864736v1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): July 12, 1999
ISOLYSER COMPANY, INC.
(Exact Name of Registrant as Specified in Its Charter)
Georgia
(State or Other Jurisdiction of Incorporation)
0-24866 58-1746149
(Commission File Number) (I.R.S. Employer Identification No.)
4320 International Boulevard, Norcross, Georgia 30093
(Address of Principal Executive Offices (Zip Code)
(770) 806-9898
(Registrant's Telephone Number, Including Area Code)
(Former Name or Former Address, if Changed Since Last Report)
864736v1
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Item 2. Acquisition or Disposition of Assets
On July 12, 1999, Isolyser Company, Inc. ("Isolyser") and its wholly
owned subsidiary, MedSurg Industries, Inc. ("MedSurg"), sold to Allegiance
Healthcare Corporation ("Allegiance") substantially all of their assets used
primarily in the business (the "Business") of assembling, packaging, marketing
and selling procedure kits and trays, and Isolyser granted to Allegiance a
worldwide exclusive license (the "License") to Isolyser's proprietary
technologies to make, use and sell products made from material (the "Material")
which can be dissolved and disposed of through sanitary sewer systems for
healthcare applications. Allegiance is not an "affiliate" of Isolyser within the
meanings of the Securities Act of 1933, as amended. The purchase price payable
for such assets and license consisted of approximately $31.3 million in cash,
the assumption by Allegiance of certain liabilities of Isolyser and MedSurg
relating to the Business, and Allegiance's agreement that Isolyser would be the
sole supplier during the term of the License of Material to Allegiance which
would at least include a certain minimum quantity of fabric to be purchased by
Allegiance from Isolyser. The purchase price was negotiated at arms' length.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Businesses Acquired:
Not applicable.
(b) Pro Forma Financial Information:
The required unaudited pro forma financial information will be
filed not more than sixty days after the date this current report must be filed.
(c) Exhibits:
2.1*+ Asset Purchase Agreement dated as of May 25, 1999,
among Allegiance, Isolyser and MedSurg
2.2*+ First Amendment to Asset Purchase Agreement dated as of
July 12, 1999, among Allegiance, Isolyser and MedSurg
2.3 (1)* Supply and License Agreement dated as of July 12, 1999,
between Isolyser and Allegiance
2.4 (1)* Contract Manufacturing Agreement dated as of July 12,
1999, among Allegiance, Isolyser and MedSurg
2.5* Escrow Agreement dated as of July 12, 1999 among
Allegiance, The First National Bank of Chicago and
Isolyser
99.1* Press Release captioned "Isolyser Announces Completion
of Its Sale of MedSurg Industries and License of OREX
Technology to Allegiance" dated July 13, 1999
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* Filed herewith.
+ In accordance with Item 601(b)(2) of Regulation S-K, the schedules have
been omitted and a list briefly describing the schedules is contained in
the table of contents to the Exhibit. The Registrant will furnish
supplementally a copy of any omitted schedule to the Commission upon
request.
(1) Isolyser has applied for confidential treatent of portions of this
Agreement. Accordingly, portions thereof have been omitted and filed
separately with the Securities and Exchange Commission.
864736v1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has caused this report to be duly signed on its behalf by the
undersigned hereunto duly authorized.
ISOLYSER COMPANY, INC.
By: /s/ PETER A. SCHMITT
---------------------------------------
Peter A. Schmitt, Executive Vice President
and Chief Financial Officer
Dated: July 27, 1999
864736v1
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
2.1*+ Asset Purchase Agreement dated as of May 25, 1999,
among Allegiance, Isolyser and MedSurg
2.2*+ First Amendment to Asset Purchase Agreement dated as of
July 12, 1999, among Allegiance, Isolyser and MedSurg
2.3 (1)* Supply and License Agreement dated as of July 12, 1999,
between Isolyser and Allegiance
2.4 (1)* Contract Manufacturing Agreement dated as of July 12,
1999, among Allegiance, Isolyser and MedSurg
2.5* Escrow Agreement dated as of July 12, 1999 among
Allegiance, The First National Bank of Chicago and
Isolyser
99.1* Press Release captioned "Isolyser Announces Completion
of Its Sale of MedSurg Industries and License of OREX
Technology to Allegiance" dated July 13, 1999
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* Filed herewith.
+ In accordance with Item 601(b)(2) of Regulation S-K, the schedules have
been omitted and a list briefly describing the schedules is contained in
the table of contents to the Exhibit. The Registrant will furnish
supplementally a copy of any omitted schedule to the Commission upon
request.
(1) Isolyser has applied for confidential treatent of portions of this
Agreement. Accordingly, portions thereof have been omitted and filed
separately with the Securities and Exchange Commission.
Exhibit 2.1
861986v1 Execution Copy
ASSET PURCHASE AGREEMENT
Dated as of May 25, 1999
Among
ALLEGIANCE HEALTHCARE CORPORATION,
ISOLYSER COMPANY, INC.
and
MEDSURG INDUSTRIES, INC.
