If the Indemnifying Persons shall assume the defense of a Third
Party Claim (under circumstances in which the proviso to the first sentence of
SECTION 9.3(b) is not applicable), the Indemnifying Persons shall not be
responsible for any legal or other defense
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costs subsequently incurred by the Indemnified Persons in connection with the
defense thereof. If the Indemnifying Persons do not exercise their right to
assume the defense of a Third Party Claim by giving the written acknowledgement
referred to in SECTION 9.3(b), or are otherwise restricted from so assuming by
the proviso to the first sentence of SECTION 9.3(b), the Indemnifying Persons
shall nevertheless be entitled to participate in such defense with their own
counsel and at their own expense; and in any such case, the Indemnified Persons
shall assume the defense of the Third Party Claim, with counsel which shall be
reasonably satisfactory to the Indemnifying Persons, and shall act reasonably
and in accordance with their good faith business judgment and shall not effect
any settlement without the consent of the Indemnifying Persons, which consent
shall not unreasonably be withheld or delayed.
(d) If the Indemnifying Persons exercise their right to assume the
defense of a Third Party Claim, they shall not make any settlement of any claims
without the written consent of the Indemnified Persons, which consent shall not
be unreasonably withheld; provided, however, that in the event the Indemnifying
Persons shall propose the settlement of any claim which is capable of settlement
by the payment of money only and shall demonstrate to the reasonable
satisfaction of the Indemnified Persons the ability to pay such amount, and the
Indemnified Persons shall not consent thereto within 20 days after the receipt
of written notice thereof, any Losses incurred by the Indemnified Persons in
excess of such proposed settlement shall be at the sole expense of the
Indemnified Persons.
(e) Any claim by an Indemnified Person on account of a Loss which
does not result from a Third Party Claim (a "Direct Claim") will be asserted by
giving the Indemnifying Person reasonably prompt written notice thereof, and the
Indemnifying Person will have a period of 30 calendar days within which to
respond in writing to such Direct Claim. If the Indemnifying Person does not so
respond within such 30 calendar day period, the Indemnifying Person shall be
deemed to have rejected such claim, in which event the Indemnified Person shall
be free to pursue such remedies as may be available to the Indemnified Person.
(f) A failure to give timely notice as provided in this SECTION 9.3
shall not affect the rights or obligations of any party hereunder except and
only to the extent that, as a result of such failure, any party which was
entitled to receive such notice was deprived of its right to recover any payment
under its applicable insurance coverage or was otherwise directly and materially
damaged as a result of such failure.
9.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
Subject to the further provisions of this SECTION 9.4, the representations
and warranties of the Parties contained in this Agreement or in any certificate
or other writing delivered in connection with this Agreement shall survive the
Closing Date until the first anniversary of the Closing Date. Representations
and Warranties contained in SECTION 5.9, the first sentence of SECTION 5.10,
SECTION 5.15, 5.18 and 5.19 shall survive until the expiration of the applicable
statute of limitations. The covenants and other agreements of the Sellers and
the Purchaser contained in this Agreement shall survive the Closing Date until
they are otherwise terminated by their terms. For convenience of reference, the
date upon which any representation or warranty contained herein shall terminate,
if any, is referred to herein as the "Survival Date".
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9.5 LIMITATIONS ON INDEMNIFICATION.
(a) From and after the Closing, the Purchaser Indemnified Persons
shall not have the right to be indemnified for breaches of representations and
warranties of any Seller pursuant to SECTION 9.1(a)(i) and the Seller
Indemnified Persons shall not have the right to be indemnified for breaches of
representations and warranties of the Purchaser pursuant to SECTION 9.1(c)(i)
unless and until the Indemnified Persons (or any of them) shall have incurred on
a cumulative basis aggregate Losses in an amount exceeding $150,000; provided,
however, that in no event shall the limitations set forth in this SECTION 9.5
apply with respect to any willful or knowing breach of such representations or
warranties. Once aggregate Losses under SECTION 9.1(a)(i) or SECTION 9.1(c)(i),
as applicable, exceed $150,000, the Purchaser Indemnified Persons and the Seller
Indemnified Persons shall be entitled to indemnification for the amount of all
Losses, including the amount of Losses less than $150,000.
(b) Neither the Purchaser Indemnified Persons nor the Seller Indemnified Persons
may recover Losses under this Agreement for breaches of representations and
warranties which in the aggregate exceed the amount of $1,000,000 under SECTION
9.1(a)(i) or SECTION 9.1(c)(i), as applicable.
9.6 DEFINITIONS.
As used herein the following terms have the following respective meanings:
"Purchaser Indemnified Persons" means and includes (A) before the
Closing, the Purchaser, its Affiliates, successors and assigns, and the
respective officers and directors of each of the foregoing and (B) after the
Closing, the Purchaser and its Affiliates including Leisegang GmbH and their
respective successors and assigns, and the respective officers and directors of
each of the foregoing.
"Purchaser Indemnifying Persons" means and includes (A) before the
Closing, the Purchaser and its Affiliates and (B) after the Closing, the
Purchaser and its Affiliates including Leisegang GmbH and their respective
successors and assigns.
"Purchaser Losses" means any and all Losses sustained, suffered or
incurred by any the Purchaser Indemnified Person arising from or in connection
with any such matter which is the subject of indemnification under SECTION
9.1(a).
"Indemnified Persons" means and includes the Seller Indemnified
Persons or the Purchaser Indemnified Persons, as the case may be.
"Indemnifying Persons" means and includes the Seller Indemnifying
Persons or the Purchaser Indemnifying Persons, as the case may be.
"Seller Indemnified Persons" means and includes (A) before the
Closing, each Seller, its Affiliates and their respective successors and
assigns, and the respective officers and directors of each of the foregoing and
(B) after the Closing, NetOptix, Leisegang and Galenica and their respective
Affiliates, successors and assigns, and the respective officers and directors of
each of the foregoing.
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"Seller Indemnifying Persons" means and includes (A) before the
Closing, each Seller and their respective Affiliates and (B) after the Closing,
NetOptix, Leisegang and Galenica and their respective Affiliates, successors and
assigns.
"Seller Losses" means any and all Losses sustained, suffered or
incurred by any Seller Indemnified Person arising from or in connection with any
matter which is the subject of indemnification under SECTION 9.1(C).
9.7 PAYMENTS FROM ESCROW FUND.
Claims by Purchaser Indemnified Persons for indemnification hereunder
shall first be satisfied from any balance in the Escrow Fund. Any excess over
such balance shall be paid by NetOptix.
ARTICLE X
TERMINATION; EFFECT OF TERMINATION.
10.1 TERMINATION.
This Agreement may be terminated at any time prior to the Closing by:
(a) the mutual consent of the Purchaser and NetOptix; or
(b) the Purchaser, if:
(i) there has been a willful breach by any Seller or of any
representation, warranty, covenant or agreement set forth in this
Agreement which is material and which such Seller fails to cure within 10
Business Days after notice thereof is given by the Purchaser (except no
cure period shall be provided for a breach by any Seller which by its
nature cannot be cured);
(ii) the conditions set forth in SECTION 8.1 shall not have
been satisfied or waived (to the extent they may be waived) by January 31,
2000; or
(iii) the matters contained in a supplement or amendment of
any Schedule of this Agreement by the Sellers constitute a Material
Adverse Effect;
(c) NetOptix, if:
(i) there has been a willful breach by the Purchaser of any
representation, warranty, covenant or agreement set forth in this
Agreement which is material and which the Purchaser fails to cure within
10 Business Days after notice thereof is given by NetOptix (except no cure
period shall be provided for a breach by the Purchaser which by its nature
cannot be cured); or
(ii) if the conditions set forth in SECTION 8.2 shall not have
been satisfied or waived (to the extent they may be waived) by January 31,
2000;
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(d) the Purchaser or NetOptix, if any permanent injunction or other
Order of a court or other Governmental Entity preventing the Closing shall have
become final and nonappealable;
provided, however, that NetOptix shall not be entitled to terminate this
Agreement pursuant to SECTION 10.1(c)(ii) if any Seller's intentional breach of
this Agreement has prevented the satisfaction of a condition and the Purchaser
shall not be entitled to terminate the Agreement pursuant to SECTION 10.1(b)(II)
if the Purchaser's intentional breach of this Agreement has prevented the
satisfaction of all conditions.
10.2 TERMINATION PROCEDURES.
Any termination pursuant to SECTION 10.1(a) shall be effected by a written
instrument signed by the Purchaser and NetOptix, and any other termination
pursuant to this SECTION 10.1 shall be effected by written notice from the party
or parties so terminating to the other parties hereto, which notice shall
specify the Section of this Agreement pursuant to which this Agreement is being
terminated.
10.3 EFFECT OF TERMINATION.
In the event of the termination of this Agreement as provided in SECTION
10.1, this Agreement shall be of no further force or effect, except for SECTION
5.20, SECTION 6.4, this SECTION 10.3 and SECTION 12.6, each of which shall
survive the termination of this Agreement; provided, however, that the Liability
of any party for any breach by such party of the representations, warranties,
covenants or agreements of such party set forth in this Agreement occurring
prior to the termination of this Agreement shall survive the termination of this
Agreement and, in addition, in the event of any action for breach of contract in
the event of a termination of this Agreement, the prevailing party shall be
reimbursed by the other party to the action for reasonable attorneys' fees and
expenses relating to such action.
ARTICLE XI
POST CLOSING COVENANTS
11.1 ACCESS TO RECORDS.
The Asset Sellers shall, for the longer of three years after the Closing
or the period required by applicable Law, give to the Purchaser and its
authorized Representatives, upon reasonable notice and during normal business
hours, access to the books and records being retained by the Asset Sellers,
which in any way relate to the Business and the Purchaser shall for the same
period give to NetOptix and its authorized Representatives, upon reasonable
notice and during normal business hours, access to the books and records of
Leisegang GmbH and of the Business which are acquired by the Purchaser from the
Asset Sellers relating to the period up to the Closing Date. The Purchaser and
NetOptix shall each be entitled, at its own expense, to make extracts and copies
of such books and records and shall cooperate in connection with accomplishing
the same. The Purchaser and the Asset Sellers shall, during such period,
preserve and maintain such books and records held by them and shall not,
subsequent to such period, destroy or cause to be destroyed any such books or
records without first obtaining the written
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consent of the other or giving to the other the opportunity to take delivery of
the books and records to be destroyed. If the Purchaser or NetOptix, as the case
may be (a "Requesting Party"), promptly notifies the other Party that it desires
or requires any of such books or records to be retained for any longer period,
such books and records shall be either retained by the party in possession of it
or be shipped promptly to the Requesting Party at the expense of the Requesting
Party.
11.2 PHYSICAL TRANSFER OF PURCHASED ASSETS.
(a) The tangible Purchased Assets shall be deemed delivered to the
Purchaser at the time of Closing at the location of each Asset Seller or, if not
located at the premises of the Asset Seller, wherever located. Title and risk of
loss of the designated Purchased Assets shall pass to the Purchaser at the time
of Closing.
(b) The Purchaser shall have sixty (60) days after the Closing to
remove from that portion of the Florida Facility not covered by the Sublease
(the "Non-Subleased Premises") any tangible Purchased Assets located on the
Non-Subleased Premises at Closing. Such Non-Subleased Premises shall be
available for such sixty (60) day period at no cost to the Purchaser, provided
that (i) Seller may use such Non-Subleased Premises for its own assets and
activities, (ii) access by the Purchaser shall be limited to normal business
hours upon reasonable notice, and (iii) none of the Sellers shall have any
Liability or obligation with respect to any Purchased Assets located on the
Non-Subleased Premises, except for gross negligence or willful misconduct.
11.3 COLLECTION OF ACCOUNTS RECEIVABLE.
(a) The Purchaser and Leisegang GmbH shall each use its reasonable
efforts, exercised in good faith, to collect all of the Receivables, the
collection practices of the Purchaser and Leisegang GmbH prior to the date
hereof being deemed to be an acceptable standard.
(b) Unless otherwise designated by the Debtor, any payment from a
Debtor (other than a payment with respect to a Disputed Receivable) received
subsequent to the Closing shall, for purposes of this Agreement, be applied
against the Receivables of such Debtor other than Disputed Receivables, in the
order of the oldest amounts owing. Payments from Debtors with respect to
Disputed Receivables shall be applied against such Disputed Receivables.
NetOptix and the Purchaser shall each timely notify the other of any Disputed
Receivable.
(c) On or promptly after the 180th day following the Closing Date,
the Purchaser shall notify NetOptix of all Receivables remaining uncollected as
of such date, which notice shall identify each such Receivable by name of
Debtor.
(d) The Asset Sellers (i) guaranty to the Purchaser that the
Receivables will be collectible in the ordinary course of business up to the
aggregate amount of the Net Receivables shown on the Closing Statements as
finally determined or settled pursuant to SECTION 3.3 (the "Net Receivables
Amount") and (ii) NetOptix shall, at the option of the Purchaser, pay to the
Purchaser an amount equal to the excess of the Net Receivables Amount over the
amount of the Receivables collected by the date of the Purchaser's written
exercise of such option, which shall not be sooner than the 180th day following
the Closing. If NetOptix is requested to make a
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payment to the Purchaser with respect to the uncollected Receivables pursuant to
this SECTION 11.3(d), the Purchaser shall, upon receipt of such payment, (i)
assign, transfer, convey and deliver to NetOptix all of the Purchaser's or
Leisegang GmbH's right, title and interest to and under such Receivables not so
collected (including without limitation all documentation related to such
Receivables), free and clear of Encumbrances due to the acts or omissions of the
Purchaser and (ii) provide NetOptix with the existing collection history of the
Purchaser or Leisegang GmbH for such Receivables. Payment shall be made first
from the Escrow Fund, to the extent available, and by NetOptix to the extent of
any payments required in excess of the amount available in the Escrow Fund and,
if made by NetOptix, by wire transfer in immediately available funds to an
account designated by the Purchaser. The Purchaser shall deliver monthly to
NetOptix all amounts subsequently collected by the Purchaser or Leisegang GmbH
on Receivables which have been so purchased by NetOptix.
(e) As used herein the following terms have the following respective
meanings:
"Claim" means a claim, refusal to pay or other set-off against a
Receivable arising out of the goods or services to which the Receivable is
related.
