<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------
FORM 8-K
CURRENT REPORT
-----------------------------
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report
(Date of earliest event reported): October 1, 1999
BEI MEDICAL SYSTEMS COMPANY, INC.
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(Exact name of registrant as specified in its charter)
Delaware 0-17885
-------------------------- --------------------------
(State of incorporation) (Commission File Number)
71-0455756
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(IRS Employer Identification No.)
100 Hollister Road Teterboro, New Jersey 07608
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(Address of principal executive offices) (zip code)
(201) 727-4900
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(Registrant's telephone number, including area code)
1.
<PAGE>
Item 5. Other Events.
This Current Report on Form 8-K contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. The forward-
looking statements contained herein involve risks and uncertainties, including
those relating to the possible inability to complete the asset purchase
transaction (the "Asset Sale") involving BEI Medical Systems Company, Inc., a
Delaware corporation (the "Company"), and CooperSurgical Acquisition Corp., a
Delaware corporation (the "Purchaser"), as scheduled, if at all, and those
associated with the Company's business if the Asset Sale is consummated. Actual
results and developments may differ materially from those described or
incorporated by reference in this Report. For more information about the
Company and risks arising in investing in the Company, investors are directed to
the Company's most recent report on Form 10-K and most recent report on Form 10-
Q as filed with the Securities and Exchange Commission (the "SEC"). For more
information about the risks associated with completion or failure to complete
the Asset Sale, investors are directed to the Company's proxy statement relating
to the Asset Sale as filed with the SEC on October 8, 1999.
The Company engages in the business of developing, manufacturing, marketing
and servicing a broad array of advanced systems and devices for diagnostic and
therapeutic procedures in the medical fields of gynecology and gastroenterology
(the "Base Business"). On October 1, 1999, the Company entered into an Asset
Purchase Agreement (the "Asset Purchase Agreement") with CooperSurgical
Acquisition Corp., a Delaware corporation (the "Purchaser") pursuant to which
the Company agreed to sell to the Purchaser the Base Business. The Base
Business constitutes a substantial portion of the Company's assets. The Company
will retain its business relating to its Hydro ThermAblator product.
The aggregate cash consideration to be paid by the Purchaser to the Company
under the Asset Purchase Agreement is up to $11,206,600 subject to purchase
price adjustments to be made at and following the closing of the Asset Sale (the
"Closing"). In addition, the Purchaser will: (a) assume up to $350,000 of
specified liabilities of the Company, (b) assume liabilities under certain
contracts of the Company and (c) forgive royalty payments, which may be due to
it in the future from the Company, in an amount of up to $100,000.
At the Closing, the Company will receive a total consideration of up to
$11,206,600 in cash, subject to:
-- a dollar-for-dollar downward adjustment if the inventory and net
receivables of the Company on the date of the Closing (the
"Closing Date"), as reflected in a balance sheet prepared by the
Company after the Closing, are in the aggregate less than
$3,600,000;
-- a dollar-for-dollar upward adjustment if the inventory and net
receivables of the Company on the Closing Date, as reflected in a
balance sheet prepared by the Company after the Closing, are in
the aggregate greater than $3,750,000;
2.
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-- a downward adjustment based on a complex valuation matrix which
is dependent upon both (a) the Company's sales for the nine month
period ended October 2, 1999, on an annualized basis, and (b) the
sales mix of the Base Business during the same nine month period;
-- a dollar-for-dollar upward adjustment to the extent the amount of
the liabilities being assumed by the Purchaser is less than
$350,000; and
-- a downward adjustment if certain customers indicate that they
will not continue after the Closing to purchase products that are
included in the product lines being sold in the Asset Sale based
upon the sales to these customers as included in the sales
valuation matrix mentioned above.
In connection with the Asset Sale, the Company has agreed to provide
certain transition services to the Purchaser pursuant to a transition agreement.
Under the transition agreement, for three months following the Closing (and at
the Purchaser's option, for up to an additional three months), the Company will
operate on behalf of the Purchaser certain aspects of the Base Business. Under
the transition agreement, the Company is obligated to do the following:
-- pay approximately $210,000 in connection with severance payments,
bonuses and other costs associated with the transition services
to be provided by the Company to the Purchaser; and
-- provide the first $245,000 of products and services to the
Purchaser without cost for transition services.
The Company will recognize a gain on the Asset Sale, but anticipates that,
for Federal and New Jersey state tax purposes, it will have net operating losses
in amounts sufficient to offset such taxable gain. However, the Company may be
required to pay alternative minimum tax and sales tax as a result of the Asset
Sale. The Asset Sale will not have a tax consequence for stockholders of the
Company.
The Asset Sale will be accounted for as a sale of assets in accordance with
generally accepted accounting principles. The Company will recognize a gain for
book purposes based upon the excess net proceeds to be received under the Asset
Purchase Agreement over the book value of the net assets sold.
The Asset Sale is subject to approval by the stockholders of the Company
and other customary closing conditions. Further, the Company and the Company's
Chief Executive Officer are required to enter into noncompetition agreements as
conditions to Closing.
The foregoing summary of certain principal terms of the Asset Purchase
Agreement and related agreements do not purport to be complete and is qualified
in its entirety by reference to the Asset Purchase Agreement, a copy of which is
attached hereto as Exhibit 2.1 and is hereby incorporated by reference herein.
A copy of the press release issued by the Company on October 4, 1999 is
attached hereto as Exhibit 99.1 and is hereby incorporated by reference herein.
3.
<PAGE>
A proxy statement relating to a vote of the Company's stockholders on the
Asset Sale was filed with the SEC on October 8, 1999.
Item 7. Financial Statements and Exhibits
(a) Financial statements of businesses acquired.
Not applicable.
(b) Pro forma financial information.
Not applicable.
(c) Exhibits
2.1 Asset Purchase Agreement by and between BEI Medical Systems
Company, Inc., a Delaware corporation (the "Company") and
CooperSurgical Acquisition Corp., a Delaware corporation, dated
October 1, 1999.
99.1 Press Release of the Company.
4.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BEI Medical Systems Company, Inc.
/s/ Thomas W. Fry
---------------------------------------
By: Thomas W. Fry
Title: Vice President, Finance and
Administration, Treasurer and Secretary
Dated: October 14, 1999
5.
<PAGE>
Exhibit Number Exhibit Description
2.1 Asset Purchase Agreement by and between BEI Medical Systems
Company, Inc., a Delaware corporation (the "Company") and
CooperSurgical Acquisition Corp., a Delaware corporation,
dated October 1, 1999.
99.1 Press Release of the Company.
6.
<PAGE>
Exhibit 2.1
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ASSET PURCHASE AGREEMENT
between:
BEI MEDICAL SYSTEMS COMPANY, INC.,
a Delaware corporation
and
COOPERSURGICAL ACQUISITION CORP.,
a Delaware corporation
______________________
Dated as of October 1, 1999
______________________
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<PAGE>
TABLE OF CONTENTS
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Section 1 SALE OF ASSETS; RELATED TRANSACTIONS; DEFINITIONS............ 1
1.1 Sale Of Assets.................................................. 1
1.2 Instruments of Conveyance and Transfer and Assumption........... 2
1.3 Further Assurances.............................................. 2
1.4 Assignments of Contracts and Rights............................. 2
1.5 Power of Attorney; Right of Endorsement......................... 2
1.6 Liabilities Being Assumed....................................... 3
1.7 Liabilities Not Being Assumed................................... 3
1.8 Purchase Price.................................................. 4
1.9 Delivery of Estimated Inventory and Net Receivables Statement... 4
1.10 Purchase Price Adjustment....................................... 4
1.11 Sales Taxes..................................................... 6
1.12 Closing......................................................... 7
1.13 Definitions..................................................... 7
Section 2 REPRESENTATIONS AND WARRANTIES OF THE SELLER................. 7
2.1 Organization and Qualification; Subsidiaries.................... 7
2.2 Authority Relative to this Agreement; Vote Required............. 7
2.3 No Conflict; Required Filings and Consents...................... 8
2.4 Compliance; Permits............................................. 9
2.5 SEC Filings; Financial Statements............................... 9
2.6 Absence of Certain Changes or Events............................ 10
2.7 No Undisclosed Liabilities...................................... 11
2.8 Contracts....................................................... 11
2.9 Title to Property............................................... 12
2.10 Brokers......................................................... 13
2.11 Intellectual Property Rights.................................... 13
2.12 Litigation...................................................... 14
2.13 Opinion of Financial Advisor.................................... 14
2.14 Accounts and Notes Receivable................................... 14
2.15 Suppliers, Consultants and Vendors.............................. 15
2.16 Customers....................................................... 15
2.17 Conflicts of Interest........................................... 15
2.18 Tax Matters..................................................... 15
2.19 FDA and Certain Other Compliances............................... 16
2.20 Insurance....................................................... 18
2.21 Environmental Matters........................................... 18
2.22 Sufficiency of Assets........................................... 18
2.23 Disclosure...................................................... 18
Section 3 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.............. 19
3.1 Due Organization................................................ 19
3.2 Authority; Binding Nature Of Agreements......................... 19
3.3 Non-Contravention; Consents..................................... 19
3.4 Brokers......................................................... 20
Section 4 PRE-CLOSING COVENANTS........................................ 20
4.1 Access And Investigation........................................ 20
4.2 Operation of Business........................................... 21
4.3 Filings and Consents............................................ 22
4.4 Notification of Certain Changes; Supplements to Schedules....... 22
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4.5 Public Announcements........................................... 23
4.6 Reasonable Efforts............................................. 23
4.7 Exchange Proceeds.............................................. 23
4.8 Allocation of Purchase Price................................... 23
4.9 Exclusivity.................................................... 24
4.10 Special Payment to Purchaser Based Upon Another Transaction.... 25
4.11 Stockholders' Meeting.......................................... 25
4.12 Subsidiary Approval............................................ 25
4.13 Insurance...................................................... 25
Section 5 CONDITIONS PRECEDENT TO THE PURCHASER'S OBLIGATIOn TO CLOSE.. 26
5.1 Accuracy Of Representations.................................... 26
5.2 Performance Of Obligations..................................... 26
5.3 No Proceedings................................................. 26
5.4 No Prohibition................................................. 26
5.5 Stockholder and Board of Directors Approval.................... 26
5.6 Opinion of the Seller's Counsel................................ 27
5.7 Consents and Approvals......................................... 27
5.8 Related Documents.............................................. 27
5.9 Seller Certificates............................................ 27
5.10 Release of Encumbrance......................................... 28
5.11 Integrated Video Systems....................................... 28
Section 6 CONDITIONS PRECEDENT TO THE SELLER'S OBLIGATION TO CLOSE..... 28
6.1 Accuracy Of Representations.................................... 28
6.2 Performance Of Obligations..................................... 29
6.3 No Proceedings................................................. 29
6.4 No Prohibition................................................. 29
6.5 Stockholder Approval........................................... 29
6.6 Opinion of the Purchaser's Counsel............................. 29
6.7 Consents and Approvals......................................... 29
6.8 Related Documents.............................................. 30
6.9 Purchaser's Certificates....................................... 30
6.10 Termination of Royalty Obligation.............................. 30
Section 7 INDEMNIFICATION.............................................. 30
7.1 Generally...................................................... 30
7.2 Assertion of Claims............................................ 32
7.3 Notice and Defense of Third Party Claims....................... 32
7.4 Survival of Representations and Warranties..................... 34
7.5 Limitations on Indemnification................................. 34
7.6 Attorneys' Fees................................................ 35
Section 8 TERMINATION.................................................. 35
8.1 Termination Events............................................. 35
8.2 Termination Procedures......................................... 36
8.3 Effect Of Termination.......................................... 36
8.4 Nonexclusivity Of Termination Rights........................... 37
Section 9 POST CLOSING COVENANTS....................................... 37
9.1 Access to Records.............................................. 37
9.2 Use of Seller's Labels, etc.................................... 37
9.3 Physical Transfer of Purchased Assets.......................... 38
9.4 Collection of Accounts Receivable.............................. 38
9.5 Collection of Invoices representing Evaluation Inventory, etc.. 39
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Section 10 MISCELLANEOUS PROVISIONS.................................... 39
10.1 Further Assurances............................................. 39
10.2 Fees And Expenses.............................................. 39
10.3 Notices........................................................ 40
10.4 Headings....................................................... 41
10.5 Counterparts................................................... 41
10.6 Governing Law.................................................. 41
10.7 Successors And Assigns; Parties In Interest.................... 41
10.8 Remedies Cumulative; Specific Performance...................... 41
10.9 Waiver......................................................... 42
10.10 Amendments..................................................... 42
10.11 Severability................................................... 42
10.12 Entire Agreement; Confidential Disclosure Agreement............ 42
10.13 Knowledge...................................................... 42
10.14 Construction................................................... 43
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<PAGE>
EXHIBITS AND SCHEDULES
Exhibit A: - Form of Bill of Sale
Exhibit B: - Certain Definitions
Exhibit C: - Statement of Allocation
Exhibit D: - Form of Opinion of Counsel for the Seller
Exhibit E: - Form of Transition Agreement
Exhibit F: - Form of Non-Competition Agreement with the Seller
Exhibit G: - Form of Non-Competition Agreement with Richard W. Turner
Exhibit H: - Form of Opinion of Counsel for the Purchaser
Schedule 1.1: - List of Purchased Assets
Schedule 1.6: - List of Assumed Liabilities
Schedule 1.7: - List of Excluded Liabilities
Schedule 1.8(a): - Sales Shortfall Calculation
Schedule 1.10(a): - Inventory Valuation Rules
Schedule 5.7: - Consents and Approvals
SELLER DISCLOSURE SCHEDULE
Section 1.1 - List of Purchased Assets
Section 1.6 - List of Assumed Liabilities
Section 1.7 - List of Excluded Liabilities
Section 1.8 - Sales Shortfall Calculation
Section 1.10 - Inventory Valuation Rights
Section 1.11 - Sales Taxes
Section 2.1 - Good Standing and Qualification
Section 2.3 - No Conflict; Required Filing and Consents
Section 2.4 - Compliance; Permits
Section 2.5 - SEC Filings; Financial Statements
Section 2.6 - Absence of Certain Changes or Events
Section 2.7 - Undisclosed Liabilities
Section 2.8 - Contracts
Section 2.9 - Title to Property
Section 2.10 - Brokers
Section 2.11 - Intellectual Property Rights
Section 2.14 - Accounts and Notes Receivable
Section 2.15 - Suppliers, Consultants and Vendors
Section 2.16 - Customers
Section 2.17 - Conflicts of Interest
Section 2.18 - Tax Matters
Section 2.19 - FDA and Other Compliances
Section 2.20 - Insurance
Section 2.21 - Environmental Matters
iv
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DEFINED TERMS INDEX
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Term Location
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Accountant's Determination Section 1.10(c)
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Acquisition Expenses Section 4.9
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Agreement Exhibit B
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Affiliate Exhibit B
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Another Transaction Section 4.9(a)
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Approvals Section 2.1
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Assumed Contracts Section 1.6
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Assumed Liabilities Section 1.6
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Bill of Sale Section 1.2
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Blocked Jurisdiction Section 7.5(b)
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Business Recital B
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CERCLA Exhibit B
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CERCLIS Exhibit B
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CGMP Section 2.19(c)(i)
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Control Exhibit B
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Claim Section 9.4(e)
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Closing Section 1.12
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Closing Date Section 1.12
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Code Section 2.18(a)
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Compliance Claim Section 7.5(b)
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Consent Exhibit B
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Debtor Section 9.4(e)
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Disputed Receivable Section 9.4(e)
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DGCL Section 2.2
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Encumbrance Exhibit B
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Environmental, Health and Safety Laws Exhibit B
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Examination Period Section 1.10(b)
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Exchange Proceeds Section 4.7
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Estimated Inventory Section 1.9(a)
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Estimated Inventory and Net Receivables Holdback Amount Section 1.9(b)
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Estimated Inventory and Net Receivables Statement Section 1.9(a)
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Estimated Net Receivables Section 1.9(a)
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Excluded Assets Section 1.1
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Excluded Liabilities Section 1.7
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FDA Section 2.19(a)
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GAAP Exhibit B
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Governmental Entity Exhibit B
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Hazardous Materials Exhibit B
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HTA Recital A
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Indemnified Persons Exhibit B
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Indemnifying Persons Exhibit B
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Inventory Section 1.10(a)
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Inventory Statement Section 1.10(a)
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Law Exhibit B
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Liabilities Exhibit B
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Losses Exhibit B
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Lost Sales Amount Section 7.5(b)
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Knowledge Section 10.13
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Material Adverse Effect Exhibit B
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MDRs Section 2.19(c)(iv)
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</TABLE>
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<TABLE>
<S> <C>
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Net Receivables Section 1.10(a)(ii)
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Non-Competition Agreements Section 5.8(ii)
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Objection Notice Section 1.10(c)
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Orders Exhibit B
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Permitted Encumbrances Exhibit B
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Permits Exhibit B
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Person Exhibit B
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Physical Inventory Section 1.10(a)
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Pre-Closing Period Section 4.1
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Proceedings Section 2.12
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Products Exhibit B
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Proprietary Matter Section 2.11(a)(i)
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Purchase Price Section 1.8(c)
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Purchased Assets Section 1.1
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Purchaser Preamble
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Purchaser Indemnified Persons Exhibit B
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Purchaser Indemnifying Persons Exhibit B
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Purchaser Losses Exhibit B
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Related Document, Documents Section 5.8
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Receivable Section 9.4(e)
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Representatives Exhibit B
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Requesting Party Section 9.1
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Sale Exhibit B
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Sales Shortfall Exhibit B
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Seller Preamble
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Seller Disclosure Schedule Section 2
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Seller Indemnified Persons Exhibit B
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Seller Indemnifying Persons Exhibit B
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Seller Losses Exhibit B
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Seller Permits Section 2.4(b)
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Seller SEC Reports Section 2.5(a)
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Settlement Agreement Section 1.10(c)
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Special Tax Losses Exhibit B
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Statement of Allocation Section 4.8
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Statements Section 1.10(b)
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Stockholders Meeting Section 8.1 (d)
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Subsidiaries Section 1.1
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Survival Date Section 7.4
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Tax Return Exhibit B
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Taxes Exhibit B
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Third Party Claim Section 7.3
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Transaction Taxes Section 1.11
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Transition Agreement Section 5.8 (i)
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</TABLE>
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<PAGE>
THIS ASSET PURCHASE
AGREEMENT is entered into as
of October 1, 1999, by and
between: BEI MEDICAL SYSTEMS
COMPANY, INC., a Delaware
corporation (the "Seller"),
------
and COOPERSURGICAL
ACQUISITION CORP., a
Delaware corporation (the
"Purchaser").
----------
RECITALS
A. The Seller and its subsidiaries are engaged in the business
of developing, manufacturing, marketing and servicing a broad array of advanced
systems and devices for diagnostic and therapeutic procedures in the medical
fields of gastroenterology and gynecology. The Seller also produces a variety of
products for use in various medical and surgical procedures that are sold by it
under original equipment manufacture labeling arrangements. The Seller is
currently focusing its development and commercialization efforts on its new
Hydro ThermAblator ("HTA") product and related accessories for treatment of
---
excessive uterine bleeding through endometrial ablation.
B. The Seller desires to sell its non-HTA business (hereinafter
called the "Business")
C. The Seller and its subsidiaries desire to sell to the
Purchaser, and the Purchaser desires to purchase from the Seller and its
subsidiaries, certain of the assets of the Seller and its subsidiaries, subject
to the Purchaser's assumption of certain specified liabilities of the Seller, in
each case related to the Business, on the terms and subject to the conditions
contained in this Agreement.
ACCORDINGLY, in consideration of the premises and the mutual
representations hereinafter set forth, the parties hereto hereby agree as set
forth below.
Section 1 SALE OF ASSETS; RELATED TRANSACTIONS; DEFINITIONS.
1.1 Sale Of Assets.
The Seller shall cause to be sold, assigned, transferred, conveyed and
delivered to the Purchaser, free and clear of all Encumbrances, and the
Purchaser shall purchase from the Seller and its subsidiaries (the
"Subsidiaries") which own or have rights to the assets that are identified on
------------
Schedule 1.1 (which assets are collectively referred to in this Agreement as the
"Purchased Assets"), at the Closing (as defined in Section 1.5), all of the
----------------
Seller's and the Subsidiaries' right, title and interest in, to and under the
Purchased Assets which exist at the Closing, on the terms and subject to the
conditions set forth in this Agreement. The Seller shall not sell, assign,
transfer, convey or deliver to the Purchaser at the Closing and shall
specifically retain any asset of the Seller that is not identified on Schedule
1.1 (which assets are collectively referred to in this Agreement as the
"Excluded Assets").
---------------
<PAGE>
1.2 Instruments of Conveyance and Transfer and Assumption.
At the Closing, the Seller and the Subsidiaries shall execute and deliver
to the Purchaser, and the Purchaser shall execute and deliver to the Seller, a
bill of sale, assignment and assumption agreement, substantially in the form of
Exhibit A attached hereto (the "Bill 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 to the Purchaser good title to the Purchased Assets free and clear of
any and all Encumbrances. The Seller shall take all reasonable legal steps that
may be necessary to put the Purchaser in possession and operating control of the
Purchased Assets.
1.3 Further Assurances.
The Seller shall promptly pay or deliver to the Purchaser any Purchased
Asset which may be received by the Seller or a Subsidiary after the Closing. The
Seller shall at its expense, at any time and from time to time after the
Closing, upon the reasonable 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 title to the Purchased Assets as herein provided.
1.4 Assignments of Contracts and Rights.
Anything contained in this Agreement to the contrary notwithstanding,
this Agreement shall not constitute an agreement or an attempted agreement to
transfer, sublease or assign any 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 adversely affect the rights of the
Purchaser thereunder. The Seller shall use commercially reasonable efforts to
obtain the consent of the other party to any 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 contract. If any
such consent is not obtained and the Closing occurs, the Seller shall provide
for the Purchaser the benefits of such 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 the Seller thereunder
and (b) enforcement for the benefit of the Purchaser of any and all rights of
the Seller thereunder against the other party or parties thereto arising out of
the breach or cancellation thereof by such other party or parties or otherwise.
1.5 Power of Attorney; Right of Endorsement.
Effective as of the Closing, the Seller and each Subsidiary hereby
constitute and appoint the Purchaser as the true and lawful attorney of the
Seller and each Subsidiary, with full power of substitution, in the name of the
Seller and each Subsidiary, on behalf of and for the benefit of the Purchaser,
solely (a) to collect all Purchased Assets, (b) to endorse, without recourse,
checks, notes and other instruments attributable to the Purchased Assets and the
Assumed Liabilities (as
2
<PAGE>
defined in Section 1.6), (c) to institute and prosecute all proceedings which
the Purchaser may reasonably 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 or the
Assumed Liabilities and (e) to do all such acts and things with respect to the
Purchased Assets or the Assumed Liabilities as the Purchaser may reasonably deem
advisable. The foregoing powers are coupled with an interest and shall not be
revocable by the Seller or any Subsidiary, directly or indirectly, by the
dissolution of the Seller or any Subsidiary 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 Seller and each
Subsidiary shall promptly pay to the Purchaser any amounts it receives after the
Closing with respect to the Purchased Assets.
1.6 Liabilities Being Assumed.
Upon the terms and subject to the conditions of this Agreement, the
Purchaser shall assume the following and only the following liabilities and
obligations of the Seller (a) all liabilities and obligations (excluding those
arising from a breach by the Seller or any Subsidiary of any Assumed Contract)
accruing from and after Closing pursuant to the contracts identified on Schedule
1.1 (the "Assumed Contracts") and (b) effective as of the Closing, and from and
-----------------
after the Closing, the Purchaser shall pay or assume, perform and discharge when
due the liabilities of Seller related to the Business which are identified on
Schedule 1.6 (collectively, the "Assumed Liabilities"). Anything contained in
-------------------
this Agreement to the contrary notwithstanding, in no case shall the Assumed
Liabilities described on Schedule 1.6 or any liabilities associated with the
Assumed Contracts (excluding any royalty payments accruing from and after the
Closing and the cost of performance by the Purchaser after the Closing under
those Assumed Contracts specifically identified in Schedule 1.6 which relate to
sales of Products or acquisition of inventory by the Purchaser after the
Closing) exceed $350,000. To reach $350,000, the Assumed Liabilities shall be
assumed by the Purchaser in the following order of priority: first, to the
extent of any trade accounts payable up to $350,000; second, up to $25,000 of
warranty obligations up to the difference between $350,000 and the lesser amount
of trade accounts payable so assumed; third, to the extent of the amount at
Closing of any accrued sales return obligations up to the difference between
$350,000 and the sum less than $350,000 of the amount of trade accounts payable
and warranty obligations so assumed; and last, the amount at Closing of any
accrued royalty obligations, up to any remaining difference between $350,000 and
the sum less than $350,000 of the amount of trade accounts payable, warranty
obligations and sales return obligations so assumed.
1.7 Liabilities Not Being Assumed.
Anything contained in this Agreement to the contrary notwithstanding, the
Purchaser is not assuming any Liabilities of the Seller 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 Seller. Without limiting the generality of
the foregoing, the Purchaser is not assuming any of the Liabilities identified
on Schedule 1.7 (collectively, the "Excluded Liabilities") .