<PAGE>
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861986v1
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS................................................1
1.1. Definitions.........................................................1
ARTICLE II PURCHASE AND SALE..........................................8
2.1. Purchased Assets....................................................8
2.2. Excluded Assets....................................................10
2.3. Assumed Liabilities................................................11
2.4. Excluded Liabilities...............................................11
2.5. Non-assignable Contracts...........................................13
ARTICLE III PURCHASE PRICE............................................14
3.1. Purchase Price.....................................................14
3.2. Adjustment to Preliminary Purchase Price...........................14
3.3. Determination of Inventory Adjustment Amount.......................14
3.4. Determination of Net Asset Adjustment..............................16
3.5. Deferred Closing Adjustment to Purchase Price......................16
3.6. Allocation of Purchase Price.......................................17
ARTICLE IV CLOSING...................................................18
4.1. Closing Date.......................................................18
4.2. Payment on the Closing Date........................................18
4.3. Buyer's Additional Deliveries......................................18
4.4. Parent's Deliveries................................................19
4.5. Deferred Closing...................................................20
4.6. Payments in Connection with Certain Personal Property Leases.......21
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND MEDSURG......22
5.1. Organization of Parent.............................................22
5.2. Subsidiaries and Investments.......................................22
5.3. Authority of Parent................................................23
5.4. Financial Statements...............................................23
5.5. Operations Since Balance Sheet Date................................24
5.6. No Undisclosed Liabilities.........................................25
5.7. Taxes..............................................................25
5.8. Availability of Assets.............................................26
5.9. Governmental Permits...............................................26
5.10. Real Property. ....................................................27
5.11. Real Property Leases...............................................27
5.12. Condemnation.......................................................27
5.13. Personal Property..................................................28
5.14. Personal Property Leases...........................................28
5.15. Intellectual Property; Software....................................28
5.16. Accounts Receivable; Inventories...................................29
5.17. Title to Property..................................................30
5.18. Employees and Related Agreements; ERISA............................30
5.19. Employee Relations.................................................30
5.20. Contracts..........................................................31
5.21. Status of Contracts................................................32
5.22. No Violation, Litigation or Regulatory Action......................32
5.23. Environmental Matters..............................................33
5.24. Insurance..........................................................34
5.25. Customers and Suppliers............................................34
5.26. [INTENTIONALLY BLANK]..............................................35
5.27. Warranties and Product Liabilities.................................35
5.28. No Finder..........................................................35
5.29. No Third Party Options.............................................35
5.30. Disclosure.........................................................36
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BUYER...................36
6.1. Organization of Buyer..............................................36
6.2. Authority of Buyer.................................................36
6.3. No Finder..........................................................37
ARTICLE VII ACTION PRIOR TO THE CLOSING DATE..........................37
7.1. Investigation of the Business by Buyer.............................37
7.2. Preserve Accuracy of Representations and Warranties................37
7.3. Consents of Third Parties; Governmental Approvals..................38
7.4. Operations Prior to the Closing Date...............................38
7.5. Notification by Parent of Certain Matters..........................40
7.6. Antitrust Law Compliance...........................................40
7.7. Insurance..........................................................40
7.8. [INTENTIONALLY BLANK]..............................................40
ARTICLE VIII ADDITIONAL AGREEMENTS.....................................40
8.1. Covenant Not to Compete or Solicit Business........................40
8.2. Use of Names.......................................................41
8.3. Taxes..............................................................42
8.4. Discharge of Business' Liabilities.................................43
8.5. Employees and Employee Benefit Plans...............................43
8.6. [INTENTIONALLY BLANK]..............................................43
8.7. Ancillary Agreements...............................................44
8.8. Handling of Returned Products......................................44
ARTICLE IX CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER..............44
9.1. No Misrepresentation or Breach of Covenants and Warranties.........44
9.2. No Changes or Destruction of Property..............................44
9.3. No Restraint or Litigation.........................................45
9.4. Necessary Governmental Approvals...................................45
9.5. Necessary Consents.................................................45
9.6. Maintenance of Accounts............................................45
9.7. Key Employees......................................................45
9.8. [INTENTIONALLY BLANK]..............................................45
9.9. Instrument of Assignment and Ancillary Agreements..................45
ARTICLE X CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MEDSURG.46
10.1. No Misrepresentation or Breach of Covenants and Warranties.........46
10.2. No Restraint or Litigation.........................................46
10.3. Necessary Governmental Approvals...................................46
10.4. Purchase Price, Instrument of Assumption and Ancillary Agreements..46
ARTICLE XI INDEMNIFICATION...........................................46
11.1. Indemnification by Parent..........................................46
11.2. Indemnification by Buyer...........................................47
11.3. Notice of Claims...................................................48
11.4. Third Person Claims................................................48
ARTICLE XII TERMINATION...............................................49
12.1. Termination........................................................49
12.2. Notice of Termination..............................................50
12.3. Effect of Termination..............................................50
ARTICLE XIII GENERAL PROVISIONS........................................50
13.1. Survival of Obligations............................................50
13.2. Confidential Nature of Information.................................50
13.3. No Public Announcement.............................................51
13.4. Notices............................................................51
13.5. Successors and Assigns.............................................52
13.6. Access to Records after Closing....................................53
13.7. Entire Agreement; Amendments.......................................53
13.8. Interpretation.....................................................53
13.9. Waivers............................................................54
13.10. Expenses...........................................................54
13.11. Partial Invalidity.................................................54
13.12. Execution in Counterparts..........................................54
13.13. Further Assurances.................................................54
13.14. Governing Law......................................................55
13.15. Submission to Jurisdiction..........................................55
<PAGE>
Schedules
1.1 Exceptions to Agreed Accounting Principles
2.1(L) Purchased Assets
2.2(I) Inventory on Consignment
2.4(B) Excluded Liabilities
5.1 Organization of Parent
5.2(A) Organization of MedSurg
5.3 Authority of Parent
5.4 Financial Statements
5.5(A) Operations Since Balance Sheet Date
5.5(B) Operations Since Balance Sheet Date
5.6 No Undisclosed Liabilities
5.7 Taxes
5.8 Availability of Assets
5.9 Governmental Permits
5.10 Real Property
5.11 Real Property Leases
5.13 Personal Property
5.14 Personal Property Leases
5.15 Intellectual Property; Software
5.17 Title to Property
5.19 Employee Relations
5.20 Contracts
5.21 Status of Contracts
5.22 No Violation, Litigation or Regulatory Action
5.23 Environmental Matters
5.24 Insurance
5.25 Customers and Suppliers
5.27 Warranties and Product Liabilities
9.5 Necessary Consents
9.7 Key Employees
EXHIBITS
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EXHIBIT A-1-INSTRUMENT OF ASSIGNMENT DUE AT CLOSING
EXHIBIT A-2-INSTRUMENT OF ASSIGNMENT DUE AT THE DEFERRED CLOSING
EXHIBIT B-1-INSTRUMENT OF ASSUMPTION DUE AT CLOSING
EXHIBIT B-2-INSTRUMENT OF ASSUMPTION DUE AT THE DEFERRED CLOSING
EXHIBIT C - SUPPLY & LICENSE AGREEMENT
EXHIBIT D - CONTRACT MANUFACTURING AGREEMENT
EXHIBIT E - ESCROW AGREEMENT
EXHIBIT F - OPINION OF GENERAL COUNSEL OF BUYER AND OPINION OF COUNSEL TO BUYER
EXHIBIT G - OPINION OF COUNSEL TO PARENT
EXHIBIT H - PAYMENT IN CONNECTION WITH CERTAIN PERSONAL PROPERTY LEASES
<PAGE>
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of May 25, 1999 (this "Agreement"),
among Allegiance Healthcare Corporation, a Delaware corporation ("Buyer"),
Isolyser Company, Inc., a Georgia corporation ("Parent") and MedSurg Industries,
Inc, a Georgia corporation and a wholly-owned subsidiary of Parent ("MedSurg").