"Debtor" means a debtor or an obligor of a Receivable or Foreign
Receivable.
"Disputed Receivable" means a Receivable as to which the Debtor has
communicated a Claim to a Seller or the Purchaser.
"Receivables" means the Net Receivables.
11.4 SALE OF NETOPTIX INVENTORY.
(a) At, and from time to time after the Closing, NetOptix shall
assemble, package and prepare at NetOptix' location, for delivery to the
Purchaser at the location or locations designated by the Purchaser, the items of
inventory of NetOptix specified on SCHEDULE 11.4 to be delivered prior to the
Closing (the "NetOptix Inventory"). The standard cost at Closing on the books of
NetOptix of the NetOptix Inventory determined in accordance with GAAP shall be
provided by NetOptix to the Purchaser. NetOptix shall deliver the NetOptix
Inventory to the Purchaser F.O.B. the Purchaser's location by carrier designated
by NetOptix. Risk of loss of the NetOptix Inventory shall pass to the Purchaser
upon proper delivery of such inventory by NetOptix to the Purchaser's location.
Title to the NetOptix Inventory shall remain with NetOptix.
(b) From and after the Closing Date (but in no event after the
second anniversary of the Closing Date), the Purchaser shall use its
commercially reasonable efforts to sell for NetOptix, without warranty or
recourse to the Purchaser, the NetOptix Inventory. The Purchaser shall have no
obligation or liability to NetOptix or any other Seller if the Purchaser fails
to sell all or any part of the NetOptix Inventory or, as to any such inventory
sold, if the Purchaser fails to obtain any minimum price for the NetOptix
Inventory. Notwithstanding the foregoing, the Purchaser shall not sell any
NetOptix Inventory at a price which is less than 40% of NetOptix's standard cost
of such inventory without the consent of NetOptix.
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(c) On or before July 31, 2000, with respect to the period ending on
June 30, 2000, and within 30 days after each such successive calendar quarter
thereafter, the Purchaser shall pay to NetOptix in respect of sales by the
Purchaser of NetOptix Inventory during the preceding quarterly period an amount
equal to the lesser of (i) proceeds received by the Purchaser during such period
from such sales of NetOptix Inventory minus the Incremental Sales Costs incurred
by the Purchaser during such period and (ii) the standard cost of the NetOptix
Inventory so sold during such period minus the Incremental Sales Costs incurred
by the Purchaser during such period. Each such payment shall be accompanied by
the Purchaser's statement of such sales and Incremental Sales Costs.
(d) For purposes of this SECTION 11.4, the "Incremental Sales Cost"
means the incremental warehousing, marketing, sales, packaging and shipping
costs incurred by the Purchaser in connection with NetOptix Inventory.
(e) The Seller Indemnifying Persons shall indemnify and hold the
Purchaser harmless from any and all Liabilities incurred or sustained by or
against the Purchaser with respect to or arising out of the NetOptix Inventory
as provided SECTION 9.1(a).
(f) All sales of NetOptix inventory by the Purchaser shall be made
on an "as is" basis, without representation or warranty of any kind, express or
implied, by statute or otherwise (including warranties of fitness for any
purpose or merchantability). The Purchaser shall use reasonable commercial
efforts to assure that all such sales are in compliance with applicable Laws of
the United States and other jurisdictions.
(g) THE PURCHASER DOES NOT BY THIS SECTION 11.4 MAKE ANY WARRANTIES,
EXPRESS OR IMPLIED, BY STATUTE OR OTHERWISE, REGARDING ANY PRODUCT PRODUCED BY
NETOPTIX AND SOLD BY THE PURCHASER UNDER THIS SECTION 11.4, ITS FITNESS FOR ANY
PURPOSE, ITS QUALITY, ITS MERCHANTABILITY OR OTHERWISE.
(h) The Purchaser, effective as of the Closing, authorizes NetOptix
to use, to the extent of the Purchaser's interest therein and without warranty
from or recourse to the Purchaser, solely in connection with the sale of
NetOptix Inventory, the trademark "Leisegang" and any other intellectual
property related to the NetOptix Inventory.
11.5 ESCROW AGREEMENT.
(a) The interest, earnings and proceeds from the Escrow Amount is
called the "Escrow Income". The Escrow Fund shall be paid by the Escrow Agent as
follows:
(i) from time to time, to the Purchaser, such amounts as it
may certify it is entitled to be paid under the provisions of this
Agreement; provided, however, that if NetOptix objects thereto, the Escrow
Agent shall continue to hold such amounts in escrow under the Escrow
Agreement;
(ii) pursuant to the joint written instructions of the
Purchaser and NetOptix;
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(iii) on the first anniversary of the Closing Date, to NetOptix, the
balance in the Escrow Fund, less all amounts claimed under this Agreement
but not theretofore paid from the Escrow Fund to Purchaser Indemnified
Persons (such amounts to be paid to NetOptix or Purchaser Indemnified
Persons as claims are resolved); or
(iv) as determined by the final order, decree or judgement (a
"Final Decree") of a court of competent jurisdiction, (the time for appeal
having expired with no appeal being taken) in a proceeding to which the
Purchaser and NetOptix are parties upon the Escrow Agent's receipt from
the Purchaser or NetOptix of a written notice, accompanied by a certified
copy of such Final Decree.
(b) Taxable Escrow Income shall be allocated, and the interest on
the Escrow Fund shall be paid quarterly, to NetOptix commencing on April 1, 2000
and on the first day of each calendar quarter thereafter.
NetOptix and the Purchaser shall provide instructions to the Escrow Agent
to implement the provisions of this Agreement and the Escrow Agreement.
11.6 APPORTIONMENTS.
(a) Utilities. The Purchaser, NetOptix and Galenica shall jointly
instruct the utilities servicing the Canadian Manufacturing Facility, the
Canadian Office Facility and the space in the Florida Facility to be subleased
by the Purchaser to prepare final bills as of the closing of business on the day
preceding the Closing Date for all utility services to the premises to be
occupied by the Purchaser from and after the Closing and to transfer to NetOptix
the deposit and to continue utility service in the Purchaser's name commencing
at such time. The parties shall arrange that all telephone numbers used in
connection with the Canadian Facilities and all telephone numbers at the Florida
Facility used in connection with the Business be transferred to the Purchaser.
(b) Salaries. The Seller shall be responsible for and pay
compensation and any related expenses, including fringe benefits, taxes, etc. of
the employees of Galenica incurred to the end of the last shift on the day
preceding the Closing Date and the Purchaser shall be responsible for
compensation for such employees accruing from and after the Closing Date.
(c) Taxes. Taxes accrued on real estate and personal property of
Galenica in Canada shall be pro-rated to the day preceding the Closing, whether
or not such taxes are then due. Special assessments, if any, for work relating
to the Canadian Manufacturing Facility which accrue prior to the Closing Date
and which are payable in installments shall be paid by the owner of the Canadian
Manufacturing Facility when the installments are due.
(d) Miscellaneous Proration. All water, fuel, sewer expense,
licensing and permit fees, costs and rentals on equipment which are part of the
Purchased Assets and service contracts which are part of the Purchased Assets
shall be apportioned to the day preceding the Closing.
(e) Implementation. At the time of Closing or as soon thereafter as
is practicable, representatives of the Purchaser and NetOptix shall examine the
books and records of the Business as of the time of Closing to make a
determination of the apportionment referred to in
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this SECTION 11.6. Payments in respect thereof shall be made, where possible, by
good check at the Closing or within forty days after the Closing or, if the
determinations are disputed and such dispute is not resolved within forty five
days after the Closing, within ten days after resolution of the dispute.
11.7 CORPORATE NAME CHANGE.
Immediately after the Closing, Leisegang shall take all steps necessary to
change its corporate name to a name sufficiently dissimilar from its current
name so that the Purchaser immediately may commence use of the Leisegang name
and, in the reasonable judgment of the Purchaser, there will be no confusion of
the public.
ARTICLE XII
MISCELLANEOUS PROVISIONS.
12.1 AMENDMENT.
This Agreement shall not be altered or otherwise amended except pursuant
to an instrument in writing signed by each Seller and the Purchaser, except that
NetOptix may waive any obligation owed by any Seller under this Agreement to the
Purchaser. No waiver by any Seller or the Purchaser of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
12.2 EXTENSION; WAIVER.
At any time prior to the Closing, (a) the Purchaser may (i) extend the
time for the performance of any of the obligations or other acts of any Seller,
(ii) waive any inaccuracies in the representations and warranties of any Seller
contained in this Agreement or in any document delivered pursuant to this
Agreement and (iii) waive compliance by any Seller with any of the agreements or
conditions contained in this Agreement and (b) NetOptix may (i) extend the time
for the performance of any of the obligations or other acts of the Purchaser or
the Parent, (ii) waive any inaccuracies in the representations and warranties of
the Purchaser or the Parent contained in any document delivered pursuant to this
Agreement and (iii) waive compliance by the Purchaser or the Parent with any of
the agreements or conditions contained in this Agreement. Any such waiver shall
not operate or be construed as a waiver of any subsequent breach by the other
party.
12.3 ENTIRE AGREEMENT.
This Agreement and the Related Documents (including the schedules and the
exhibits attached hereto) contain all of the agreements among the parties hereto
with respect to the transactions contemplated hereby and supersede all prior
agreements or understandings, whether written or oral, among the parties with
respect thereto including the letter agreement dated October 29, 1999 between
the Parent and NetOptix.
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12.4 SEVERABILITY.
The parties desire that the provisions of this Agreement be enforced to
the fullest extent permissible under the Law and public policies applied in each
jurisdiction in which enforcement is sought. Accordingly, in the event that any
provision of this Agreement would be held in any jurisdiction to be invalid,
prohibited or unenforceable for any reason, such provision, as to such
jurisdiction, shall be ineffective, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction. Notwithstanding the foregoing, if such
provision could be more narrowly drawn so as not to be invalid, prohibited or
unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so
narrowly drawn, without invalidating the remaining provisions of this Agreement
or affecting the validity or enforceability of such provision in any other
jurisdiction.
12.5 BENEFITS OF AGREEMENT.
All the terms and provisions of this Agreement shall be binding upon and
inure to the benefit of the Sellers and the Purchaser and the Parent and their
respective successors and permitted assigns. Anything contained herein to the
contrary notwithstanding, this Agreement shall not be assigned by (i) any Seller
without the prior written consent of the Purchaser or (ii) the Purchaser without
the prior written consent of NetOptix, except that the Purchaser may, without
the consent of NetOptix, assign its rights under this Agreement to one or more
of its Affiliates; provided that no such assignment shall relieve the Purchaser
or the Parent of its obligations hereunder.
12.6 FEES AND EXPENSES.
Each Seller and the Purchaser shall bear and pay its own respective legal,
accounting and broker fees, costs and expenses that have been incurred or that
are in the future incurred by, on behalf of or for the benefit of such party in
connection with: (i) the negotiation, preparation and review of any summary of
terms or similar document relating to the Sale; (ii) the negotiation,
preparation and review of this Agreement and the Related Documents (including
any disclosure schedule), and all bills of sale, assignments, certificates, and
other instruments and documents delivered or to be delivered in connection with
the Sale; (iii) the obtaining of any consent required to be obtained in
connection with the Sale; (iv) the investigation and review conducted by the
Purchaser with respect to the business of the Sellers and (iv) the consummation
of the transactions contemplated by this Agreement and the Related Documents.
12.7 HEADINGS.
Descriptive headings are for convenience only and shall not control or
affect in any way the meaning or construction of any provision of this
Agreement.
12.8 NOTICES.
Any notice or other communication required or permitted to be delivered to
any party under this Agreement shall be in writing and shall be deemed properly
delivered, given and received, if delivered during business hours on a Business
Day, when delivered (by hand, by registered mail, by courier or express delivery
service or by facsimile) to the address or facsimile
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telephone number set forth beneath the name of such party below (or to such
other address or facsimile telephone number as such party shall have specified
in a written notice given to the other party hereto) or, if not delivered during
business hours on a Business Day, on the next succeeding business day:
(a) if to the Sellers, to NetOptix:
NetOptix Corporation
Sturbridge Business Park
P.O. Box 550
Sturbridge MA 01566
Attention: Mr. Gerhard R. Andlinger, President
Telecopier: (508) 347-2270
with a copy to:
Edwards & Angell, LLP
250 Royal Palm Way
Palm Beach, FL 33480
Attention: Jonathan E. Cole, Esq.
Telecopier: (561) 655-8719.
(b) if to the Purchaser, to:
CooperSurgical Acquisition Corp.
c/o The Cooper Companies, Inc.
6140 Stoneridge Mall Road, Suite 590
Pleasanton, California 94588
Attention: Carol R. Kaufman, V.P., Legal Affairs
Telecopier: (925) 460-3662;
with a copy to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: David I. Karabell, Esq.
Telecopier: (212) 408-2420.
12.9 COUNTERPARTS.
This Agreement may be executed in any number of counterparts, and each
such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute one agreement.
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12.10 GOVERNING LAW.
This Agreement will be governed by and construed in accordance with the
domestic laws of the State of New York, without giving effect to any choice of
law or conflicting provision or rule (whether of the State of New York, or any
other jurisdiction) that would cause the laws of any jurisdiction other than the
State of New York to be applied. in furtherance of the foregoing, the internal
law of the State of New York will control the interpretation and construction of
this agreement, even if under such jurisdiction's choice of law or conflict of
law analysis, the substantive law of some other jurisdiction would ordinarily
apply.
12.11 INCORPORATION OF EXHIBITS AND SCHEDULES.
The EXHIBITS and SCHEDULES identified in this Agreement are incorporated
herein by reference and made a part hereof.
12.12 INDEPENDENCE OF COVENANTS AND REPRESENTATIONS AND WARRANTIES.
All covenants hereunder shall be given independent effect so that if a
certain action or condition constitutes a default under a certain covenant, the
fact that such action or condition is permitted by another covenant shall not
affect the occurrence of such default, unless expressly permitted under an
exception to such initial covenant. In addition, all representations and
warranties hereunder shall be given independent effect so that if a particular
representation or warranty proves to be incorrect or is breached, the fact that
another representation or warranty concerning the same or similar subject matter
is correct or is not breached shall not affect the incorrectness of or a breach
of a representation and warranty hereunder.