--------------------
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1.8 Purchase Price.
Subject to Section 1.10, as the aggregate consideration for the sale of
the Purchased Assets to the Purchaser:
(a) at the Closing, the Purchaser shall pay to the Seller, by wire
transfer of immediately available funds, $11,206,600, minus an amount equal to
-----
(i) the Sales Shortfall described on Schedule 1.8(a), if any, and (ii) the
Estimated Inventory and Receivables Holdback Amount as defined in Section 1.9,
if any; and
(b) at the Closing, the Purchaser shall assume the Assumed
Liabilities.
(c) The "Purchase Price" means $11,206,600, as adjusted pursuant to
--------------
Section 1.10, less the Sales Shortfall plus the amount of the Assumed
---- ----
Liabilities.
1.9 Delivery of Estimated Inventory and Net Receivables Statement.
(a) The Seller, in consultation with the Purchaser, shall prepare and
deliver to the Purchaser as soon as practicable, and in no case less than three
Business Days prior to the Closing Date, a statement (the "Estimated Inventory
-------------------
and Net Receivables Statement") setting forth (i) their good faith estimate of
- -----------------------------
the value at Closing of the Inventory (the "Estimated Inventory") and the Net
-------------------
Receivables (the "Estimated Net Receivables"). The Estimated Inventory and
-------------------------
Estimated Net Receivables shall be determined in accordance with the guidelines
set forth in Section 1.10(a) and 1.10(b), respectively.
(b) The "Estimated Inventory and Net Receivables Holdback Amount"
-------------------------------------------------------
means the amount, if any, by which the Estimated Inventory plus Estimated Net
Receivables, as reflected on the Estimated Inventory and Receivables Statement
is, in the aggregate, less than $3,600,000.
1.10 Purchase Price Adjustment.
(a) Preparation of Statements.
-------------------------
(i) As of the Closing, a physical inventory ("Physical
--------
Inventory") will be taken of all the inventory of the Seller and each
---------
Subsidiary included in the Purchased Assets (the "Inventory") at which
---------
Representatives of be present, in a manner to be agreed upon by the
Seller and the Purchaser and to be performed by the Seller. Promptly
after completion of the Physical Inventory, the Seller shall prepare and
deliver to the Purchaser within 30 days of Closing a written statement
which sets forth the value of the Inventory as of the Closing based on
the Physical Inventory (the "Inventory Statement"). The value of the
-------------------
Inventory shall be determined in accordance with GAAP, as modified in
accordance with the methodology set forth on Schedule 1.10(a).
(ii) The Seller shall also prepare and deliver to the
Purchaser with the Inventory Statement a written statement which sets
forth the value as of the Closing of the Net Receivables and the Assumed
Liabilities for each category set forth in Schedule 1.6. "Net
---
Receivables" means the Seller's accounts receivable included in the
-----------
Purchased
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Assets as of the Closing (determined in accordance with GAAP) minus the
Seller's reserve for doubtful accounts receivable (such reserve to be
calculated in accordance with GAAP based on the historical experience of
the Seller). The value of the Assumed Liabilities shall be determined in
accordance with GAAP, adjusted in accordance with the methodology set
forth in Schedule 1.6.
(b) Review of the Statements. Promptly after the Inventory and other
------------------------
statements referred to in Section 1.10(a) (collectively, the "Statements") are
----------
delivered to the Purchaser pursuant to Section 1.10(a), the Purchaser shall
conduct an examination of the Statements. The Seller shall give the Purchaser
and its Representatives timely and reasonable access to such of the Seller's
working papers, documents, financial information and other information used in
the preparation of the Statements as the Purchaser reasonably deems necessary or
desirable in connection with such examination. The Purchaser shall complete its
examination of the Statements during the Examination Period. The "Examination
-----------
Period" shall commence upon delivery by the Seller to the Purchaser of the
- ------
Statements and end on the earliest of (i) thirty (30) days after such delivery,
(ii) the date the Purchaser delivers an Objection Notice to the Seller and (iii)
the date the Purchaser notifies the Seller that the Purchaser accepts the
Statements. The Statements as prepared by the Seller and examined by the
Purchaser 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 1.10(c).
(c) Disputes. The Purchaser may object during the Examination Period
--------
by providing the Seller a written notice describing in reasonable detail the
Purchaser's objections to any item or valuation on the Statements (an "Objection
---------
Notice"). The Purchaser's failure to deliver an Objection Notice to the Seller
- ------
within thirty (30) days after the Seller's delivery of the Statement to the
Purchaser shall constitute the Purchaser's binding acceptance of the Statements
and all matters identified therein. If the Seller 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 Seller, then, at the
request of either party, the Seller and the Purchaser 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 Statements shall be deemed to be as agreed therein. If the
parties are unable to resolve the objection described on the Objection Notice
within twenty (20) days after receipt by Seller of such Objection Notice, then
the Seller 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 the 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 Statements and (3)
nonappealable and incontestable by the Seller 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 shall be borne by the Purchaser and the Seller
equally.
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(d) Payments. (i) If the value of the Inventory and the Net
--------
Receivables is in the aggregate greater than $3,750,000, then the Purchaser
shall pay to the Seller an amount equal to the amount by which the value of the
Inventory and the Net Receivables exceeds $3,750,000, plus the Estimated
Inventory and Receivables Holdback Amount. If such value of the Inventory and
the Net Receivables is in the aggregate less than $3,600,000, then the Seller
shall pay to the Purchaser an amount equal to the amount by which $3,600,000
exceeds the value of the Inventory and the Net Receivables, minus the Estimated
-----
Inventory and Receivables Holdback Amount up to the amount of such excess and
the Purchaser shall pay to the Seller any excess of the Estimated Inventory and
Receivables Holdback Amount over the amount by which $3,600,000 exceeds the
value of the Inventory and Net Receivables, if any. If such value of the
Inventory and the Net Receivables is in the aggregate equal to or less than
$3,750,000 and equal to or greater than $3,600,000, then the Purchaser shall pay
to the Seller an amount equal to the Estimated Inventory and Receivables
Holdback Amount.
(ii) If the value of the Assumed Liabilities is less than
$350,000, then the Purchaser shall pay to the Seller an amount equal
to the amount by which the value of the Assumed Liabilities is less
than $350,000 .
(iii) Each value referred to subparagraphs (i) and (ii) above
shall be as determined in the Statements or, in the case of a dispute,
as determined in a Settlement Agreement or in the Accountant's
Determination.
(iv) All payments to be made pursuant to this Section 1.10(d)
shall be made by wire transfer of immediately available funds.
(e) Schedule of Payments. Any payments required to be made pursuant
--------------------
to Section 1.10(d) shall be made as follows: (i) if the Purchaser shall not have
delivered an Objection Notice to the Seller in accordance with the provisions of
Section 1.10(c), then the payment required to be made pursuant to Section
1.10(d) shall be made no later than five (5) days after the end of the
Examination Period, and (ii) if the Purchaser shall have delivered an Objection
Notice to the Seller in accordance with the provisions of Section 1.10(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 1.10(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 as provided in
Section 1.10(c).
1.11 Sales Taxes.
The parties shall each bear one-half of any sales taxes, use taxes,
transfer taxes, documentary charges, recording fees or similar taxes, charges or
fees that may become payable in connection with the sale of the Purchased Assets
to the Purchaser (the "Transaction Taxes"). If one of the parties pays less
-----------------
than one-half of the total Transaction Taxes, such party shall pay to the other
party a sum equal to the difference between one-half of the total Transaction
Taxes and the amount of Transaction Taxes so paid by such party. Each party
shall timely pay the amount of Transaction Taxes it is obligated to pay to the
appropriate Governmental Entity, and shall thereafter send evidence to the other
party that such Transaction Taxes have been paid.
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1.12 Closing.
The closing of the sale of the Purchased Assets to the Purchaser, and the
transactions contemplated herein, (the "Closing") shall take place at Cooley
-------
Godward LLP, One Maritime Plaza, 20th Floor, San Francisco, CA 94111, no later
than two days after the date that all closing conditions set forth in Sections 5
and 6 have been satisfied or waived or on such other date to which the parties
mutually agree (the "Closing Date").
------------
1.13 Definitions.
Certain capitalized terms used and not defined in this Agreement have the
meanings given to them in Exhibit B attached hereto.
---------
Section 2 REPRESENTATIONS AND WARRANTIES OF THE SELLER.
The Seller represents and warrants, to and for the benefit of the
Purchaser that, except as set forth in the Disclosure Schedule delivered by the
Seller to the Purchaser on the date hereof (the "Seller Disclosure Schedule"):
--------------------------
2.1 Organization and Qualification; Subsidiaries.
The Seller is a corporation duly organized, validly existing and in good
standing under the laws of Delaware. The Seller and each Subsidiary has all the
requisite corporate power and authority and is in possession of all franchises,
grants, authorizations, licenses, permits, easements, consents, certificates,
approvals and orders ("Approvals") necessary to own, lease and operate its
---------
Purchased Assets and to carry on its business as it is now being conducted. The
Seller and each Subsidiary is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in all the jurisdictions
listed on Section 2.1 of the Seller Disclosure Schedule, which constitute
jurisdictions where the character of the properties owned, leased or operated by
it or the nature of its activities makes such qualification or licensing
necessary, except for such failures to be so duly qualified or licensed and in
good standing that would not have a Material Adverse Effect. The Purchaser has
been furnished with true, correct and complete copies of the Certificate of
Incorporation and By-laws (or comparable charter documents) of the Seller and
each Subsidiary. Except as set forth in Section 2.1(a) of the Seller Disclosure
Schedule, neither the Seller nor any Subsidiary has (a) engaged within the last
five (5) years in any business or activity other than the Business or (b) used
within the last five (5) years any trade name or assumed name other than its
corporate name set forth in the this Agreement (including the Seller Disclosure
Schedule). A true and complete list of all of the Seller's direct and indirect
subsidiaries, together with the jurisdiction of incorporation of each
subsidiary, is set forth in Section 2.1(b) of the Seller Disclosure Schedule.
Except as set forth in Section 2.1(b) of the Seller Disclosure Schedule, the
Seller does not own or hold, directly or indirectly, any equity interest or debt
obligation (excluding accounts receivable arising in the ordinary course of the
Business, consistent with past practice) of any other Person that relates to the
Business.
2.2 Authority Relative to this Agreement; Vote Required.
(a) The Seller and each Subsidiary has all necessary corporate power
and authority to execute, deliver and perform its obligations under this
Agreement and each Related Document
7
<PAGE>
to which it is or will be a party and (subject only, with respect to the Sale,
to the approval and adoption of this Agreement and approval of the Sale by the
holders of at least a majority of the outstanding shares of the Seller and
Subsidiary common stock entitled to vote in accordance with the Delaware General
Corporation Law ("DGCL") and the Seller's and each Subsidiary's Certificate of
----
Incorporation and By-Laws) to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement and each Related
Document to which it is or will be a party by the Seller and each Subsidiary and
the consummation by the Seller and each Subsidiary of the transactions
contemplated hereby and thereby have been duly and validly authorized by all
necessary corporate action on the part of the Seller and each Subsidiary, and no
other corporate proceedings on the part of the Seller or any Subsidiary are
necessary to authorize this Agreement and each Related Document to which it is
or will be a party or to consummate the transactions so contemplated hereby and
thereby (other than the approval and adoption of this Agreement and the approval
of the Sale by the holders of at least a majority of the outstanding shares of
Seller and Subsidiary common stock entitled to vote in accordance with the DGCL
and the Seller's and each Subsidiary's Certificate of Incorporation and
By-Laws). As of the date hereof, the Board of Directors of the Seller has
determined that the Sale, upon the terms and subject to the conditions of this
Agreement, is advisable to and in the best interests of the Seller and its
stockholders. This Agreement and each Related Document to which it is or will be
a party has been, or upon the execution thereof will be, duly and validly
executed and delivered by the Seller and each Subsidiary party thereto.
(b) Assuming the due authorization, execution and delivery by the
Purchaser, this Agreement and each Related Document to which it is or will be a
party constitutes or will constitute a legal, valid and binding obligation of
the Seller and each Subsidiary party thereto, enforceable against the Seller and
each Subsidiary in accordance with its terms, except as such enforceability may
be limited by any applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting the enforcement of creditors' rights generally,
and except as the availability of equitable remedies may be limited by the
application of general principles of equity (regardless of whether such
equitable principles are applied in a proceeding at law or in equity).
(c) The approvals of the holders of a majority of the outstanding
shares of the Seller common stock and the common stock of each Subsidiary are
the only votes of the holders of any class or series of the Seller's and each
Subsidiary's capital stock necessary to approve the Sale and this Agreement.
2.3 No Conflict; Required Filings and Consents.
(a) Except as set forth in Section 2.3 of the Seller Disclosure
Schedule, the execution and delivery of this Agreement and each Related Document
to which it is or will be a party by the Seller and each Subsidiary party
thereto does not, and the performance of this Agreement and each Related
Document to which it is or will be a party by the Seller and such Subsidiary,
and of the transactions contemplated hereby and thereby, will not:
(i) conflict with or violate (with or without notice or lapse
of time or both) the Certificate of Incorporation or By-Laws of the
Seller or such Subsidiary,
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<PAGE>
(ii) conflict with or violate (with or without notice or lapse
of time or both) any Law applicable to the Seller or any such Subsidiary
or by which its or any of their respective properties is bound or
affected, or
(iii) result in any violation or breach of or constitute a
default (or an event that with notice or lapse of time or both would
become a default) under, or impair the Seller's or any such Subsidiary's
rights or alter the rights or obligations of any third party under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on
any of the properties or assets of the Seller or any of its subsidiaries
pursuant to, any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to
which the Seller or any of its subsidiaries is a party or by which the
Seller or any of its subsidiaries or its or any of their respective
properties is bound or affected,
(b) The execution and delivery of this Agreement and each Related
Document by the Seller and each Subsidiary party thereto does not, and
the performance of this Agreement and each Related Document to which it
is or will be a party by the Seller and each such Subsidiary will not,
require the Seller or any Subsidiary to obtain any consent, approval,
authorization or permit of, or to file with or notify, any Governmental
Entity.
2.4 Compliance; Permits.
(a) Except as disclosed in Section 2.4 of the Seller Disclosure
Schedule, neither the Seller nor any Subsidiary is in conflict with, or in
default or violation of, (i) any Law applicable to the Seller or any Subsidiary
or by which its or any of the Purchased Assets are bound or affected or (ii) any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Seller or any
Subsidiary is a party or by which the Seller or any Subsidiary or any of its or
their respective properties is bound or affected, except for any such conflicts,
defaults or violations which would not reasonably be expected to have a Material
Adverse Effect.
(b) Except as disclosed in Section 2.4 of the Seller Disclosure
Schedule, the Seller and each Subsidiary hold all permits, licenses, easements,
variances, exemptions, consents, certificates, orders and approvals from
Governmental Entities which are material to their respective operation of the
Business as it is currently being conducted, or the current use or ownership of
the Purchased Assets (collectively, the "Seller Permits"). The Seller and each
--------------
Subsidiary is in compliance with the terms of the Seller Permits.
2.5 SEC Filings; Financial Statements.
(a) Except as disclosed in Section 2.5 of the Seller Disclosure
Schedule, all forms, reports, statements and other documents required to be
filed by the Seller with the SEC since September 28, 1997 (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 of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, 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
9
<PAGE>
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(b) The consolidated financial statements (including, in each case,
any related notes or schedules thereto) contained in the Seller SEC Reports 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 the Seller 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.
2.6 Absence of Certain Changes or Events.
Except as contemplated by this Agreement, or as set forth in Section 2.6 of
the Seller Disclosure Schedule, during the period from July 3, 1999 to the date
of this Agreement, none of the following have occurred:
(a) any change, event or condition (or any development involving a
prospective change, event or condition) shall have occurred or be threatened
which has, or is reasonably likely to have, a Material Adverse Effect;
(b) any change in tax or accounting methods, principles or practices
by the Seller or any Subsidiary affecting the Purchased Assets, the Business or
its Liabilities, except as required by any change in GAAP or change in Law;
(c) any material revaluation by the Seller or any Subsidiary of any
of the Purchased Assets, including without limitation, writing off notes or
accounts receivable;
(d) any damage, destruction or loss that has had or is reasonably
likely to have a Material Adverse Effect on the Purchased Assets;
(e) any cancellation of any material debts or waiver or release of
any material right or claim of the Seller or any Subsidiary relating to the
Business or the Purchased Assets;
(f) entering into or executing any arrangement, agreement or
understanding involving an amount exceeding $20,000 relating to the Business to
which the Seller or any Subsidiary is a party which cannot be terminated by it
on notice of 30 days or less without cost or penalty;
(g) any adoption of a plan of liquidation or resolutions providing
for the liquidation, dissolution, merger, consolidation or other reorganization
of the Seller or any Subsidiary other than as contemplated by this Agreement;
(h) any delay or failure to repay when due any material obligation of
the Seller or any Subsidiary that relates to the Business or the Purchased
Assets;
10
<PAGE>
(i) any general uniform increase in the compensation of employees
(including, without limitation, any increase pursuant to any bonus, pension,
profit-sharing or other plan or commitment) of the Seller or any Subsidiary, or
any increase in any such compensation payable to any officer, director or key
employee;
(j) any change in the manner in which products or services of the
Business are marketed (including, without limitation, any change in prices) or
sold, any change in the manner in which the Seller extends discounts or credits
to customers or any change in the manner or terms by which the Seller collects
its accounts receivable or otherwise deals with customers;
(k) any acquisition or disposition of the Purchased Assets, including
Proprietary Matter, other than the purchase of raw materials or the sale of
inventories for fair value in the ordinary course of business consistent with
past practice;
(l) any forward purchase commitments or sales commitment for the
Business not disclosed in Section 2.8 of the Seller Disclosure Schedule;
(m) any changes in the practices and policies of the Seller with
respect to the collection of accounts receivable, payment of accounts payable or
the ordering or shipping of products related to the Business;
(n) any other transactions relating to the Business or the Purchased
Assets other than in the ordinary course of business consistent with past
practice; or
(o) any agreement by the Seller or any Subsidiary to do any of the
things described in the preceding clauses (a) through (n) other than as
expressly provided for herein.
2.7 No Undisclosed Liabilities.
Except as indicated in Section 2.7 of the Seller Disclosure Schedule or the
Seller SEC Reports filed prior to the date hereof, neither the Seller nor any
Subsidiary has any Liabilities (including all Liabilities for Taxes) which would
be required to be disclosed in financial statements, including the footnotes
thereto, prepared in accordance with GAAP, and which are not adequately
reflected or reserved against in the Seller's balance sheet as of July 3, 1999,
including the footnotes thereto, except such as have arisen in the ordinary
course of business consistent with past practice since such date.
2.8 Contracts.
Other than contracts or agreements which may be terminated by the Seller on
notice of 30 days or less or which involve annual payments of less than $6,000,
Section 2.8 of the Seller Disclosure Schedule lists all contracts and agreements
to which: (a) the Seller or any Subsidiary is a party, (b) that are currently in
force and (c) that relate to the Purchased Assets or the Business, including:
(i) contracts that restrict the Business;
(ii) distribution agreements;
11
<PAGE>
(iii) supply agreements;
(iv) service agreements;
(v) indemnification or guaranty agreements pursuant to
which the Seller or any Subsidiary may incur a Liability;
(vi) agreements pertaining to the purchase or sale of any
assets or businesses entered into outside the ordinary course of business,
(vii) joint marketing or development agreements;
(viii) agreements pursuant to which the Seller or any
Subsidiary may draw funds as borrowed money and any related security
agreements;
(ix) license agreements (other than commercial shrink-wrap
licenses), whether the Seller or any Subsidiary is a licensee or licensor;
and
(x) other agreements requiring the Seller or any Subsidiary
to expend in excess of $50,000 in the aggregate for all such agreements
after the date hereof.
All such contracts and agreements are duly and validly executed by the Seller or
by one or more of its Subsidiaries, as applicable, and, to the Seller's
knowledge, by all other parties thereto, are in full force and effect as of the
date of this Agreement and, to the Seller's knowledge, will be in full force and
effect on the Closing Date. No event has occurred which, after notice or the
passage of time or both, would constitute a default by the Seller or any
Subsidiary under any such contract. To the Seller's knowledge, all such
contracts and agreements will continue, after the Closing Date, to be
enforceable in accordance with their respective terms against the Seller or the
Subsidiary party thereto until their respective expiration dates. The Seller and
each Subsidiary party thereto has performed all of the obligations under such
contracts 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 default in the performance by the Seller and each such
Subsidiary or, to the Seller's knowledge, any other party to any such contracts
of their respective obligations thereunder. The Purchaser has been furnished
with true, complete and correct copies of all written contracts and Section 2.8
of the Seller Disclosure Schedule (including by incorporated reference) contains
summary descriptions of all oral items listed on Section 2.8 of the Seller
Disclosure Schedule (including by incorporated reference).
2.9 Title to Property.
Except as set forth in Section 2.9 of the Seller Disclosure Schedule, the
Seller and its Subsidiaries, as applicable, have good and defensible title to
the Purchased Assets, free and clear of all Encumbrances, except Permitted
Encumbrances; and all leases pursuant to which the Seller or any Subsidiary
leases a Purchased Asset from others are in full force and effect as of the date
of this Agreement in accordance with their respective terms, and neither the
Seller nor any Subsidiary is currently in default under any of such leases nor,
to the Seller's knowledge, is any other party in default under any of such
leases and, to the Seller's knowledge, there is not under any of such leases any
existing event of default (or event which with notice or lapse of time, or
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<PAGE>
both, would constitute an event of default). Section 2.9 of the Seller
Disclosure Schedule identifies each item of tangible personal property included
in the Purchased Assets and specifies the premises of the Seller or its
Subsidiaries on which such item is located.
2.10 Brokers.
Except as set forth in Section 2.10 of the Seller Disclosure Schedule, no
broker, finder or investment banker is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of the Seller. To the
extent the Seller has agreed to pay any brokerage commission, finder's fee or
similar commission or fee in connection with any of the transactions
contemplated by this Agreement, it will be solely responsible for the payment of
such commission or fee.
2.11 Intellectual Property Rights.
(a) Section 2.11 of the Seller Disclosure Schedule contains summary
information (including where applicable the federal registration number and the
date of registration or application for registration and the name in which
registration was applied for) concerning:
(i) trade secrets, patents, registered copyrights,
trademarks, trade names and service marks, and all currently pending
applications for any thereof relating to the Purchased Assets, owned,
licensed or otherwise used by the Seller and/or any Subsidiary
(collectively, "Proprietary Matter"); and
------------------
(ii) any licenses or options to obtain rights or licenses
granted by the Seller or any Subsidiary to others covering any Proprietary
Matter, other than implied licenses to customers of the Seller or any
Subsidiary for Proprietary Matter embedded in a Product sold by the Seller
or any Subsidiary to such customers.
(b) Except in each case as set forth on Section 2.11 of the Seller
Disclosure Schedule:
(i) the Seller owns, or has the right to use all the
Proprietary Matter and to sell, license and dispose of, and has the right
to bring actions for the infringement of all owned and exclusively licensed
Proprietary Matter, and such Proprietary Matter constitutes all
intellectual property rights necessary or required for the conduct of the
Business, and such rights to use, sell, license, dispose of and bring
actions are exclusive with respect to Proprietary Matter owned by the
Seller;
(ii) there are no royalties, honoraria, fees or other
payments payable by the Seller to any Person by reason of the ownership,
use, license, sale or disposition of the Proprietary Matter;
(iii) no activity, service or procedure currently conducted
or proposed to be conducted by the Seller or any Subsidiary and related to
the Business violates or shall violate any contract, instrument, license,
commitment, lease or similar document of the Seller or any Subsidiary with
any third Person relating to any intellectual property rights,
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or infringes any trade secrets, patents, copyrights, trademarks, trade
names, or service marks or other intellectual property rights of any other
Person;
(iv) the Seller has taken the steps described on Section
2.11 of the Seller Disclosure Schedule designed to safeguard and maintain
(i) the secrecy and confidentiality of confidential or proprietary
information related to the Business and (ii) the proprietary rights of the
Seller and each Subsidiary in all of its Proprietary Matter;
(v) in the conduct of the Business, neither the Seller nor
any Subsidiary has infringed upon, misappropriated or otherwise come into
conflict with any intellectual property rights of any Person or committed
any acts of unfair competition, and neither the Seller nor any Subsidiary
has received from any Person in the past five years any notice, charge,
complaint, claim or assertion thereof; and
(vi) in the conduct of the Business, neither the Seller nor
any Subsidiary has sent to any Person in the past five years, or otherwise
communicated to any Person, any notice, charge, complaint, claim or other
assertion of any present, impending or threatened infringement by or
misappropriation of, or other conflict with, any intellectual property
rights of the Seller or any Subsidiary by such other Person or any acts of
unfair competition by such other Person, nor, to the Knowledge of the
Seller, is any such infringement, misappropriation, conflict or act of
unfair competition occurring or threatened.