WHEREAS, Parent is engaged through one or more of its subsidiaries in
the business of assembling, packaging, marketing and selling procedure kits and
trays (the "Business"); and
WHEREAS, Parent desires to sell or cause to be sold to Buyer, and
Buyer desires to purchase the Business and certain of the assets of the
Business, together with certain liabilities related thereto, all on the terms
and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, it is hereby agreed among Parent, MedSurg and
Buyer as follows:
ARTICLE I
DEFINITIONS
1.1. Definitions. In this Agreement, the following terms have the
meanings specified or referred to in this Section 1.1 and shall be equally
applicable to both the singular and plural forms. Any agreement referred to
below shall mean such agreement as amended, supplemented and modified from time
to time to the extent permitted by the applicable provisions thereof and by this
Agreement.
"Action" means any legal action, suit, arbitration, inquiry,
proceeding or investigation by or before any court, any governmental or other
regulatory or administrative agency or commission or any arbitration tribunal.
"Adjusted Purchase Price" has the meaning specified in Section 3.2(b).
"Adjustment Report" has the meaning specified in Section 3.4(a).
"Affiliate" means, with respect to any Person, any other Person which
directly or indirectly controls, is controlled by or is under common control
with such Person.
"Agreed Accounting Principles" means generally accepted accounting
principles consistently applied, provided that, notwithstanding the foregoing,
Agreed Accounting Principles shall include the accounting policies and be
subject to the exceptions described in Schedule 1.1; and provided further that,
for purposes of the Agreed Accounting Principles, no known adjustments for items
or matters, regardless of the amount thereof, shall be deemed to be immaterial.
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"Allocation Schedule" has the meaning specified in Section 3.6.
"Ancillary Agreements" has the meaning specified in Section 8.7.
"Assumed Liabilities" has the meaning specified in Section 2.3.
"Balance Sheet" means the unaudited balance sheet of the Business as
of April 30, 1999 included in Schedule 5.4.
"Balance Sheet Date" means April 30, 1999.
"Business" has the meaning specified in the first recital to this
Agreement.
"Buyer" has the meaning specified in the first paragraph of this
Agreement.
"Buyer Ancillary Agreements" means all agreements, instruments and
documents being or to be executed and delivered by Buyer under this Agreement or
in connection herewith.
"Buyer Group Member" means Buyer and its Affiliates and their
respective successors and assigns.
"CA" has the meaning specified in Section 4.6(a).
"CA License Agreement" has the meaning specified in Section 4.6(a).
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. Sections 9601 et seq. and any amendments thereto,
and any regulations promulgated thereunder, as in effect on or prior to the
Closing Date.
"Claim Notice" has the meaning specified in Section 11.3(a).
"Closing" means the closing of the transfer of the Purchased Assets
(except for the Unfinished Goods) from Parent to Buyer.
"Closing Date" has the meaning specified in Section 4.1.
"COBRA" has the meaning specified in Section 8.5(b).
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"Code" means the Internal Revenue Code of 1986, as amended.
"Collection Report" has the meaning specified in Section 8.6(b).
"Confidentiality Agreement" means the Confidentiality Agreement dated
March 19, 1999 between Buyer and Parent.
"Contracts" means all contracts, agreements, commitments,
understandings and arrangements, whether written or oral.
"Contract Manufacturing Agreement" means the Contract Manufacturing
Agreement in the form of Exhibit D.
"Copyrights" means United States and foreign copyrights, whether
registered or unregistered, and pending applications to register the same.
"Court Order" means any judgment, order, award or decree of any
foreign, federal, state, local or other court or tribunal and any award in any
arbitration proceeding.
"Deferred Closing" has the meaning in Section 4.5.
"Deferred Closing Adjustment Report" has the meaning specified in
Section 3.5(a).
"Deferred Closing Purchase Price Adjustment Amount" has the meaning
specified in Section 3.5(c).
"Deferred Closing Trade Payables" has the meaning specified in Section
3.5(a).
"Deferred Closing Unfinished Goods Inventory" has the meaning
specified in Section 3.5(a).
"Designated Employees" has the meaning specified in Section 8.1(b).
"Encumbrance" means any lien (statutory or other) claim, charge,
security interest, mortgage, deed of trust, pledge, hypothecation, assignment,
conditional sale or other title retention agreement, preference, priority or
other security agreement or preferential arrangement of any kind or nature, and
any easement, encroachment, covenant, restriction, right of way, defect in title
or other encumbrance of any kind.
"Employees" has the meaning specified in Section 8.5(a).
"Environmental Encumbrance" means an Encumbrance in favor of any
Governmental Authority for (i) any liability under any Environmental Law, or
(ii) damages arising from, or costs incurred by such Governmental Authority in
response to, a Release or threatened Release of Hazardous Materials into the
environment.
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"Environmental Law" means all Requirements of Laws derived from or
relating to all federal, state and local laws or regulations relating to or
addressing the environment, health or safety, including but not limited to
CERCLA, OSHA and RCRA and any state equivalent thereof as in effect on or prior
to the Closing Date.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Account" has the meaning specified in Section 4.2(b).
"Escrow Agent" has the meaning specified in Section 4.2(b).
"Escrow Agreement" has the meaning specified in Section 4.2(b).
"Escrowed Amount" has the meaning specified in Section 4.2(b).
"Excluded Assets" has the meaning specified in Section 2.2.
"Excluded Liabilities" has the meaning specified in Section 2.4.
"Expenses" means any and all expenses incurred in connection with
investigating, defending or asserting any claim, action, suit or proceeding
incident to any matter indemnified against hereunder (including, without
limitation, court filing fees, court costs, arbitration fees or costs, witness
fees, and reasonable fees and disbursements of legal counsel, investigators,
expert witnesses, consultants, accountants and other professionals).
"Facilities" means any plant, building, facility, structure,
underground storage tank, equipment or unit, or other asset owned, leased or
operated by either Parent or MedSurg and used primarily in the Business.
"Governmental Authority" means any foreign, federal, state, local or
other government, governmental, statutory or administrative authority,
regulatory body or commission or any court, tribunal, or judicial or arbitral
body.