12.13 INTERPRETATION; CONSTRUCTION.
"Agreement" means this agreement together with all schedules and exhibits
hereto, as the same may from time to time be amended, modified, supplemented or
restated in accordance with the terms hereof. "Best Knowledge" of any Person
means (i) the actual knowledge of such Person and (ii) that knowledge which
should have been acquired by such Person after making such due inquiry and
exercising such due diligence as a prudent businessperson would have made or
exercised in the management of his or her business affairs, including due
inquiry of those key employees and professional advisers (including attorneys,
accountants and consultants) of the Person who could reasonably be expected to
have actual knowledge of the matters in question. The use in this Agreement of
the term "including" means "including, without limitation." The words "herein",
"hereof", "hereunder", "hereby", "hereto", "hereinafter", and other words of
similar import refer to this Agreement as a whole, including the schedules and
exhibits, as the same may from time to time be amended, modified, supplemented
or restated, and not to any particular ARTICLE, section, subsection, paragraph,
subparagraph or clause contained in this Agreement. All references to ARTICLES,
sections, subsections, clauses, paragraphs, schedules and exhibits mean such
provisions of this Agreement and the schedules and exhibits attached to this
Agreement, except where otherwise stated. The title of and the ARTICLE, section
and paragraph headings in this Agreement are for convenience of reference only
and shall not govern or affect the interpretation of any of the terms or
provisions of this Agreement. The use herein of the masculine, feminine or
neuter forms shall also denote the
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other forms, as in each case the context may require. Where specific language is
used to clarify by example a general statement contained herein, such specific
language shall not be deemed to modify, limit or restrict in any manner the
construction of the general statement to which it relates. The language used in
this Agreement has been chosen by the parties to express their mutual intent,
and no rule of strict construction shall be applied against any party.
Accounting terms used but not otherwise defined herein shall have the meanings
given to them under GAAP. The use of the sign "$" (without further currency
identification) within this Agreement shall refer only to currency of the United
States of America.
12.14 DEFINITIONS.
As used herein, the following terms have the following meanings:
"Affiliate" means, with respect to any Person (i) a director,
officer or shareholder of such Person, (ii) a spouse, parent, sibling or
descendant of such Person (or spouse, parent, sibling or descendant of any
director or executive officer of such Person), and (iii) any other Person that,
directly or indirectly through one or more intermediaries, controls, or is
Controlled by, or is under common Control with, such Person.
"Business Day" means any day that is not a Saturday, Sunday or a day
on which banking institutions in New York, New York are not required to be open.
"Encumbrances" means any security interests, mortgages, deeds of
trust, liens, pledges, charges, claims, easements, reservations, restrictions,
clouds, equities, rights of way, options, rights of first refusal, grants of
power to confess judgment, conditional sales and title retention agreements
(including any lease in the nature thereof) and all other encumbrances whether
or not relating to the extension of credit or the borrowing of money.
"Control" means, with respect to any Person, the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
"Florida Facility Lease" means the Commercial Lease dated August
26, 1993 between Catexor Limited Partnership and Leisegang.
"GAAP" means generally accepted accounting principles in the United
States consistently applied (and in the case of Galenica and Leisegang GmbH, the
local domestic equivalent of GAAP).
"Law" means any law, statute, treaty, rule, directive or regulation
or Order of any Governmental Entity.
"Liability" means any liability or obligation, whether known or
unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued,
liquidated or unliquidated and whether due or to become due, regardless of when
asserted.
"Litigation Expense" means any out-of-pocket expenses incurred in
connection with investigating, defending or asserting any claim, legal or
administrative action, suit or
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Proceeding incident to any matter indemnified against hereunder including,
without limitation, court filing fees, court costs, arbitration fees or costs,
witness fees and fees and disbursements of outside legal counsel, investigators,
expert witnesses, accountants and other professionals.
"Losses" means any and all losses, claims, shortages, damages,
Liabilities, expenses (including reasonable attorneys' and accountants' and
other professionals' fees and Litigation Expenses), assessments, Tax
deficiencies, Taxes (including interest or penalties thereon) and insurance
premium increases arising from or in connection with any such matter that is the
subject of indemnification under ARTICLE IX, in each instance after deduction of
the amount of any insurance proceeds recovered and net of any tax benefit
actually realized as a result of the Loss by the Indemnified Person in the year
in which the claim for indemnification for such Loss was made pursuant to this
Agreement or, in the case of a corporation, net of any tax benefit actually
realized in such year by a member of an affiliated group of such corporation
within the meaning of Section 1504 of the Code.
"Material Adverse Effect" means a material adverse effect on (i) the
financial condition, business, results of operations or prospects of the
Business taken as a whole, (ii) the financial condition, business or results of
operations or prospects of Leisegang GmbH or Galenica, (iii) on the Purchased
Assets taken as a whole or (iv) on the ability of each Seller to perform its
obligations under or to consummate the Sale; provided, however, that in no event
shall any of the following constitute a Material Adverse Effect: (x) any
effects, changes, events, circumstances or conditions generally affecting the
industry in which any Seller operates or arising from changes in general
business or economic conditions (including litigation, delays in customer
orders, a reduction in sales, a disruption in business relationships or a loss
of employees); and (y) any effects, changes, events, circumstances or conditions
resulting from (A) compliance by any Seller with the terms of, or the taking of
any action contemplated or permitted by, this Agreement or any Related Document;
(B) the voluntary resignation or other departure of any sales representatives or
employee dedicated to sales of the Asset Sellers located in the United States;
(C) the voluntary resignation or departure of that number of employees of the
Asset Sellers that does not in the aggregate prevent the Business from being
conducted by the Purchaser as it is currently being conducted; or (D) the
termination or threatened termination of any non-material customer or supplier
relationship, in each case of clauses (B), (C) and (D) above, such actions
occurring as a result of the identity of the Purchaser or its Affiliates.
"Orders" means judgments, writs, decrees, compliance agreements,
injunctions or orders of any Governmental Entity or arbitrator.
"Permits" means all permits, licenses, authorizations,
registrations, franchises, approvals, certificates, variances and similar rights
obtained, or required to be obtained, from Governmental Entities.
"Permitted Encumbrances" means (i) Encumbrances set forth on
SCHEDULE 5.10(b), (ii) Encumbrances for Taxes not yet due and payable or being
contested in good faith by appropriate proceedings and for which there are
adequate reserves on the books, (iii) workers or unemployment compensation liens
arising in the ordinary course of business; and (iv) mechanic's, materialman's,
supplier's, vendor's or similar liens arising in the ordinary course of business
securing amounts that are not delinquent.
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"Person" shall be construed broadly and shall include an individual,
a partnership, a corporation, a limited liability company, an association, a
joint stock company, a trust, a joint venture, an unincorporated organization or
a Governmental Entity.
"Proceedings" means actions, suits, claims, investigations or legal
or administrative or arbitration proceedings.
"Representative" means officers, directors, employees, agents,
attorneys, accountants and financial advisors of the Purchaser and the Sellers,
as the case may be.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Sublease" means a sublease agreement under which Leisegang
subleases to the Purchaser each of (i) Suites 110 and 116 located at 6401
Congress Avenue, Boca Raton, Florida, for the period from the Closing Date until
the end of the current lease term in 2001, and (ii) Suites 110 and 116 located
at 6421 Congress Avenue, Boca Raton, Florida, for the period ending six months
from the Closing Date, in each case on the same terms and conditions and the
same costs as such suites are leased to Leisegang under the Florida Facility
Lease.
12.15 REMEDIES.
THE PARTIES SHALL EACH HAVE AND RETAIN ALL RIGHTS AND REMEDIES EXISTING IN
THEIR FAVOR UNDER THIS AGREEMENT, AT LAW OR EQUITY, INCLUDING RIGHTS TO BRING
ACTIONS FOR SPECIFIC PERFORMANCE AND INJUNCTIVE AND OTHER EQUITABLE RELIEF
(INCLUDING, WITHOUT LIMITATION, THE REMEDY OF RESCISSION) TO ENFORCE OR PREVENT
A BREACH OR ANY VIOLATION OF THIS AGREEMENT. ALL SUCH RIGHTS AND REMEDIES SHALL
BE CUMULATIVE AND THE EXISTENCE, ASSERTION, PURSUIT OR EXERCISE OF ANY THEREOF
BY A PARTY SHALL NOT PRECLUDE THE ASSERTION, PURSUIT OR EXERCISE BY SUCH PARTY
OF ANY OTHER RIGHTS OR REMEDIES AVAILABLE TO IT.
ARTICLE XIII
NETOPTIX AS REPRESENTATIVE
By signing this Agreement, each Seller, for itself and its successors and
assigns, hereby irrevocably authorizes NetOptix to execute and deliver and to
take all action required or permitted under this Agreement (including the giving
and receiving of all waivers, notices and consents, the receipt of service of
process and the execution and delivery of all documents and agreements
hereunder, including any amendments, waivers and consents which any Seller may
provide hereunder, taking any action concerning the Escrow Fund including the
bringing of any
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action and the settlement of any disputes and any releases in connection with
the settlement of disputes or claims).
Without limiting the generality of the foregoing paragraph, NetOptix is
hereby irrevocably authorized by each Seller as its authorized agent to take all
action or to refrain from taking any action which a Seller can take or refrain
from taking under this Agreement or any Related Document, to accept and
acknowledge on its behalf service of any and all legal process which may
lawfully be served upon any Seller in any action, suit or proceeding under or
relating to this Agreement in any court in the City and State of New York. Each
Seller hereby irrevocably consents to the jurisdiction of any such court in any
such action, suit or proceeding and agrees that service of such process upon it
may be made on NetOptix, that such service shall be deemed in every respect
effective service of process upon such Seller in any such action, suit or
proceeding and shall be valid personal service whether or not such Seller shall
then be doing, or at any time shall have done, business within the State of New
York or then be present in person, or at any time shall have been present in
person within such State, and any such service of process shall be of the same
force and validity as if service were made upon him or it according to the Laws
governing the validity of such service in such State. Each Seller hereby
irrevocably waives all claims of error in respect of any such service.
The authorization by Leisegang GmbH as provided for in this Article XIII
shall terminate at the Closing.
ARTICLE XIV
JURISDICTION
14.1 MUTUAL WAIVER OF JURY TRIAL.
BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS
ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON
AND THE PARTIES WISH APPLICABLE LAWS TO APPLY (RATHER THAN ARBITRATION RULES),
THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH
APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF
THE JUDICIAL SYSTEM, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES
UNDER THIS AGREEMENT OR ANY RELATED DOCUMENTS.
14.2 EXCLUSIVE JURISDICTION.
EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS FOR ITSELF AND
ITS PROPERTY, TO THE EXCLUSIVE JURISDICTION OF ANY NEW YORK STATE COURT OR
FEDERAL COURT OF THE UNITED STATES OF AMERICA SITTING IN NEW YORK COUNTY, IN ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR FOR
RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, EACH PARTY HEREBY IRREVOCABLY AND
UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH
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ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH NEW YORK STATE
COURT BY SUCH FEDERAL COURT. EACH PARTY AGREES THAT A FINAL JUDGMENT IN ANY SUCH
ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
EACH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT
IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION THAT IT MAY HAVE OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS AGREEMENT IN ANY NEW YORK STATE OR FEDERAL COURT
SITTING IN NEW YORK COUNTY. EACH PARTY IRREVOCABLY WAIVES TO THE FULLEST EXTENT
PERMITTED BY LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF
SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.
* * *
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<PAGE> 78
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first written above.
THE PURCHASER:
COOPERSURGICAL ACQUISITION CORP.
By: _____________________________________
Name:
Title:
THE PARENT HEREBY GUARANTEES, AS PRIMARY
AND NOT AS SECONDARY OBLIGOR, ALL
OBLIGATIONS OF THE PURCHASER UNDER THIS
AGREEMENT:
THE COOPER COMPANIES, INC.
By: _____________________________________
Name:
Title:
THE SELLERS:
NETOPTIX CORPORATION
By: _____________________________________
Charles E. Ball
Authorized Signatory
LEISEGANG MEDICAL, INC.
By: _____________________________________
Charles E. Ball
Authorized Signatory
<PAGE> 79
GALENICA INC.
By: _____________________________________
Charles E. Ball
Authorized Signatory
LEISEGANG FEINMECHANIK-OPTIK GMBH
By: _____________________________________
Charles E. Ball
Authorized Signatory
<PAGE> 80
EXHIBIT A
---------
BILL OF SALE, ASSIGNMENT AND ASSUMPTION
AGREEMENT dated as of January __, 2000 (this
"Agreement"), among NETOPTIX CORPORATION, a
Delaware corporation, LEISEGANG MEDICAL,
INC., a Florida corporation (collectively,
the "U.S. Sellers"), and COOPERSURGICAL
ACQUISITION CORP., a Delaware corporation
(the "Purchaser").
Reference is made to the Stock and Asset Purchase Agreement
dated as of December 14, 1999 (the "Purchase Agreement") among the Purchaser,
the U.S. Sellers and the other Sellers named therein.
Pursuant to the terms of the Purchase Agreement, (i) the U.S.
Sellers have agreed to sell, and the Purchaser has agreed to purchase
substantially all of the assets of the U.S. Sellers related to the Business,
subject to the Purchaser's assumption of certain liabilities of the U.S.
Sellers, and (ii) NetOptix has agreed to sell, and the Purchaser has agreed to
purchase, all of NetOptix' right, title and interest to the capital stock of
Leisegang GmbH.
ACCORDINGLY, in consideration of the mutual covenants and
obligations set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
SECTION 1. DEFINED TERMS.
Capitalized terms used and not otherwise defined herein shall
have the respective meanings ascribed thereto in the Purchase Agreement.
SECTION 2. SALE OF ASSETS AND SHARES.
On and subject to the terms and conditions of the Purchase
Agreement, (a) the U.S. Sellers hereby sell, transfer, assign, convey and
deliver to the Purchaser all right, title and interest in and to the Purchased
Assets, subject only to Permitted Encumbrances. The Purchaser hereby accepts
title to the Purchased Assets.
SECTION 3. ASSUMED LIABILITIES.
On and subject to the terms and conditions of the Purchase
Agreement, the Purchaser hereby assumes and agrees to discharge and/or perform,
when due in accordance with the terms thereof, the Assumed Liabilities.
SECTION 4. GOVERNING LAW.