2.12 Litigation.
There are no actions, suits or proceedings ("Proceedings") relating to the
-----------
Business or the Purchased Assets pending or, to the Seller's knowledge,
threatened in writing against the Seller or any Subsidiary, whether at law or in
equity, whether civil or criminal in nature or before or by any Governmental
Entity, nor is the Seller or any Subsidiary subject to any order, judgment,
writ, injunction or decree relating to the Business or the Purchased Assets.
2.13 Opinion of Financial Advisor.
The Seller has been advised by its financial advisor, Ewing Monroe Bemiss &
Co., that in its opinion, as of the date hereof, the Sale is fair from a
financial point of view to the holders of shares of the Seller's common stock.
2.14 Accounts and Notes Receivable.
Except as set forth on Section 2.14 of the Seller Disclosure Schedule and
except for allowances for bad debt reflected on the Seller's balance sheet as of
July 3, 1999, all accounts receivable and notes receivable relating to the
Business owing to the Seller or any Subsidiary as of the date hereof constitute,
and all such accounts receivable and notes receivable owing to the Seller or any
Subsidiary as of the Closing shall constitute, valid and enforceable claims
arising from bona fide transactions in the ordinary course of business, and, to
the Seller's knowledge, there are no asserted claims, refusals to pay or other
rights of set-off against any thereof. Section 2.14 of the Seller Disclosure
Schedule, sets forth an aging schedule of the accounts receivable related to the
Business.
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2.15 Suppliers, Consultants and Vendors.
Except in the ordinary course of business, no material supplier, consultant
or vendor to the Seller or any Subsidiary in connection with the Business has
canceled or otherwise terminated, or, to the Seller's knowledge, threatened in
writing to cancel or otherwise terminate, its relationship with the Seller or
any Subsidiary or has decreased, limited or otherwise modified, or to the
Seller's knowledge, threatened to decrease, limit or otherwise modify, the
services, supplies or materials it provides to the Seller or any Subsidiary.
2.16 Customers.
Except as set forth in Section 2.16 of the Seller Disclosure Schedule, no
customer of the Seller or any Subsidiary in connection with the Business, to
which or whom more than $50,000 of annual sales were made in either of fiscal
years 1999 or 1998, has notified the Seller or any Subsidiary that it intends to
terminate or materially curtail its relationship and dealings with the Seller or
any Subsidiary.
2.17 Conflicts of Interest.
Except as set forth on Schedule 2.17 of the Seller Disclosure Schedule,
neither the Seller or any Subsidiary, nor any officer, employee, agent or other
Person acting on behalf of the Seller or any Subsidiary has, directly or
indirectly, given or agreed to give any money, gift or similar benefit (other
than legal price concessions to customers in the ordinary course of business) to
any customer, supplier, employee or agent of a customer or supplier, or official
or employee of any Governmental Entity or other Person who was, is, or may be in
a position to help or hinder the Business (or assist in connection with any
actual or proposed transaction) that (a) might subject the Seller to any damage
or penalty in any proceeding, (b) if not given in the past, would have resulted
in a Material Adverse Effect, or (c) if not continued in the future, could
reasonably be expected to result in a Material Adverse Effect. There is not now,
and there has never been, any employment by the Seller or any Subsidiary of, or
beneficial ownership in the Seller or any Subsidiary by, any governmental or
political official in any jurisdiction in which the Seller or any Subsidiary has
conducted or proposes to conduct the Business.
2.18 Tax Matters.
(a) Except as set forth on Section 2.18 of the Seller Disclosure
Schedule, the Seller and each other Person included in any consolidated or
combined Tax Return and part of an affiliated group, within the meaning of
Section 1504 of the Internal Revenue Code of 1986, as amended (the "Code"), of
----
which the Seller is a common parent:
(i) has timely paid or caused to be paid all Taxes required
to be paid by it through the date hereof and as of the Closing Date
(including any Taxes shown due on any Tax Return);
(ii) has filed or caused to be filed in a timely and proper
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
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(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) The Seller has previously made available to the Purchaser true,
correct and complete copies of all Tax Returns filed by or on behalf of the
Seller and each Subsidiary for all completed Tax years of such Company that
remain open for audit or review by the relevant Taxing authority. All such Tax
Returns were true, complete and correct in all material respects.
(c) Except as set forth in Section 2.18(c) of the Seller Disclosure
Schedule:
(i) the Seller has not been notified by the Internal
Revenue Service or any other taxing authority that any issues have been
raised (and no such issues are currently pending) by the Internal Revenue
Service or any other taxing authority in connection with any Tax Return of
the Seller and each Subsidiary, there are no pending Tax audits and no
waivers of statutes of limitations have been given or requested with
respect to the Seller or any Subsidiary; no Tax Liens have been filed
against the Seller or any Subsidiary and remain undischarged, other than
for Taxes not yet due and payable; and no unresolved deficiencies or
additions to Taxes have been proposed, asserted or assessed against the
Seller or any Subsidiary;
(ii) the Seller is not, and has not ever been, a party to
any Tax sharing agreement with any Person;
(iii) the Seller is not a foreign Person within the meaning
of Treasury Regulation Section 1.1445-2(b), and the Purchaser has been
furnished with a true and accurate certificate from the Seller so stating
which complies in all respects Treasury Regulation with Section 1.1445-
2(b)(2).
2.19 FDA and Certain Other Compliances.
(a) Except as set forth on Section 2.19 of the Seller Disclosure
Schedule, the Seller and each Subsidiary is in substantial compliance, in all
material respects, with all Laws administered or issued by the United States
Food and Drug Administration (the "FDA") and any other Governmental Entities in
---
foreign jurisdictions performing functions similar to those performed by the
FDA. All Products, where required by Laws applicable thereto, are being
manufactured and marketed under a valid Section 510(k) clearance letter or PMA
issued by the FDA and Section 2.19 of the Seller Disclosure Schedule lists each
such 510(k) clearance letter and PMA and includes a copy thereof. Such Section
also lists those of the Products which are being marketed without a valid
Section 510(k) clearance letter or PMA issued by the FDA, whether or not
required 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 Section 2.19 of the Seller Disclosure
Schedule:
(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, or otherwise relating to any of the
Products by or on behalf of the Seller and each Subsidiary.
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(ii) any PMA or 510(k) documents and related documents for
each of the Products of the Seller and each Subsidiary are in compliance,
in all material respects, with applicable Laws administered or promulgated
by the FDA and there is no reason to believe that the FDA is considering
limiting, suspending, or revoking such approvals/clearances or changing the
marketing classification or labeling of any such Products.
(iii) all preclinical and clinical studies, if any, have been
conducted by the 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; and
(iv) the Seller has obtained all regulatory approvals from
any Governmental Entities required for the Products that are necessary to
the Seller's and the Subsidiaries' conduct of the Business.
(c) (i) Section 2.19 of the Seller Disclosure Schedule sets forth an
accurate list of written information regarding internal audits concerning
whether the Seller and the Subsidiaries comply with current good manufacturing
practices including FDA Quality Systems Regulations ("QSR") and ISO 9001
standards ("CGMP") and all written reports or written information regarding CGMP
----
audits conducted for the Seller or any Subsidiary by an outside auditor.
(ii) The Seller and each Subsidiary is in substantial
compliance with the QSR and any other applicable CGMP regulations of each
Governmental Entity including, the inspection 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.
(iii) The Seller has signed up-to-date written policies that
reflect its actual CGMP procedures.
(iv) The Seller has, in a timely manner, filed all required
medical device reports ("MDRs") for deaths, serious injuries, and
----
reportable malfunctions. A list of such reports and the Seller's written
policy regarding MDR reporting is attached as part of Section 2.19 of the
Schedule.
(v) The Seller has no 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 the Seller's
Products.
(vi) The Seller has established a Corporate Compliance
Program which is described as part of Section 2.19 of the Schedule.
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(d) Section 2.19 of the Seller Disclosure Schedule sets forth each
foreign jurisdiction in which the Seller or any Subsidiary is directly or
indirectly marketing or selling Products.
2.20 Insurance.
Section 2.20 of the Seller Disclosure Schedule contains a true and
complete list of all policies of liability, theft, fidelity, life, fire, product
liability, workmen's compensation, health and other forms of insurance held by
the Seller and any Subsidiary (specifying the insurer, amount of coverage, type
of insurance, policy number and any pending claims thereunder).
2.21 Environmental Matters.
(a) Neither the Seller nor any Subsidiary nor, to the Seller's
knowledge, any of their past property or operations, is subject to or the
subject of, any Proceeding, Order, settlement, or other Contract arising under
any Environmental, Health and Safety Laws, nor, to the Seller's knowledge, has
any investigation been commenced or is any Proceeding threatened against the
Seller or any Subsidiary under any Environmental, Health and Safety Laws with
regard to the Business or the Purchased Assets.
(b) Except as set forth on Section 2.21 of the Seller Disclosure
Schedule, neither the Seller nor any Subsidiary has received any written or oral
notice, report or other information that it 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, to the Seller's knowledge, neither the Seller nor any
Subsidiary has transported or disposed of, or allowed or arranged for any third
Person 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.
2.22 Sufficiency of Assets.
The sale of the Purchased Assets by the Seller to the Purchaser pursuant to
this Agreement will effectively convey to, or provide the license to (in the
case of the "BEI" trademark), the Purchaser the entire Business of, and all of
the tangible and intangible property used in the conduct of the Business by the
Seller and the Subsidiaries (whether owned, leased or held under license by the
Seller or by the Subsidiaries) and necessary or desirable to, the conduct of the
Business as conducted by the Seller and the Subsidiaries; provided, however,
that the Seller believes that all of the contracts listed on Section 2.8 of the
Seller Disclosure Schedule are necessary or desirable to the conduct of the
Business, but the Purchaser has elected to include in the Assumed Contracts only
those contracts listed on Annex C to Schedule 1.1 of this Agreement.
2.23 Disclosure.
This Agreement, including the Seller Disclosure Schedule, attachments or
Exhibits hereto, does not contain any untrue statement of a material fact or
omit a material fact necessary
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to make the statements contained herein or therein, taken as a whole, in light
of the circumstances in which they were made, not misleading.
Section 3 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
The Purchaser represents and warrants, to and for the benefit of the
Seller, as follows:
3.1 Due Organization.
The Purchaser is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. The Purchaser is duly
qualified or licensed as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of its properties owned,
leased or operated by it or the nature of its activities makes such
qualification or licensing necessary.
3.2 Authority; Binding Nature Of Agreements.
The Purchaser has all necessary corporate power and authority to execute,
deliver and perform its obligations under this Agreement and each Related
Document to which it is or will be a party and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and each Related Document to which it is or will be a party by the Purchaser and
the consummation by the Purchaser of the transactions contemplated hereby and
thereby have been duly and validly authorized by all necessary corporate action
on the part of the Purchaser, and no other corporate proceedings on the part of
the Purchaser are necessary to authorize this Agreement and each Related
Document to which it is or will be a party or to consummate the transactions so
contemplated hereby and thereby. As of the date hereof, the Board of Directors
of the Purchaser has approved the Sale. This Agreement and each Related Document
to which it is or will be a party has been, or upon the Purchaser's execution
thereof will be, duly and validly executed and delivered by the Purchaser.
Assuming the due authorization, execution and delivery by the Seller and each
Subsidiary party thereto, each of this Agreement and each Related Document to
which it is or will be a party constitutes a legal, valid and binding obligation
of the Purchaser, enforceable against the Purchaser in accordance with its
terms, except as such enforceability may be limited by any applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally, and except as the
availability of equitable remedies may be limited by the application of general
principles of equity (regardless of whether such equitable principles are
applied in a proceeding at law or in equity).
3.3 Non-Contravention; Consents.
(a) The execution and delivery of this Agreement and each Related
Document to which it is or will be a party by the Purchaser does not, and the
performance of this Agreement and each Related Document to which it is or will
be a party by the Purchaser, and the transactions contemplated hereby and
thereby, will not,
(i) conflict with or violate (with or without notice or
lapse of time or both) the Certificate of Incorporation or By-Laws of the
Purchaser,
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(ii) conflict with or violate (with or without notice or
lapse of time or both) any Law applicable to the Purchaser or by which its
properties are bound or affected, or
(iii) result in any violation or breach of or constitute a
default (or an event that with notice or lapse of time or both would become
a default) under, or impair the Purchaser's rights or alter the rights or
obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of the
Purchaser pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or
obligation to which the Purchaser is a party or by which the Purchaser or
any of its properties is bound or affected.
(b) The execution and delivery of this Agreement and each Related
Document to which it is or will be a party by the Purchaser does not, and the
performance of this Agreement and each Related Document to which it is or will
be a party by the Purchaser will not, require the Purchaser to obtain any
consent, approval, authorization or permit of, or to file with or notify, any
Governmental Entity.
3.4 Brokers.
To the extent that the Purchaser has agreed to pay any brokerage
commission, finder's fee or similar commission or fee in connection with any of
the transactions contemplated by this Agreement, it will be solely responsible
for the payment of such commission or fee.
Section 4 PRE-CLOSING COVENANTS
4.1 Access And Investigation
The Seller shall ensure that, during normal business hours during the
period between the date hereof and the Closing Date or the date of termination
of this Agreement pursuant to Section 8 (the "Pre-Closing Period"), the Seller
------------------
and its Representatives provide the Purchaser and its Representatives with
reasonable access to the Seller's Representatives, the Seller's vendors (but not
its customers except as provided below), the Purchased Assets and to the
Seller's locations where the Business is conducted, and to all existing books,
records, tax returns, work papers and other documents and information relating
to the Purchased Assets and the Business; provided, however, that (a) the
Purchaser shall not contact, and the Purchaser shall ensure that none of its
Representatives contacts, any Representative of the Seller or any vendor without
the prior authorization of Richard Turner, President and Chief Executive Officer
of the Seller, or Thomas W. Fry, Vice President, Finance and Administration of
the Seller, and (b) the Purchaser shall take reasonable precautions to ensure
that neither it nor any of its Representatives interferes with or otherwise
disrupts the business or operations of the Seller while exercising rights
provided under this Section 4.1. The Purchaser shall hold, and will cause its
Representatives to hold, any and all information received from the Seller or its
Representatives, in confidence, in accordance with the Confidential Disclosure
Agreement dated June 21, 1999. Neither Mr. Fry nor Mr. Turner shall
unreasonably withhold consent to the Purchaser's request for any such contact.
Contacts by the Purchaser with vendors and suppliers shall be made jointly with
the Seller by telephone or other means determined by the Purchaser.
Notwithstanding the foregoing, (x) if the
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Purchaser requests Richard Turner or Thomas Fry to authorize the Purchaser to
contact any Representative or vendor of the Seller and the Purchaser does not
receive a response within two business days from the date the request was made,
then the Seller shall be deemed to have consented to the contact requested and
(y) without consent of Mr. Fry or Mr. Turner, the Purchaser may contact during
business hours pursuant to this Section 4.1 the following Persons: SurgiTech,
Inc. and Bates, Fujinon, Inc., PENTAX Precision Instrument Corporation and ERBE
USA, Inc., and Larry Doll, Anthony Manna and Paul Dube, the Seller's MIS
Manager. Contacts to the foregoing customers and suppliers shall be made jointly
with the Seller by telephone or other means determined by the Purchaser. If the
Purchaser, based on such investigations and contacts after the date of this
Agreement with Fujinon, Inc., PENTAX Precision Instrument Corporation and ERBE
USA, Inc., customers of the Seller, reasonably believes that one or more of such
customers do not intend after the Closing to continue to buy Products from the
Purchaser, then, for purposes of calculating the Sales Shortfall, the sales of
Products to such customer or customers shall not be counted. If within 12 months
of the Closing any such customer for which sales were excluded from the
calculation of the Sales Shortfall pursuant to the preceding sentence buys any
Products from the Purchaser, then the Purchaser shall pay to the Seller by wire
transfer of immediately available funds an amount equal to the amount by which
the Purchase Price was reduced as a result of the exclusion from the Sales
Shortfall calculation of sales to such customer.
4.2 Operation of Business
The Seller shall ensure that during the Pre-Closing Period:
(a) the Seller and each Subsidiary conducts its respective operations
as they relate to the Purchased Assets and the Business in the ordinary course
of business and consistent with the manner such operations have been conducted
prior to the date of this Agreement;
(b) with respect to the Purchased Assets and the Business, the Seller
and its Subsidiaries use commercially reasonable efforts to (i) preserve intact
its current business organization, (ii) keep available the services of its
current officers and employees, (iii) maintain its relations and good will with
its and each Subsidiary's suppliers, customers, landlords, creditors, licensors,
licensees, employees, independent contractors and other Persons having business
relationships with the Seller and its Subsidiaries, and (iv) repair, restore or
replace any Purchased Assets that are destroyed or damaged;
(c) neither the Seller nor any Subsidiary enters into or permits any
of the Purchased Assets to become bound by any contract relating to the
Purchased Assets except in the ordinary course of business consistent with past
practice;
(d) neither the Seller nor any Subsidiary sells or otherwise disposes
of, or permits any Encumbrance, other than a Permitted Encumbrance, to be
imposed upon, any Proprietary Matter or any other Purchased Asset;
(e) neither the Seller nor any Subsidiary enters into any transaction
or takes any other action that might reasonably be expected to cause or
constitute a breach of any representation or warranty made by the Seller in this
Agreement or a Related Document;
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(f) neither the Seller nor any Subsidiary pays accounts payable or
collects accounts receivable related to the Business, other than in the ordinary
course of business consistent with past practice and does not delay or postpone
the payment of such accounts payable and other Liabilities related to the
Business or accelerate the collection of such accounts receivable;
(g) neither the Seller nor any Subsidiary shall change its pricing or
commission policies or sales incentive programs involving the Business without
the prior written consent of the Purchaser;
(h) neither the Seller nor any Subsidiary shall change its practices
or policies with respect to the ordering or shipping of Products; and
(i) neither the Seller nor any Subsidiary agrees, commits or offers
(in writing or otherwise) to take any of the actions described in clauses "(a)"
through "(h)" of this Section 4.2.
4.3 Filings and Consents.
Each of the Seller and the Purchaser shall ensure that: (a) all filings,
notices and Consents required to be made, given and obtained by it in order to
consummate the Sale are made, given and obtained on a timely basis; and (b)
during the Pre-Closing Period, all documents required to be available and all
actions required to be taken in connection with any filing, notice or Consent
that the Purchaser or the Seller is required to make, give or obtain are made
available or taken.
4.4 Notification of Certain Changes; Supplements to Schedules.
(a) The Seller shall give prompt notice to the Purchaser, and the
Purchaser shall give prompt notice to the Seller, of (i) the occurrence or
nonoccurrence of any event the occurrence or nonoccurrence of which would be
likely to cause any representation or warranty contained in this Agreement or
any Related Document to be materially untrue or inaccurate such that the
conditions set forth in Sections 5.1 or 6.1 would not be satisfied as a result,
or (ii) any failure of the Seller or the Purchaser, as the case may be,
materially to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder such that the conditions set forth in
Sections 5.2 or 6.2 would not be satisfied as a result; provided, however, that
the delivery of any notice pursuant to this Section 4.4 shall not limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
(b) From time to time prior to the Closing, the Seller 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. Any supplement or amendment
delivered pursuant to this Section 4.4(b) shall in no event be the basis for any
claim that any representation or warranty is inaccurate or has been breached for
purposes of Section 5.1 or Section 7; provided, however, if the matters
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described by any such supplement or amendment constitute a Material Adverse
Effect, the Purchaser shall not be obligated, pursuant to Section 5.1, to
purchase the Purchased Assets and may terminate this Agreement pursuant to
Section 8.1(f).
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4.5 Public Announcements.
The Purchaser and the Seller 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 shall not 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 parties.
4.6 Reasonable Efforts.
(a) During the Pre-Closing Period, the Seller shall use its
commercially reasonable efforts to cause the conditions set forth in Section 5
to be satisfied. The Purchaser shall, at the Seller's request, make its
personnel available to talk and provide information to parties to the Assumed
Contracts in connection with seeking from such parties the consents,
certificates and approvals provided for in Section 5.7 of this Agreement.
(b) During the Pre-Closing Period, the Purchaser shall use its
commercially reasonable efforts to cause the conditions set forth in Section 6
to be satisfied.
4.7 Exchange Proceeds.
If during the Pre-Closing Period the Seller or any Subsidiary receives any
proceeds in consideration for the exchange of any of its assets that constitute
Purchased Assets, whether from the sale of any such Purchased Assets (other than
sales of inventory in the ordinary course of business consistent with past
practice) and from insurance proceeds payable on account of any loss or casualty
to such Purchased Assets, any proceeds from the taking of such Purchased Assets
pursuant to the power of eminent domain, or any other proceeds from whatever
source relating to the disposition of such Purchased Assets (the "Exchange
--------
Proceeds"), the Seller 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.
4.8 Allocation of Purchase Price.
The Purchase Price shall be allocated to the Purchased Assets in accordance
with the allocation set forth in Exhibit C (the "Statement of Allocation"). At
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the Closing, the Seller shall:
(a) complete and execute a Form 8594 Asset Acquisition Statement
Under Section 1060 of the Code, consistent with the Statement of Allocation; and
(b) deliver a copy of such form to the Purchaser; and
file a copy of such form with its respective tax returns, as the case may, for
the period which includes the Closing Date.
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4.9 Exclusivity.
(a) The Seller 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, 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), the Seller shall not, and shall use its best efforts to not
permit any of the Representatives of the Seller or any Subsidiary to: (i) unless
following consultation with outside legal counsel, the Seller'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, the Seller'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, the Seller'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
the Seller knows, or has reason to believe, would have any interest in
participating in Another Transaction. Nothing contained in this Section 4.9
shall prevent the Seller'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 of 1934, as amended, 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 Seller 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. As used herein, the term "Another Transaction"
-------------------
means (A) the sale of 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 the Seller. The Seller represents that
it is not a party to, or bound by, any agreement with respect to Another
Transaction other than this Agreement.
(b) The Seller shall disclose to the Purchaser the terms of Another
Transaction that the Seller negotiates or discusses, as permitted under this
Section 4.9, 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 4.9 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, the Seller agrees that the Purchaser shall be entitled, in
addition to any other remedies and damages available, to the equitable
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remedies of injunction and specific performance with respect to the Seller's
obligations hereunder.
4.10 Special Payment to Purchaser Based Upon Another Transaction.
In the event that the Seller'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, the Seller may terminate this Agreement pursuant
to Section 8 under circumstances not involving a breach by the Seller 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 the Seller of this Agreement, the Seller shall pay $300,000 to the Purchaser
and, conditioned upon there not having been a breach by the Seller of the
provisions of this Agreement including without limitation the provisions of
Section 4.9, such payments shall fully satisfy the Seller's obligations to the
Purchaser under this Agreement.
4.11 Stockholders' Meeting.
On or before November 22, 1999, the Seller shall have caused to be convened
a meeting of the Seller's stockholders (in compliance in all respects with
provisions of applicable corporate law and the Certificate of Incorporation and
By-laws of the Seller) at which meeting the stockholders shall consider whether
to approve the Sale and authorize the Seller to execute this Agreement and the
Related Documents and to consummate the transactions contemplated hereby and
thereby. The Seller shall deliver to the Purchaser for review drafts and final
versions of proxy material to be distributed to the Seller's stockholders in
connection with such meeting.
4.12 Subsidiary Approval.
Immediately upon approval of the Sale by the Seller's stockholders, the
Seller shall cause the Boards of Directors of each Subsidiary to approve and the
Seller or any applicable Subsidiary, as sole stockholder, of each Subsidiary,
shall approve the Sale and the consummation of the transactions contemplated by
this Agreement and each Related Document.
4.13 Insurance.
The Seller shall, at its election, obtain by the Closing Date extended
reporting period coverage for its Product Liability Policy and Umbrella Policy
set forth in Section 2.20 of the Seller Disclosure Schedule or keep in effect
the coverage currently provided under such policies so that the Seller, and the
Purchaser as an additional insured, will be entitled to make and collect for a
period of three years after the Closing claims which arise out of events
involving the Seller or any Subsidiary that occurred, or products that were sold
or services that were performed by the Seller or any Subsidiary, prior to the
Closing and that are covered by such insurance policies.
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Section 5 CONDITIONS PRECEDENT TO THE PURCHASER'S OBLIGATION TO CLOSE.
The Purchaser's obligation to purchase the Purchased Assets and to take the
other actions required to be taken by the Purchaser at the Closing is subject to
the satisfaction, at or prior to the Closing, of each of the following
conditions (any of which may be waived by the Purchaser, in whole or in part, in
writing):
5.1 Accuracy Of Representations.
The representations and warranties of the Seller contained 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 respects on and as of the Closing Date, except (i) for
changes contemplated by this Agreement, (ii) for those representations and
warranties which address matters only as of a particular date (which shall have
been true and correct as of such date) and (iii) where the failure or failures
of such representations and warranties to be so true and correct, individually
or in the aggregate, has not resulted in a Material Adverse Effect.
5.2 Performance Of Obligations.
The Seller shall have performed or complied in all material respects with
all agreements and covenants required by this Agreement and the Related
Documents to be performed or complied with by it on or prior to the Closing
Date, except where the failure to perform or comply with such agreements and
covenants has not resulted in or would not reasonably be expected to result in a
Material Adverse Effect.