"Governmental Permits" has the meaning specified in Section 5.9.
"Hazardous Materials" means any waste, pollutant, hazardous or toxic
substance or waste, petroleum-based substance or waste, special waste or any
constituent of any such substance or waste, as the same are defined in, or for
which standards of care are imposed pursuant to, Environmental Laws.
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"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"IBM" has the meaning specified in Section 4.6(b).
"IBM Lease" has the meaning specified in Section 4.6(b).
"Indemnified Party" has the meaning specified in Section 11.3(a).
"Indemnitor" has the meaning specified in Section 11.3(a).
"Independent Accountant" has the meaning specified in Section 3.3(f).
"Instrument of Assignment" means the Instruments of Assignment in the
forms of Exhibit A-1 or Exhibit A-2, as the case may be.
"Instrument of Assumption" means the Instruments of Assumption in the
forms of Exhibit B-1 or Exhibit B-2, as the case may be.
"Intellectual Property" means Copyrights, Patent Rights, Trademarks
and Trade Secrets and all agreements, Contracts, licenses, sublicenses,
assignments, and indemnities which relate or pertain to any of the foregoing.
"Inventory" has the meaning specified in Section 2.1(b).
"Inventory Adjustment Amount" has the meaning specified in Section
3.2(b).
"Inventory Book Value" has the meaning specified in Section 3.3(a).
"IRS" means the Internal Revenue Service.
"knowledge" means, as to a particular matter, actual knowledge after
due inquiry of Parent and its Affiliates.
"Leased Real Property" has the meaning specified in Section 5.11.
"Losses" means any and all losses, costs, obligations, liabilities,
settlement payments, awards, judgments, fines, penalties, damages, fees,
expenses, deficiencies claims or other charges.
"Medical Product Regulatory Authority" means any Governmental
Authority that is concerned with the safety, efficacy, reliability, manufacture,
sale or marketing of medical products.
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"MedSurg" has the meaning specified in the first paragraph of this
Agreement.
"Net Asset Adjustment" has the meaning specified in Section 3.2(b).
"Net Assets" has the meaning specified in Section 3.2(b).
"Net Deferred Closing Inventory" has the meaning specified in Section
3.5(c).
"Net Inventory Base" means the amount of the Unfinished Goods set
forth on the Balance Sheet minus the amount of Trade Payables set forth on the
Balance Sheet.
"OSHA" means the Occupational Safety and Health Act, 29 U.S.C.
Sections 651 et seq., any amendment thereto, any successor statute, and any
regulations promulgated thereunder.
"Parent" has the meaning specified in the first paragraph of this
Agreement.
"Parent Agreements" has the meaning specified in Section 5.21.
"Parent Ancillary Agreements" means all agreements, instruments and
documents being or to be executed and delivered by Parent or any of its
Affiliates under this Agreement or in connection herewith.
"Parent Group Member" means Parent and its Affiliates and their
respective successors and assigns.
"Patent Rights" means United States and foreign patents, patent
applications, provisional applications, continuations, continuations-in-part,
divisions, reissues, patent disclosures, inventions (whether or not patentable
or reduced to practice) or improvements thereto.
"Permitted Encumbrances" means (a) liens for taxes and other
governmental charges and assessments reflected on the Valuation Date Balance
Sheet and arising in the ordinary course of the Business which are not yet due
and payable, (b) liens of landlords and liens of carriers, warehousemen,
mechanics and materialmen and other like liens reflected on the Valuation Date
Balance Sheet and arising in the ordinary course of the Business for sums not
yet due and payable, (c) other non-monetary liens or imperfections on property
which do not interfere with, and are not violated by, the consummation of the
transactions contemplated by this Agreement, and do not impair the marketability
of, or detract from the value of or impair the existing use of the property
affected by such lien or imperfection and (d) leases to which any leased asset
is subject.
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"Person" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company, trust,
unincorporated organization or Governmental Authority.
"Physical Inventory Value" has the meaning specified in Section
3.3(c).
"Preliminary Purchase Price" has the meaning specified in Section 3.1.
"Purchase Price" has the meaning specified in Section 3.1.
"Purchase Price Adjustment Amount" has the meaning specified in
Section 3.2(a).
"Purchased Assets" has the meaning specified in Section 2.1.
"RCRA" means the Resource Conservation and Recovery Act, 42 U.S.C.
Sections 6901 et seq., and any amendments thereto, and any regulations
promulgated thereunder, as in effect on or prior to the Closing Date.
"Release" means release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration of Hazardous
Materials into the indoor or outdoor environment or into or out of any of the
Facilities, including the movement of Hazardous Materials through or in the air,
soil, surface water, groundwater or Facilities.
"Remedial Action" means actions required to (a) clean up, remove,
treat or in any other way address Hazardous Materials in the indoor or outdoor
environment; (b) prevent the Release or threatened Release or minimize the
further Release of Hazardous Materials; or (c) investigate and determine if a
remedial response is needed and to design such a response and post-remedial
investigation, monitoring, operation and maintenance and care.
"Requirements of Laws" means any foreign, federal, state and local
laws, statutes, regulations, rules, codes, ordinances or requirements enacted,
adopted, issued or promulgated by any Governmental Authority (including, without
limitation, those pertaining to electrical, building, zoning, subdivision, land
use, environmental and occupational safety and health requirements) or common
law.
"Software" means computer software programs and software systems,
including, without limitation, all databases, compilations, tool sets,
compilers, higher level or "proprietary" languages, related documentation,
technical manuals and materials, whether in source code, object code or human
readable form and any licenses or rights with respect to the foregoing.
"Special Audit" has the meaning specified in Section 3.3(c).
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<PAGE>
"Supply & License Agreement" means the Supply & License Agreement in
the form of Exhibit C.
"Tax" means any federal, state, local or foreign net income,
alternative or add-on minimum, ad valorem, value-added, gross income, gross
receipts, windfall profits, severance, production, environmental, property,
sales, use, transfer, stamp, gains, license, excise, employment, payroll,
withholding or minimum tax, or any other tax, custom, duty, governmental fee or
other like assessment or charge of any kind whatsoever, together with any
interest or any penalty, addition to tax or additional amount imposed by any
Governmental Authority.
"Tax Return" means any return, report or similar statement required to
be filed with respect to any Taxes (including any attached schedules),
including, without limitation, any information return, claim for refund, amended
return and declaration of estimated Tax.