This agreement will be governed by and construed in accordance
with the domestic laws of the State of New York, without giving effect to any
choice of law or conflicting provision or rule (whether of the State of New York
or any other jurisdiction) that would cause the laws of any jurisdiction other
than the State of New York to be applied.
<PAGE> 81
SECTION 5. PURCHASE AGREEMENT.
The Purchase Agreement is hereby incorporated herein by
reference and shall control in the event of any conflict with this Agreement.
Nothing contained in this Agreement is intended to provide any rights to, or
impose any obligations on, the Purchaser or the Sellers beyond those rights and
obligations expressly provided to, or imposed on, the Purchaser or the Sellers
in the Purchase Agreement.
* * * * *
2
<PAGE> 82
EXHIBIT A
IN WITNESS WHEREOF, each of the undersigned has caused this
Bill of Sale, Assignment and Assumption Agreement to be executed on its behalf
as of the date first written above.
COOPERSURGICAL ACQUISITION CORP.
By:___________________________________
Name:
Title:
NETOPTIX CORPORATION
By:___________________________________
Name:
Title:
LEISEGANG MEDICAL, INC.
By:___________________________________
Name:
Title:
<PAGE> 83
EXHIBIT B
BILL OF SALE, ASSIGNMENT AND ASSUMPTION
AGREEMENT dated as of January __, 1999 (this
"Agreement"), between GALENICA INC., a
corporation continued under the laws of the
Province of New Brunswick, Canada (the
"Seller"), and 1386184 ONTARIO LIMITED, INC.,
a corporation incorporated under the laws of
the Province of Ontario (the "Purchaser"),
and a, direct or indirect, wholly-owned
subsidiary of THE COOPER COMPANIES, INC., a
Delaware corporation ("Cooper").
Reference is made to the Stock and Asset Purchase Agreement
dated as of December 14, 1999 (the "Purchase Agreement") among CooperSurgical
Acquisition Corp., a Delaware corporation wholly-owned by Cooper ("CSAC"), the
Seller and the other Sellers named therein.
Pursuant to the terms of the Purchase Agreement, (i) the
Seller has agreed to sell, and CSAC has agreed to purchase directly or through
an affiliate such as the Purchaser, substantially all of the assets of the
Seller, subject to assumption of certain liabilities of the Seller, related to
the Business, and (ii) NetOptix has agreed to sell, and the Purchaser has agreed
to purchase, all of NetOptix' right, title and interest to the capital stock of
the Leisegang GmbH.
ACCORDINGLY, in consideration of the mutual covenants and
obligations set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
SECTION 1. DEFINED TERMS.
Capitalized terms used and not otherwise defined herein shall
have the respective meanings ascribed thereto in the Purchase Agreement.
SECTION 2. SALE OF ASSETS.
On and subject to the terms and conditions of the Purchase
Agreement, the Seller hereby sells, transfers, assigns, conveys and delivers to
the Purchaser all right, title and interest in and to the Purchased Assets, free
and clear of all Encumbrances except for Permitted Encumbrances including the
Canadian Mortgages on the Canadian Manufacturing Facility. The Purchaser hereby
accepts title to the Purchased Assets.
SECTION 3. ASSUMED LIABILITIES.
On and subject to the terms and conditions of the Purchase
Agreement, the Purchaser hereby assumes and agrees to discharge and/or perform,
when due in accordance with the terms thereof, the Assumed Liabilities.
<PAGE> 84
SECTION 4. GOVERNING LAW.
This agreement will be governed by and construed in accordance
with the domestic laws of the Province of Quebec, without giving effect to any
choice of law or conflicting provision or rule (whether of the Province of
Quebec or any other jurisdiction) that would cause the laws of any jurisdiction
other than the Province of Quebec to be applied.
SECTION 5. PURCHASE AGREEMENT.
The Purchase Agreement is hereby incorporated herein by
reference and shall control in the event of any conflict with this Agreement.
Nothing contained in this Agreement is intended to provide any rights to, or
impose obligations on, the Purchaser or the Seller beyond those rights and
obligations expressly provided to, or imposed on, CSAC or the Seller in the
Purchase Agreement.
* * * * *
2
<PAGE> 85
IN WITNESS WHEREOF, each of the undersigned has caused this
Bill of Sale, Assignment and Assumption Agreement to be executed on its behalf
as of the date first written above.
1386184 ONTARIO LIMITED, INC.
By:___________________________________
Name:
Title:
GALENICA INC.
By:___________________________________
Name:
Title:
<PAGE> 86
EXHIBIT C
---------
ESCROW AGREEMENT (this "Escrow
Agreement") dated as of January __, 2000,
among COOPERSURGICAL ACQUISITION CORP., a
Delaware corporation (the "Purchaser"),
NETOPTIX CORPORATION, a Delaware corporation
("NetOptix"), LEISEGANG MEDICAL, INC., a
Florida corporation, GALENICA INC., a
corporation continued under the laws of the
Province of New Brunswick, Canada, (each, a
"Seller", and collectively, the "Sellers")
and CHASE BANK, N.A., a ________ corporation
(the "Escrow Agent").
The parties are entering into this Escrow Agreement pursuant
to the Stock and Asset Purchase Agreement dated as of December 14, 1999 among
the Purchaser and the Sellers (the "Purchase Agreement").
This Escrow Agreement is designed to implement the provisions
of the Purchase Agreement.
ACCORDINGLY, the parties hereto hereby agree as follows:
Section 1. Appointment of Escrow Agent. The Escrow Agent is hereby
appointed to act as escrow agent hereunder, and the Escrow Agent hereby agrees
to act as such in accordance with the terms of this Escrow Agreement.
Section 2. Escrow Fund and Escrow Account.
(a) On the date hereof, the Purchaser shall deliver the sum of
$1,000,000 in cash to the Escrow Agent. Such cash is called the "Escrow Amount".
The interest, earnings and proceeds from the Escrow Amount is called the "Escrow
Income". The Escrow Agent hereby accepts the Escrow Amount for deposit in escrow
pursuant to the provisions of this Escrow Agreement.
(b) The Escrow Agent shall establish a segregated account (the "Escrow
Account") on its books in which to hold the Escrow Amount in which the Escrow
Amount may from time to time be invested. The amount in the Escrow Account is
called the "Escrow Fund".
Section 3. Investments.
(a) The Escrow Fund not needed for payment shall be invested by the
Escrow Agent upon instructions of NetOptix, which shall be in writing or, if
oral, which shall be confirmed in writing within 48 hours, in:
(i) direct obligations of, or obligations fully guaranteed by, the
United States of America or any agency thereof;
<PAGE> 87
(ii) bonds, debentures, notes or other evidence of indebtedness
issued by any of the following agencies: Bank for Cooperatives; Federal
Intermediate Credit Bank; Federal Home Loan Bank System; Export-Import Bank
of the United States; Federal Land Bank; Federal National Mortgage
Association; Government National Mortgage Association; Federal Financing
Bank; or any agency or instrumentality of the Federal Government which
shall be established for the purpose of acquiring the obligations of any of
the foregoing or otherwise providing financing therefor;
(iii) direct and general obligations of, or obligations
unconditionally guaranteed by, any state of the United States but only if
(A) the payment of the principal of and interest on which are secured by a
pledge of the full faith and credit of such state and (B) at the time of
their purchase under this Escrow Agreement, such obligations are rated in
any of the two highest rating categories by a nationally recognized bond
rating service;
(iv) certificates of deposit, whether negotiable or non-negotiable,
issued by any bank, trust company or national banking association
(including the Escrow Agent), provided that such certificates of deposit
shall (A) be issued by a bank, trust company or national banking
association having a capital stock and surplus of more than $500,000,000,
(B) be fully insured by the Federal Deposit Insurance Corporation or (C) be
fully and continuously secured by direct obligations of, or obligations
unconditionally guaranteed by, the United States of America, which (1)
shall have a market value (exclusive of accrued interest) at all times at
least equal to the principal amount of such certificates of deposit and (2)
shall be held by the Escrow Agent or its agent (or any correspondent bank
or trust company designated by the Escrow Agent), as custodian, by the
bank, trust company or national banking association issuing such
certificate of deposit;
(v) commercial paper which, at the time of purchase pursuant to the
terms of this Escrow Agreement, is rated in the highest rating category for
such short term investments by Standard & Poor's Corporation or Moody's
Investors Service;
(vi) any repurchase agreement with any bank or trust company
organized under the laws of any state of the United States or any national
banking association or any government securities dealer which is listed as
reporting to the market statistics division of the Federal Reserve Bank of
New York secured by any one or more of the securities described in clauses
(i) or (ii) above;
(vii) a money market mutual fund offered by the Escrow Agent; and
(viii) a money market mutual fund investing in securities and
repurchase agreements as described in clauses (i), (ii) and (vi) above.
In the event that no such written instructions are given by the NetOptix, as to
any uninvested portion of the Escrow Fund, such portion shall be invested by the
Escrow Agent in a mutual fund as described in Section 3(a)(vii) hereof.
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<PAGE> 88
(b) Limitations of Maturities. Maturities or unexpired terms of
maturities of instruments in which the Escrow Fund is invested shall not exceed
the following maturities:
At least 25% of the fund shall be invested at maturities not
to exceed 60 days;
At least 50% of the fund shall be invested at maturities not
to exceed 90 days;
At least 75% of the fund shall be invested at maturities not
to exceed 150 days; and
100% of the fund shall be invested at maturities not to exceed
1 year
NetOptix shall include in its instructions as to investments under
Section 3(a) instructions concerning the maturities of such investments.
In no event will maturities be later than January 31, 2002.
(c) Disposition of Securities. The Escrow Agent is authorized to sell
such investments as may be required to make any payment under this Escrow
Agreement, and the Escrow Agent shall not be liable for any loss due to early
such sales.
(d) Reports. The Escrow Agent shall deliver monthly reports to the
Purchaser and NetOptix as to the status of the Escrow Fund and the earnings
thereon.
Section 4. Rights to Escrow Fund. The Escrow Fund shall be for the
exclusive benefit of the Purchaser and the Sellers and their respective
successors and assigns, and no other person or entity ("Person") shall have any
right, title or interest therein; and any claim of any Person to the Escrow Fund
or any part thereof, shall be subject and subordinate to the prior right thereto
of the Purchaser and the Seller.
Section 5. Distributions from the Escrow Fund. The Escrow Agent shall
continue to hold the Escrow Fund in its possession until authorized hereunder to
distribute the Escrow Fund, or any specified portion thereof, as follows:
(a) to NetOptix on April 1, 2000 and on the first day of each calendar
quarter thereafter, any Escrow Income;
(b) from time to time, to the Purchaser such amounts as the Purchaser
may certify to the Escrow Agent and to NetOptix, by notice substantially in the
form of Exhibit A hereto (a "Notice of Claim"), it is entitled to be paid under
the provisions of the Purchase Agreement; provided however, that if the NetOptix
objects to the Purchaser's Notice of Claim, by written notice to the Escrow
Agent and to the Purchaser given within 20 days after the Notice of Claim is
given, the Escrow Agent shall continue to hold such amounts in escrow hereunder;
(c) pursuant to the joint written instructions (the "Joint
Instructions") of the Purchaser and NetOptix substantially in the form of
Exhibit B hereto;
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<PAGE> 89
(d) on the first anniversary of the date of this Agreement, to
NetOptix, the balance in the Escrow Fund, less all amounts claimed under the
Purchase Agreement pursuant to Section 5(b) hereof, but not theretofore paid
from the Escrow Fund;
(e) as determined by the final order, decree or judgment (a "Final
Decree") of a court of competent jurisdiction in the United States of America
(the time for appeal having expired with no appeal being taken) in a proceeding
to which the Purchaser and the Seller are parties upon the Escrow Agent's
receipt from the Purchaser or NetOptix of a written notice substantially in the
form of Exhibit C hereto, accompanied by a certified copy of such Final Decree.
Section 6. Termination. This Escrow Agreement may be terminated at any
time by and upon the receipt by the Escrow Agent of 10 days' prior written
notice of termination executed by the Purchaser and NetOptix directing the
distribution of all property then held by the Escrow Agent under and pursuant to
this Escrow Agreement.
Section 7. Escrow Agent.
(a) Obligations.
(i) The obligations of the Escrow Agent are those specifically
provided in this Escrow Agreement and no other, and the Escrow Agent shall
have no liability under, or duty to inquire into the terms and provisions
of, any agreement between the parties hereto. The duties of the Escrow
Agent are purely ministerial in nature, and it shall not incur any
liability whatsoever, except for misconduct or negligence. The Escrow Agent
may consult with counsel of its choice.
(ii) The Escrow Agent shall not have any responsibility for the
genuineness, authorization or validity of any document or other item
deposited with it or of any signature thereon and shall not have any
liability for acting in accordance with any written instructions or
certificates given to it hereunder and in good faith believed by it to be
signed by an officer of either NetOptix or the Purchaser, as the case may
be.
(b) Resignation and Removal. The Escrow Agent may resign and be
discharged from its duties hereunder at any time by giving at least 30 days'
notice of such resignation to the Seller and the Purchaser, specifying a date
upon which such resignation shall take effect; provided, however, that the
Escrow Agent shall continue to serve until its successor accepts the Escrow
Fund. Upon receipt of such notice, a successor escrow agent shall be jointly
appointed by NetOptix and the Purchaser, such successor escrow agent to become
the escrow agent hereunder on the resignation date specified in such notice. If
an instrument of acceptance by a successor escrow agent shall not have been
delivered to the Escrow Agent within 40 days after the giving of such notice of
resignation, the resigning escrow agent may petition any court of competent
jurisdiction for the appointment of a successor escrow agent. The Purchaser and
NetOptix may jointly at any time substitute a new escrow agent by giving 10
days' notice thereof to the current Escrow Agent then acting and paying all fees
and expenses owed to the current Escrow Agent.