5.3 No Proceedings.
There shall not have been commenced and be pending against the Purchaser
any Proceeding (a) involving any material challenge to, or seeking material
damages or other material relief in connection with, the Sale or (b) that is
reasonably likely to have the effect of preventing, delaying, making illegal or
otherwise interfering with the Sale.
5.4 No Prohibition.
No temporary restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or other legal
restraint or prohibition preventing the consummation of the Sale shall be in
effect; and there shall not be any action taken, or any Law enacted, entered or
enforced which makes the consummation of the Sale illegal.
5.5 Stockholder and Board of Directors Approval.
This Agreement and the Sale shall have been approved by the requisite vote
of the stockholders of the Seller and by its Board of Directors.
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5.6 Opinion of the Seller's Counsel.
The Purchaser shall have received an opinion of Cooley Godward LLP, counsel
for the Seller, dated the Closing Date and covering the matters set forth on
Exhibit D attached hereto.
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5.7 Consents and Approvals.
The Purchaser shall have received duly executed copies of (i) all consents,
certificates and approvals required for or in connection with the execution and
delivery by the Seller and each Subsidiary of this Agreement and each Related
Document to which it is a party and the consummation of the transactions
contemplated hereby and thereby, (ii) consents to or notices of, as appropriate,
the assignment to the Purchaser of all the Assumed Contracts identified on Annex
C to Schedule 1.1 hereto from or to each party to such contracts other than the
Seller and (iii) consents and waivers set forth on Schedule 5.7 hereto.
5.8 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 parties thereto:
(i) Transition Agreement. The Seller shall have executed
--------------------
and delivered a transition agreement with the Purchaser substantially in
the form of Exhibit E attached hereto (the "Transition Agreement").
--------- --------------------
(ii) Non-Competition Agreements. The Seller and Richard W.
--------------------------
Turner shall each have executed and delivered a non-competition agreement
with the Purchaser, substantially in the form of Exhibit F and Exhibit G,
--------- ---------
respectively, attached hereto (the "Non-Competition Agreements").
--------------------------
(iii) Bill of Sale, Assignment and Assumption Agreement. The
-------------------------------------------------
Seller each Subsidiary shall have executed and delivered the Bill of Sale.
5.9 Seller 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 Seller, dated as
of the Closing Date, certifying (i) that true and complete copies of the
Seller's Certificate of Incorporation and By-Laws as in effect on the
Closing Date are attached thereto, (ii) as to the incumbency and
genuineness of the signatures of each officer of the Seller executing this
Agreement and the Related Documents on behalf of the Seller; and (iii) the
genuineness of the resolutions (attached thereto) of the board of directors
or similar governing body of the Seller authorizing the execution, delivery
and performance of this Agreement and the Related Documents to which the
Seller is a party and the consummation of the transactions contemplated
hereby and thereby;
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(ii) certificates dated as of the Closing Date of the
secretaries of state of the states in which the Seller and each Subsidiary
is organized and qualified to do business, certifying as to the good
standing and non-delinquent tax status of the Seller and each Subsidiary;
(iii) a certificate signed by an officer of the Seller and
each Subsidiary, dated as of the Closing Date, and certifying as to (A) the
accuracy of the representations and warranties of the Seller contained
herein, as contemplated by Section 5.1, and (B) the performance of the
covenants of the Company contained herein, as contemplated in Section 5.2;
and
(iv) a certificate of a principal executive officer of the
Seller, dated as of the Closing Date, certifying that such company is not a
foreign person within the meaning of Section 1445 of the Code.
5.10 Release of Encumbrance.
The Purchaser shall have received from the Seller (i) evidence that the
Seller's lender, Transamerica Business Credit Corporation, has consented to the
Sale and released its Encumbrance on the Purchased Assets and (ii) a waiver from
BEI Technologies, Inc. of any obligation the Seller may have under the
provisions of Section V(A) of the Assumption of Liabilities and Indemnity
Agreement by and between BEI Technologies, Inc. and BEI Electronics, Inc. (the
Seller's predecessor) to cause the Purchaser to assume the Seller's
indemnification obligations under such agreement in the case of a sale of the
properties and assets of the Seller substantially as an entirety.
5.11 Integrated Video Systems.
The Purchaser shall have received from the Seller an irrevocable purchase
order to purchase from the Purchaser 24 Integrated Video Systems at a price
equal to the Seller's standard costs at which such Systems were valued under
Section 1.10. Such Systems shall be delivered by the Purchaser to the Seller at
a rate of 2 systems per month for 12 months, commencing in the month in which
the Closing occurs.
Section 6 CONDITIONS PRECEDENT TO THE SELLER'S OBLIGATION TO CLOSE.
The Seller's obligation to sell the Purchased Assets and to take the other
actions required to be taken by the Seller at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by the Seller, in whole or in part, in writing):
6.1 Accuracy Of Representations.
The representations and warranties of the Purchaser contained 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 respects on and as of the Closing Date, except
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(i) for changes contemplated by this Agreement, (ii) for those representations
and warranties which address matters only as of a particular date (which shall
have been true and correct as of such date) and (iii) where the failure or
failures of such representatives and warranties to be so true and correct,
individually or in the aggregate, has not resulted in a material adverse effect
on the business or financial condition of the consolidated group of the
Purchaser, taken as a whole.
6.2 Performance Of Obligations.
The Purchaser shall have performed or complied in all material respects
with all agreements and covenants required by this Agreement and the Related
Documents to be performed or complied with by it on or prior to the Closing
Date, except where the failure to perform or comply with such agreements and
covenants has not resulted in or would not reasonably be expected to result in a
material adverse effect on the business or financial condition of the
consolidated group of the Purchaser, taken as a whole.
6.3 No Proceedings.
There shall not have been commenced and be pending against the Seller any
Proceeding (a) involving any material challenge to, or seeking material damages
or other material relief in connection with, the Sale or (b) that is reasonably
likely to have the effect of preventing, delaying, making illegal or otherwise
interfering with the Sale.
6.4 No Prohibition.
No temporary restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or other legal
restraint or prohibition preventing the consummation of the Sale shall be in
effect; and there shall not be any action taken, or any Law enacted, entered or
enforced which makes the consummation of the Sale illegal.
6.5 Stockholder Approval.
This Agreement and the Sale shall have been approved by the requisite vote
of the stockholders of the Seller.
6.6 Opinion of the Purchaser's Counsel.
The Seller shall have received an opinion of O'Sullivan Graev & Karabell,
LLP, counsel for the Purchaser, dated the Closing Date and covering the matters
set forth on Exhibit H attached hereto.
----------
6.7 Consents and Approvals.
The Seller shall have received duly executed copies of all consents and
approvals required for or in connection with the execution and delivery by the
Seller and each Subsidiary of this Agreement and each of the Related Documents
to which each of them is a party and the consummation of the transactions
contemplated hereby and thereby, in form and substance reasonably satisfactory
to the Seller and its counsel.
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6.8 Related Documents.
Each of the Related Documents to which the Purchaser is a party shall have
been executed and/or delivered by the Purchaser and the transactions
contemplated thereby to be completed at or prior to the Closing shall have been
substantially consummated or effected, as the case may be, in accordance with
the terms thereof.
6.9 Purchaser's 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 (i) that true and complete copies of the
Purchaser's Certificate of Incorporation and By-Laws as in effect on the
Closing Date are attached thereto, (ii) as to the incumbency and
genuineness of the signatures of each officer of the Purchaser executing
this Agreement and the Related Documents on behalf of the Purchaser; and
(iii) the genuineness of the resolutions (attached thereto) of the board of
directors or similar governing body of the Purchaser authorizing the
execution, delivery and performance of this Agreement and the Related
Documents to which the Purchaser is a party and the consummation of the
transactions contemplated hereby and thereby;
(ii) certificates dated as of the Closing Date of the
secretaries of state of the states in which the Purchaser is organized and
qualified to do business, certifying as to the good standing and non-
delinquent tax status of the Purchaser; and
(iii) a certificate signed by an officer of the Purchaser,
dated as of the Closing Date, and certifying as to (A) the accuracy of the
representations and warranties of the Purchaser contained herein, as
contemplated by Section 6.1, and (B) the performance of the covenants of
the Company contained herein, as contemplated in Section 6.2.
6.10 Termination of Royalty Obligation.
The royalty obligations of the Seller to the Purchaser pursuant to the
Settlement Agreement by and between CooperSurgical, Inc., a Delaware
corporation, Richard W. Turner, an individual, the Seller, Meditron Devices,
Inc., a Delaware corporation, XYLOG Corporation, a New Jersey corporation,
Zinnanti Surgical Instruments, Inc., a California corporation, and Donald L.
Tuttle, an individual, dated as of July 9, 1998, shall have been terminated.
Section 7 INDEMNIFICATION.
7.1 Generally.
(a) The Seller shall indemnify the Purchaser Indemnified Persons for,
and hold each of them harmless from and against, any and all Purchaser Losses to
the extent incurred or suffered by any Purchaser Indemnified Persons as a result
of or based upon the following:
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(i) the inaccuracy or breach of any representation or
warranty of the Seller or any Subsidiary contained in this Agreement or any
Related Document or in any certificate delivered by the Seller or any
Subsidiary in connection herewith or therewith at or before the Closing (or
any facts or circumstances constituting any such inaccuracy or breach);
(ii) the breach of any agreement or covenant of the Seller
or any Subsidiary contained in this Agreement or any Related Document;
(iii) the Excluded Assets;
(iv) the Excluded Liabilities;
(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, which arise out of events involving the Seller or any
Subsidiary that occurred, or products sold or services performed by the
Seller or any Subsidiary 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 (x) any action or inaction
of the Seller or any of its stockholders in connection with the action of
any such stockholders required to approve the Sale, (y) the assertion
against the Purchaser by any such stockholder of any claim with respect to
any actions or the transactions of or involving the Seller prior to or at
Closing (including the actions and transactions contemplated by this
Agreement), or (z) 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, except for any such Liabilities the facts or
circumstances underlying which are caused solely by the operation of the
Business after the Closing Date.
(vi) non-compliance by the Seller with any applicable "bulk
sales laws"; and
(vii) any and all Special Tax Losses.
(b) The Purchaser shall indemnify the Seller Indemnified Persons for,
and hold each of them harmless from and against, any and all Seller Losses to
the extent arising from or in connection with any of the following:
(i) the inaccuracy or breach of any representation or
warranty of the Purchaser contained in this Agreement or any Related
Document or any certificate delivered by the Purchaser in connection
herewith or therewith at or before the Closing (or any facts or
circumstances constituting any such inaccuracy or breach);
(ii) the breach of any agreement or covenant of the
Purchaser contained in this Agreement or any Related Document;
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(iii) any Seller Losses arising from the Purchaser's
ownership and operation of the Purchased Assets from and after the Closing
Date (but excluding any Seller Losses as a result of any transaction
between the Purchaser and the Seller after the Closing Date not
contemplated by this Agreement); and
(iv) the Assumed Liabilities.
7.2 Assertion of Claims.
No claim shall be brought under Section 7.1 hereof unless the Indemnified
Persons, or any of them, give the Indemnifying Persons (a) written notice prior
to the applicable Survival Date 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 prior to such Survival Date pursuant to Section 7.3 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 thereafter commence legal proceedings for the
enforcement of their rights under Section 7.1.
7.3 Notice and Defense of Third Party Claims.
The Liabilities of an Indemnifying Person with respect to Losses resulting
from the assertion of any Liability by third parties (each, a
"Third Party Claim") shall be subject to the terms and conditions set forth
-----------------
below.
(a) The Indemnified Persons shall promptly give written notice (and
in any event prior to any applicable Survival Date) 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; provided, however, that no delay on the part of
-------- -------
the Indemnified Persons in notifying any Indemnifying Persons shall relieve the
Indemnifying Persons from any Liability hereunder unless (and then solely to the
extent that) the Indemnifying Person thereby is prejudiced by the delay. Such
notice shall be accompanied by copies of all relevant documentation with respect
to such Third Party Claim, including 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 such Third Party Claim is properly
subject to their indemnification obligations hereunder, 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
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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, (ii) such action or proceeding involves, or could
32
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reasonably be expected to have a material effect on, any material matter beyond
the scope of the indemnification obligation of the Indemnifying Persons or (iii)
the Indemnifying Persons shall not have assumed the defense of the Third Party
Claim in a timely fashion.
(c) If the Indemnifying Persons shall assume the defense of a Third
Party Claim (under circumstances in which the proviso to Section 7.3(b) is not
applicable), the Indemnifying Persons shall not be responsible for any legal or
other defense 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
acknowledgment referred to in Section 7.3(b), or are otherwise restricted from
so assuming by the proviso to Section 7.3(b), the Indemnifying Persons shall
nevertheless be entitled to participate in such defense with their own counsel
and at their own expense. If the defense of a Third Party Claim is assumed by
the Indemnified Persons pursuant to clause (i) or (ii) of the proviso to Section
7.3(b), the Indemnified Persons shall proceed diligently to defend such Third
Party Claim with counsel reasonably satisfactory to the Indemnifying Persons,
but shall not be entitled to settle such Third Party Claim without the prior
written consent of the Indemnifying Persons, which consent shall not be
unreasonably withheld or delayed.
(d) If the Indemnifying Persons exercise their right to assume the
defense of a Third Party Claim pursuant to Section 7.3(b), (i) the Indemnified
Persons shall be entitled to participate in such defense with their own counsel
at their own expense and (ii) the Indemnifying Persons shall not make any
settlement of any claims without the written consent of the Indemnified Persons,
which consent shall not be unreasonably withheld or delayed, unless the terms of
such settlement requires no more than the payment of money and the Indemnifying
Persons pay the money required by such settlement.
(e) If the Indemnifying Persons assume the defense of a Third Party
Claim, the Indemnified Persons shall cooperate fully as reasonably requested by
the Indemnifying Persons in the defense of such Third Party Claim, and shall
make available to the Indemnifying Persons all books, records and other
materials that are under the direct or indirect control of any Indemnified
Person and that the Indemnifying Persons reasonably consider necessary or
desirable for the defense of such Third Party Claims.
(f) Except as hereinafter provided in this paragraph and
notwithstanding anything to the contrary contained in this Agreement (i) the
Purchaser Indemnified Persons shall use commercially reasonable efforts to seek
recovery from their insurance providers with respect to any Losses for which
indemnity or reimbursement may be sought under Section 7 and for which insurance
may be available, and (ii) all Losses shall be net of any insurance proceeds or
other amounts actually recovered by or on behalf of the Purchaser Indemnified
Persons; provided, that, the provisions of this paragraph shall not require the
-------- ----
Purchaser to seek recovery from its insurance providers for Losses relating to
product liability or Environmental, Health and Safety Laws.
(g) To the extent that any Indemnifying Person makes any
indemnification payment to any Indemnified Person, the Indemnifying Person shall
be entitled to exercise, and shall be subrogated to, any rights and remedies
(including rights of indemnity, rights of contribution and other rights of
recovery) that the Indemnified Party may have against any other
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Person with respect to any Losses for which such indemnification payment is
made. The Indemnified Person shall take such actions as the Indemnifying Person
may reasonably request for the purpose of enabling the Indemnifying Person to
perfect or exercise the Indemnifying Person's right of subrogation hereunder.
7.4 Survival of Representations and Warranties.
Subject to the further provisions of this Section 7.4, 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 January 31, 2001; provided, however, that the representations
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and warranties of the Seller contained in Sections 2.2, 2.5, 2.9, 2.10, 2.11,
2.19 and 2.22 shall survive the Closing Date for the period representing their
respective statute of limitations. The representations and warranties of the
Purchaser contained in Sections 3.2 and 3.4 shall survive the Closing
indefinitely. The covenants and other agreements of each of the Seller 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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7.5 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 the Seller and any Subsidiary pursuant to Section 7.1(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
7.1(b)(i) unless and until the Indemnified Persons (or any of them) shall have
incurred on a cumulative basis aggregate Losses in an amount exceeding $125,000;
provided, however, that in no event shall the limitations set forth in this
- -------- -------
Section 7.5 apply with respect to any willful or knowing breach of such
representations or warranties. Once aggregate Losses exceed $125,000, 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 $125,000.
(b) In the event that the Purchaser claims Purchaser Losses as a
result of or based upon the inaccuracy or breach of a representation or warranty
of the Seller or any Subsidiary contained in either subparagraph (b) of Section
2.4 or contained in Section 2.19 (the "Compliance Claim"), the Purchaser shall
----------------
provide written notice to the Seller of the Compliance Claim pursuant to Section
7.2. The Seller may elect to address the Compliance Claim pursuant to Section
7.3 as if it were a Third Party Claim by providing written notice to the
Purchaser of such election within 10 days of the delivery of the Purchaser's
notice to the Seller of the Compliance Claim. If the Seller does not provide
written notice to the Purchaser of such election within such 10 day period, the
Purchaser may address the Compliance Claim. In any event, the Seller's
indemnification obligations under any Compliance Claim shall be limited to FDA
consultants' fees and fines and costs imposed by any Governmental Entity. In
addition, in the event that the Purchaser makes such a Compliance Claim, and
Losses under such Compliance Claim include those resulting from an Order of a
Governmental Entity which has the effect of preventing the Purchaser from
selling a Product for 90 days or more in any country (a "Blocked
-------
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Jurisdiction"), the Seller shall promptly pay to the Purchaser after the
- ------------
Closing by wire transfer of immediately available funds the Lost Sales Amount.
"Lost Sales Amount" means the Blocked Product Sales Amount divided by 9
-----------------
multiplied by 12. "Blocked Product Sales Amount" means that portion of the
----------------------------
Product Sales Amount determined under Schedule 1.8(a) for a Product that is the
subject of such Order, which portion is derived from sales in each Blocked
Jurisdiction.
(c) Absent fraud or willful misconduct, no party hereto shall be
entitled to recover special or punitive damages with respect to any breach of
any representation or warranty or non-performance of any obligation under this
Agreement (or otherwise relating to the transactions contemplated hereby), and
under no circumstances shall such damages be considered Losses under this
Section 7. Neither the Purchaser Indemnified Persons nor the Seller Indemnified
Persons may recover Losses under this Agreement which in the aggregate exceed
the amount of the Purchase Price.
(d) Absent fraud or willful misconduct of the Seller, from and after
the Closing, recourse of the Purchaser Indemnified Persons pursuant to this
Section 7 shall be the sole and exclusive remedy of the Purchaser Indemnified
Persons for any Claims under this Agreement and the Related Documents or
relating to any transactions contemplated hereby or thereby.
7.6 Attorneys' Fees.
Any legal action or other legal proceeding relating to any of this
Agreement or any Related Document or the enforcement of any provision of any of
this Agreement or any Related Document may be brought by an Indemnified Person
against an Indemnifying Person, and may be contested by such Indemnifying
Person. In that event, if the court or arbitrator in such proceeding determines
that the Indemnifying Person is not obligated under this Agreement or any
Related Document to indemnify the Indemnified Person for all or any part of the
amount claimed by the Indemnified Person in such proceeding, then the
Indemnifying Person shall be entitled to recover a portion of the reasonable
attorneys' fees, costs and disbursements incurred by the Indemnifying Person in
contesting the claim of the Indemnified Person against the Indemnifying Person
in such proceeding (in addition to any other relief to which it may be entitled)
based upon the extent to which the Indemnifying Person was successful in
contesting the amount claimed by the Indemnified Person. This provision shall
not limit in any way Losses to which an Indemnified Person is entitled under the
provisions of this Section 7.
Section 8 TERMINATION.
8.1 Termination Events.
This Agreement may be terminated prior to the Closing:
(a) by the Purchaser if the Closing has not taken place on or before
November 30, 1999 (other than as a result of any failure on the part of the
Purchaser to comply with or perform its covenants and obligations under this
Agreement);
(b) by the Seller if the Closing has not taken place on or before
November 30, 1999 (other than as a result of any failure on the part of the
Seller to comply with or perform any covenant or obligation set forth in this
Agreement);
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<PAGE>
(c) by the Seller or the Purchaser, if a court of competent
jurisdiction or other Governmental Entity shall have issued a nonappealable
final order, decree or ruling or taken any other action having the effect of
permanently restraining, enjoining or otherwise prohibiting the Sale;
(d) by the Purchaser or the Seller, if, at a duly held meeting of the
stockholders of the Seller (including any adjournment thereof) (the
"Stockholders Meeting") held for the purpose of voting on the Sale and this
--------------------
Agreement: (A) the holders of the Seller common stock shall have taken a final
vote on a proposal to approve the Sale and this Agreement and (B) the approval
of the Sale and this Agreement by the holders of a majority of the outstanding
shares of the Seller common stock outstanding on the record date for the
Stockholders Meeting shall not have been obtained;
(e) by the Seller, if the Purchaser has willfully breached this
Agreement, and as a result of such breach, the conditions set forth in Sections
6.1 or 6.2 would not then be satisfied and which breach the Purchaser fails to
cure within ten (10) business days after notice thereof from the Seller;
provided, however, that as long as the Purchaser continues to exercise
reasonable best efforts to cure such breach, the Seller may not terminate this
Agreement on account of such breach;
(f) by the Purchaser, if (i) the matters contained in a supplement or
amendment of any section of the Seller Disclosure Schedule by the Seller
constitute a Material Adverse Effect or (ii) the Seller has willfully breached
this Agreement, and as a result of such breach, the conditions set forth in
Sections 5.1 or 5.2 would not then be satisfied and which breach the Seller
fails to cure within ten (10) business days after notice thereof from the
Purchaser; provided, however, that as long as the Seller continues to exercise
reasonable best efforts to cure such breach, the Purchaser may not terminate
this Agreement on account of such breach; or
(g) by the mutual written consent of the Purchaser and the Seller.
8.2 Termination Procedures.
If the Purchaser wishes to terminate this Agreement pursuant to Section
8.1(a), Section 8.1(c), Section 8.1(d) or Section 8.1(f), the Purchaser shall
deliver to the Seller a written notice stating that the Purchaser is terminating
this Agreement and setting forth a brief description of the basis on which the
Purchaser is terminating this Agreement. If the Seller wishes to terminate this
Agreement pursuant to Section 8.1(b), Section 8.1(c), Section 8.1(d) or Section
8.1(e), the Seller shall deliver to the Purchaser a written notice stating that
the Seller is terminating this Agreement and setting forth a brief description
of the basis on which the Seller is terminating this Agreement.
8.3 Effect Of Termination.
If this Agreement is terminated pursuant to Section 8.1, all further
obligations of the parties under this Agreement shall terminate; provided,
however, that: (a) no party shall be relieved of any Liability arising from any
breach by such party of any provision of this Agreement; and (b) the parties
shall, in all events, remain bound by and continue to be subject to
36
<PAGE>
the provisions set forth in Section 10 (other than Sections 10.1) and (c) the
Seller shall remain obligated to make the payment to the Purchaser under Section
4.10, if applicable.
8.4 Nonexclusivity Of Termination Rights.
The termination rights provided in Section 8 shall not be deemed to be
exclusive. Accordingly, the exercise by any party of its right to terminate this
Agreement pursuant to Section 8 shall not be deemed to be an election of
remedies and shall not be deemed to prejudice, or to constitute or operate as a
waiver of, any other right or remedy that such party may be entitled to exercise
(whether under this Agreement, under any other contract or under any Law, at
common law, in equity or otherwise).
Section 9 POST CLOSING COVENANTS
9.1 Access to Records.
Each of the Purchaser and the Seller shall, for the longer of three years
after the Closing or the period required by applicable Law, give to the other
and the other's authorized Representatives, upon reasonable notice and during
normal business hours, access to the books and records being acquired by the
Purchaser or retained by the Seller, as the case may be, which in any way relate
to the Business. Each of the Purchaser and the Seller shall 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. Each of the Purchaser and
the Seller 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
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 Seller, 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 non-
Requesting Party.
9.2 Use of Seller's Labels, etc.
The Purchaser may, for a period of three hundred sixty-five (365) days from
the Closing Date, (i) sell or otherwise dispose of any products bearing as of
the Closing Date the Seller's name or marks, or (ii) use any cartons, labels,
forms, invoices or other printed matter bearing as of the Closing Date the
Seller's name or marks in connection with the sale or other disposition of the
products or otherwise in connection with the conduct of the Business. After such
365-day period, the Purchaser may continue using the materials referred to in
the immediately preceding clause (ii) if the Purchaser overlays its name or
marks on such materials so as to indicate clearly that the materials are those
of the Purchaser. The Seller shall have and retain sole ownership of the
trademark "BEI", including the goodwill pertaining or accruing thereto. The
Purchaser shall not do or suffer to be done any act or thing that would impair
the Seller's rights in the "BEI" trademark or damage the reputation for quality
inherent in the "BEI" trademark. The Purchaser shall indemnify and hold the
Seller harmless from any and all Liabilities suffered or paid as a result of any
and all claims, demands, suits, causes of action, proceedings, judgments and
37
<PAGE>
liabilities, including reasonable counsel fees, incurred or sustained by or
against the Seller with respect to or arising out of the Purchaser's use of the
Seller's names or marks on products, cartons, labels, forms, invoices or other
printed matter bearing the Seller's names or marks as contemplated by this
Section 9.2.