"Trade Payables" means accounts payable to trade creditors.
"Trade Secrets" means confidential ideas, trade secrets, know-how,
concepts, methods, processes, formulae, reports, data, customer lists, mailing
lists, business plans or other proprietary information.
"Trademarks" means United States, state and foreign trademarks,
service marks, logos, trade dress, trade names and Internet domain names
(including all assumed or fictitious names under which the Business is
conducting its business or has within the previous five years conducted its
business), whether registered or unregistered and pending applications to
register the foregoing.
"Unfinished Goods" means all Inventory excluding finished goods
inventory.
"Valuation Date Balance Sheet" has the meaning specified in Section
3.4(a).
"Year 2000 Compliant" means, with respect to a microprocessor,
computer, computer program or other items of software (a) the functions,
calculations, and other computing processes of the microprocessor, computer,
program or software (collectively, the AProcesses@) perform in a consistent and
correct manner without interruption regardless of the date on which the
Processes are actually performed and regardless of the date input to the
applicable computer system, whether before, on, or after January 1, 2000; (b)
the microprocessor, computer, program or software accepts, calculates, compares,
sorts, extracts, sequences, and otherwise processes date inputs and date values,
and returns and displays date values, in a consistent and correct manner
regardless of the dates used whether before, on, or after January 1, 2000; (c)
the microprocessor, computer, program or software accepts and responds to year
input, if any, in a manner that resolves any ambiguities as to century in a
defined, predetermined, and appropriate manner; (d) the microprocessor,
computer, program or software stores and displays date information in ways that
are unambiguous as to the determination of the century; and (e) leap years will
be determined by the following standard (A) if dividing the year by 4 yields an
integer, it is a leap year, except for years ending in 00, but (B) a year ending
in 00 is a leap year if dividing it by 400 yields an integer.
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"WARN Act" has the meaning specified in Section 5.19.
"Warn Notice" has the meaning specified in Section 8.5(c).
ARTICLE II
PURCHASE AND SALE
2.1. Purchased Assets. Upon the terms and subject to the conditions of
this Agreement and subject to Sections 2.2 and 4.5, on the Closing Date, Parent
shall sell, transfer, assign, convey and deliver, or cause to be sold,
transferred, assigned, conveyed and delivered, to Buyer, and Buyer shall
purchase, free and clear of all Encumbrances (except for Permitted
Encumbrances), the Business and all of the assets of Parent and its Affiliates
including MedSurg, of every kind and description, wherever located, personal or
mixed, tangible or intangible, used primarily, or held primarily for use in to
the Business as the same shall exist on the Closing Date (herein collectively
called the "Purchased Assets"), including, without limitation, all right, title
and interest of MedSurg in, to and under:
(a) all notes and accounts receivable;
(b) except for the consignment Inventory set forth in
Schedule 2.2(I), all raw materials, supplies, work-in-process,
finished goods, packaging materials, samples and other materials
included in the inventory (the "Inventory");
(c) the machinery, equipment, appliances, vehicles, tools,
spare parts, accessories, furniture and other personal property listed
or referred to in Schedule 5.13 (including all such items which are
currently on order for use primarily in the Business and all such
items which are stored or used off-site but which have been used
primarily in the ordinary course of the Business within the 12 months
preceding the date hereof);
(d) the personal property leases listed in Schedule 5.14;
(e) the lease agreements and leasehold improvements listed
or described in Schedule 5.11;
(f) the Governmental Permits listed in Schedule 5.9;
(g) the Copyrights, Patent Rights and Trademarks (and all
goodwill associated therewith), including the product labels,
Contracts, licenses, sublicenses, assignments and indemnities, listed
in Schedule 5.15;
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(h) the Parent Agreements included as part of the Purchased
Assets;
(i) all Trade Secrets and other proprietary or confidential
information used primarily in or relating primarily to the Business;
(j) [INTENTIONALLY BLANK];
(k) all books, records, files, invoices, Inventory records,
product specifications, advertising materials, customer lists, cost
and pricing information, supplier lists, business plans, catalogs,
customer literature, quality control records and manuals, research and
development files, records and laboratory books and credit records of
customers (including all data and other information stored on discs,
tapes or other media) primarily relating to the assets, properties,
business and operations of the Business, excluding, however, records,
files and other information kept for financial reporting or income tax
purposes;
(l) all telephone, telex and telephone facsimile numbers,
other directory listings and Internet domain names utilized primarily
in connection with the Business, including the toll free customer
service numbers listed in Schedule 2.1(L);
(m) all benefits and rights arising from prepaid expenses
attributable primarily to the Business other than those relating to
any of the Excluded Assets, including, without limitation, (i) ad
valorem and other property Taxes, (ii) all refundable security
deposits paid by MedSurg with respect to the Contracts listed in
Schedule 5.20, (iii) pre-paid expenses to outside vendors for special
orders that have not been reimbursed to MedSurg in the ordinary course
of the Business, and (iv) payments or deposits related to licenses and
permits transferred to Buyer; and
(n) all benefits and rights, including rights of recovery,
under insurance notices relating primarily to the Business or the
Purchased Assets with respect to occurrences on or prior to the
Closing Date.
2.2. Excluded Assets. Notwithstanding the provisions of Section 2.1,
the Purchased Assets shall not include the following (herein referred to as the
"Excluded Assets"):
(a) all cash, bank deposits and cash equivalents, except for
deposits and refunds related to the Purchased Assets;
(b) except as provided in Section 8.2, the name "Isolyser"
or any related or similar trade names, trademarks, service marks or
logos to the extent the same incorporate the name "Isolyser" or any
variation thereof;
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(c) rights, claims or causes of action against third parties
relating to the assets, properties, business or operations of the
Business which may arise in connection with the discharge by Parent of
the Excluded Liabilities;
(d) Intellectual Property related primarily to Parent's Orex
and Enviroguard products;
(e) all Contracts of insurance;
(f) all corporate minute books and stock transfer books and
the corporate seal of MedSurg;
(g) all Contracts with employees of Parent or MedSurg, other
than those Contracts entered into by employees in a capacity other
than as employees of Parent or MedSurg;
(h) all refunds of any Tax for which Parent or MedSurg is
liable pursuant to Section 8.3;
(i) Inventory on consignment from unrelated third parties of
Parent, MedSurg or any of their Affiliates set forth in Schedule
2.2(I);
(j) all assets under or relating to any employee benefit
plan, program or arrangement of Parent, MedSurg or any of their
Affiliates;
(k) Software listed on Schedule 5.15;
(l) the name "MedSurg Industries, Inc.";
(m) the Contracts listed in items 1 and 2 of Schedule 5.14;
in items 1 and 2 of Schedule 5.15; and in items 3, 4, 6, 7, 8, 9, 11,
12, 14, 15, and 16 of Schedule 5.20; and
(n) the items described in Schedule 5.8.