-4-
<PAGE> 90
(c) Indemnification. NetOptix shall hold the Escrow Agent harmless and
indemnify the Escrow Agent against any loss, liability, expense (including
attorney's fees and expenses), claim or demand arising out of or in connection
with the performance of its obligations in accordance with the provisions of
this Escrow Agreement (any of the foregoing, a "Loss") that is attributable to
any act or omission of NetOptix, except for any Loss arising out of the
negligence or misconduct of the Escrow Agent. The Purchaser shall hold the
Escrow Agent harmless from, and indemnify the Escrow Agent against, any Loss
that is attributable to any act or omission of the Purchaser, except for any
Loss arising out of the negligence or misconduct of the Escrow Agent. Any Loss
that is not attributable to any act or omission of the Purchaser or NetOptix and
does not arise out of the negligence or misconduct of the Escrow Agent shall be
borne one-half by NetOptix and one-half by the Purchaser. The foregoing
indemnities in this paragraph shall survive the resignation or substitution of
the Escrow Agent or the termination of this Escrow Agreement.
(d) Fees of Escrow Agent. For its services hereunder, the Escrow Agent
shall be entitled to the fees set forth in Schedule I hereto. No increase in the
rate of any fee charged by the Escrow Agent shall be valid hereunder unless
previously approved in writing by the other parties hereto. Such fees shall be
paid 50% by NetOptix and 50% by the Purchaser. In addition, the Escrow Agent
shall be reimbursed for all reasonable expenses, disbursements and advances,
including reasonable attorneys' fees, incurred by the Escrow Agent in connection
with the carrying out of its ordinary duties to maintain the Escrow Account and
deliver funds therefrom pursuant to this Escrow Agreement. The amount of such
reimbursement shall be paid 50% by NetOptix and 50% by the Purchaser. The Escrow
Agent shall periodically (but not less frequently than quarterly) provide to
NetOptix and the Purchaser a statement of such fees and expenses.
Section 8. Allocation of Escrow Income for Tax Purposes. Escrow Income,
to the extent the same constitutes taxable income to the recipient for United
States Federal income tax purposes, shall be allocated to NetOptix.
Section 9. Miscellaneous.
(a) Notices. Any notice or other communication required or permitted to
be delivered to any party under this Agreement shall be in writing and shall be
deemed properly delivered, given and received, if delivered during business
hours on a business day, when delivered (by hand, by registered mail, by courier
or express delivery service or by facsimile) to the address or facsimile
telephone number set forth beneath the name of such party below (or to such
other address or facsimile telephone number as such party shall have specified
in a written notice given to the other parties hereto) or, if not delivered
during business hours on a business day, on the next succeeding business day:
-5-
<PAGE> 91
If to the Sellers, to:
NetOptix Corporation
P.O. Box 550
Sturbridge, MA 01566
Attention: Gerhard R. Andlinger, President
Telecopier: (508) 347-2270
with a copy to:
Edwards & Angell, LLP
250 Royal Palm Way
Palm Beach, FL 33480
Attention: Jonathan E. Cole, Esq.
telecopier: (561) 655-8719
If to the Purchaser, to:
CooperSurgical Acquisition Corp.
c/o CooperSurgical, Inc.
15 Forest Parkway
Shelton, CT 06484
Attn: Nicholas J. Pichotta, President
Fax: (203) 929-4583
with a copy to:
The Cooper Companies, Inc.
6140 Stoneridge Mall Road, Suite 590
Pleasanton, CA 94588
Attn: Carol R. Kaufman, V.P. Legal Affairs
Fax: (925) 460-3662
with a copy to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10012
Attn: David I. Karabell, Esq.
Fax: (212) 408-2420
-6-
<PAGE> 92
If to the Escrow Agent, to:
[ ]
[ ]
Attn: [ ]
Fax: [ ]
Notices and other communications sent by a party to the Escrow Agent
shall also be sent to the other party hereto.
(b) Counterparts. This Escrow Agreement may be executed in any number
of counterparts, and each such counterpart hereof shall be deemed to be an
original instrument, but all such counterparts together shall constitute but one
agreement.
(c) Governing Law. This Escrow Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to principles of conflicts of law.
(d) Benefits of Agreement; Assignment. All the terms and provisions of
this Escrow Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns. Anything contained
herein to the contrary notwithstanding, no rights or obligations under this
Escrow Agreement shall be assignable by any party hereto without the consent of
the other parties hereto. The rights and obligations of the Escrow Agent
hereunder shall automatically inure to the benefit of any successor-in-interest
of the Escrow Agent or any bank, trust company or national banking association
with capital and surplus exceeding $500,000,000 to which the Escrow Agent
transfers all or substantially all its trust business.
(e) Amendments. This Escrow Agreement may not be altered or otherwise
amended except pursuant to an instrument in writing signed by each of the
parties hereto.
(f) Descriptive Headings. The descriptive headings in this Escrow
Agreement are for reference and convenience only and shall not control or affect
the meaning or construction of any provision of this Escrow Agreement.
* * * * *
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<PAGE> 93
IN WITNESS WHEREOF, the parties hereto have caused this Escrow
Agreement to be executed and delivered on the date first above written.
NETOPTIX CORPORATION
By:___________________________________________
Name:
Title:
LEISEGANG MEDICAL, INC.
By:___________________________________________
Name:
Title:
GALENICA INC.
By:___________________________________________
Name:
Title:
COOPERSURGICAL ACQUISITION CORP.
By:___________________________________________
Name:
Title:
CHASE BANK, N.A.
By:___________________________________________
Name:
Title:
<PAGE> 94
SCHEDULE I
----------
SCHEDULE OF ESCROW AGENT FEES
-----------------------------
9
<PAGE> 95
EXHIBIT A
---------
[Date]
[Escrow Agent]
and
[NetOptix]
Notice of Claim
---------------
Gentlemen:
Reference is made to the Escrow Agreement dated as of January
__, 2000 (the "Escrow Agreement"), among NetOptix Corporation, a Delaware
corporation, Leisegang Medical, Inc., a Florida corporation, Galenica Inc., a
corporation continued under the laws of the Province of New Brunswick, Canada,
CooperSurgical Acquisition Corp., a Delaware corporation, and you and to the
Purchase Agreement referred to therein.
The undersigned hereby certifies to you pursuant to Section 5
(b) of the Escrow Agreement that it is entitled to be paid the amount of
$___________ from the Escrow Fund (as defined in the Escrow Agreement).
The undersigned further certifies that a copy of this Notice
of Claim has been delivered to NetOptix Corporation, in the manner provided in
the Escrow Agreement, either previous to or simultaneously with its delivery to
you.
COOPERSURGICAL ACQUISITION CORP.
By:__________________________________________
Name:
Title:
10
<PAGE> 96
EXHIBIT B
---------
[Date]
[Escrow Agent]
Joint Instructions
------------------
Gentlemen:
Reference is made to the Escrow Agreement dated January __,
2000 (the "Escrow Agreement"), among NetOptix Corporation, a Delaware
corporation, Leisegang Medical, Inc., a Florida corporation, Galenica Inc., a
corporation continued under the laws of the Province of New Brunswick, Canada,
CooperSurgical Acquisition Corp. a Delaware corporation, and you.
Pursuant to Section 5(c) of the Escrow Agreement, each of the
undersigned hereby instructs you to disburse from the Escrow Fund (as defined in
the Escrow Agreement) to the party or parties set forth on Annex A hereto the
respective amounts set forth opposite their names thereon.
NETOPTIX CORPORATION
By:__________________________________________
Name:
Title:
COOPERSURGICAL ACQUISITION CORP.
By:__________________________________________
Name:
Title:
11
<PAGE> 97
EXHIBIT C
---------
[Date]
[Escrow Agent]
Notice of Final Decree or Arbitration Decision
----------------------------------------------
Gentlemen:
Reference is made to the Escrow Agreement dated January __,
2000 (the "Escrow Agreement"), among NetOptix Corporation, a Delaware
corporation, Leisegang Medical, Inc., a Florida corporation, Galenica Inc., a
corporation continued under the laws of the Province of New Brunswick, Canada,
CooperSurgical Acquisition Corp. a Delaware corporation, and you.
Pursuant to Section 5(e) of the Escrow Agreement, the
undersigned hereby instructs you to pay to [insert payee] $_________ from the
Escrow Fund (as defined in the Escrow Agreement) in accordance with the Final
Decree (as defined in the Escrow Agreement) a certified copy of which is
attached hereto.
COOPERSURGICAL ACQUISITION CORP.
By:____________________________________________
Name:
Title:
or
NETOPTIX CORPORATION
By:____________________________________________
Name:
Title:
12
<PAGE> 98
EXHIBIT H
---------
NONCOMPETITION AGREEMENT dated as of
January __, 1999, between COOPERSURGICAL
ACQUISITION CORP., a Delaware corporation
(the "Company"), and NETOPTIX CORPORATION, a
Delaware corporation ("NetOptix"), LEISEGANG
MEDICAL, INC., a Florida corporation
("Leisegang"), and GALENICA INC., a
corporation continued under the laws of the
Province of New Brunswick, Canada
("Galenica") (collectively, the
"Covenantors").
Reference is made to the Stock and Asset Purchase Agreement dated as of
December 14, 1999, among the Company and the Covenantors (the "Purchase
Agreement"). Pursuant to the Purchase Agreement, the Company is acquiring
certain of the assets of NetOptix and substantially all of the assets, including
the Products, of Galenica and Leisegang which relate to the Business and all of
the capital stock of the Leisegang GmbH. This Agreement is being entered into
pursuant to the Purchase Agreement.
In consideration of the Company purchasing the Purchased Assets and the
Share under the Purchase Agreement and in order to prevent the Company from
being economically harmed by a loss of the goodwill associated with the
Business, the Covenantors have agreed not to compete with the Company under the
conditions set forth in this Agreement.
ACCORDINGLY, in consideration of the good and valuable consideration
which the parties hereto acknowledge, the parties hereto hereby agree as
follows:
Section 1. Certain Defined Terms.
Capitalized terms used but not otherwise defined herein have the
meanings set forth in the Purchase Agreement.
Section 2. Non-competition and Non-solicitation.
(a) Each Covenantor agrees that, during the Non-Compete Period (as
defined below), such Covenantor shall not, directly or indirectly, own, manage,
control, participate in, consult with, render services for, whether as an agent,
employee, consultant, advisor, representative, stockholder, partner or joint
venturer, or in any manner engage in any business within any Restricted
Territory (as defined below) competing with the Products, including any
improvements and replacements for the Products, or with any other products or
procedures which are used to perform the same function as, or treatments and
procedures performed by, the Products. As used in this Agreement, the term
"Restricted Territory" means any of the following geographic areas (whether
domestic or foreign) in which any Product, process, good or service has been
manufactured, provided, sold or offered or promoted for sale by the Company or
its Business Group or with respect to which the Company or its Business Group
have devoted substantial expense in anticipation of launching into such
geographic area a portion of the Business: (i) any state in the continental
United States; (ii) Alaska and Hawaii; (iii) any other
<PAGE> 99
territory or possession of the United States; (iv) each country in the European
Union("EU"); and (v) any country other than (x) the United States or any state,
territory, possession or political subdivision thereof and (y) a country in the
EU, in which the Products have been sold by the Covenantors at any time in the
past two (2) years. As used in this Agreement, the term "Non-Compete Period"
means the period beginning on the date of this Agreement and ending on the fifth
anniversary of the date of this Agreement.
(b) During the one year period after the date hereof, each Covenantor
agrees that such Covenantor shall not directly, or indirectly through another
Person, (i) solicit any employee of the Company or its Business Group to leave
the employ of the Company or any of its Business Group, or in any way interfere
with the relationship between the Company or any of its Business Group, on the
one hand, and any employee thereof, on the other hand; provided, however, that
the general solicitation of third parties through the use of means generally
available to the public, including the placement of advertisements in the
newspaper, shall not be deemed to violate this clause (i), (ii) hire any
individual who was an employee of the Company until two (2) months after such
individual's employment relationship with the Company or any of its Business
Group has been terminated or (iii) induce or attempt to induce any customer,
supplier, consultant, licensee or other business relation of the Company or any
of its Business Group to cease doing business with the Company or any of its
Business Group, or in any way interfere with the relationship between any such
customer, supplier, consultant, licensee or business relation, on the one hand,
and the Company or any of its Business Group, on the other hand.
(c) Notwithstanding the foregoing, Covenantors shall be permitted, at
any time, to deal in, sell, offer for sale and market and remarket any or all of
the NetOptix Inventory (as defined in the Purchase Agreement) on such terms as
Covenantors or any of them deem appropriate, and to use (solely in connection
with dealing in, offering for sale and marketing or remarketing the NetOptix
Inventory) the name, and related derivatives and designs or marks, of
"Leisegang". From time to time, at the request of any Covenantor, Purchaser
shall confirm in writing, on such terms as any Covenantor may reasonably
request, the rights of such Covenantor hereunder.
Section 3. Confidentiality.
(a) No Covenantor will disclose or use at any time, either during the
Non-Compete Period or thereafter, any Confidential Information of which any
Covenantor is or becomes aware, whether or not such information was developed by
such Covenantor.
(b) As used in this Agreement, the term "Confidential Information"
means information that is not generally known or available to the public and
that was used, developed or obtained by any Covenantor in connection with the
Business and for use by the Business, including but not limited (i) products or
services, (ii) fees, costs and pricing structures, (iii) designs, (iv) analyses,
(v) drawings, photographs and reports, (vi) computer software, including
operating systems, applications and program listings, (vii) flow charts, manuals
and documentation, (viii) data bases, (ix) accounting and business methods, (x)
inventions, devices, new developments, methods and processes, whether patentable
or unpatentable and whether or not reduced to practice, (xi) customers and
clients and customer or client lists, (xii) other
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<PAGE> 100
copyrightable works, (xiii) all production methods, processes, technology and
trade secrets, and (xiv) all similar and related information in whatever form.
(c) Notwithstanding the provisions of this Agreement to the contrary,
no Covenantor shall have liability to the Company for disclosure of Confidential
Information if the Confidential Information:
(i) is known to the receiving party at the time of disclosure by
any Covenantor to the receiving party of such Confidential Information
other than as the result of a breach of this Section 3 by any
Covenantor;
(ii) has been or becomes publicly known, or has been or is
disclosed by the Company other than as the result of a breach of this
Section 3 by any Covenantor;
(iii) is received by any Covenantor after the date of this
Agreement from a third party that is not under an obligation of
confidentiality to the Company; or
(iv) is required to be disclosed by law, court order, or similar
compulsion or in connection with any legal proceeding, provided that
such disclosure shall be limited to the extent so required and, to the
extent reasonably practicable and except to the extent prohibited by
law, each Covenantor shall give the Company notice of its intent to so
disclose such Confidential Information and shall reasonably cooperate
with the Company (at the expense of the Company) in seeking suitable
confidentiality protections.