9.3 Physical Transfer of Purchased Assets.
At and from time to time after the Closing (but in no case later than the
end of the Transition Period as defined in the Transition Services Agreement),
the Seller shall assemble and prepare for delivery to the Purchaser, at a
location or locations designated by the Purchaser, the tangible Purchased Assets
specified by the Purchaser. Such designated Purchased Assets shall be delivered
F.O.B. Seller's location to a carrier designated by the Purchaser, or in the
absence of a designation by the Purchaser, to a carrier reasonably designated by
the Seller. Title and risk of loss of the designated Purchased Assets shall pass
to the Purchaser upon proper delivery by the Seller to the designated carrier.
9.4 Collection of Accounts Receivable.
(a) Upon the termination of the provision of the Seller's services to
collect the Receivables pursuant to the terms of the Transition Services
Agreement, the Purchaser shall use its reasonable efforts, exercised in good
faith, to collect all of the Receivables, the collection practices of the
Purchaser 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. The
Seller 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
(but in no event later than 10 business days thereafter), the Purchaser shall
notify the Seller of all Receivables remaining uncollected as of such date,
which notice shall identify each such Receivable by name of Debtor.
(d) The Seller (i) guarantees to the Purchaser that the Receivables
will be collectible in the ordinary course of business and (ii) the Seller
shall, at the option of the Purchaser, pay to the Purchaser an amount equal to
the Net Receivables to the extent such Receivables have not been 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; provided, however, that the
Seller shall not be required to pay any amount to the Purchaser for any
Receivable for which the Debtor has claimed in writing a right of offset or
other defense to payment based on any act or omission of the Purchaser following
the Closing Date. If the Seller is requested to make a payment to the Purchaser
for a Receivable pursuant to this Section 9.4(d), the Purchaser shall, upon
receipt of such payment from the Seller, (i) assign, transfer, convey and
deliver to the Seller all of the Purchaser's right, title and interest to and
under such Receivable (including without limitation all documentation related to
such Receivable), free and clear of Encumbrances
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due to the acts or omissions of the Purchaser and (ii) provide the Seller with
the Purchaser's existing collection history for such Receivable. Payment shall
be made by wire transfer in immediately available funds to an account designated
by the Purchaser. The Purchaser shall deliver monthly to the Seller all amounts
subsequently collected by the Purchaser on Receivables which the Seller have
paid to the Purchaser, up to the amount so paid.
(e) "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.
"Disputed Receivable" means a Receivable as to which the Debtor
has communicated a Claim to the Seller or the Purchaser.
"Receivables" means the Seller's accounts receivable included in
the Purchased Assets as of the Closing excluding invoiced amounts relating to
Evaluation Inventory (valued as determined in accordance with GAAP).
9.5 Collection of Invoices representing Evaluation Inventory, etc
If, subsequent to and not later than one year after the Closing Date,
Evaluation Inventory which was valued for the Inventory Statement at zero is
returned to the Purchaser or if an invoice representing Evaluation Inventory
which was valued for the Inventory Statement at zero is paid, then the Purchaser
shall pay to the Seller 50% of the invoiced value of such inventory which is
returned to the Purchaser or 50% of the amount of the invoice paid for such
inventory, as the case may be.
Section 10 MISCELLANEOUS PROVISIONS.
10.1 Further Assurances.
From and after the Closing Date, the parties hereto and their
Representatives shall cooperate with each other, and shall execute and deliver
such documents and take such other actions as the other party may reasonably
request, for the purpose of evidencing the Sale and putting the Purchaser in
possession and control of all of the Assets.
10.2 Fees And Expenses.
Each party 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 (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 Seller; (iv) the consummation of the Sale and (v) disputes under Section
1.9 of this Agreement.
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10.3 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 party hereto) or, if not delivered during business hours on a business
day, on the next succeeding business day:
if to the Seller: BEI Medical Systems Company, Inc.
BEI Medical Systems Company, Inc.
100 Hollister Road
Teterboro, NJ 07608
Facsimile: 210-727-4998
Attn.: Richard W. Turner, President and CEO
with a copy to:
Cooley Godward LLP
One Maritime Plaza
20th Floor
San Francisco, CA 94111-3580
Facsimile: (415) 951-3699
Attn.: Christopher A. Westover, Esq.
if to the Purchaser: Cooper Surgical Acquisition Corp.
CooperSurgical Acquisition Corp.
c/o The Cooper Companies, Inc.
6140 Stoneridge Mall Road, Suite 590
Pleasonton, CA 94588
Facsimile: (925) 460-3660
Attn.: Carol R. Kaufman, V.P., Legal Affairs
with a copy to:
CooperSurgical, Inc.
15 Forest Parkway
Shelton, CT 06484
Facsimile: (203) 925-0135
Attn.: Nicolas J. Pichotta, President
40
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O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
Facsimile: (212) 408-2420
Attn.: David I. Karabell, Esq.
10.4 Headings.
Headings contained in this Agreement are for convenience of reference only,
shall not be deemed to be a part of this Agreement and shall not be referred to
in connection with the construction or interpretation of this Agreement.
10.5 Counterparts.
This Agreement may be executed in several counterparts, each of which shall
constitute an original and all of which, when taken together, shall constitute
one agreement.
10.6 Governing Law.
This Agreement shall be construed in accordance with, and governed in all
respects by, the internal laws of the State of Delaware (without giving effect
to principles of conflict of laws).
10.7 Successors And Assigns; Parties In Interest.
(a) This Agreement shall be binding upon and inure to the benefit of
the Seller, the Purchaser, and their respective successors and assigns.
(b) Neither party shall be permitted to assign any of its rights or
delegate any of its obligations under this Agreement without the prior written
consent of the other party, provided, that prior to the Closing, the Purchaser
--------
may assign its rights to any Affiliate and, after the Closing, the Purchaser or
any Affiliate purchasing the Purchased Assets may assign its rights and delegate
its duties to any other Person that assumes in writing the Purchaser's
Liabilities under this Agreement and the Related Documents; provided, however,
-------- -------
that the Purchaser shall remain secondarily liable for the performance of all
such Liabilities.
(c) No provision of this Agreement is intended to provide any rights
or remedies to any Person other than the parties to this Agreement and their
respective successors and assigns (if any). Without limiting the generality of
the foregoing, no creditor of the Seller shall have any rights under this
Agreement.
10.8 Remedies Cumulative; Specific Performance.
The rights and remedies of the parties hereto shall be cumulative (and not
alternative). The Seller agrees that in the event of any breach or threatened
breach by the Seller of any covenant, obligation or other provision set forth in
this Agreement, the Purchaser shall be entitled (in addition to any other remedy
that may be available to it) to (a) a decree or order of specific performance or
mandamus to enforce the observance and performance of such covenant, obligation
or other provision, and (b) an injunction restraining such breach or threatened
breach.
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10.9 Waiver
(a) No failure on the part of any Person to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of any
Person in exercising any power, right, privilege or remedy under this Agreement,
shall operate as a waiver of such power, right, privilege or remedy; and no
single or partial exercise of any such power, right, privilege or remedy shall
preclude any other or further exercise thereof or of any other power, right,
privilege or remedy.
(b) No Person shall be deemed to have waived any claim arising out of
this Agreement, or any power, right, privilege or remedy under this Agreement,
unless the waiver of such claim, power, right, privilege or remedy is expressly
set forth in a written instrument duly executed and delivered on behalf of such
Person; and any such waiver shall not be applicable or have any effect except in
the specific instance in which it is given.
10.10 Amendments.
This Agreement may not be amended, modified, altered or supplemented other
than by means of a written instrument duly executed and delivered on behalf of
the Purchaser and the Seller.
10.11 Severability.
In the event that any provision of this Agreement, or the application of
any such provision to any Person or set of circumstances, shall be determined to
be invalid, unlawful, void or unenforceable to any extent, the remainder of this
Agreement, and the application of such provision to Persons or circumstances
other than those as to which it is determined to be invalid, unlawful, void or
unenforceable, shall not be impaired or otherwise affected and shall continue to
be valid and enforceable to the fullest extent permitted by Law.
10.12 Entire Agreement; Confidential Disclosure Agreement.
This Agreement, the Related Documents and the Confidential Disclosure
Agreement dated June 21, 1999, set forth the entire understanding of the parties
relating to the subject matter hereof and thereof and supersede all prior
agreements and understandings among or between any of the parties relating to
such subject matter. Notwithstanding the foregoing provisions, the sixth
paragraph of the Confidential Disclosure Agreement dated June 21, 1999 shall
expire at the Closing to the extent applicable to those individuals employed by
the Seller or the Subsidiaries solely in connection with the Business
10.13 Knowledge.
For purposes of this Agreement, the Seller shall be deemed to have
"knowledge" of a particular fact or other matter if Richard Turner, President
---------
and Chief Executive Officer of the Seller, Thomas W. Fry, Vice President,
Finance and Administration of the Seller and Samuel Dickstein, Vice President -
New Business Development and Technology of the Seller, has actual knowledge of
such fact or other matter after exercising due diligence with respect thereto,
including making reasonable inquiries of the employees or Representatives of the
Seller and its
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subsidiaries who the Seller has determined in good faith may have any knowledge
concerning such fact or other matter.
10.14 Construction.
(a) 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.
(b) 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.
(c) 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."
(d) Except as otherwise indicated, all references in this Agreement
to "Sections" and "Exhibits" and "Annexes" and "Schedules" are intended to refer
to Sections, Exhibits, Annexes and Schedules to this Agreement.
43
<PAGE>
The parties to this Agreement have caused this Agreement to be
executed and delivered as of the date first set forth above.
BEI MEDICAL SYSTEMS COMPANY, INC., a Delaware
corporation
By: ____________________________________________
Name:
Title:
COOPERSURGICAL ACQUISITION CORP., a Delaware
corporation
By: ____________________________________________
Name:
Title:
<PAGE>
EXHIBIT A TO
ASSET PURCHASE
AGREEMENT
---------
BILL OF SALE, ASSIGNMENT
AND ASSUMPTION AGREEMENT dated as of
_________ __, 1999 (this "Agreement"), among
---------
BEI MEDICAL SYSTEMS COMPANY, INC., a
Delaware corporation (the "Seller"), MEDITRON
DEVICES, INC., a Delaware corporation,
XYLOG CORPORATION, a New Jersey
corporation, BEI MEDICAL SYSTEMS
INTERNATIONAL, INC., a Delaware
corporation, OVAMED CORPORATION, a
California corporation, CALCULUS
INSTRUMENTS COMPANY, INC., a New
Jersey corporation, ZINNANTI SURGICAL
INSTRUMENTS, INC., a California corporation
(each, a "Subsidiary"), and COOPERSURGICAL
----------
ACQUISITION CORP., a Delaware corporation
(the "Purchaser").
---------
Reference is made to the Asset Purchase Agreement dated as of
September __, 1999 (the "Purchase Agreement") between the Purchaser and the
------------------
Seller.
Pursuant to the terms of the Purchase Agreement, the Seller has agreed
to sell, and the Purchaser has agreed to purchase, substantially all of the
assets of the Seller, subject to the Purchaser's assumption of certain
liabilities of the Seller, related to the Business.
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 and each Subsidiary 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. The Purchaser hereby accepts title
to the Purchased Assets.
<PAGE>
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 Delaware, without giving effect to any choice
of law or conflicting provision or rule (whether of the State of Delaware or any
other jurisdiction) that would cause the laws of any jurisdiction other than the
State of Delaware 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 the Purchaser
or the Seller and each Subsidiary beyond those rights expressly provided to the
Purchaser or the Seller and each Subsidiary in the Purchase Agreement.
* * * * *
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.
B COMPANY
By:___________________________________
Name:
Title:
BEI MEDICAL SYSTEMS COMPANY, INC.
By:___________________________________
Name:
Title:
XYLOG CORPORATION
By:___________________________________
Name:
Title:
<PAGE>
BEI MEDICAL SYSTEMS INTERNATIONAL, INC.
By:___________________________________
Name:
Title:
OVAMED CORPORATION
By:___________________________________
Name:
Title:
CALCULUS INSTRUMENTS COMPANY, INC.
By:___________________________________
Name:
Title:
ZINNANTI SURGICAL INSTRUMENTS, INC.
By:___________________________________
Name:
Title:
COOPERSURGICAL ACQUISITION CORP.
By:___________________________________
Name:
Title:
<PAGE>
EXHIBIT B TO
ASSET PURCHASE
AGREEMENT
---------
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit B):
"Affiliate" means, with respect to any Person, 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.
"Agreement" means the Asset Purchase Agreement to which this Exhibit B
is attached (including the Seller Disclosure Schedule), as it may be amended
from time to time.
"CERCLA" means the Comprehensive Environmental Response, Compensation,
and Liability Act, as amended.
"CERCLIS" means the Comprehensive Environmental Response,
Compensation, and Liability Information System.
"Consent" means any approval, consent, ratification, permission,
waiver or authorization (including any Approval as defined in Section 2.1).
"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.
"Encumbrance" means and includes security interests, mortgages, liens,
pledges, charges, easements, reservations, restrictions, rights of way,
servitudes, options, rights of first refusal, community property interests,
equitable interests, restrictions of any kind and all other encumbrances,
whether or not relating to the extension of credit or the borrowing of money.
"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, but not limited to, the Solid Waste Disposal Act, as amended,
42 U.S.C. (S)(S)6901, et seq., the Clean Air Act, as amended, 42 U.S.C.
(S)(S)7401 et seq., the Federal Water Pollution Control Act, as amended, 33
U.S.C. (S)(S)1251 et seq., the Emergency Planning and Community Right-to-Know
Act, as amended, 42 U.S.C. (S)(S)11001 et seq., CERCLA, 42 U.S.C. (S)(S)9601 et
seq., the Hazardous Materials Transportation Uniform Safety Act, as amended, 49
U.S.C. (S)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.
<PAGE>
"Evaluation Inventory" means Products which have been invoiced and
shipped to customers for evaluation purposes, which the customer can decide to
either purchase or return to the Seller for a full credit.
"GAAP" means generally accepted accounting principles in the United
States.
"Governmental Entity" means any government and any governmental
authority or instrumentality, whether federal, state, local or foreign and
whether legislative, executive, judicial or otherwise.
"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).
"Indemnified Persons" means the Seller Indemnified Persons and/or the
Purchaser Indemnified Persons, as the case may be.
"Indemnifying Persons" means the Seller Indemnifying Persons and/or
the Purchaser Indemnifying Persons, as the case may be.
"Law" means any applicable foreign, federal, state or local law,
statute, treaty, rule, directive, regulation, order, judgment, writ, injunction,
decree, ordinances and similar provisions having the force or effect of law or
an Order of any Governmental Entity (including all Environmental, Health and
Safety Laws).
"Liabilities" means any liability or obligation of any nature, 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.
"Losses" means any and all losses, claims, shortages, damages,
expenses (including reasonable attorneys' and accountants' and other
professionals' fees and expenses and litigation expenses), assessments, 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 Section 7, 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 or results of operations of the Business taken as
a whole, (ii) on the Purchased Assets taken as a whole or (iii) on the ability
of the Seller or any Subsidiary 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
the Seller or any Subsidiary 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
<PAGE>
relationships or a loss of employees); and (y) any effects, changes, events,
circumstances or conditions resulting from compliance by the Seller or any
Subsidiary with the terms of, or the taking of any action contemplated or
permitted by, this Agreement or any Related Document. Notwithstanding the
foregoing, for purposes of Section 4.4(b) and Section 8.1(f)(i), Material
Adverse Effect shall not include the matters specified in subparagraph (i) of
this definition so long as the Closing occurs on or before November 15, 1999. If
the Closing occurs thereafter, the definition of Material Adverse Effect shall
remain unchanged.
"Orders" means judgments, writs, decrees, compliance agreements,
injunctions or judicial or administrative orders and determinations of any
Governmental Entity or arbitrator.
"Permits" means any and all permits, licenses, concessions,
authorizations, registrations, franchises, approvals, consents, certificates,
variances and similar rights obtained, or required to be obtained, from a
Governmental Entity.
"Permitted Encumbrances" means (i) 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, (ii) workers or unemployment
compensation liens arising in the ordinary course of business and (iii)
mechanic's, materialman's, supplier's, vendor's or similar liens arising in the
ordinary course of business securing amounts that are not delinquent.
"Person" means any individual or entity including any Governmental
Entity.
"Products" has the meaning ascribed to it on Schedule 1.1 hereto.
"Purchaser Indemnified Persons" means the Purchaser and its
Affiliates, their respective successors and assigns, and the respective
officers, directors and controlling parties of each of the foregoing; provided,
however, that any such Person who was, prior to the Closing Date, an officer,
director, employee, Affiliate, successor or assign of the Seller shall not in
such capacity be a Purchaser Indemnified Person with respect to a breach of this
Agreement or any Related Document based on facts or circumstances occurring, or
actions taken by such Person, at or prior to the Closing.
"Purchaser Indemnifying Persons" means the Purchaser and its
successors.
"Purchaser Losses" means any and all Losses sustained, suffered or
incurred by any Purchaser Indemnified Person arising from or in connection with
any such matter which is the subject of indemnification under Section 7.
"Representatives" means officers, directors, employees, agents,
attorneys, accountants and financial advisors of the Purchaser or the Seller or
any Subsidiary, as the case may be.
"Sale" means (i) the sale of the Assets by the Seller to the Purchaser
in accordance with this Agreement; (ii) the assumption of the Assumed
Liabilities by the Purchaser pursuant to the Bill of Sale; and (iii) the
performance by the Seller and the Purchaser of their respective obligations
under this Agreement and each Related Document, and the exercise by the Seller
and the Purchaser of their respective rights under this Agreement.
<PAGE>
"Sales Shortfall" has the meaning ascribed to it on Schedule 1.8(a)
hereto.
"Seller Indemnified Persons" means the Seller and its Affiliates,
their respective successors and assigns, and the respective officers, directors
and controlling parties of each of the foregoing.
"Seller Indemnifying Persons" means the Seller and its successors.
"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 7.
"Special Tax Losses" means any and all Losses sustained, suffered or
incurred by any Purchaser Indemnified Person arising from or in connection with
Taxes payable by the 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) or the
inaccuracy or breach of the representations and warranties of the Seller
contained in Section 2.18.
"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.
"Taxes" means, with respect to any Person, (i) all Income Taxes 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
<PAGE>
EXHIBIT C TO
ASSET PURCHASE
AGREEMENT
---------
STATEMENT OF ALLOCATION
Purchase Price consists of $11,206,600 minus (a) the Sales Shortfall described
on Schedule 1.8 (a), if any, and (ii) the Estimated Inventory and Receivables
Holdback Amount plus (c) the amount of the Assumed Liabilities.
Class III.
- ---------
Receivables and Inventory
valued as provided in this
Agreement estimated at $3,600,000
Net fixed assets estimated at $ 100,000
----------
$3,700,000
==========
Class IV.
- --------
Trademarks $ 350,000
Patents $1,000,000
Customer Lists $1,500,000
Covenant not to compete $1,500,000
----------
$4,350,000
==========
Class V. Goodwill-Balance of Purchase Price
- -------
<PAGE>
EXHIBIT D TO
ASSET PURCHASE
AGREEMENT
---------
________________, 1999
CooperSurgical Acquisition Corp.
Re: Asset Purchase Agreement
Ladies and Gentlemen:
We have acted as counsel for BEI Medical Systems Company, Inc., a Delaware
corporation (the "Seller"), in connection with that certain Asset Purchase
Agreement (the "Purchase Agreement") dated as of September __, 1999, by and
between CooperSurgical Acquisition Corp., a Delaware corporation ("the
Purchaser") and the Seller. We are rendering this opinion pursuant to Section 5
of the Purchase Agreement. Capitalized terms used but not defined herein have
the respective meanings given to them in the Purchase Agreement. "Related
Documents" shall mean:
1. Noncompetition Agreement between the Purchaser and the Seller of even
date herewith.
2. Noncompetition Agreement between the Purchaser and Richard W. Turner
of even date herewith.
3. Transition Agreement between the Purchaser and the Seller of even date
herewith.
4. Bill of Sale and Assumption and Assignment Agreement by the Seller,
the Subsidiaries and the Purchaser.
In connection with this opinion, we have examined and relied upon the
representations and warranties as to factual matters contained in and made
pursuant to the Purchase Agreement by the various parties and originals, or
copies certified to our satisfaction, of such records, documents, certificates,
opinions, memoranda and other instruments as in our judgment are necessary or
appropriate to enable us to render the opinion expressed below. Where we render
an opinion concerning an item "of which we are aware" or our opinion otherwise
refers to our knowledge, it is based solely upon (i) an inquiry of attorneys
within this firm who perform legal services for the Seller, (ii) receipt of a
certificate executed by an officer of the Seller covering such matters, and
(iii) such other investigation, if any, that we specifically set forth herein.
In rendering this opinion, we have assumed: the genuineness and authenticity of
all signatures on original documents; the authenticity of all documents
submitted to us as originals; the conformity to originals of all documents
submitted to us as copies; the accuracy, completeness and authenticity of
certificates of public officials; and the due authorization, execution and
delivery of all documents (except the due authorization, execution and delivery
by the Seller and each Subsidiary of the Purchase Agreement and the Related
Documents to which it is a party),
<PAGE>
where authorization, execution and delivery are prerequisites to the
effectiveness of such documents. We have also assumed: that Richard W. Turner
executing and delivering documents in his individual capacity had the legal
capacity to so execute and deliver; that you have received all documents you
were to receive under the Purchase Agreement and the Related Documents; that the
Purchase Agreement and the Related Documents to which you are a party are
obligations binding upon you; that the Purchaser has filed any required
California franchise or income tax returns and has paid any required California
franchise or income taxes; and that there are no extrinsic agreements or
understandings among the parties to the Purchase Agreement or the Related
Documents that would modify or interpret the terms of the Purchase Agreement or
the Related Documents or the respective rights or obligations of the parties
thereunder.
Our opinion is expressed only with respect to the federal laws of the United
States of America, the General Corporation Law of the State of Delaware and the
laws of the State of California. We are not rendering any opinion as to
compliance with any antifraud law, rule or regulation relating to securities, or
to the sale or issuance thereof, or as to compliance with any antitrust law. We
note that the parties to the Purchase Agreement and certain of the Related
Documents have designated the laws of the State of Delaware or the State of New
York as the laws governing the Purchase Agreement and the Related Documents. Our
opinion in paragraph 3 below as to the legality, validity, binding effect and
enforceability of the Purchase Agreement and the Related Documents is premised
upon the result that would obtain if a California court were to apply the
internal laws of the State of California (notwithstanding the designation of the
laws of the State of Delaware or the State of New York) to the interpretation
and enforcement of the Purchase Agreement and the Related Documents. We express
no opinion as to whether the laws of any particular jurisdiction apply, and no
opinion to the extent that the laws of any jurisdiction other than those
identified above are applicable to the subject matter hereof. Further, we
express no opinion with respect to the enforceability or validity of any
noncompetition agreements or covenants entered into by the parties in connection
with the Purchase Agreement or the transactions contemplated thereby.
With regard to our opinion in paragraph 4 below with respect to material
breaches and defaults under any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
known to us, we have relied solely upon (i) inquiries of officers of the Seller,
(ii) a list supplied to us by the Seller, a copy of which is attached as Exhibit
A hereto, of any material note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which the
Seller or any Subsidiary is a party or by which the Seller or any Subsidiary is
bound (collectively, the "Material Agreements") and (iii) an examination of the
items on the aforementioned list; we have made no further investigation.
On the basis of the foregoing, in reliance thereon and with the foregoing
qualifications, we are of the opinion that:
1. The Seller is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware. The Seller and each
Subsidiary has all the requisite corporate power and authority necessary to own,
lease and operate the Purchased Assets and to carry on its business as it is now
being conducted. The Seller and each Subsidiary are
<PAGE>
duly qualified or licensed as a foreign corporation to do business, and is in
good standing, in the respective jurisdictions listed on Exhibit B.
2. The Seller has the corporate right, power and authority to enter into
and to perform its obligations under the Purchase Agreement and each Related
Document to which it is a party and to consummate the transactions contemplated
thereby. The execution and delivery by the Seller of the Purchase Agreement and
each Related Document to which it is a party and the consummation of the
transactions contemplated thereby have been duly authorized by all necessary
corporate action on the part of the Seller, and no other corporate proceedings
on the part of the Seller are necessary to authorize the Purchase Agreement and
each Related Document to which it is a party or to consummate the transactions
so contemplated thereby. Each Subsidiary has the corporate right, power and
authority to enter into and perform its respective obligations under each
Related Document to which it is respectively a party and to consummate the
transactions contemplated thereby. The execution and delivery by each Subsidiary
of the Related Documents to which it is respectively a party and the
consummation of the transactions contemplated thereby have been duly authorized
by all necessary corporate action on the part of each such Subsidiary, and no
other corporate proceedings on the part of any such Subsidiary are necessary to
authorize the Related Documents to which such Subsidiary is a party or to
consummate the transactions so contemplated thereby.