2.3. Assumed Liabilities. Upon the terms and subject to the conditions
of this Agreement, on the Closing Date, Buyer shall, subject to Sections 2.4 and
4.5, deliver to MedSurg the Instrument of Assumption pursuant to which Buyer
shall assume and agree to discharge all of the following obligations and
liabilities of Parent or its Affiliates, including MedSurg in accordance with
their respective terms and subject to the respective conditions thereof:
(a) all liabilities of the Business other than Trade Payables
reflected in the Valuation Date Balance Sheet as a dollar amount but
only to the extent of the dollar amount shown thereon;
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(b) all Trade Payables included in the Deferred Closing Trade
Payables Amount as a dollar amount but only to the extent of the dollar
amount so included;
(c) all liabilities and obligations to be paid or performed
after the Closing Date under the Parent Agreements or any other
Contracts related primarily to the Business which are not required by
the terms of Section 5.20 to be listed or described in Schedule 5.20,
in each case included as part of the Purchased Assets; and
(d) all liabilities and obligations arising out of or
resulting from the conduct of the Business from the Balance Sheet Date
to the Closing Date but only if such liabilities and obligations shall
have been incurred by MedSurg in the ordinary course of the Business
consistent with past practice and in compliance with this Agreement;
provided, however, that nothing in this Section 2.3 shall be deemed to
modify or limit any representation or warranty contained in Article V
or any covenant or obligation of Parent contained in this Agreement or
the obligation to indemnify Buyer as provided in Article XI.
All of the foregoing liabilities and obligations to be assumed by Buyer
hereunder (excluding any Excluded Liabilities) are referred to herein as the
"Assumed Liabilities".
2.4. Excluded Liabilities. Notwithstanding anything to the contrary in
Section 2.3 and subject to Section 4.5, Buyer shall not assume or be obligated
to pay, perform or otherwise discharge any liability or obligation of Parent or
any of its Affiliates including MedSurg, direct or indirect, known or unknown,
absolute or contingent, not expressly assumed by Buyer pursuant to the
Instrument of Assumption (all such liabilities and obligations not being assumed
being herein called the "Excluded Liabilities") and none of the following shall
be Assumed Liabilities for purposes of this Agreement:
(a) any liabilities in respect of Taxes for which Parent is
liable pursuant to Section 8.3;
(b) any intercompany payables and other liabilities or
obligations to Parent or any of its Affiliates, except as set forth in
Schedule 2.4(B);
(c) any costs and expenses incurred by Parent or MedSurg incident
to its negotiation and preparation of this Agreement and its
performance and compliance with the agreements and conditions
contained herein;
(d) any liabilities or obligations in respect of any Excluded
Assets except Excluded Assets described in Section 2.2(i);
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(e) any liabilities in respect of the claims or proceedings
described in Schedule 5.22;
(f) liabilities of any kind which were not reflected on the
Valuation Date Balance Sheet as a dollar amount or which are in excess
of the dollar amount shown thereon (other than those described in
Section 2.3(c) or (d);
(g) any liabilities and obligations related to, associated with
or arising out of the occupancy, operation, use or control of any of
the Facilities or the operation of the Business on or prior to the
Closing Date, in each case incurred or imposed by any Environmental
Law (including, without limitation, any Release of any Hazardous
Materials on, at or from (i) the Facilities, including, without
limitation, all facilities, improvements, structures and equipment
thereon, surface water thereon or adjacent thereto and soil or
groundwater thereunder, or any conditions whatsoever on, under or in
the vicinity of such real property) or (ii) any real property or
facility owned by a third Person to which Hazardous Materials
generated by the Business were sent prior to the Closing Date;
(h) any product liability or claims for injury to person or
property, regardless of when made or asserted, relating to products
manufactured, distributed or sold by the Business or services
performed by the Business on or prior to the Closing Date or which is
imposed, or asserted to be imposed, by operation of law, in connection
with any service performed or product manufactured by or on behalf of
Parent or any of its Affiliates, including MedSurg, prior to the
Closing Date;
(i) any recalls on or after the Closing Date mandated by any
Governmental Authority of the products manufactured, distributed or
sold by the Business on or prior to the Closing Date;
(j) any liability, claim or obligation arising out of, or
otherwise relating to, any Actions (i) currently pending, as of the
Closing Date, against Parent or any of its Affiliates including
MedSurg, or (ii) instituted after Closing to the extent based upon, or
arising out of, any fact, condition, event or circumstance which
occurs or is otherwise existing prior to the Closing Date;
(k) any obligations related to products manufactured, distributed
or sold by the Business on or prior to the Closing Date which are
returned by a customer after the Closing Date;
(l) any liability or obligation to provide warranty or service
on, or to repair or replace, any products manufactured, distributed or
sold by the Business on or prior to the Closing Date;
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(m) any liability or obligation arising with respect to any claim
seeking recovery for consequential damage, lost revenue or income or
punitive damages, regardless of the nature thereof, to the extent
arising out of service performed or products related to the Business
manufactured by or on behalf of Parent or any of its Affiliates,
including MedSurg, prior to the Closing Date or any other fact,
condition, event or circumstance which occurs or is otherwise existing
prior to the Closing Date;
(n) any liability or obligation within the scope of Section 8.5;
(o) any obligations of Parent or any of its Affiliates, including
MedSurg, to indemnify any Person in connection with the operation of
the Business by reason of the fact that such Person was an officer,
employee or agent of Parent or any of its Affiliates or was serving at
the request of Parent or any of its Affiliates as a partner, trustee,
director, officer, employee or agent of another entity, whether
arising under Contract, common law or otherwise; and
(p) any liability or obligation to Employees for vacation pay or
severance.