Section 4. Representation and Warranties.
(a) Each Covenantor hereby represents and warrants to the Company that
(i) the execution, delivery and performance of this Agreement by such Covenantor
does not and will not conflict with, breach, violate or cause a default under
any agreement, contract or instrument to which any Covenantor is a party or any
judgment, order or decree to which such Covenantor is subject, (ii) no
Covenantor is a party to or bound by any employment agreement, consulting
agreement, non-compete agreement, confidentiality agreement or similar agreement
with any other Person that is inconsistent with the provisions of this Agreement
and (iii) upon the execution and delivery of this Agreement by the Company and
each Covenantor, this Agreement will be a valid and binding obligation of such
Covenantor.
(b) The Company hereby represents and warrants to the Covenantors that
(i) this Agreement has been duly authorized by all necessary corporate action on
the part of the Company, (ii) the execution, delivery and performance of this
Agreement by the Company does not and will not conflict with, breach, violate or
cause a default under any agreement, contract or instrument to which the Company
is a party or any judgment, order or decree to which the Company is subject, and
(iii) upon the execution and delivery of this Agreement by the Company and each
Covenantor, this Agreement will be a valid and binding obligation of the
Company.
Section 5. Enforcement.
(a) Because the relationship between the Company and each Covenantor is
unique and because each Covenantor has had access to Confidential Information,
the parties hereto
-3-
<PAGE> 101
agree that money damages would be an inadequate remedy for any breach of this
Agreement. Therefore, in the event of a breach or threatened breach by any
Covenantor of this Agreement, the Company may apply to any court of competent
jurisdiction for specific performance and/or injunctive or other relief in order
to enforce, or prevent any violations of, the provisions hereof (without posting
a bond or other security) in addition to other rights and remedies existing in
its favor, including requiring each Covenantor to account for and pay over to
the Company all compensation, profits, moneys, accruals, increments or other
benefits derived or received as a direct result of any transactions constituting
a breach of the covenants contained therein.
(b) The prevailing party in any legal action arising out of or relating
to this Agreement shall be entitled to its reasonable attorneys' fees and court
costs.
Section 6. General Provisions.
(a) Severability. It is the desire and intent of the parties hereto
that the provisions of this Agreement be enforced to the fullest extent
permissible under the laws and public policies applied in each jurisdiction in
which enforcement is sought. Accordingly, if any particular provision of this
Agreement shall be adjudicated by a court of competent jurisdiction to be
invalid, prohibited or unenforceable for any reason, such provision, as to such
jurisdiction, shall be ineffective, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of this
Agreement or affecting the validity or enforceability of such provision in any
other jurisdiction. Notwithstanding the foregoing, if such provision could be
more narrowly drawn so as not to be invalid, prohibited or unenforceable in such
jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without
invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.
(b) Complete Agreement. This Agreement and the Purchase Agreement
constitute the entire agreement between the parties hereto with respect to the
subject matter hereof and supersede and preempt any prior understandings,
agreements or representations by or between the parties, written or oral, which
may have related to the subject matter hereof in any way.
(c) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of such Covenantor and the Company and their respective
successors, permitted assigns, personal representatives, heirs and estates, as
the case may be.
(d) Governing Law. This agreement will be governed by and construed in
accordance with the domestic laws of the State of New York, without giving
effect to any choice of law or conflicting provision or rule (whether of the
State of New York or any other jurisdiction), that would cause the laws of any
jurisdiction other than the state of New York to be applied. In furtherance of
the foregoing, the internal law of the State of New York will control the
interpretation and construction of this agreement, even if under such
jurisdiction's choice of law or conflict of law analysis, the substantive law of
some other jurisdiction would ordinarily apply.
-4-
<PAGE> 102
(e) Jurisdiction and Venue.
THE COMPANY AND EACH COVENANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY
SUBMIT, FOR THEMSELVES AND THEIR PROPERTY, TO THE EXCLUSIVE JURISDICTION OF ANY
COURT OR FEDERAL COURT OF THE UNITED STATES OF AMERICA SITTING IN NEW YORK
COUNTY AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR FOR RECOGNITION OR ENFORCEMENT
OF ANY JUDGMENT, AND THE COMPANY AND EACH COVENANTOR HEREBY IRREVOCABLY AND
UNCONDITIONALLY AGREE THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH NEW YORK STATE COURT OR, TO
THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. THE COMPANY AND EACH
COVENANTOR AGREE THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR
IN ANY OTHER MANNER PROVIDED BY LAW.
THE COMPANY AND EACH COVENANTOR IRREVOCABLY AND UNCONDITIONALLY WAIVE,
TO THE FULLEST EXTENT THEY MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION THAT
THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT IN ANY NEW YORK STATE OR
FEDERAL COURT SITTING IN NEW YORK COUNTY. THE COMPANY AND EACH COVENANTOR
IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE OF AN
INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH
COURT.
(f) Waiver of Jury Trial.
THIS IS A COMPLEX BUSINESS TRANSACTION. THE PARTIES BELIEVE THAT IT
WOULD BE BETTER TO HAVE ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS AGREEMENT RESOLVED BY A JUDGE WITHOUT A JURY. EACH OF THE
PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(g) Amendment and Waiver. The provisions of this Agreement may be
amended and waived only with the prior written consent of the Company and
NetOptix, and no course of conduct or failure or delay in enforcing the
provisions of this Agreement shall affect the validity, binding effect or
enforceability of this Agreement or any provision hereof.
(h) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
-5-
<PAGE> 103
(i) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
(j) Business Group. For purposes of this Agreement, the term "Business
Group" means, with respect to the Company, the Company's current Affiliates. The
term "control" means the possession, directly or indirectly, of the power to
direct the management and policies of a Person, whether through the ownership of
voting securities, by contract or otherwise.
(k) Business Days. If any time period for giving notice or taking
action hereunder expires on a day which is a Saturday, Sunday or holiday in the
State of New York, the time period for taking action shall be automatically
extended to the business day immediately following such Saturday, Sunday or
holiday.
(l) Survival of Representations and Warranties. All representations and
warranties contained herein shall survive the consummation of the transactions
contemplated hereby and by the Purchase Agreement.
(m) Construction.
(i) For purposes of this Agreement, whenever the context requires:
the singular number shall include the plural, and vice versa; the
masculine gender shall include the feminine and neuter genders; the
feminine gender shall include the masculine and neuter genders; and the
neuter gender shall include the masculine and feminine genders.
(ii) Any rule of construction to the effect that ambiguities are to
be resolved against the drafting party shall not be applied in the
construction or interpretation of this Agreement.
(iii) As used in this Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words
"without limitation."
(n) Any notice or other communication required or permitted to be
delivered to any party under this Agreement shall be in writing and shall be
deemed properly delivered, given and received, if delivered during business
hours on a business day, when delivered (by hand, by registered mail, by courier
or express delivery service or by facsimile) to the address or facsimile
telephone number set forth beneath the name of such party below (or to such
other address or facsimile telephone number as such party shall have specified
in a written notice given to the other party hereto) or, if not delivered during
business hours on a business day, on the next succeeding business day:
(A) if to the Company, to:
CooperSurgical Acquisition Corp.
c/o CooperSurgical, Inc.
15 Forest Parkway
-6-
<PAGE> 104
Shelton, Connecticut 06484
Attention: Nicholas J. Pichotta, President
Telecopier: (203) 925-135
with a copy to:
The Cooper Companies, Inc.
6140 Stoneridge Mall Road
Suite 590
Pleasanton, CA 94588
Attention: Carol R. Kaufman, V.P., Legal Affairs
Telecopier: (925) 460-3662
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: David I. Karabell, Esq.
Telecopier: (212) 408-2400; and
(B) if to the Covenantors, to:
NetOptix Corporation
P.O. Box 550
Sturbridge, MA 01566
Attention: Gerhard R. Andlinger, President
Telecopier: (508) 347-2270
with a copy to:
Edwards & Angell, LLP
250 Royal Palm Way
Palm Beach, FL 33480
Attention: Jonathan E. Cole, Esq,
Telecopier: (561) 655-8719
* * * *
-7-
<PAGE> 105
IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Noncompetition Agreement as of the date first written above.
COOPERSURGICAL ACQUISITION CORP.
By:
----------------------------------
Name:
Title:
NETOPTIX CORPORATION
By:
----------------------------------
Name:
Title:
LEISEGANG MEDICAL, INC.
By:
----------------------------------
Name:
Title:
GALENICA INC.
By:
----------------------------------
Name:
Title:
<PAGE> 106
OGK DRAFT 12/14/99
------------------
EXHIBIT I
---------
[OGK LETTERHEAD]
January __,1999
NetOptix Corporation
P.O. Box 550
Sturbridge, MA 01566
Re: The Cooper Companies, Inc. and CooperSurgical Acquisition Corp.
Ladies and Gentlemen:
We have acted as counsel to CooperSurgical Acquisition Corp., a
Delaware corporation (together with each of its United States Affiliates as may
be purchasing the Purchased Assets, the "Purchaser") and The Cooper Companies,
Inc., a Delaware corporation ("Parent"), in connection with (a) the Stock and
Asset Purchase Agreement (the "Purchase Agreement") dated December __, 1999
among the Parent, the Purchaser, NetOptix Corporation, a Delaware corporation
("NetOptix"), Leisegang Medical, Inc., a Florida corporation ("Leisegang"),
Galenica Inc., a corporation continued under the laws of the Province of New
Brunswick ("Galenica"), and Leisegang Feinmechanik-Optik GmbH, a corporation
formed under the laws of Germany ("Leisegang GmbH"), (b) the Bill of Sale,
Assignment and Assumption Agreements each dated the date hereof between the
Purchaser and the U.S. Sellers (the "U.S. Bills of Sale"), (c) the
Non-Competition Agreement dated the date hereof among the Purchaser, NetOptix,
Leisegang and Galenica (the "Non-Competition Agreement") and (d) the Escrow
Agreement dated the date hereof among the Purchaser, NetOptix, Leisegang,
Galenica and the escrow agent named therein (the "Escrow Agreement"; and
together with the Purchase Agreement, U.S. and Canadian Bills of Sale and
Non-Competition Agreement, the "Transaction Documents"). Capitalized terms used
but not otherwise defined herein have the meanings given them in the Purchase
Agreement. This opinion is being delivered pursuant to the Purchase Agreement.
We have not adopted the Legal Opinion Accord (the "Accord") of the ABA
Section of Business Law (1991) for purposes of this opinion letter. In rendering
the opinions expressed in this opinion letter, however, we have relied without
investigation on the assumptions set forth in Section 4 of the Accord.
In addition, as to matters of fact (including matters of fact set forth
in this opinion letter), we have relied (except to the extent that we have
actual knowledge of facts to the contrary) without investigation on (i) the
representations and warranties of the various parties set forth in the
Transaction Documents, (ii) certificates of officers of the Purchaser and the
Parent delivered at the Closing and (iii) certificates of public officials.
<PAGE> 107
Our opinions in this opinion letter are limited to the law of the State
of New York, the General Corporation Law of the State of Delaware and the
federal law of the United States of America. We do not express any opinion as to
any other law. Unless explicitly addressed herein, we do not express any opinion
as to any of the legal issues set forth in Section 19 of the Accord.
Based upon the foregoing, we are of the opinion that:
1. Each of the Purchaser and the Parent is a corporation, validly
existing and in good standing under the laws of the State of Delaware.
2. Each of the Purchaser and the Parent has all requisite corporate
power and authority to enter into each Transaction Document to which it is a
party, to perform its obligations thereunder and to consummate the transactions
with respect to it contemplated thereby. The execution, delivery and performance
by the Purchaser and the Parent of each Transaction Document to which it is a
party and the consummation by the Purchaser and the Parent of the transactions
contemplated thereby have been duly and validly authorized by all necessary
corporate action on the part of the Purchaser and the Parent.
3. Each Transaction Document to which the Purchaser and the Parent is a
party has been duly and validly executed and delivered by the Purchaser and the
Parent and each of the Purchase Agreement, the U.S. Bills of Sale, the
Non-Competition Agreement and the Escrow Agreement, is the valid and binding
obligation of the Purchaser and the Parent, enforceable against the Purchaser
and the Parent in accordance with its terms.
4. The execution and delivery by each of the Purchaser and the Parent
of each Transaction Document to which it is a party, the performance of its
obligations thereunder and the consummation by each of the Purchaser and the
Parent of the transactions contemplated thereby will not (i) conflict with or
result in a violation of any term, condition or provision of the Charter or
By-laws of the Purchaser or the Parent, or (ii) violate any Law applicable to
the Purchaser or the Parent or any of their respective properties or assets.
5. The execution and delivery by the each of the Purchaser and the
Parent of each Transaction Documents to which it is a party, the performance of
its obligations thereunder and the consummation by each of the Purchaser and the
Parent of the transactions contemplated thereby do not require any consent or
approval of, notice to, filing with, or other action by, any governmental
authority.
Our opinion is subject to the General Qualifications (as defined in the
Accord) and the opinion expressed in clause (ii) of paragraph 4 above is based
on our review of those Laws that, in our experience, are normally applicable to
transactions of the type contemplated by the Transaction Documents.
This opinion letter has been rendered solely for your benefit in
connection with the execution and delivery of the Transaction Documents and the
transactions contemplated thereby. Accordingly, it is not to be relied upon by
any other Person, and is not to be used for any other purpose, without our prior
written consent.
Very truly yours,
2
<PAGE> 1
EMPLOYMENT AGREEMENT
This Agreement dated as of March 22, 1999, is between Galileo
Corporation ("the "Company"), a Delaware corporation with its principal offices
at Galileo Park, P.O. Box 550, Sturbridge, MA 01566, and Ralf Faber (the
"Executive") residing at Kapellenhof 6, Freinsheim, Germany. The parties desire
to set forth the terms and conditions of the Executive's future employment as an
executive officer of the Company's wholly-owned subsidiary Optical Filter
Corporation ("OFC").