3. The Purchase Agreement and each Related Document to which the Seller
is a party constitute the legal, valid and binding obligations of the Seller,
enforceable against the Seller in accordance with their terms, subject to (a)
laws of general application relating to bankruptcy, insolvency, moratorium,
arrangement, reorganization and other similar laws affecting creditors' rights,
(b) general principles of equity, and (c) limitations on the availability of
equitable relief, including specific performance. Each Related Document to which
each Subsidiary is a party constitutes the legal, valid and binding obligation
of each of the respective Subsidiaries, enforceable against such Subsidiary in
accordance with its terms, subject to (a) laws of general application relating
to bankruptcy, insolvency, moratorium, arrangement, reorganization and other
similar laws affecting creditors' rights, (b) general principles of equity, and
(c) limitations on the availability of equitable relief, including specific
performance.
4. Except as set forth in Exhibit C, the execution and delivery of the
Purchase Agreement and each Related Document to which it is a party by the
Seller and each applicable Subsidiary does not, and the performance of the
Purchase Agreement and each Related Document to which it is a party by the
Seller and each applicable Subsidiary, and of the transactions contemplated
thereby, will not: (i) conflict with or violate (with or without notice or lapse
of time or both) the Certificate of Incorporation or By-Laws of the Seller or
such Subsidiary, (ii) conflict with, violate or cause a default under (with or
without notice or lapse of time or both) any federal laws of the United States
of America or the General Corporation Law of the State of Delaware applicable to
the Seller or any such Subsidiary or by which its or any of their respective
properties are bound or affected, or (iii) result in any material violation or
breach of or constitute a default (or an event that with notice or lapse of time
or both would become a default) under or impair the Seller's or such
Subsidiary's rights or alter the rights or obligations of any third party under,
or give to others any rights of termination, amendment, acceleration or
<PAGE>
cancellation of, or result in the creation of an Encumbrance on any of property
or assets of the Seller or any Subsidiary pursuant to, any Material Agreement
known to us.
5. The execution and delivery by the Seller of the Purchase Agreement and
each Related Document to which it is a party does not, and the performance by
the Seller of the Purchase Agreement and each Related Document to which it is a
party will not, require any consent, approval, authorization or permit of, or
filing with or notification to, any regulatory authority or governmental body in
the United States, except for such consents, approvals, authorizations, permits,
filings or notifications as have been made or obtained. The execution and
delivery by each Subsidiary of each Related Document to which it is a party does
not, and the performance by each Subsidiary of each Related Document to which it
is a party will not, require any consent, approval, authorization or permit of,
or filing with or notification to, any regulatory authority or governmental body
in the United States, except for such consents, approvals, authorizations,
permits, filings or notifications as have been made or obtained.
6. To our knowledge, there are no actions, suits or proceedings
("proceedings") relating to the Business or the Purchased Assets pending or
threatened in writing against the Seller or any Subsidiary, whether at law or in
equity, whether civil or criminal in nature or before or by any regulatory
authority or governmental body in the United States, nor to our knowledge has
any order, judgment, writ, injunction or decree of a regulatory authority or
governmental body in the United States relating to the Business or the Purchased
Assets been entered against the Seller or any Subsidiary.
7. The Bill of Sale and Assumption and Assignment Agreement are
sufficient in form to transfer all right, title and interest held by the Seller
and the Subsidiaries.
This opinion is intended solely for your benefit and is not to be made available
to or be relied upon by any other Person without our prior written consent.
Sincerely,
Cooley Godward LLP
Christopher A. Westover
<PAGE>
EXHIBIT E TO
ASSET PURCHASE
AGREEMENT
---------
TRANSITION AGREEMENT
This Transition Agreement (the "Agreement") is entered into as of this ___
day of _________, 1999 by and among B Company, a Delaware corporation ("Seller")
and C Company, a Delaware corporation ("Buyer").
Recitals
Whereas, Seller and Buyer have entered into an asset purchase agreement
(the "Asset Purchase Agreement") dated September __, 1999 pursuant to which
Seller will sell, and Buyer will purchase, substantially all of the assets and
assume certain of the liabilities of Seller relating to the Business as defined
in the Asset Purchase Agreement; and
Whereas, in connection with Buyer's acquisition of the Business from Seller
(the "Acquisition"), Seller and Buyer desire to provide for certain transition
services, on an interim basis, as set forth herein.
Now, Therefore, in consideration of the foregoing premises and the mutual
covenants set forth below, and other good and valuable consideration, the
receipt of which is hereby acknowledged, the parties agree as follows:
Agreement
1. Transition Services.
(a) During the term of this Agreement as set forth in Section 3 below (the
"Transition Period"), Seller shall continue to provide on behalf of Buyer the
products and services related to the Business in substantially the same manner
as such services were heretofore provided by Seller on its own behalf in
carrying on the Business, including the activity set forth on Annex A attached
hereto.
(b) Annex A constitutes part of this Agreement and may be amended from
time to time with the written consent of Seller and Buyer.
(c) Buyer shall pay the following amounts for the products and services
provided by Seller under this Agreement: (i) the cost of materials purchased by
Seller subsequent to the date of this Agreement to produce products pursuant to
a production plan mutually agreed upon by Seller and Buyer, which plan shall in
no event exceed Seller's manufacturing capacity as of the date of this Agreement
(the "Mutual Production Plan"), (ii) for each employee not engaged in production
or manufacturing and listed on Annex B, that percentage set forth on such annex
opposite the name of such employee under the column headed "Support Base
Business %" of the amount of weekly salary set forth on such annex opposite the
name of such employee under the column headed "Weekly Salary" plus an amount
equal to 28% of the result of the foregoing
<PAGE>
calculation, (iii) the amount of out-of-pocket expenditures for supplies and
services provided for the benefit of Buyer under this Agreement that are
approved by Buyer, which approval shall not be unreasonably withheld, (iv) the
cost of moving expenses for, and repairs and installation of, equipment owned by
Buyer, (v) as a labor component for each product delivered for Buyer hereunder,
an amount equal to the number of direct labor hours multiplied by direct labor
costs for each product as set forth on Schedule 1(c), which product is delivered
by Seller to or at the direction of Buyer pursuant to the Mutual Production
Plan, (vi) costs and expenses such as employment agency fees which are incurred
as a direct result of Seller's efforts to replace on a temporary basis any
employee performing transition services under this Agreement who voluntarily
terminates employment with Seller during the Transition Period, (vii) all
incremental costs approved by Buyer that are associated with customer
solicitation activity including, but not limited to: sales commissions, postage,
sales literature, freight, samples and other free goods, telephone and
communications, computer and office supplies, maintenance and repairs, outside
computer services and travel and entertainment expenses, (viii) all related pre-
approved collection charges and (ix) the commissions provided for in Annex A.
Seller shall send bills and/or invoices in connection with the foregoing items
at the end of each one-week period of the Transition Period. Buyer shall within
five days after receipt of such bills and/or invoices, pay to Seller the amounts
specified in such bills and/or invoices in full. Notwithstanding the foregoing,
although Seller shall bill all amounts to be paid pursuant to this subsection,
Buyer shall have no obligation to pay to Seller the first $245,000 for products
and services due under this Agreement and such amount will not be considered due
to Seller under this Agreement as Seller has agreed to provide the first
$245,000 of products and services delivered hereunder without cost to Buyer.
2. General Intent. Seller shall use its commercially reasonable best efforts
to provide all transition assistance which the Buyer may reasonably request
during the Transition Period. Seller shall use its commercially reasonable best
efforts to retain the employees required to produce the services set forth in
Annex A. Seller is not obligated to hire any new employees to replace those
employees who may leave the employment of the Seller during the Transition
Period; provided, however, that Seller shall use commercially reasonable efforts
to replace such employees with temporary personnel to the extent required for
Seller to perform its obligations under this Agreement. Because Seller is
performing the transition services for the benefit of Buyer, Seller shall
perform such services under the direction and control of Buyer, provided that
Buyer shall provide such direction and control through Seller's existing
management and supervisory channels. Buyer's personnel may be present on the
premises of Seller on which transition services are being performed to monitor
and control such services. Each party shall execute such further documents and
take such further actions as may be necessary to carry out the purposes of this
Agreement.
3. Term.
(a) Except as provided in Section 3(b), 3(c), and 3(d) below, the term of
this Agreement shall commence on the date of the closing of the Acquisition (the
"Closing Date") and shall continue for ninety (90) days; provided, however, that
either party may terminate this Agreement in the event of a material default by
the other party hereunder that is not cured within five (5) business days
following written notice of default by the non-defaulting party.
<PAGE>
(b) Notwithstanding Section 3(a), Buyer may elect to extend the term of
this Agreement on a month-to-month basis for up to three (3) months by providing
written notice at least thirty (30) days prior to the expiration of the then
applicable Transition Period of this Agreement specifying the products and
services attached hereto that Buyer requires that Seller continue to provide and
the duration for which such products and services shall be provided. During the
period of any such extension (i) products shall be provided at the costs
mutually agreed to pursuant to this Agreement, and (ii) services shall be
provided pursuant to the terms of this Agreement at the rate of one hundred
dollars ($100) per hour of Seller employee time and incidental costs incurred
for such services that are pre-approved by Buyer. If the mutually agreed upon
production schedule for a certain product has not been met by Seller during the
initial ninety (90) days of the Transition Period and such production schedule
contemplated that the products would be completed within such ninety (90) day
period, then the costs for completing such products shall be pursuant to the
costs applicable during such ninety (90) day period, as specified on Schedule
1(c), rather than pursuant to this Section 3(b).
(c) Notwithstanding Section 3(a), Seller, at the request of Buyer, from
time to time during and for up to fifteen (15) months following the date of this
Agreement will provide on reasonable notice reasonable consulting services with
respect to issues such as regulatory affairs, product details, engineering and
sales and marketing. Such services shall be provided during the term of
Transition Period for payment provided for in this Agreement and after the
Transition Period at the rate of one hundred twenty dollars ($120) per hour of
Seller employee time and incidental costs incurred for such services that are
pre-approved by Buyer.
(d) Buyer may, at any time and from time to time, terminate any product or
service to be provided by Seller under this Agreement by delivering to Seller a
"Buyer Termination Notice". Each Buyer Termination Notice shall specify the
product or service to be terminated and the date on which termination shall
occur (which shall be not less than fourteen (14) days from the delivery to
Seller of such notice). From and after each such date of termination, Buyer
shall have no further obligation under this Agreement to pay Seller the charges
specified in this Agreement for each such terminated service or product, except
for any product for which an order has already been placed by Buyer and for any
service or product provided prior to such date of termination.
4. Insurance.
(a) Buyer possesses those insurance policies, including product liability
insurance, which are necessary to fully insure the services to be conducted by
Seller against all risks normally insured against by a person or entity
conducting the same business as Buyer and the business to be conducted by Seller
pursuant to this Agreement, and such policies name Buyer as the insured. Such
insurance policies comply with any federal, state, local or foreign laws and
regulations applicable to the business and operations conducted by Buyer,
including the transactions contemplated by this Agreement.
(b) Buyer will continue to carry its existing insurance or reasonably
comparable coverage throughout the term of this Agreement. Upon the written
request of Seller, Buyer will provide copies of certificates of insurance as
evidence thereof.
<PAGE>
(c) Seller will continue to carry its existing insurance as disclosed in
Schedule 2.20 to, or as may be otherwise required by the Asset Purchase
Agreement, or reasonably comparable coverage throughout the term of this
Agreement.
(d) Seller's insurance shall cover loss or damage to property of Seller
located on Seller's facilities used to provide transition services and on such
facilities to the extent required by any lease therefor. Buyer's insurance shall
cover loss or damage to Buyer's property located on such facilities. Each party
shall request its insurers to waive subrogation against the other party for
Losses to property covered by such party's insurance as described in this
subsection 4(d).
5. Certain Seller Payments. Seller represents to Buyer that to induce each
employee of Seller listed on the Personnel Consolidation Plan attached hereto as
Annex B (the "Retained Employee") to remain as an employee of Seller during the
Transition Period, Seller has offered each such employee the stay bonus and
severance payment set forth opposite the name of such employee on such Plan.
Seller shall make the payments required to be made by it to each such employee
pursuant to such offer. Other than as set forth on Annex B, Seller shall have
no further obligation to provide any stay bonus, severance payment or other
compensation to the Retained Employees. If Buyer instructs Seller to attempt to
retain a specific Retained Employee beyond the Transition Period, Buyer shall be
solely responsible for any stay bonus, severance payment or other compensation
to be provided at the instruction of Buyer to any such Retained Employee in
order to retain such Retained Employee beyond the Transition Period, and Seller
shall not be obligated hereunder to provide any compensation to any such
Retained Employee beyond the Transition Period (including any extensions of such
Transition Period made pursuant to this Agreement) unless instructed to do so by
Buyer.
6. Indemnification.
(a) Indemnification by Buyer. As of the date of this Agreement and subject
to the other provisions of this Section 6, Buyer shall indemnify, defend (with
counsel reasonably acceptable to Seller), and hold Seller, and its respective
directors, officers, agents and employees (collectively, the "Seller Indemnified
Parties") harmless from and against, and will pay to the Seller Indemnified
Parties the amount of any and all losses, damages, liabilities, costs and
expenses, direct and indirect (including reasonable attorneys' and consultants'
fees) (collectively, the "Losses"), arising, directly or indirectly, from or in
connection with:
(i) any breach of any representation or warranty made by Buyer in
this Agreement;
(ii) any breach by Buyer of any covenant or obligation of Buyer in
this Agreement;
(iii) any suit or proceeding brought against any Seller Indemnified
Party arising out of Seller's performance or non-performance contemplated by
this Agreement except to the extent caused by the gross negligence or willful
misconduct of a Seller Indemnified Party or Seller's wrongful failure to render
the services or produce the products contemplated by this Agreement; or
<PAGE>
(iv) gross negligence or willful misconduct of Buyer.
(b) Indemnification by Seller. As of the Effective Date and subject to the
other provisions of this Section 6, Seller shall indemnify, defend and hold
Buyer, its shareholders, directors, officers, agents and employees
(collectively, the "Buyer Indemnified Parties") harmless from and against and
will pay to the Buyer Indemnified Parties the amount of any Losses, arising
directly or indirectly, from or in connection with:
(i) any breach of any representation or warranty made by Seller in
this Agreement;
(ii) any breach by Seller of any covenant or obligation of Seller in
this Agreement; or
(iii) gross negligence or willful misconduct of Seller or Seller's
wrongful failure to render the services or produce the products contemplated by
this Agreement.
Notwithstanding the above, Seller shall have no liability and shall not
indemnify Buyer for any Losses to the extent based on (A) the gross negligence
or willful misconduct of a Buyer Indemnified Party or (B) any delay or refusal
on the part of Buyer in providing any necessary pre-approvals or approvals under
this Agreement on a timely basis. In each instance where pre-approval or
approval is required under this Agreement, Seller shall request for pre-approval
or approval in advance of the time when Losses would be incurred if pre-approval
or approval were not obtained. Seller shall not be obligated to take any action
or pay any expense with respect to a matter requiring pre-approval or approval
until such pre-approval or approval has been provided by Buyer.
(c) Limitations on Indemnification by Seller. No Seller Indemnified Party
shall be liable, responsible or in anyway accountable to Buyer for, and Buyer
waives and releases any claims (including any claim by way of subrogation,
contractual or implied indemnity or otherwise) against, such Seller Indemnified
Party for Losses which at any time after the date hereof may be suffered or
sustained by any individual, including any individual employed by Buyer, who,
after the date of this Agreement, and with the permission of Seller, has entered
Seller's facilities used to provide transition services, or may at any time be
using or occupying or visiting such facilities or be in, on or about the same,
or in or about the common areas of such facilities or the sidewalks adjacent
thereto, except to the extent caused by the gross negligence or willful
misconduct of such Seller Indemnified Party.
(d) Indemnification Claims. If either party hereto (the "Claimant") wishes
to assert an indemnification claim against the other party hereto, the Claimant
shall deliver to the other party a written notice (a "Claim Notice") setting
forth:
(i) a detailed description of the facts and circumstances giving
rise to the claim; and
(ii) a reasonable estimate of the total amount of Losses incurred.
<PAGE>
(e) Defense of Third Party Actions.
(i) If either party hereto (the "Indemnitee") receives notice or
otherwise obtains knowledge of any action, hearing, arbitration, litigation,
suit or claim ("Proceeding") or any threatened Proceeding that may give rise to
an indemnification claim against the other party hereto (the "Indemnifying
Party"), then the Indemnitee shall promptly deliver to the Indemnifying Party a
written notice describing such Proceeding in reasonable detail. The failure to
give such written notice shall not relieve the Indemnifying Party of any
liability under this Section 6 with respect to such matter except to the extent
the Indemnifying Party shall have been materially prejudiced by such failure.
(ii) If any Proceeding referred to in Section 6(e)(i) is brought
against an Indemnitee and it gives notice to the Indemnifying Party of the
commencement of such Proceeding, the Indemnifying Party will be entitled to
participate in such Proceeding and, to the extent that it wishes (unless the
Indemnifying Party is also a party to such Proceeding and the Indemnitee
reasonably determines in good faith that joint representation would be
inappropriate), to assume the defense of such Proceeding with counsel reasonably
satisfactory to the Indemnitee and, after notice from the Indemnifying Party to
the Indemnitee of its election to assume the defense of such Proceeding, the
Indemnifying Party will not, as long as it diligently conducts such defense, be
liable to the Indemnitee under this Section 6(e) for any fees of other counsel
or any other expenses with respect to the defense of such Proceeding, in each
case subsequently incurred by the Indemnitee in connection with the defense of
such Proceeding. If the Indemnifying Party assumes the defense of a Proceeding,
(i) it will be conclusively established for purposes of this Agreement that the
claims made in that Proceeding are within the scope of and subject to
indemnification; (ii) no compromise or settlement of such claims may be effected
by the Indemnifying Party without the Indemnitee's consent and the Indemnitee
will have no liability with respect to any compromise or settlement of such
claims effected without its consent. If notice is given to an Indemnifying Party
of the commencement of any Proceeding and the Indemnifying Party does not,
within ten (10) days after the Indemnitee's notice is given, give notice to the
Indemnitee of its election to assume the defense of such proceeding, the
Indemnitee shall have the right to control the defense of, and to compromise or
settle such Proceeding.
(f) Survival. All representations and warranties in this Agreement will
survive for a period of one year after termination of this Agreement. The right
to indemnification, payment of damages or other remedy based on the provisions
of this Section 6 shall survive the time at which it would otherwise terminate
pursuant to Section 3, if prior to such termination, the party seeking
indemnification shall have duly delivered a Claim Notice to the party against
whom such indemnity may be sought in conformity with all of the applicable
procedures set forth in this Section 6.
(g) If the Indemnifying Party exercises its right to assume the defense of
a Proceeding pursuant to Section 6(e), (i) the Indemnitee shall be entitled to
participate in such defense with its own counsel at its own expense and (ii) the
Indemnifying Party shall not make any settlement of any claims without the
written consent of the Indemnitee, which consent shall not be unreasonably
withheld or delayed, unless the terms of such settlement requires no more than
the payment of money and the Indemnifying Party pays such amount.
<PAGE>
(h) If the Indemnifying Party assumes the defense of a Proceeding, the
Indemnitee shall cooperate fully as reasonably requested by the Indemnifying
Party in the defense of such Proceeding, and shall make available to the
Indemnifying Party all books, records and other materials that are under the
direct or indirect control of the Indemnitee and that the Indemnifying Party
reasonably considers necessary or desirable for the defense of such Proceeding.
(i) Absent fraud or willful misconduct, no party hereto shall be entitled
to recover special or punitive damages with respect to any breach of any
representation or warranty or nonperformance of any obligation under this
Agreement.
(j) Notwithstanding anything to the contrary contained in this Agreement
(i) to the extent Losses hereunder also constitute Losses under the Asset
Purchase Agreement, then those provisions of the Asset Purchase Agreement
applicable to such Losses shall determine the rights and obligations of the
parties with respect thereto and the provisions of this Agreement shall not
apply, (ii) except as provided in the previous clause (i) of this subsection
6(j), Buyer's product liability insurance shall be applicable to sales of
products by Buyer which occur subsequent to the date of this Agreement and
Seller's product liability insurance shall not be applicable to such sales,
(iii) the Indemnitee shall use commercially reasonable efforts to seek recovery
from its insurance providers with respect to any Losses for which indemnity
(other than indemnity for product liability) may be sought against the
Indemnifying Party under this Section 6 and for which the Indemnitee's insurance
may be available and such Losses shall be net of any insurance proceeds or other
amounts actually recovered by or on behalf of Indemnitee.
(k) To the extent that any Indemnifying Party makes any indemnification
payment to any Indemnitee, the Indemnifying Party shall be entitled to exercise,
and shall be subrogated to, any rights and remedies (including rights of
indemnity, rights of contribution and other rights of recovery) that the
Indemnitee may have against any other Person with respect to any Losses to which
such indemnification payment is related. The Indemnitee shall take such actions
as the Indemnifying Party may reasonably request for the purpose of enabling the
Indemnifying Party to perfect or exercise its right of subrogation hereunder.
(l) Any legal action or other legal proceeding relating to this Agreement
or the enforcement of any provision of this Agreement may be brought by an
Indemnitee against an Indemnifying Person, and may be contested by such
Indemnifying Person. In that event, if the court or arbitrator in such
proceeding determines that the Indemnifying Person is not obligated under this
Agreement to indemnify the Indemnitee for all or any part of the amount claimed
by the Indemnitee in such proceeding, then the Indemnifying Person shall be
entitled to recover a portion of the reasonable attorneys' fees, costs and
disbursements incurred by the Indemnifying Person contesting the claim of the
Indemnitee against the Indemnifying Person in such proceeding (in addition to
any other relief to which it may be entitled) based upon the extent to which the
Indemnitee was successful in contesting the amount claimed by the Indemnifying
Person. This provision shall not limit in any way Losses to which an Indemnitee
is entitled under the provisions of this Agreement.
<PAGE>
7. General.
(a) This Agreement is made in accordance with and will be governed and
construed under the laws of the State of New York, excluding conflict of law
principles that would cause the law of another jurisdiction to apply.
(b) This Agreement is not assignable or transferable by either party in
whole or in part except with the written consent of Buyer, which consent shall
not be unreasonably withheld, provided, however, this Agreement may be assigned
by Buyer to an Affiliate of Buyer to which Buyer assigns its rights and duties
under the Asset Purchase Agreement. In the case of any permitted assignment or
transfer of or under this Agreement, this Agreement or the relevant provisions
thereof will be binding upon, and inure to the benefit of, the successors and
assigns of the parties hereto.
(c) All notices and other communications required or permitted to be given
under this Agreement will be in writing and will be effective if delivered
during business hours on a business day when delivered personally by facsimile
or sent by a nationally recognized commercial overnight carrier, or by
registered or certified mail, postage prepaid, and addressed to the party at its
address set forth on the signature page hereof, unless by such notice a
different person, address or number has been designated for giving notice
hereunder or, if not delivered during business hours on a business day, the next
succeeding business day.
(d) The parties hereto agree that under this Agreement, each party is an
independent contractor and not an agent or employee of the other party. In no
way will any party be liable to the other party, its employees or agents for any
losses, injury, damages or the like occasioned by such party's activities in
connection with this Agreement, except as expressly provided herein.
(e) This Agreement may be amended only with the written approval of each
party hereto. Any of the provisions of this Agreement may be waived, generally
or in a specific instance, with the written approval of the party giving such
waiver. The failure of either party to enforce any provision of this Agreement
will not be deemed a waiver of such provision or of the right of such party
thereafter to enforce such provision or any other provision.
(f) In the event that any provision of this Agreement will be
unenforceable or invalid under any applicable law or be so held by applicable
court decision, such unenforceability or invalidity will not render this
Agreement unenforceable or invalid as a whole and, in such event, such provision
will be changed and interpreted so as to best accomplish the objectives of such
unenforceable or invalid provision within the limits of applicable law or
applicable court decision.
(g) Except as expressly provided in this Agreement, the rights and
remedies provided in this Agreement will be cumulative and not exclusive of any
other rights and remedies provided by law or otherwise.
(h) No liability shall result from delay in performance or non-performance
caused by circumstances beyond the reasonable control of the party affected,
including, without limitation, the voluntary termination of employment with
Seller by any of Seller's employees, reassignment or termination of any
employees of Seller at the direction of Buyer, acts of God, acts of a public
<PAGE>
enemy, acts of the governments of any state or political subdivision or any
department or regulatory agency thereof or entity created thereby, quotas,
embargoes, acts of any person engaged in subversive activity or sabotage, fires,
floods, explosions, or other catastrophes, epidemics, or quarantine
restrictions, strikes or other labor stoppages, slowdowns or disputes, voluntary
or involuntary compliance with any law, or regulation of any governmental agency
or authority, lack of transportation facilities, or any other cause beyond the
control of the affected party, for that period commencing at the time notice of
such circumstances is given by the affected party and terminating at such time
as the impairment caused by such circumstances ends or would have ended had the
affected party taken reasonable steps to remedy such circumstances.
(i) Seller's total liability with respect to services provided under this
Agreement will under no circumstances exceed the total of all service fees
actually paid or due to Seller or credited to Buyer under this Agreement,
including up to $245,000 billed but not paid by Buyer pursuant to Section 1(c)
of this Agreement. Furthermore, and subject to the limitations set forth in this
Agreement, if Seller fails to deliver a product in accordance with the Mutual
Production Plan (other than as a result of or failure to act on the part of
Buyer) and is unable to adequately cure such failure to deliver, the maximum
liability of Seller to Buyer with respect thereto shall be an amount equal to
the difference between the average sales price for such product and the cost to
Buyer hereunder relating to producing such product; in no event, however, shall
Seller be liable to Buyer for loss of customers in connection with the failure
to deliver a product in accordance with the Mutual Production Plan.