2.5. Nonassignable Contracts. To the extent that assignment hereunder
to Buyer of any Contract, license, lease, or permit is not permitted or is not
permitted without the consent of any third Person, this Agreement shall not be
deemed to constitute an undertaking to assign the same if such consent is not
given or if such an undertaking otherwise would constitute a breach of or cause
a loss of benefits thereunder. Parent shall use its commercially reasonable
efforts to obtain any and all such third Person consents effective as of the
Closing. Parent shall also use its commercially reasonable efforts to cooperate
with and assist Buyer in preparing and submitting any information required in
connection with registrations and licenses that relate to periods of time
commencing prior to and ending after the Closing Date; provided that Parent
shall have no obligation to offer or pay any consideration in order to obtain
any such consents or approvals provided further, that, in the case of any
arrangements relating to the sale of products of the Business to any
Governmental Authority. Parent and MedSurg will cooperate with Buyer to
facilitate the approval and/or the novation of such arrangements in favor of
Buyer, and until the earlier to occur of such approval or novation, Parent and
MedSurg will assist Buyer with respect to the sale of any such products
currently offered for sale pursuant to such arrangements.
ARTICLE III
PURCHASE PRICE
3.1. Purchase Price. The purchase price for the Purchased Assets (the
"Purchase Price") shall be equal to $31,800,000 (the "Preliminary Purchase
Price"), as adjusted pursuant to Section 3.2 and Section 3.5 below. The Purchase
Price shall be paid by Buyer in cash pursuant to Section 4.2 hereof.
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3.2. Adjustment to Preliminary Purchase Price. (a) If the Adjusted
Purchase Price (as herein defined) is less than the Preliminary Purchase Price,
the Preliminary Purchase Price shall be decreased by the amount of such
difference (the "Purchase Price Adjustment Amount").
(b) For purposes of Sections 3.2 and 3.4, the following terms have the
following meanings:
"Adjusted Purchase Price" means the Preliminary Purchase Price,
minus the Net Asset Adjustment, if any.
"Net Assets" means the Purchased Assets as shown on the Valuation
Date Balance Sheet, excluding any amounts for Unfinished Goods shown
thereon, minus Assumed Liabilities, excluding Trade Payables.
"Net Asset Adjustment" means an amount, if any, equal to the
excess of $15,000,000 over the Net Assets shown on the Valuation Date
Balance Sheet; provided, however, that if such amount is less than $
1,500,000 then the Net Asset Adjustment shall be zero.
3.3. Determination of Inventory Adjustment Amount. (a) Prior to the
Closing Date, Buyer shall be entitled to test the accuracy of the amounts of
Inventory reflected in Parent's general ledger (the "Inventory Book Value").
Such testing shall consist of (A) tying the Inventory balance in Parent's
general ledger to the Inventory balance in Parent's perpetual inventory system,
(B) testing Parent's perpetual inventory system by performing a reasonable
number of test counts, and (C) identifying slow moving and obsolete Inventory.
(b) If, as a result of the testing performed by Buyer described in
clause (a) above, Buyer shall determine that the amounts of Inventory reflected
on Parent's general ledger are acceptable, then for purposes of determining the
amount of Net Assets as of the Closing Date and the Amount of the Deferred
Closing Unfinished Goods Inventory, Inventory shall be determined by the amount
of Inventory reflected on Parent's general ledger.
(c) If, as a result of the testing performed by Buyer described in
clause (a) above, Buyer shall determine that the amounts of Inventory reflected
on Parent's general ledger are not acceptable, Parent shall cause a special
audit of the physical Inventory (the "Special Audit") to be conducted by
Deloitte & Touche for purposes of verifying the amount of Inventory (the
"Physical Inventory Value"). Such Special Audit shall be conducted as of the
Closing Date with respect to all Inventory other than Unfinished Goods and as of
the Deferred Closing Date with respect to Unfinished Goods. Buyer and Buyer's
representatives shall be permitted to observe the Special Audit. Upon completion
of the Special Audits (but not later than 30 days after the Closing Date or the
Deferred Closing Date, as the case may be), Parent shall prepare and deliver
schedules to Buyer setting forth the Physical Inventory Value (excluding
Unfinished Goods) as of the Closing Date and Unfinished Goods as of the Deferred
Closing Date observed during the Special Audit. Such schedules shall be prepared
in accordance with the Agreed Accounting Principles, including:
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(i) a breakdown of the physical Inventory present as of the
effective date of the audit, including each item included in such
Inventory, the quantities of each such item and the value of each such
item;
(ii) adequate documentation supporting the aggregate purchased
quantities and aggregate purchased cost for the physical Inventory; and
(iii) the method (e.g., average cost or market value) used for
calculation of the Physical Inventory Value as of the effective date of
the audit.
(d) Promptly following its receipt of the Physical Inventory Value
schedule, Buyer may review the same and, within 20 days after the date of such
receipt, may deliver to Parent a certificate setting forth its objections to the
calculation of the Physical Inventory Value as set forth in the Physical
Inventory Value schedule, together with a summary of the reasons therefor and
calculations which, in its view, are necessary to eliminate such objections. In
the event that Buyer does not so object within such 20-day period, the Physical
Inventory Value set forth in the Physical Inventory Value schedule shall be
final and binding for purposes of this Agreement but shall not limit the
representations, warranties, covenants and agreements of the parties set forth
elsewhere in this Agreement.
(e) In the event that the Buyer objects within such 20-day period, the
parties shall use their reasonable efforts to resolve by written agreement any
differences as to the Physical Inventory Value and, in the event parties so
resolve (in writing) any such differences, the Physical Inventory Value (as
adjusted) shall be final and binding for purposes of this Agreement but shall
not limit the representations, warranties, covenants and agreements of the
parties set forth elsewhere in this Agreement.
(f) In the event any objections relating to the calculation of the
Physical Inventory Value raised by Buyer are not resolved within the 15-day
period next following such 20-day period, then the matter shall be referred to a
firm of independent certified public accounts as the parties mutually agreement
(the "Independent Accountant") for resolution. The Independent Accountant shall
be instructed to use every reasonable effort to resolve the matter within 15
days of the submission to it of the dispute and, in any case, as soon as
practicable after such submission. The decision of the Independent Accountant
with respect to any such disputed item shall be final, binding and conclusive on
the parties and there shall be no right of appeal therefrom. The fees, costs and
expenses of the Independent Accountant shall be shared equally by Buyer and
Parent.