Accordingly, the parties hereto agree as follows:
1. EMPLOYMENT OF EXECUTIVE. Subject to the terms and conditions of this
Agreement, the Company agrees to employ Executive, and Executive agrees to serve
the Company, as the President and Chief Executive Officer of OFC reporting to
the President and Chief Executive of the Company (the "President") with such
specific duties as may be assigned to the Executive from time to time by the
President for a period of three years commencing on the date on which
Executive's employment commences, unless earlier terminated as herein provided.
The Executive's employment with the Company will commence on July 1, 1999.
Neither the Company nor Executive shall have any obligation to continue
employment after the term hereof. If Executive remains employed after the term
hereof, Executive's employment and compensation shall be at will and may be
terminated, with or without cause and with or without notice, at any time at the
option of the Company or Executive.
2. COMPENSATION. For all services to be rendered by Executive to the
Company pursuant to this Agreement, the Company shall pay to and provide the
Executive with the following compensation and benefits:
(a) SALARY. The Company shall pay to Executive a base salary
at the rate of $175,000 per year, payable in substantially equal installments no
less often than biweekly.
(b) BONUS. The Company shall pay to Executive an annual bonus
not to exceed 30% of Executive's annual Salary as defined in paragraph 2(a)
above based on to what degree the Executive has met specific objectives which
have been mutually agreed to between the Executive and the President, before the
start of the year for which the bonus is to be paid.
(c) STOCK OPTIONS. The Executive will be eligible to
participate in the Company's Employee Stock Option Plan. Subject to approval by
the Compensation Committee of the Company's Board of Directors, the Executive
will be granted an option to buy 25,000 shares of the Company's Common Stock,
subject to the provisions of the Employee Stock Option Plan and such other terms
and conditions as may be determined by the Compensation Committee of the Board
of Directors.
(d) RELOCATION EXPENSES. The Company will reimburse the
Executive the reasonable expenses of relocating himself, his immediate family
(defined for this purpose as his wife and children) and his household goods
(excluding any automobile, boat or similar
<PAGE> 2
extraordinary item) from his present residence to a location within a reasonable
distance from the Executive's place of employment. It is understood that such
relocation expenses will include the reasonable expenses associated with selling
the Executive's currently owned residence (if any) and will include the expenses
of buying a residence within a reasonable distance of the Executive's place of
employment with the Company, provided, however, that such housing-related
expenses will not exceed $10,000 and further provided that such latter residence
be purchased within one year of the Executive's start of employment. In
addition, the Company will pay to the Executive a one-time lump sum of $3,000 to
cover the incidental expenses of relocating.
(e) TEMPORARY LIVING EXPENSES. The Company will reimburse the
Executive reasonable temporary living expenses for a maximum of six months
starting on the date his employment with the Company commences and continuing
during such time that the Executive's immediate family (as defined herein) is
still residing at the Executive's current residence. Such expenses are not to
exceed $3,000 per month. During the period that the Executive is receiving such
Temporary Living Expenses, the Company will reimburse the Executive for the cost
of round-trip tourist or economy class air travel between the Executive's place
of employment with the Company and his current residence, with such trips not to
exceed one trip every two months on average.
(f) PARTICIPATION IN BENEFIT PLANS. Executive shall be
entitled to participate in all employee benefit plans or programs of OFC to the
extent eligible. The Company and OFC do not guarantee the adoption or
continuance of any particular employee benefit plan or program during the term
of this Agreement, and Executive's participation in any such plan or program
shall be subject to the provisions, rules and regulations applicable thereto,
provided that Executive shall receive benefits at least comparable to the
benefits currently provided by OFC to all full-time executives.
(g) EXPENSES. The Company shall reimburse Executive for
ordinary and necessary business expenses in accordance with the general
corporate policy of the Company or OFC from time to time in effect.
3. VISA AND/OR WORK PERMIT. The Company will make reasonable
efforts to assist the Executive to obtain the necessary visa, work permit or
other documentation (the "Documentation") required by the Executive for him to
be legally employed by the Company. The Company further agrees to assist the
Executive in obtaining the Documentation starting as soon as practical after the
date of this Agreement and will reimburse the Executive for the reasonable cost
incurred by him to obtain such Documentation, provided, however, that the
maximum amount of such reimbursement is limited to $7,500. The Company does not
provide any assurance that such Documentation will be obtained. If the Executive
is unable to obtain such Documentation by the Executive's anticipated starting
date of employment referred to in Section 1 above, this Employment Agreement
becomes null and void.
4. TERMINATION.
(a) EARLY TERMINATION. Executive's employment hereunder shall
terminate prior to the expiration of the term specified in Section 1:
<PAGE> 3
(i) upon Executive's death or inability by reason of
physical or mental impairment to perform substantially all of Executive's
services as contemplated herein for 60 days or more within any six-month period;
(ii) by the Company for cause in the event of (i)
Executive's willful failure to follow the reasonable directions of the President
or otherwise perform Executive's duties hereunder (other than as a result of
physical or mental impairment) after written notice of such failure in
reasonable detail is given to Executive by the Company or (ii) intentional or
grossly negligent conduct by Executive that is materially injurious to OFC or
the Company as reasonably determined by the President, which conduct continues
after written notice thereof in reasonable detail is given to Executive; or
(iii) by the Company without cause, subject to
payment of the amounts specified in Section 4(b).
(b) SEVERANCE. If Executive's employment is terminated by the
Company without cause (as defined in Section 4(a)(iii)), the Company will pay
Executive as severance an amount at the rate of the salary specified in Section
2(a) of this Agreement for the balance of the term of this Agreement. If
Executive's employment is terminated for any other reason, the Company will pay
Executive an amount equal to Executive's then current salary through the date of
termination.
5. CONFIDENTIAL INFORMATION, INVENTIONS AND NONCOMPETITION.
(a) CONFIDENTIAL INFORMATION. During the course of Executive's
employment, Executive may have become or will become aware of information
relating to the operations or business affairs of OFC or the Company that is
treated by them as confidential or proprietary ("Confidential Information").
Executive acknowledges that OFC or the Company is and shall at all times remain
the sole owners of the Confidential Information and of all intellectual property
rights relating thereto, and Executive agrees not to publish or otherwise
disclose or make available to any third party any Confidential Information and
not to use any Confidential Information for Executive's own benefit or for the
benefit of any third party. Upon termination of this Agreement, or at any time
upon the Company's request, Executive will return to the Company all copies of
Confidential Information in Executive's possession or under Executive's control.
Confidential Information does not include information which (a) is at
the time of disclosure or later becomes publicly known under circumstances
involving no breach of this agreement by Executive, (b) is generally disclosed
to third parties by OFC or the Company without restriction on such third
parties, or (c) is required to be disclosed by a governmental authority or by
order of a court of competent jurisdiction, provided that such disclosure is
subject to all available protection and reasonable advance notice is given to
OFC or the Company.
(b) OWNERSHIP OF INVENTIONS. Any invention, discovery, new
product or business opportunity made, discovered or reduced to practice by
Executive (whether alone or with others) in the course of performing services
for OFC or the Company or arising directly from Confidential Information
acquired by Executive ("Invention") will be the exclusive property of OFC or the
Company, and OFC or the Company may use or pursue any of them without
restriction or additional compensation to Executive.
<PAGE> 4
To the extent any Invention results in a patentable, copyrightable or
other proprietary invention, Executive hereby assigns and agrees to assign to
the Company all of Executive's right, title and interest in and to any such
invention. Executive agrees to cooperate fully in obtaining patent, copyright or
other proprietary protection for any such invention, all in the name of the
Company and at the Company's cost and expense, and to execute and deliver all
requested applications, assignments and other documents and take such other
measures as the Company may reasonably request in order to perfect and enforce
the Company's rights therein (including transfer of possession to the Company of
all inventions embodied in tangible materials).
(c) NONCOMPETITION. Executive agrees that as long as he is
employed by the Company and for two years after termination of his employment
with the Company for any reason, Executive will not, directly or indirectly,
except as a passive investor in publicly held companies, engage in competition
with OFC or the Company or any of the Company's subsidiaries, or own or control
any interest in, or act as a director, officer or employee of, or consultant to
any firm, corporation or institution directly or indirectly engage in
competition with OFC, the Company or any of the Company's subsidiaries.
6. MISCELLANEOUS.
(a) REMEDIES. Executive agrees that the restrictions contained
in this Agreement are necessary for the protection of the business and goodwill
of OFC and the Company and are reasonable for such purpose. Executive agrees
that any breach of this Agreement will cause the Company substantial and
irreparable damage, and, therefore, in the event of any such breach, in addition
to such other remedies as may be available, OFC or the Company shall have the
right to seek specific performance and injunctive relief without bond.
(b) NOTICES. Any notice or other communication hereunder shall
be in writing and shall be deemed given when so delivered in person, by
overnight courier (with receipt confirmed) or by facsimile transmission (with
receipt confirmed by telephone or by automatic transmission report) or on the
third business day (or the tenth business day if such communication is addressed
to a country other than the country from which it originated) after being sent
by registered or certified mail (postage prepaid, return receipt requested),
addressed, if to the Company, to the attention of the President, Galileo
Corporation, Galileo Park, P.O. Box 550, Sturbridge, Massachusetts 01566 (fax
number (508) 347-2270), or to such other address as the Company may designate in
writing at any time or from time to time to the Executive, and if to the
Executive, to the most recent address on file with the Company.
(c) INTEGRATION. This Agreement is the entire agreement of the
parties with respect to the subject matter hereof and supersedes any prior
agreement or understanding relating to Executive's employment with or
compensation by OFC or the Company. This Agreement may not be amended,
supplemented or otherwise modified except in writing signed by the parties
hereto.
(d) BINDING EFFECT. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their successors, assigns, heirs
and personal representatives.
(e) COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
<PAGE> 5
(f) SEVERABILITY. If any provision hereof shall for any reason
be held to be invalid or unenforceable in any respect, such invalidity or
unenforceability shall not affect any other provision hereof, and this Agreement
shall be construed as if such invalid or unenforceable provision had not been
included herein. If any provision hereof shall for any reason be held by a court
to be excessively broad as to duration, geographical scope, activity or subject
matter, it shall be construed by limiting and reducing it to make it enforceable
to the extent compatible with applicable law as then in effect.
(g) GOVERNING LAW. This Agreement shall be governed by the
laws of Massachusetts without regard to its conflict of laws principles.
IN WITNESS WHEREOF, the undersigned have duly executed and delivered
this Agreement as of the date first stated above.
GALILEO CORPORATION
By: /s/ W. Kip Speyer
-------------------------------------
W. Kip Speyer
President and Chief Executive Officer
OPTICAL FILTER CORPORATION
By: /s/ John F. Blais, Jr.
-------------------------------------
John F. Blais, Jr.
President and Chief Executive Officer
/s/ Ralf Faber
---------------------------------
Ralf Faber
<PAGE> 1
Exhibit 10.12
MANAGEMENT ADVISORY
AND
CONSULTING AGREEMENT
AGREEMENT ("Agreement") made and entered into as of the 31st day of
August, 1999, by and between GALILEO CORPORATION, a Delaware corporation having
a place of business at Sturbridge Business Park, Route 20, Sturbridge, MA 01566
(the "Company"), and ANC MANAGEMENT CORP. ("Consultant").
W I T N E S S E T H:
WHEREAS, the Company is and has been engaged in a number of businesses,
primarily related to the manufacture, distribution and sale of products
utilizing certain optical technologies as applied in different industries (the
"Business"); and
WHEREAS, the Consultant is controlled by Gerhard R. Andlinger (the
"Principal"), who has extensive experience in the management, restructuring,
strategic planning repositioning, financing and operation of manufacturing
companies, as well as experience with certain optical technologies; and
WHEREAS, in addition to the Principal, the Consultant has a staff of
employees and representatives with significant financial advisory, strategic
planning, managerial and operational experience with companies similar to the
Company; and
WHEREAS, an affiliate of the Consultant has made a significant equity
investment in the Company, and the Consultant and such affiliate have a
substantial interest in the financial success of the Company; and
WHEREAS, the Company's prior President and CEO resigned his positions
with the Company effective July 6, 1999, the Principal has been named President
and CEO, and the Board has determined not to conduct a search for a new CEO at
this time; and
WHEREAS, the terms and conditions of this Agreement and the
transactions contemplated hereby have been approved by the disinterested
directors of the Company; and
WHEREAS, the Company desires to retain Consultant to provide consulting
services under the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
<PAGE> 2
1. ENGAGEMENT. Upon the terms and conditions contained in this
Agreement, the Company hereby retains Consultant, and Consultant hereby accepts
the engagement, and agrees to perform Consulting Services (as defined below) for
the Company.
2. CONSULTING SERVICES. During the term of this Agreement, as defined
in paragraph 4 below (the "Term"), at the request of the Company, Consultant
shall perform the services described on Schedule 1 annexed hereto and shall give
to the Company the benefit of skill and advice of the Principal and other
employees and representatives of Consultant to perform the services described on
Schedule 1 annexed hereto, and as to such other matters as the Board of
Directors of the Company ("Board") may from time to time reasonably request (the
"Consulting Services"). All services shall be provided at the request of the
Company, primarily through the Principal.
3. COMPENSATION. the Consultant for any Consulting Services rendered
under this Agreement shall be paid in accordance with Schedule 2.
4. TERM. The term of Consultant's engagement (the "Term") commenced as
of July 6, 1999 and shall continue until June 30, 2002 unless sooner terminated
as provided in Section 8 below.
5. INDEPENDENT CONTRACTOR; DUTIES.
(a) In the performance of the Consulting Services, Consultant
shall be deemed to be, and shall be, an independent contractor, and not a joint
venturer, partner, employee or agent with or of the Company. Without limiting
the generality of the foregoing, neither the Company nor Consultant shall have
the power to bind the other, contractually or otherwise; Consultant shall be
entitled only to the compensation and reimbursement set forth in paragraph 3 of
this Agreement and not to any other so-called "fringe benefits;" and Consultant
shall be solely responsible for all liabilities for any and all state and
federal taxes, withholding, FICA, FUTA, worker's compensation, or other payments
due in respect of the compensation paid to Consultant by the Company and paid by
Consultant to its employees. The Consultant shall file all tax returns and pay
all taxes required in such connection on or before the due date thereof.
(b) In connection with his services as President and CEO of
the Company, the Principal shall have such authority to act for and bind the
Company as shall be customarily within the scope of authority of the executives
holding such offices, subject to such limitations as may be imposed by the Board
and also subject to such additional power and authority as shall be authorized
by the Board. In discharging such positions, the Principal shall give due regard
to his duties and obligations as an officer and director of the Company.