(j) The section headings appearing in this Agreement are inserted only as
a matter of convenience and in no way define, limit, construe or describe the
scope or extent of such paragraph or in any way affect such paragraph.
(k) This Agreement may be executed in counterparts with the same force and
effect as if each of the signatories had executed the same instrument.
8. Construction.
(a) 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.
(b) 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.
(c) 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."
<PAGE>
In Witness Whereof, the parties hereto have executed this Agreement as of
the date first above set forth.
B Corporation C Corporation
By:__________________________ By:______________________
Name:________________________ Name:____________________
Title:_______________________ Title:___________________
Address: Address:
B Corporation Corporation
_____________________________ _________________________
_____________________________ _________________________
Attn:________________________ Attn:____________________
Facsimile Number: Facsimile Number:
with a copy to: with a copy to:
Cooley Godward llp O'Sullivan Graev & Karabell, LLP
One Maritime Plaza, 20th Floor 30 Rockefeller Plaza
San Francisco, CA 94111 New York, NY 10112
Attn: Christopher A. Westover, Esq. Attn: David I. Karabell, Esq.
Facsimile Number: (415) 951-3699 Facsimile Number: (212) 728-5950
<PAGE>
EXHIBIT F TO
ASSET PURCHASE
AGREEMENT
---------
NONCOMPETITION AGREEMENT dated __________
__, 1999, between COOPERSURGICAL ACQUISITION
CORP., a Delaware corporation (the "Company"), and
BEI MEDICAL SYSTEMS COMPANY, INC., a Delaware
corporation (the "Covenantor").
Reference is made to the Asset Purchase Agreement dated as of
September __, 1999, between the Company and the Covenantor (the "Asset Purchase
--------------
Agreement"). Pursuant to the Asset Purchase Agreement, the Company is acquiring
- ---------
substantially all of the assets, including the Products, of the Covenantor which
comprise the Business. This Agreement is being entered into pursuant to the
Asset Purchase Agreement.
In consideration of the Company purchasing the Purchased Assets under
the Asset Purchase Agreement and in order to prevent the Company from being
economically harmed by a loss of the goodwill associated with the Business, the
Covenantor has 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 Asset Purchase Agreement.
Section 2. Non-competition and Non-solicitation.
------------------------------------
(a) Subject to the second paragraph of Section 2(a), the Covenantor
agrees that, during the Non-Compete Period (as defined below), the 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 competing with any other products or procedures which are used to perform the
same function as, or the same treatments and procedures performed by, the
Products or a business developing any product which is used to perform the same
function as, or the same 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;
<PAGE>
(iii) any other 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. 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. As used in this Agreement,
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.
Nothing in this Section 2 shall prohibit the Covenantor from (i)
engaging, directly or indirectly, as a partner, joint venturer or otherwise in
the development, manufacture, sales, marketing or service of the product known
as Hydro ThermAblator or HTA, or any improvement to such product (collectively,
"HTA") and, subject to the last two sentences of this paragraph, the
development, manufacture, marketing, sale or service of the products listed on
Exhibit A, or any improvement to or replacement for such products listed on
- ----------
Exhibit A (the "HTA Related Products") or (ii) being a passive owner of not more
- ---------
than (A) 4% of the outstanding capital stock of any class of a corporation (or
4% of the equity interest in any other Person), the securities of which are
publicly traded or (B) 1% of the outstanding capital stock of any class of a
corporation (or 1% of the equity interest in any other Person), the securities
of which are privately held, so long as the Covenantor has no active
participation in the business of such Person. The HTA Related Products may
only be marketed, sold or serviced, directly or through distribution channels,
(A) solely in connection with the sale or use of HTA by medical professionals,
(B) in a number reasonably necessary to facilitate the use by such medical
professionals of HTA and (C) to the medical professionals purchasing or using
HTA. Any marketing, sale or service of an HTA Related Product which does not
strictly comply with the immediately preceding sentence is a violation of the
Covenantor's obligations under this Agreement.
(b) During the Non-Compete Period, the Covenantor agrees that the
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 or its Business Group until six 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; provided,
however, that the Covenantor shall not be deemed to interfere with the
relationships of the Company or its Business Group with a customer, supplier,
consultant, licensee or other business relation solely because, in compliance
with this Agreement, the Covenantor does business on a non-exclusive basis with
such a Person.
<PAGE>
Section 3. Option To Modify Non-Competition Covenant in Section 2 (a).
----------------------------------------------------------
(a) The Company hereby grants to the Covenantor the right and option
(the "Option"), exercisable by the Covenantor under the terms specified in this
Section 3, to modify the non-competition covenant in Section 2 (a) of this
Agreement. The Option may be exercised by the Covenantor strictly in the manner
provided in this Section 3 solely on the occurrence of the first Change of
Control or Joint Venture Arrangement which is consummated after the date of this
Agreement.
(b) The Covenantor may exercise the Option by delivering an election
notice (the "Election Notice") to the Company concurrently with paying to the
Company the sum of $250,000 by wire transfer of immediately available funds. The
Election Notice shall certify to the Company that there has occurred the first
Change of Control or Joint Venture Arrangement which has been consummated after
the date of this Agreement, shall specify that the Covenantor is exercising the
Option upon consummation of such Change of Control or Joint Venture Arrangement
and shall be accompanied by confirmation that there has been paid to the Company
by wire transfer of immediately available funds the sum of $250,000.
(c) Upon exercise by the Covenantor of the Option in the manner
provided in this Section 3, then, notwithstanding the provisions of Section 2
(a), from and after such Change of Control or Joint Venture Arrangement is
consummated, only the following activities by the Person that acquires control
of the Covenantor as a result of such Change of Control or engages with the
Covenantor in such Joint Venture Arrangement shall be deemed to violate the
provisions of Section 2 (a) of this Agreement: developing, manufacturing,
selling, marketing or servicing products which both Mimic and compete with the
Principal Products
(d) "Change of Control" means either (x) the sale of substantially
all of the Covenantor's assets to an unaffiliated third Person (other than sale
of such assets to the Company) or (y) a merger or consolidation or sale of
capital stock of the Covenantor (each, a "Transaction"), under circumstances in
which the holders of a majority of the voting power of the outstanding capital
stock of the Covenantor, immediately prior to the Transaction, own less than a
majority of the voting power of the outstanding capital stock of the Covenantor
or the surviving corporation or resulting corporation, as the case may be (the
"Surviving Person"), immediately following such Transaction. A Person is deemed
to have acquired control of the Covenantor as a result of the Change of Control
(x) if such Person owns, directly or indirectly, substantially all of such
assets sold by the Covenantor or (y) if such Person controls, directly or
indirectly, a majority of the voting power of the outstanding capital stock of
the Surviving Person or (z) if such Person is the Surviving Person. "Joint
Venture Arrangement" means an agreement between the Covenantor and a third
Person to carry on a joint business activity in the form of a joint venture,
partnership or other contractual arrangement, including without limitation any
license, supply or distribution arrangement.
"Principal Products" means the Products known as "Zumi", "Zui",
"Z-Clamp", "Nichols Pelvic Set" and "Miya Hook", and all variations of such
Products. A product is deemed to "Mimic" a Principal Product if a bona fide
credible argument can be made that such product infringes a patent or patents
which may at any time have been issued for such Principal Product, even if such
Principal Product is not at the time protected by a patent.
<PAGE>
Section 4. Confidentiality.
---------------
(a) The Covenantor will not disclose or use at any time, during the
Non-Compete Period, any Confidential Information of which the Covenantor is or
becomes aware, whether or not such information was developed by the Covenantor.
(b) As used in this Agreement, the term "Confidential Information"
------------------------
means information that is not in the public domain and that was used, developed
or obtained by the Covenantor in connection with 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
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, the Covenantor shall have no liability to the Company for disclosure
or use of Confidential Information if the Confidential Information:
(i) is known to the receiving party at the time of
disclosure by the Covenantor to the receiving party of such Confidential
Information other than as the result of a breach of this Section 4 by the
Covenantor;
(ii) becomes publicly known or is disclosed by the Company
other than as the result of a breach of this Section 4 by the Covenantor;
(iii) is received by the Covenantor after the date of this
Agreement from a third party that is not under an obligation of
confidentiality to the Company;
(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, except
to the extent prohibited by law, the Covenantor shall give the Company
notice of its intent to so disclose such Confidential Information and shall
reasonably cooperate with the Company in seeking suitable confidentiality
protections; or
(v) relates to HTA.
Section 5. Representations and Warranties.
------------------------------
(a) The Covenantor hereby represents and warrants to the Company that
(i) the execution, delivery and performance of this Agreement by the Covenantor
does not and will not conflict with, breach, violate or cause a default under
any agreement, contract or instrument to which the Covenantor is a party or any
judgment, order or decree to which the Covenantor is subject, (ii) the
Covenantor is not a party to or bound by any employment agreement, consulting
<PAGE>
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
the Covenantor, this Agreement will be a valid and binding obligation of the
Covenantor.
(b) The Company hereby represents and warrants to the Covenantor 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 the
Covenantor, this Agreement will be a valid and binding obligation of the
Company.
Section 6. Enforcement.
-----------
(a) Because the relationship between the Company and the Covenantor
is unique and because the Covenantor has had access to Confidential Information,
the parties hereto 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 the 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 the 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 7. 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 Asset 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
<PAGE>
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 the 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.
(e) Jurisdiction and Venue.
----------------------
(i) THE COMPANY AND THE COVENANTOR HEREBY IRREVOCABLY AND
UNCONDITIONALLY SUBMIT, FOR THEMSELVES AND THEIR 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, AND THE COMPANY AND THE 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 SUCH FEDERAL COURT, PROVIDED THAT, IN THE EVENT THAT ANY
SUCH FEDERAL COURT HAS JURISDICTION, THE PARTIES SHALL INSTITUTE ANY SUCH
ACTION OR PROCEEDING IN SUCH FEDERAL COURT AND NOT IN SUCH STATE COURT. THE
COMPANY AND THE 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.
(ii) THE COMPANY AND THE 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 THE 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.
<PAGE>
(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 the
Covenantor, 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.
(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 and
--------------
future Affiliates including those Affiliates listed on Exhibit B, and, with
---------
respect to the Covenantor, the Covenantor's current and future Affiliates;
provided, however, that a future Affiliate of the Company shall not be
considered part of its "Business Group" unless and until the Company provides
notice to the Convenantor in writing that such Person is an Affiliate of the
Company.
(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 Asset Purchase Agreement.
<PAGE>
(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
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: (510) 460-3660
<PAGE>
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 Covenantor, to:
BEI Medical Systems Company, Inc.
100 Hollister Drive
Teterboro, NJ 07608
Attention: Richard W. Turner, President & CEO
Telecopier: (201) 727-4998
with a copy to:
Cooley Godward LLP
One Maritime Plaza
20th Floor
San Francisco, CA 94111-3580
Attention: Christopher A. Westover, Esq.
Telecopier: (415) 951-3699
* * * *
<PAGE>
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:
BEI MEDICAL SYSTEMS COMPANY, INC.
By: ________________________________
Name:
Title:
<PAGE>
EXHIBIT A
---------
HTA Related Products
--------------------
1. Endoscopic Light Source (any method).
2. Hysteroscopic Video Camera System.
3. Flexible Hysteroscope System.
4. Rigid Hysteroscope System.
5. Cervical Sealing Tenaculum.
6. Disposable Cervical Dilator.
7. Those Products which are identified by asterisk on Annex A to Schedule
1.1 of the Asset Purchase Agreement as components and/or finished
goods required in the support of HTA.
<PAGE>
EXHIBIT B
---------
The Company Affiliates
----------------------
<TABLE>
<CAPTION>
JURISDICTION OF
NAME INCORPORATION
- --------------------------------------------------------------------------------------
<S> <C>
1. The Cooper Companies, Inc. Delaware
2. The Cooper Healthcare Group, Inc. Delaware
a. Unimar, Inc. California
3. CVP, Inc. Delaware
4. The Cooper Real Estate Group, Inc. Delaware
5. CooperVision, Inc. New York
a. CooperVision Inc. Canada
6. Marlow Surgical Acquisition (dormant) Delaware
a. CooperVision GB Finance, Inc. (dormant) Delaware
b. CooperVision GB Services, Inc. (dormant) Delaware
7. Hospital Group of America, Inc. Delaware
a. HGA Management Services, Inc. Delaware
b. Hospital Group of Delaware, Inc. Delaware
c. Hospital Group of Illinois, Inc. Illinois
d. Hospital Group of Louisiana, Inc. Louisiana
e. Residential Centers of Indiana, Inc. Delaware
f. Hospital Group of New Jersey, Inc. New Jersey
g. Hampton Learning Center, Inc. New Jersey
h. HGNJ, Inc. New Jersey
8. Arlington Center for Recovery, L.L.C. Illinois
9. MeadowWood Health Services, L.L.C. Delaware
10. CooperSurgical, Inc. Delaware
a. CooperSurgical, Inc. Canada
b. HBH Medizintechnik GmbH Germany
11. Aspect Vision Holdings, Limited England-Wales
a. Aspect Vision Care Limited England-Wales
b. Contact Lens Technologies Limited England-Wales
c. Aspect Specialty Limited England-Wales
d. New Focus HealthCare Limited England-Wales
e. Aspect Vision Italia s.r.l. Italy
f. Focus Solutions Limited England-Wales
g. Averlan Company Limited England-Wales
h. Aspect Contact Lenses Limited England-Wales
12. CooperVision Limited England-Wales
</TABLE>
NOTE: Except for CooperSurgical and its 52% owned subsidiary, HBH Medizintechnik
GmbH, each subsidiary is wholly-owned either by The Cooper Companies, Inc. or by
the wholly-owned subsidiary under which it is indented in the list above. In the
case of CooperSurgical, Inc., 99.8% of the company is owned by The Cooper
Companies, Inc. and the remaining .2% is owned by members of CooperSurgical's
Medical Advisory Board.
<PAGE>
EXHIBIT G TO
ASSET PURCHASE
AGREEMENT
---------
NONCOMPETITION AGREEMENT dated as of
______ __, 1999, among COOPERSURGICAL ACQUISITION
CORP., a Delaware corporation (the "Company"), and
-------
RICHARD W. TURNER, an individual ("Turner" or the
------
"Covenantor").
----------
Reference is made to the Asset Purchase Agreement (the "Asset Purchase
--------------
Agreement") dated as of October __, 1999, and the Non-Competition Agreement (the
- ---------
" B Non-Competition Agreement") dated as of the date hereof, each between the
- -------------------------
Company and B Company, a Delaware corporation ("B"). Pursuant to the Asset
-
Purchase Agreement, the Company is acquiring substantially all of the assets,
including the products listed on Exhibit A hereto (the "Turner Products"), of B
--------- ---------------
which comprise the Business. This Agreement is being entered into pursuant to
the Asset Purchase Agreement.
Turner has been an executive active in the business and affairs of B
and has personally developed numerous relationships and successful practices and
procedures which constitute the goodwill of the Business. In consideration of
the Company purchasing the Purchased Assets under the Asset Purchase Agreement
and in order to prevent the Company from being economically harmed by a loss of
the goodwill associated with the Business, Turner has 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; Consideration.
------------------------------------
(a) Capitalized terms used but not otherwise defined herein have the
meanings set forth in the Asset Purchase Agreement.
(b) The Covenantor has been employed by B under a letter agreement
dated January 24, 1999, a copy of which is attached as Exhibit B hereto (the
---------
"Turner Letter"), which gives Turner certain rights including, among others, an
-------------
option to be paid certain monies by B upon the occurrence of a sale of B prior
to January 31, 2000, and Turner has agreed to defer the exercise of those rights
pending the conclusion of a new employment agreement with B. In addition, B may
be paying additional amounts to Turner for the transaction contemplated by the
Asset Purchase Agreement.
Section 2. Non-competition and Non-solicitation.
------------------------------------
(a) Subject to the second paragraph of Section 2(a), Covenantor
agrees that, during the Non-Compete Period (as defined below), the 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
<PAGE>
any manner engage in any business within any Restricted Territory (as defined
below) competing with the Turner Products, including any improvements and
replacements for the Turner Products, or competing with any other products or
procedures which are used to perform the same function as, or the same
treatments and procedures performed by the Turner Products ("Functionally
------------
Equivalent Products"), or a business developing Functionally Equivalent
- -------------------
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 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. As used in this Agreement, the term
"Non-Compete Period" means the period beginning on the date of this Agreement
------------------
and ending on the third anniversary of the date of this Agreement. As used in
this agreement, 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.
Nothing in this Section 2 shall prohibit the Covenantor from (i)
engaging, directly or indirectly, as an owner, manager, controlling person,
participant, agent, employee, consultant, advisor, representative, stockholder,
partner, joint venturer or otherwise in the development, manufacture, sales,
marketing or service of the product known as Hydro ThermAblator or HTA, or any
improvement to or replacement for such product (collectively, "HTA") and,
---
subject to the immediately succeeding paragraph, the sale and service of the
products listed on Exhibit C, or any improvement to or replacement for such
----------
products listed on Exhibit C (the "HTA Related Products"), or (ii) being a
--------- --------------------
passive owner of not more than (A) 4% of the outstanding equity interests of any
class of a Person, the securities of which are publicly traded, or (B) 1% of the
outstanding equity interests of any class of a Person, the securities of which
are privately held, so long as the Covenantor has no active participation in the
business of such Person, or (iii) serving as an employee or consultant for any
Person, if (A) the sales of such Person to the gynecological, infertility and
family practice medical markets (collectively, the "Proscribed Markets"), or any
------------------
of such markets, do not exceed 25% of the total sales of such Person, and (B)
none of the activities of the Covenantor relate directly or indirectly to the
activities of such Person which, as to the Covenantor, are prohibited under
Section 2(a), or (iv) serving as an employee or consultant for any Person
selling products or services to the Proscribed Markets, or any of them, which
products or services do not include the Turner Products or Functionally
Equivalent Products.
The HTA Related Products may only be marketed, sold or serviced,
directly or through distribution channels, (A) solely in connection with the
sale or use of HTA by medical professionals, and (B) in a number reasonably
necessary to facilitate the use by such medical professionals of HTA, and (C) to
the medical professionals purchasing or using HTA. Any marketing, sale or
service of an HTA Related Product which does not strictly comply with the
immediately preceding sentence is a violation of the Covenantor's obligations
under this Agreement. Notwithstanding the first two sentences in this paragraph,
sales of HTA Related Products shall not be subject to the restrictions in such
sentences so long as such sales are made only by a Person described in clause
(iii) of the immediately preceding paragraph as part of the
<PAGE>
sales of such a Person to the Proscribed Markets, or any of them, which do not
exceed 25% of the total sales of such Person.
(b) During the Non-Compete Period, the Covenantor agrees that the
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 or its Business Group until six 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 relationships 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; provided,
however, that the Covenantor shall not be deemed to interfere with the
relationship of the Company or its Business Group with a customer, supplier,
consultant, licensee or other business relation solely because, in compliance
with this Agreement, the Covenantor does business on a non-exclusive basis with
such Person.
(c) Turner acknowledges that, in the course of his employment with B
and/or its Business Group (as defined below) and their predecessors, he has
become familiar with B's and its Business Group's and their predecessors' trade
secrets and with other Confidential Information (as defined below) concerning B,
its Business Group and their respective predecessors and that his services have
been of special, unique and extraordinary value to B and its Business Group.
(d) Turner understands that the foregoing restrictions may limit his
ability to earn a livelihood in a business similar to the Business. However,
Turner has been a manager and an executive for many years in different types of
businesses, some of which are similar and some of which are not similar to the
Business. Turner does not believe that the restrictions in this Agreement, given
Turner's education, skills, experience and ability, would prevent him from
earning a living.
Section 3. Option To Modify Non-Competition Covenant in Section 2 (a).
----------------------------------------------------------
(a) Pursuant to the B Non-Competition Agreement, the Company granted
to B the right and option (the "Option"), exercisable by B under the terms
------
specified in Section 3 of the B Non-Competition Agreement, to modify the non-
competition covenant in Section 2(a) of the B Non-Competition Agreement. The
Option may be exercised by B strictly in the manner provided in Section 3 of the
B Non-Competition Agreement solely on the occurrence of the first Change of
Control or Joint Venture Arrangement (each as defined in the B Non-Competition
Agreement) which is consummated after the date of this Agreement.
(b) In the event that B exercises the Option, then, so long as Turner
at the time of the exercise of the Option has been continually employed or
retained as a consultant by B, and continues without interruption to be so
employed or so retained as a consultant by B or the
<PAGE>
Person which acquires control of B as a result of the Change of Control or which
engages with B in the Joint Venture Arrangement upon which the exercise of the
Option is based, Turner may, solely as an employee or a consultant to such
Person, engage in the same activities that such Person may engage in pursuant to
section 3(c) of the B Non-Competition Agreement. If Turner is not so employed or
so retained as a consultant and commencing at any time as he does not continue
without interruption to be so employed or so retained as a consultant, then the
provisions of this Agreement shall remain in effect unmodified by this Section
3. A leave of absence for family or medical reasons will not be deemed an
interruption in continual employment or consulting by Turner for such Person.
Section 4. Confidentiality.
---------------
(a) The Covenantor will not disclose or use at any time during the
Non-Compete Period any Confidential Information of which the Covenantor is or
becomes aware, whether or not such information was developed by the Covenantor.
(b) As used in this Agreement, the term "Confidential Information"
------------------------
means information that is not in the public domain and that was used, developed
or obtained by the Covenantor in connection with the Business, including but not
limited to (i) information, observations and data obtained by Turner while
employed by B Company or any predecessors thereof concerning the Business, (ii)
products or services, (iii) fees, costs and pricing structures, (iv) designs,
(v) analyses, (vi) drawings, photographs and reports, (vii) computer software,
including operating systems, applications and program listings, (viii) flow
charts, manuals and documentation, (ix) data bases, (x) accounting and business
methods, (xi) inventions, devices, new developments, methods and processes,
whether patentable or unpatentable and whether or not reduced to practice, (xii)
customers and clients and customer or client lists, (xiii) other copyrightable
works, (xiv) all production methods, processes, technology and trade secrets,
and (xv) all similar and related information in whatever form.
(c) Notwithstanding the provisions of this Agreement to the contrary,
the Covenantor shall have no liability to the Company for disclosure or use of
Confidential Information if the Confidential Information:
(i) is known to the receiving party at the time of disclosure
by the Covenantor to the receiving party of such Confidential Information
other than as the result of a breach of this Section 4 by the Covenantor;
(ii) becomes publicly known or is disclosed by the Company other
than as the result of a breach of this Section 4 by the Covenantor;
(iii) is received by the Covenantor after the date of this
Agreement from a third party that is not under an obligation of
confidentiality to the Company;
(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, except to the
extent prohibited by law, the Covenantor shall give the Company notice of
its intent to so disclose such Confidential Information and shall
reasonably cooperate with the Company in seeking suitable confidentiality
protections;
<PAGE>
(v) relates to HTA; or
(vi) is independently developed by the Covenantor in connection
with matters unrelated to the Turner Products or Functionally Equivalent
Products without reference to or reliance upon Confidential Information;
provided, that such independent development can be reasonably proven by the
Covenantor by written records.
Section 5. Representations and Warranties.
------------------------------
(a) The Covenantor hereby represents and warrants to the Company
that (i) the execution, delivery and performance of this Agreement by the
Covenantor does not and will not conflict with, breach, violate or cause a
default under any agreement, contract or instrument to which the Covenantor is a
party or any judgment, order or decree to which the Covenantor is subject, (ii)
the Covenantor is not 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 the Covenantor, this Agreement will be a valid and binding
obligation of the Covenantor.
(b) The Company hereby represents and warrants to the Covenantor
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 the Covenantor, this Agreement will be a valid and binding
obligation of the Company.
Section 6. Enforcement.
------------
(a) Because the relationship between the Company and the Covenantor
is unique and because the Covenantor has had access to Confidential Information,
the parties hereto 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 the 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 the Covenantor to account
for and pay over to the Company all compensation, profits, moneys, accruals,
increments or other benefits derived or received as a 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 7. 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
<PAGE>
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 Asset 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 the 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.
(e) Jurisdiction and Venue.
----------------------
(i) THE COMPANY AND THE COVENANTOR HEREBY IRREVOCABLY AND
UNCONDITIONALLY SUBMIT, FOR THEMSELVES AND THEIR PROPERTY, TO THE EXCLUSIVE
JURISDICTION OF ANY 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, AND THE COMPANY AND THE 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
SUCH FEDERAL COURT, PROVIDED THAT, IN THE EVENT THAT ANY SUCH FEDERAL COURT
HAS JURISDICTION, THE PARTIES SHALL INSTITUTE ANY SUCH ACTION OR PROCEEDING
IN SUCH FEDERAL COURT AND NOT IN SUCH STATE COURT. THE COMPANY AND THE
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
<PAGE>
LAW; PROVIDED THAT, NOTWITHSTANDING THE FOREGOING, IF THE COVENANTOR IS A
DEFENDANT IN ANY SUCH ACTION OR PROCEEDING IN WHICH B IS NOT ALSO A
DEFENDANT, SUCH ACTION OR PROCEEDING SHALL INSTEAD BE BROUGHT AND
MAINTAINED IN ANY COURT IN THE STATE OR COUNTY IN WHICH THE COVENANTOR'S
PRINCIPAL RESIDENCE IS LOCATED OR IN WHICH THE COVENANTOR'S PRINCIPAL PLACE
OF BUSINESS IS LOCATED.