(c) The Principal may be removed as President and CEO at any
time by the Board of Directors and, subject to the provisions of the Securities
Purchase Agreement dated as of December 22, 1998 by and between Andlinger
Capital XIII LLC and the Company, as a director by the shareholders of the
Company, all as provided in the Company's bylaws and the
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<PAGE> 3
Delaware General Corporation Law, but such removal shall not otherwise affect
the duties and obligations of the parties hereunder.
(d) The Consultant may, with the approval of the Board of
Directors, engage third party professionals, consultants and other advisors to
assist Consultant in carrying out its duties or to provide services directly to
the Company, the costs of which shall be borne by the Company.
6. ASSIGNMENT. This Agreement shall bind and inure to the benefit of
only Consultant, the Company and their respective successors and assigns.
Neither party may assign any of its rights or delegate any of its obligations
under this Agreement without the express written consent of the other party. Any
attempted assignment or delegation which does not comply with this paragraph
shall be void.
7. CONFIDENTIAL INFORMATION; NON-COMPETITION.
(a) For purposes of this Agreement, "Confidential Information"
means all information, data and knowledge disclosed to the Consultant by the
Company concerning the organization, business, technology or finances of the
Company or of any third party that the Company is under an obligation to keep
confidential, including, but not limited to, trade secrets and other proprietary
ideas or confidential information respecting inventions (whether or not
patentable), patents, patent applications (under any divisions, continuations,
in whole or in part, patents issuing thereon and issues thereof), products,
designs, sketches, plans, calculations, prototypes, models, formulas,
specifications, procedures, discoveries, improvements, charts, diagrams, graphs,
writings, methods, know-how, techniques, systems, processes, hardware, software,
firmware, code, software programs, works of authorship, records, studies, trade
practices, customer lists, projects, plans and proposals, whether in written,
electronic, magnetic, optical or any other form.
"Affiliate" shall mean, with respect to an individual, the members of his or her
immediate family or any entity directly or indirectly controlled by such
individual; and with respect to an entity, any person or entity controlling,
controlled by or under common control with, such entity.
(b) From time to time the Company has disclosed to the
Consultant, and may continue to disclosure to Consultant, Confidential
Information for the purpose of obtaining management advisory and consulting
services from the Consultant. The Confidential Information includes, but is not
limited to, information relating to the Company's business strategy, financing
sources and structure, customer contacts and similar business information.
(c) All Confidential Information disclosed to the Consultant
by the Company shall remain the property of the Company.
(d) The Consultant shall use the Confidential Information only
for the purposes described in this Agreement and shall not use the Confidential
Information or assist
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<PAGE> 4
others to use the Confidential Information for any other purpose and shall not
publish or otherwise disclose the Confidential Information or any part thereof
to any other person, firm or corporation; provided, however, that the obligation
not to disclose the Confidential Information shall not apply to any of the
following: (i) information that is already known to Consultant; (ii) information
that Consultant receives from a third party without restriction or without
breach of this Agreement; (iii) information that is approved for release by
written authorization by the Company; or (iv) information that is or becomes
publicly known other than through a knowing or wrongful act of the Consultant.
(e) Each of Consultant and Principal severally agree that, so
long as this Agreement is in effect and for a period of one (1) year after the
expiration hereof or its termination for any reason, Consultant and Principal
will not, directly or indirectly, except as a passive investor in publicly-held
companies, engage in competition with the Company or any of its subsidiaries, or
own or control any interest in, or act as a director, officer or employee of, or
consultant to, any firm, corporation or institution directly or indirectly
engaged in competition with the Company or any of its subsidiaries.
8. TERMINATION; SURVIVAL.
(a) This Agreement may be terminated at the election of the
Board of Directors at any time upon written notice for "cause". As used here
"cause" means (i) the Consultant's continued failure to render services to the
Company as provided herein, which failure continues for more than thirty (30)
days after written notice; (ii) willful misconduct or gross negligence in the
performance of its services hereunder; (iii) breach of any material fiduciary
duty to the Company; or (iv) breach of any material item of this Agreement which
remains uncured for a period of thirty (30) days after written notice.
(b) Upon the death or disability of the Principal or his
resignation, removal or other termination as President and CEO of the Company,
this Agreement may be terminated by the Company at any time upon no less than
ninety (90) days written notice.
(c) This Agreement may be terminated at the election of
Consultant at any time upon no less than ninety (90) days written notice.
(d) No termination of this Agreement by either party,
regardless of the circumstances or reasons, shall terminate, amend or in any way
affect the validity of the provisions of Section 7 hereof or any other agreement
executed by consultant relating to Confidential Information of the Company.
9. INDEMNIFICATION.
(a) In the event that the Consultant is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
based on acts or omissions under or relating to this Agreement, the Company
shall indemnify the Consultant against expenses (including attorneys' fees),
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<PAGE> 5
judgments, fines and amounts paid in settlement actually and reasonably incurred
by the Consultant in connection with such action, suit or proceeding if the
Consultant acted in good faith and in a manner the Consultant reasonably
believed to be in, or not opposed to, the best interests of the Company, and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe the Consultant's conduct was unlawful. The termination of any action,
suit or proceeding by judgment, order, settlement, conviction or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a presumption
that the Consultant did not act in good faith and in a manner which the
Consultant reasonably believed to be in or not opposed to the best interests of
the Company, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that the Consultant's conduct was unlawful.
(b) To the extent that the Consultant has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred to
in subsection (a) of this section, or in defense of any claim, issue or matter
therein, the Consultant shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred in connection therewith.
(c) Expenses (including attorneys' fees) incurred by the
Consultant in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the Company in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of the Consultant to repay such amount if it shall ultimately be
determined that the Consultant is not entitled to be indemnified by the Company
as authorized in this section. Such expenses (including attorneys' fees)
incurred by the Consultant may be so paid upon such terms and conditions, if
any, as the Company reasonably deems appropriate consistent with this Agreement.
(d) The indemnification and advancement of expenses provided
by, or granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to the Consultant notwithstanding the
termination of this Agreement and shall inure to the benefit of the successors
of the Consultant.
10. NO CONFLICTS. Consultant represents and warrants to the Company
that performance of Consultant's obligations under this Agreement does not and
will not violate any written or oral contract, agreement, or court order by
which Consultant is bound and Consultant covenants not to create such a
violation during the Term of this Agreement including, without limitation, such
violation created by using any information belonging to any third party, that
would be characterized as Confidential Information if such information belonged
to the Company.
11. SEVERABILITY. Should any provision of this Agreement be held by a
court of competent jurisdiction to be unenforceable, or enforceable only if
modified, such holding shall not affect the validity of the remainder of this
Agreement, which shall continue to be binding upon the parties hereto. The
parties further agree that any such court is expressly authorized to modify any
such unenforceable provision of this Agreement in lieu of severing the
unenforceable provisions from this Agreement in its entirety, whether by
rewriting the offending provision, adding additional language to this Agreement
or making such other modifications as the court
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<PAGE> 6
deems warranted to carry out the agreement of the parties. The parties expressly
agree that this Agreement as so modified by the court shall be binding upon and
enforceable against each of them.
12. STANDARDS OF CONDUCT. Consultant agrees to adhere at all times to
Company policies and to conduct its services in compliance with applicable laws,
rules and regulations and use all reasonable efforts to maintain the highest
standards of business ethics.
13. EXCLUSIVITY. Consultant shall not, during the Term of this
Agreement, perform services related to the same subject matter as those
performed under this Agreement for any other individual, firm, association or
organization which directly or indirectly competes with the Company without
prior written notification to and consent by the Company. In those cases where a
potential conflict appears to exist, a mutually agreeable resolution shall be
made before such conflicting services are furnished or performed.
14. GENERAL PROVISIONS.
(a) Waiver of any provision of this Agreement, in whole or in
part, in any one instance shall not constitute a waiver of any other provision
in the same instance, nor any waiver of the same provision in another instance,
but each provision shall continue in full force and effect with respect to any
other then-existing or subsequent breach.
(b) Any notice required or permitted hereunder shall be in
writing and shall be sufficiently given if personally delivered, delivered by
facsimile telephone transmission, delivered by express delivery service (such as
Federal Express), or mailed first class U.S. mail, postage prepaid, addressed as
follows:
If to the Company:
Galileo Corporation
Sturbridge Business Park
PO Box 550
Sturbridge, MA 01566
Attn: Thomas J. Mathews
Fax No.: 1-508-347-2270
with a copy to:
Edwards & Angell
250 Royal Palm Way
Palm Beach, FL 33480
Attention: Jonathan E. Cole
Fax No.: 561-655-8719
-6-
<PAGE> 7
If to Consultant:
ANC Management Corp.
303 South Broadway
Tarrytown, NY 10591
Attn: Gerhard R. Andlinger
Fax No.: 1-914-332-4977
with a copy to:
Stephen A. Magida
105 Harbor Drive, Suite 125
Stamford, CT 06902
Fax No.: 1-203-348-6790
(or to such other address as any party shall specify by written notice so
given), and shall be deemed to have been delivered as of the date so delivered
or three (3) days after mailing for domestic mail and seven (7) days for
international mail.
(c) This Agreement: (i) may be executed in any number of
counterparts, each of which, when executed by both parties to this Agreement
shall be deemed to be an original, and all of which counterparts together shall
constitute one and the same instrument; (ii) shall be governed by and construed
under the laws of Massachusetts applicable to contracts made, accepted, and
performed wholly within Massachusetts, without application of principles of
conflicts of law; (iii) may be amended, modified, or terminated, and any right
under this Agreement may be waived in whole or in part, only by a writing signed
by both parties; (iv) contains headings only for convenience, which headings do
not form part, and shall not be used in construction, of this Agreement; (v)
shall bind and inure to the benefit of the parties and their respective legal
representatives, successors and permitted assigns; and (vi) is not intended to
inure to the benefit of any third-party beneficiaries.
(d) This Agreement, together with Schedules 1 and 2 constitute
the entire agreement of the parties with respect to its subject matter,
superseding all prior oral and written communications, proposals, negotiations,
representations, understandings, courses of dealing, agreements, contracts, and
the like between the parties in such respect;
(e) The obligations imposed by this Agreement are unique.
Breach of any of such obligations would injure the parties to this Agreement;
such injury is likely to be difficult to measure; and monetary damages, even if
ascertainable, are likely to be inadequate compensation for such injury.
Therefore, the parties to this Agreement acknowledge and agree that protection
of the respective interests in this Agreement would require equitable relief,
including specific performance and injunctive relief, in addition to any other
remedy or remedies that the parties may have at law or under this Agreement,
including, without limitation, entitlement to reimbursement by the breaching
party or parties of the legal fees and expenses of the injured party or parties
prevailing in any such suit.
-7-
<PAGE> 8
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
COMPANY:
GALILEO CORPORATION
By: ________________________________
Thomas J. Mathews,
Vice President and CFO
CONSULTANT:
ANC MANAGEMENT CORP.
By: ________________________________
Gerhard R. Andlinger, Chairman
The undersigned Gerhard R. Andlinger, in his individual capacity, agrees to the
provisions of Section 7 hereof.
Dated as of August 31, 1999 ____________________________________
Gerhard R. Andlinger
-8-
<PAGE> 9
SCHEDULE 1
SCOPE OF SERVICES
1. MANAGEMENT SERVICES.
a. Consultation and advice with respect to the overall
management and operation of the Company and its business, including advisory
services with respect to production, marketing and sales, finance,
administration and personnel matters.
b. Provision of the Principal as President and CEO of the
Company, to perform the duties customarily performed by such officer in similar
companies.
2. STRATEGIC SERVICES.
a. Consultation and advice with respect to the development,
implementation and monitoring of a strategic plan for the Company and
participation in the deliberations of the Board relating to the strategic plan.
b. Consultation and advice with respect to strategic
transactions and analysis with respect there.
[NOTE: FINANCIAL ADVISORY, STRUCTURING, ANALYTICAL AND NEGOTIATING SERVICES AND
RELATED FEES (IF ANY) WITH RESPECT TO SPECIFIC STRATEGIC TRANSACTIONS WILL BE
SEPARATELY NEGOTIATED AND AGREED TO OUTSIDE OF THIS AGREEMENT.]
<PAGE> 10
SCHEDULE 2
COMPENSATION/EXPENSES
COMPENSATION:
A. Consultant shall be entitled to cash compensation at the rate of
$250,000 per annum, payable in equal monthly installments on the last
day of each month.
B. In addition, Consultant shall receive non-qualified options pursuant to
the Company's 1991 Stock Option Plan to purchase 100,000 shares of the
Company's Common Stock, $.01 par value per share, at an exercise price
of $11.4375 per share, exercisable at any time until June 30, 2009.
Such options shall be governed by a mutually agreeable Non-Qualified
Stock Option Agreement.
EXPENSES:
The Company shall reimburse the Consultant, from time to time upon request
accompanied by appropriate documentation, all out-of-pocket expenses (including
an automobile allowance at the IRS rate then in effect) reasonably incurred by
Consultant in providing consulting services.
<PAGE> 1
EXHIBIT 21
LIST OF SUBSIDIARIES
1. Leisegang Medical, Inc. (Boca Raton, Florida)
2. Leisegang Feinmechanik-Optik GmbH (Berlin, Germany)
3. Galenica Inc. (New Brunswick, Canada)
4. Galenica, Inc. (Delaware)
5. Optical Filter Corporation (Natick, Massachusetts)
6. Optical Filter Corporation, GmbH (Waechtersbach, Germany)
7. Galileo Foreign Sales Corporation
8. Galileo Photonics, Inc.
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-3, No. 333-19391) of NetOptix Corporation (formerly Galileo Corporation)
and in the Registration Statements (Form S-8, Nos. 2-92671, 33-5142, 33-47589,
33-47588, 333-02435, 333-23345 and 333-48375) pertaining to the Stock Option and
Stock Purchase Plans of NetOptix Corporation, of our report dated December 21,
1999, with respect to the Consolidated Financial Statements and schedule of
NetOptix Corporation included in the Annual Report (Form 10-K) for the year
ended September 30, 1999.
ERNST & YOUNG LLP
Providence, Rhode Island
December 21, 1999
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