(ii) SUBJECT TO (e)(i), THE COMPANY AND THE COVENANTOR
IRREVOCABLY AND U NCONDITIONALLY 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 THE 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.
(iii) THE COVENANTOR HEREBY CONSENTS TO SERVICE OF PROCESS BY
MAIL IN THE COUNTY IN WHICH THE COVENANTOR'S PRINCIPAL RESIDENCE IS LOCATED
OR IN WHICH THE COVENANTOR'S PRINCIPAL PLACE OF BUSINESS IS LOCATED AND
SUCH SERVICE SHALL BE DEEMED TO BE GOOD AND SUFFICIENT SERVICE FOR ALL
PURPOSES. THE COVENANTOR SHALL NOTIFY THE COMPANY PURSUANT TO THIS
AGREEMENT OF EACH OF HIS PRINCIPAL PLACE OF RESIDENCE AND PRINCIPAL PLACE
OF BUSINESS.
<PAGE>
(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 the
Covenantor, 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.
(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 and future
- -----
Affiliates, including those Affiliates listed on Exhibit D; provided, however,
---------
that a future Affiliate of the Company shall not be considered part of its
"Business Group" unless and until the Company provides notice to the Covenantor
in writing that such Person is an affiliate of the Company.
(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 Asset 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.
8
<PAGE>
(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.
(i) if to the Company, to:
CooperSurgical Acquisition Corp.
c/o CooperSurgical, Inc.
15 Forest Parkway
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: (510) 460-3660
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: David I. Karabell, Esq.
Telecopier: (212) 408-2400; and
(ii) Richard W. Turner, the principal place of residence
and telecopier number set forth under Turner's signature
hereto.
9
<PAGE>
with a copy to:
McCarter & English LLP
Four Gateway Center
100 Mulberry Street
Newark, NJ 07702
Attention: William J. Heller, Esq.
Telecopier: (973) 624-7070
10
<PAGE>
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:
________________________________________
RICHARD W. TURNER
Principal Place of Residence:
________________________________________
________________________________________
________________________________________
Principal Place of Business:
________________________________________
________________________________________
________________________________________
<PAGE>
EXHIBIT A
---------
Turner Products
---------------
All of the products listed in the B Gynecology Products 1999 Catalog,
except for the following products:
1. Microscope and endoscope equipment.
2. Generic vaginal specula.
3. Spring - loaded syringe.
4. Sterilization and storage trays.
5. Cryo systems so long as they are sold outside of the GYN and family
practitioner markets.
6. Generic needle holders, clamps and scissors.
7. Office video equipment so long as it is sold outside of the GYN and family
practitioner markets.
8. Endo-sock or other similar retrieval instruments so long as they are sold
outside of GYN and family practitioner markets.
9. Laproscopic insufflater so long as it is sold outside of the GYN market.
<PAGE>
EXHIBIT B
---------
Letter Agreement
----------------
Attached letter agreement dated January 24, 1999 between the Covenantor and B.
<PAGE>
EXHIBIT C
---------
HTA Related Products
--------------------
1. Endoscopic Light Source (any method).
2. Hysteroscopic Video Camera System.
3. Flexible Hysteroscopic System.
4. Rigid Hysteroscopic System.
5. Cervical Sealing Tenaculum.
6. Disposable Cervical Dilator.
7. Those Products which are identified by asterisk on Annex A to Schedule 1.1
of the Asset Purchase Agreement as components and/or finished goods
required in the support of HTA.
<PAGE>
EXHIBIT D
---------
The Company Affiliates
----------------------
JURISDICTION OF
NAME INCORPORATION
- --------------------------------------------------------------------------------
1. The Cooper Companies, Inc. Delaware
2. The Cooper Healthcare Group, Inc. Delaware
a. Unimar, Inc. California
3. CVP, Inc. Delaware
4. The Cooper Real Estate Group, Inc. Delaware
5. CooperVision, Inc. New York
a. CooperVision Inc. Canada
6. Marlow Surgical Acquisition (dormant) Delaware
a. CooperVision GB Finance, Inc. (dormant) Delaware
b. CooperVision GB Services, Inc. (dormant) Delaware
7. Hospital Group of America, Inc. Delaware
a. HGA Management Services, Inc. Delaware
b. Hospital Group of Delaware, Inc. Delaware
c. Hospital Group of Illinois, Inc. Illinois
d. Hospital Group of Louisiana, Inc. Louisiana
e. Residential Centers of Indiana, Inc. Delaware
f. Hospital Group of New Jersey, Inc. New Jersey
g. Hampton Learning Center, Inc. New Jersey
h. HGNJ, Inc. New Jersey
8. Arlington Center for Recovery, L.L.C. Illinois
9. MeadowWood Health Services, L.L.C. Delaware
10. CooperSurgical, Inc. Delaware
a. CooperSurgical, Inc. Canada
b. HBH Medizintechnik GmbH Germany
11. Aspect Vision Holdings, Limited England-Wales
a. Aspect Vision Care Limited England-Wales
b. Contact Lens Technologies Limited England-Wales
c. Aspect Specialty Limited England-Wales
d. New Focus HealthCare Limited England-Wales
e. Aspect Vision Italia s.r.l. Italy
f. Focus Solutions Limited England-Wales
g. Averlan Company Limited England-Wales
h. Aspect Contact Lenses Limited England-Wales
12. CooperVision Limited England-Wales
NOTE: Except for CooperSurgical and its 52% owned subsidiary, HBH Medizintechnik
GmbH, each subsidiary is wholly-owned either by The Cooper Companies, Inc. or by
the wholly-owned subsidiary under which it is indented in the list above. In
the case of CooperSurgical, Inc., 99.8% of the company is owned by The Cooper
Companies, Inc. and the remaining .2% is owned by members of CooperSurgical's
Medical Advisory Board.
<PAGE>
EXHIBIT H TO
ASSET PURCHASE
AGREEMENT
---------
_____________ _____,1999
B Corp.
Ladies and Gentlemen:
We have acted as counsel to CooperSurgical Acquisition Corp., a
Delaware corporation ("Cooper"), in connection with (a) the Asset Purchase
Agreement (the "Asset Purchase Agreement") dated September __, 1999 between
------------------------
Cooper and B Corp., a Delaware corporation (the "Company"), (b) the Bill of
Sale, Assignment and Assumption Agreements each dated the date hereof between
Cooper and the Company and each Subsidiary, respectively (the "Bills of Sale"),
-------------
(c) the Transition Agreement dated the date hereof between Cooper and the
Company (the "Transition Agreement"), and (d) the two Non-Competition Agreements
--------------------
dated the date hereof between Cooper and each of the Company and Richard W.
Turner, respectively (the "Non-Competition Agreements", and together with the
--------------------------
Asset Purchase Agreement, the Bills of Sale and the Transition Agreement, the
"Transaction Documents"). Capitalized terms used but not otherwise defined
---------------------
herein have the meanings given them in the Asset Purchase Agreement. This
opinion is being delivered pursuant to Section 6.6 of the Asset 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 Cooper delivered at the
Closing and (iii) certificates of public officials.
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. Although we note that the Asset Purchase Agreement and the
Transition Agreement are, by their terms, governed by the laws of the State of
Delaware we have assumed, with your consent, for purposes of the opinions
expressed below that each such agreement is governed by and construed in
accordance with the laws of the State of New York without giving effect to
principles of conflicts of law. We do not express any opinion with respect to
any provisions of the Asset Purchase Agreement and the Transition Agreement
providing for the choice of the laws of the State of Delaware . 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.
<PAGE>
Based upon the foregoing, we are of the opinion that:
1. Cooper is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware.
2. Cooper has all necessary corporate power and authority to execute,
deliver, and perform its obligations under each Transaction Document to which it
is a party and to consummate the transactions contemplated thereby. The
execution and delivery by Cooper of each Transaction Document to which it is a
party and the consummation by Cooper of the transactions contemplated thereby
have been duly and validly authorized by all necessary corporate action on the
part of Cooper.
3. Cooper has duly and validly executed and delivered each Transaction
Document to which it is a party. Each Transaction Document to which Cooper is a
party constitutes a legal, valid and binding obligation of Cooper, enforceable
against Cooper in accordance with its terms.
4. The execution and delivery by Cooper of each Transaction Document to
which it is a party and its performance of its obligations thereunder will not
(i) conflict with or violate (with or without notice or lapse of time or both)
its Certificate of Incorporation or By-Laws, or (ii) conflict with or violate
(with or without notice or lapse of time or both) any Law applicable to it.
5. The execution and delivery by Cooper of each Transaction Document to
which it is a party does not, and the performance of its obligations thereunder
will not, require any consent, approval, authorization or permit of, or filing
with or notification to, any Governmental Entity.
Our opinion is subject to the General Qualifications (as defined in
the Accord) and the opinions expressed in clause (ii) of paragraph 4 above and
in paragraph 5 above are 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,
<PAGE>
SCHEDULE 1.1
[OMITTED]
<PAGE>
SCHEDULE 1.6
Assumed Liabilities
-------------------
A) The Assumed Liabilities shall consist of and be assumed in the following
order:
1. First, to the extent of any trade accounts payable ("Trade Payables") up to
--------------
$350,000;
2. Second, up to $25,000 of warranty obligations ("Warranty Obligations") up
--------------------
to the difference between $350,000 and the lesser amount of Trade Payables
so assumed;
3. Third, to the extent of the amount at Closing of any accrued sales return
obligations ("Sales Return Obligations") up to the difference between
------------------------
$350,000 and the sum less than $350,000 of the amount of Trade Payables and
Warranty Obligations so assumed; and
4. Fourth, the amount at Closing of any accrued royalty obligations
("Royalty Obligations"), up to any remaining difference between $350,000
-------------------
and the sumless than $350,000 of the amount of Trade Payables, Warranty
Obligations and Sales Return Obligations so assumed.
Any part of the Liabilities referred to above which are not Assumed
Liabilities are Excluded Liabilities. The Seller shall pay such Excluded
Liabilities as part of its indemnification obligations to the Purchaser
Indemnified Persons under this Agreement. Since $25,000 of Warranty Obligations
is a negotiated number, the Seller shall pay to the Purchaser upon delivery of
the Statements pursuant to this Agreement an amount equal to all or any part of
the Warranty Obligations which are Excluded Liabilities, if any; provided,
however, that if the Seller pays such amounts to the Purchaser promptly when
due, such amounts shall not be counted towards the calculation of the Losses
under Section 7.5(a). The Seller shall pay to the Purchaser an amount equal to
all or any part of the Trade Payables, Sale Return Obligations and Royalty
Obligations which are Excluded Liabilities when the Purchaser incurs such
liabilities and makes a claim under Section 7 of this Agreement therefor.
B) The Assumed Liabilities shall also consist of approximately $11,000 owed by
the Seller to Venusa, Ltd. for tooling pursuant to the Letter Agreement
dated October 2, 1998 between the Seller and Venusa, Ltd. This Liability
shall be assumed by the Purchaser in addition to the Liabilities assumed by
the Purchaser under subsection (A).
<PAGE>
SCHEDULE 1.7
Excluded Liabilities
--------------------
The Purchaser is not assuming any of the following Excluded Liabilities:
(a) any Liability of the Seller or any Subsidiary under this
Agreement;
(b) any Liability of the Seller or any Subsidiary 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 brokerage fees
incurred by or imposed upon the Seller or any Subsidiary);
(c) any Liability of the Seller or any Subsidiary for any
indebtedness;
(d) any Liability of the Seller or any Subsidiary under any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Seller or any
Subsidiary is a party or by which the Seller or any Subsidiary or its or any of
their respective properties is bound or affected other than Assumed Liabilities
specified in Schedule 1.6 and Liabilities assumed by the Purchaser in accordance
with Section 1.6 which accrue from and after the Closing pursuant to the Assumed
Contracts;
(e) any Liability relating to any Employee Benefit Plan;
(f) any Liability of the Seller or any Subsidiary for worker's
compensation; and
(g) any Liability of the Seller or any Subsidiary which relate to the
Excluded Assets;
The Seller and each Subsidiary shall pay, discharge and perform all
its respective Excluded Liabilities promptly when due.
<PAGE>
SCHEDULE 1.8(a)
Sales Shortfall Calculation
---------------------------
The Sales Shortfall shall be calculated as follows:
1. The amount of Included Sales for the period beginning on January 3,
1999 and ending on October 2, 1999 (each, a "Channel Sales Amount") shall be
--------------------
calculated for the following categories of buyers: (a) U.S. End User; (b) U.S.
Distributor; (c) Non-U.S. (except for OEM); and (d) OEM.
2. Each Channel Sales Amount shall then be multiplied by the sales
multiple specified on Annex A hereto under the column headed by the buyer
category for which such Channel Sales Amount was calculated, which appears
opposite the name of each Product. The product of each such modification is
called, a "Total Channel Sales Amount".
--------------------------
3. All Total Channel Sales Amounts for each Product shall be added
together to determine the "Product Sales Amount".
--------------------
4. All the Product Sales Amounts shall be added together to determine the
"9 Month Total Sales Amount" for all Products.
--------------------------
5. The 9 Month Total Sales Amount shall be annualized by dividing such
amount by 9, then multiplying the result of such calculation by 12, to determine
the "Total Annualized Sales Amount".
-----------------------------
6. The amount, if any, by which the Total Annualized Sales Amount is less
than $11,231,600 is the "Sales Shortfall". Such Sales Shortfall, if any, shall
---------------
be subtracted from the Purchase Price paid by the Purchaser to the Seller on the
Closing Date.
"Included Sales" means all sales for each Product which is sold in the
ordinary course of the Business, except (i) sales of OEM Industrial Products and
(ii) any sales of Products to Fujinon, Inc., PENTAX Precision Instrument
Corporation and ERBE USA, Inc. excluded pursuant to the last sentence of Section
4.1.
<PAGE>
ANNEX A
TO
SCHEDULE 1.8(a)
Product Sales Multiple Analysis
-------------------------------
<TABLE>
<CAPTION>
Non-United
States
United States United States (Except
Buyer Categories End User Distributor for OEM) OEM
- --------------------------------------------------------- ------------- ------------- ---------- -------
<S> <C> <C> <C> <C>
LEEP Products:
- -------------
Electrodes 2.21 1.66 1.11 0.28
Procedure Kits 2.21 1.66 1.11 0.28
Other Disposable 2.21 1.66 1.11 0.28
------------- ------------- ---------- -------
Sub total - LEEP Disposables N/A N/A N/A N/A
Hardware 1.11 0.55 0.28 0.28
Coated Instruments 1.11 0.55 0.28 0.28
------------- ------------- ---------- -------
Total LEEP Products N/A N/A N/A N/A
Other GYN Products:
- ------------------
Zumi 2.21 1.66 1.11 0.28
Zui 2.21 1.66 1.11 0.28
HSG/SHG 2.21 1.66 1.11 0.28
Z-Samplers 2.21 1.66 1.11 0.28
Endo-Sock/Mega-Pouch 2.21 1.66 1.11 0.28
Other GYN Disposables 2.21 1.66 1.11 0.28
------------- ------------- ---------- -------
Sub total - GYN Disposables N/A N/A N/A N/A
Biopsy Punch 2.21 1.66 1.11 0.28
Specula 2.21 1.66 1.11 0.28
Z-Clamps 2.21 1.66 1.11 0.28
Z-Scissors 2.21 1.66 1.11 0.28
OS Finder 2.21 1.66 1.11 0.28
Nichols Pelvic Surgery Set 2.21 1.66 1.11 0.28
Other Reusable Instruments 1.11 0.55 0.28 0.28
------------- ------------- ---------- -------
Sub total - GYN Instruments N/A N/A N/A N/A
Colposcopes 1.11 0.55 0.28 0.28
Hysteroscopy System 1.11 0.55 0.28 0.28
Cryo System 1.11 0.55 0.28 0.28
------------- ------------- ---------- -------
N/A N/A N/A N/A
TOTAL OTHER GYN N/A N/A N/A N/A
TOTAL GYN SALES N/A N/A N/A N/A
Other Products:
- --------------
GYNESYS Products N/A 0.28 0.28 0.28
Misc. Hardware 0.28 0.28 0.28 0.28
GI Products 0.28 0.28 0.28 0.28
OEM Products 0.28 0.28 0.28 0.28
HTA Products N/A N/A N/A N/A
TOTAL OTHER PRODUCTS N/A N/A N/A N/A
TOTAL BEI SALES N/A N/A N/A N/A
</TABLE>
<PAGE>
SCHEDULE 1.10(a)
Inventory Valuation Rules
-------------------------
A. Finished Goods Inventory
------------------------
Finished goods inventory of the Business on hand at the Facilities of
the Seller at Closing and not held by vendors shall be valued for purposes of
the Inventory Statement as provided in this Schedule
1. The number of units of each separate Product will be counted. The
result of this count for each Product is called the "Closing Unit Number." For
-------------------
this count, the following will be treated as one Product: (a) like Products
which are sold by the Seller in different package configurations (i.e., ZUMI 4.5
Box of 12 and ZUMI single will be treated as one Product); (b) groups of common
Products in varying sizes or configurations which the Seller has frequently sold
and promoted in sets (i.e., Z-Clamps and Z-Scissors will be treated as one
Product); and (c) a Product which is sold by the Seller in the United States and
the same Product which has been modified solely to meet requirements for a sale
by the Seller outside of the United States (i.e., a Lletz Plus II Generator in a
110-volt configuration for the United States market and in a 220-volt
configuration for the market outside the United States shall be treated as one
Product).
2. The "Two Year Sales Number" for each Product shall be determined.
---------------------
Two Years Sales Number for each Product means the number of units of such
Product sold by the Seller during the ten month period commencing October 1,
1998 and ending July 31, 1999 divided by 10 and multiplied by 24.
3. The excess, if any, of the Closing Unit Number for each Product
over the Two Year Sales Number for the same Product shall have zero value for
purposes of calculating the value of finished goods inventory on hand at
Closing.
4. That number of units of finished goods inventory of each Product
on hand at Closing not in excess of the Two Year Sales Number for the same
Product shall be valued as follows;
(a) The lessor of (i) The full absorbed standard costs
historically used by the Seller to value finished goods inventory
("Standard Costs"); or
--------------
(ii) the lesser of (x) the value of such inventory at the lower
of cost or market, (y) for the bipolar Product line (including generators,
Loops and Balls), 25% of Standard Costs and (z) for demonstration inventory
(except demonstration inventory consisting of the bipolar Product line), if
placed in service by the Seller within the four year period preceding the
Closing Date, 50% of Standard Costs, and if placed in service by the Seller
prior to such four year period, zero; and
(b) Evaluation Inventory represented by an invoice bearing a
date which is less than 90 days prior to the Closing Date, 50% of the
amount of the invoice
<PAGE>
SCHEDULE 5.7
[OMITTED]
<PAGE>
SCHEDULE 1.10(a) - Page 2
representing such inventory, and Evaluation Inventory represented by an invoice
bearing a date which is 90 days or more prior to the Closing Date, zero.
5. Notwithstanding the foregoing, (a) OEM Industrial Inventory shall
be valued at zero and (b) that number of units at Closing of finished goods
inventory of the integrated video system Product which equals up to the greater
of (x) the Two Year Sales Number for that Product and (y) 24, shall be valued at
Standard Costs. The excess of units of such inventory over such number of units
at Closing shall be valued at zero.
B. Raw Materials Inventory and Inventory Held By Vendors
-----------------------------------------------------
Attached to this Schedule is an analysis of raw material inventory of
the Business at July 31, 1999, separated into categories of Products. The
inventory in such analysis constitutes approximately 72% of the value of all raw
material inventory of the Business at that date. The valuation percentage of
Standard Costs for each category of Products in the analysis is specified
opposite the description of such category. Raw material and unfinished inventory
and inventory of the Business held by vendors and not located at Closing at the
Seller's Facilities (except inventory held by Venusa, Ltd.) which is a component
of or included in each category of Products will be valued at the same
percentage of Standard Costs as raw material, unfinished inventory and inventory
included in such analysis. Raw material, unfinished inventory and inventory held
by Venusa, Ltd. shall be valued at zero.
C. Work-in-Process
---------------
Work-in-Process shall be valued at Standard Cost therefor.
D. General
-------
HTA inventory and components and inventory of Products which have been
discontinued by the Seller shall be valued at zero. HTA inventory and components
are not part of the Purchased Assets. Inventories of Products that have been
discontinued are part of the Purchased Assets. Units of Products which are
Products used in the Business and which are also HTA Related Products (as
defined in the Non-Competition Agreement) shall be divided as follows:
(a) that percentage of units of such products on hand at Closing
equal to the percentage of the Seller's sales of all Products for the nine
(9) month period ended September 30, 1999 represented by sales of Products
used in the Business shall constitute Purchased Assets.
(b) The balance of units of such products on hand at Closing shall
constitute Excluded Assets.
As specified in the Agreement to which this Schedule is attached,
inventory shall be valued in accordance with GAAP, applied consistently with the
Seller's allocations thereof, as GAAP may be modified by this Schedule.
<PAGE>
SELLER DISCLOSURE SCHEDULE
[OMITTED]
<PAGE>
Exhibit 99.1
For further information, please contact:
Thomas W. Fry, Chief Financial Officer
BEI Medical Systems Company, Inc.
201/727-4900 Fax: 201/727-4998
http://www.beimedical.com
[email protected]
BEI MEDICAL SYSTEMS TO SELL CERTAIN PRODUCT LINES FOR CASH;
WILL FOCUS ON HYDRO THERMABLATOR(R) SYSTEM
TETERBORO, NJ, October 4, 1999 - BEI Medical Systems Company, Inc. (Nasdaq:
BMED) has entered into an agreement to sell certain product lines to
CooperSurgical, Inc., a subsidiary of The Cooper Companies (NYSE: COO), for
approximately $11.2 million in cash and assumption of specified liabilities.
Such amount will be reduced by certain fees and may be reduced by adjustments to
be determined at and after closing of the sale. Following the sale, BEI will
focus exclusively on the Company's Hydro ThermAblator(R), or HTA(R), system to
treat excessive uterine bleeding, according to Richard W. Turner, president and
chief executive officer. The transaction is expected to be completed in
November.
The sale represents products that presently account for approximately 96% of the
Company's revenues and is subject to approval by the stockholders of BEI Medical
Systems and other customary conditions. The sale includes two product lines
that are utilized by gynecologists in daily practice, for such procedures as
examination, manipulation and treatment of the cervix and uterus, and a product
line used in gastroenterology.
Turner said, "This transaction focuses our business on the HTA system and
provides the resources to further develop and market the HTA system worldwide.
We remain enthusiastic about the commercial potential of this new system for
endometrial ablation as a treatment for menorrhagia, or excessive uterine
bleeding. The Company recently completed the patient treatment stage of the
Phase III clinical trial and will continue the pre-market approval process with
the Food and Drug Administration, while continuing to market and promote the
product internationally."
"We will work closely with CooperSurgical over the next few months for the
smooth transition of the portion of our business we are selling. At the same
time, while our revenue generating activity will decline substantially following
the sale, we will concentrate our energies on the HTA system, and we expect to
emerge as a stronger company. Although FDA approval of any medical devices is
uncertain, our goal is to file for pre-market approval in the fall of 2000,
after one year follow-up of the Phase III patients. We look forward to the
opportunity to demonstrate the inherent value of the HTA to the market and to
our stockholders."
<PAGE>
-2-
BEI Medical Systems Company, Inc. is an emerging manufacturer of diagnostic and
therapeutic products focused on gynecology and women's health issues. Products
comprising the Company's base business include disposable and reusable
instruments, visualization instruments (which include hysteroscopy and other
video systems), electrosurgery systems, catheters and procedure kits. In
addition, the Company is conducting clinical trials of a proprietary system, the
Hydro ThermAblator, or HTA system, which is intended to treat excessive uterine
bleeding, or menorrhagia, to avoid hysterectomy. BEI Medical Systems(R), Hydro
ThermAblator(R), and HTA(R) are registered trademarks of BEI Medical Systems
Company, Inc. in the United States and certain foreign countries.
Except for historical information, this news release may be deemed to contain
forward-looking statements that involve risks and uncertainties, including
statements with respect to timely development and acceptance and pricing of
BEI's products and, in particular, HTA products; whether BEI Medical's new
products now in U.S. or international clinical trials prove to be safe and
effective under applicable regulatory guidelines; receipt of required FDA
approvals; the impact of competitive products and pricing; and general economic
conditions as they affect BEI Medical's customers, as well as other risks
detailed from time to time in the Company's reports to the Securities and
Exchange Commission, including the Company's Form 10-K Annual Report for fiscal
1998.
* * * *