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3.4. Determination of Net Asset Adjustment. (a) As soon as possible,
but in any event on or before the 60th day following the Closing Date, Buyer
shall prepare and distribute to Parent (i) an unaudited balance sheet of the
Business as of the close of business on the Closing Date (the "Valuation Date
Balance Sheet") and (ii) a report (the "Adjustment Report") setting forth the
Adjusted Purchase Price and the Net Asset Adjustment, along with a calculation
of each such item. Buyer shall prepare the Valuation Date Balance Sheet in
accordance with Agreed Accounting Principles.
(b) Promptly following its receipt of the Valuation Date Balance Sheet
and the Adjustment Report, Parent may review same. The Valuation Date Balance
Sheet and the Adjustment Report will be deemed to be accepted by the parties
hereto and shall be conclusive for purposes of determining the Adjusted Purchase
Price and the Net Asset Adjustment, except to the extent that, within 20 days
after the date of such receipt, Parent may deliver to Buyer describing in
reasonable detail its objections (if any) thereto, specifying the amount in
dispute together with a summary of the reasons therefor and calculations which,
in its view, are necessary to eliminate such objections. Buyer and Parent shall
use reasonable efforts to resolve any such objections in good faith, but if they
do not obtain a final resolution within 15 days after Parent has delivered the
statement of objections, then the Independent Accountant shall be retained to
resolve any remaining objections and shall within 25 days after submission
determine and report to Buyer and Parent upon such remaining disputed items. The
fees, costs and expenses of the Independent Accountant shall be shared equally
by Buyer and Parent.
(c) Promptly (but not later than 5 days) after the determination of
the Adjusted Purchase Price pursuant to Sections 3.2 and 3.4 that is final and
binding as set forth herein, Parent shall pay to Buyer, the Purchase Price
Adjustment Amount, if any, by wire transfer of immediately available funds to
the account in the United States specified by Buyer.
3.5. Deferred Closing Adjustment to Purchase Price. (a) Within 60 days
following the termination of the Contract Manufacturing Agreement as provided
therein, Buyer shall prepare and distribute to Parent (i) a schedule setting
forth the amount of the Unfinished Goods as of such termination date (the
"Deferred Closing Unfinished Goods Inventory") and each item included therein,
the quantities of each such item and the value of each such item determined in
accordance with the Agreed Accounting Principles; (ii) a schedule setting forth
the amount of the Trade Payables as of such date (the "Deferred Closing Trade
Payables"); and (iii) a report setting forth the Deferred Closing Purchase Price
Adjustment Amount as determined in accordance with Section 3.5(c) (collectively,
such schedules and report shall be hereinafter referred to as the "Deferred
Closing Adjustment Report").
(b) Promptly following its receipt of the Deferred Closing Adjustment
Report, Parent may review same. The Deferred Closing Adjustment Report will be
deemed to be accepted by the parties hereto and shall be conclusive for purposes
of determining the Deferred Closing Unfinished Goods Inventory, Deferred Closing
Trade Payables and the Deferred Closing Purchase Price Adjustment Amount, except
to the extent that, within 20 days after the date of such receipt, Parent may
deliver to Buyer describing in reasonable detail its objections (if any)
thereto, specifying the amount in dispute together with a summary of the reasons
therefor and calculations which, in its view, are necessary to eliminate such
objections. Buyer and Parent shall use reasonable efforts to resolve any such
objections in good faith, but if they do not obtain a final resolution within 10
days after Parent has delivered the statement of objections, then the
Independent Accountant shall be retained to resolve any remaining objections and
shall within 15 days after submission determine and report to Buyer and Parent
upon such disputed items. The fees, costs and expenses of the Independent
Accountant shall be shared equally by Buyer and Parent.
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(c) The "Deferred Closing Purchase Price Adjustment Amount" shall be
equal to the Net Inventory Base minus the Net Deferred Closing Inventory. For
purposes of this Section 3.5, "Net Deferred Closing Inventory" means the
Deferred Closing Unfinished Goods Inventory minus the Deferred Closing Trade
Payables.
(d) Promptly (but not later than 5 days) after determination of the
Deferred Closing Purchase Price Adjustment Amount pursuant to this Section 3.5
that is final and binding as set forth herein, Parent shall pay to Buyer, the
Deferred Closing Purchase Price Adjustment Amount, if any, by wire transfer of
immediately available funds to the account in the United States specified by
Buyer.
3.6. Allocation of Purchase Price. Within 30 days following the
Deferred Closing Date, Buyer shall deliver to Parent a schedule (the "Allocation
Schedule") allocating the Purchase Price (including, for purposes of this
Section 3.6, any other consideration paid to Parent including the Assumed
Liabilities) among the Purchased Assets and the covenants of Parent in Section
8.1. The Allocation Schedule shall be reasonable and shall be prepared in
accordance with Section 1060 of the Code and the regulations thereunder. Parent
agrees that promptly after receiving the Allocation Schedule, it shall sign the
Allocation Schedule and return an executed copy thereof to Buyer. Buyer and
Parent each agrees to file Internal Revenue Service Form 8594, and all federal,
state, local and foreign Tax Returns, in accordance with the Allocation
Schedule. Buyer and Parent each agrees to provide the other promptly with any
other information required to complete Form 8594.
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ARTICLE IV
CLOSING
4.1. Closing Date. The Closing shall be consummated at 10:00 A.M.,
local time, on the third business day following the expiration or termination of
the waiting period under the HSR Act, or such later date as may be agreed upon
by Buyer and Parent after the conditions set forth in Articles IX and X have
been satisfied, at the offices of Sidley & Austin, One First National Plaza,
Chicago, IL 60603, or at such other place or at such other time as shall be
agreed upon by Buyer and Parent, except that the closing with respect to the
Unfinished Goods and Trade Payables shall be consummated as provided in Section
4.5. The time and date on which the Closing is actually held are sometimes
referred to herein as the "Closing Date."
4.2. Payment on the Closing Date; Escrow. (a) Subject to fulfillment
or waiver of the conditions set forth in Article IX, at Closing Buyer shall pay
MedSurg an amount equal to the Preliminary Purchase Price less the Escrowed
Amount (as defined below) by wire transfer of immediately available funds to the
account in the United States specified by Parent in writing to Buyer at least
two business days prior to the Closing.
(b) On or prior to the Closing Date, Buyer, MedSurg and the First
National Bank of Chicago, as escrow agent (the "Escrow Agent"), shall enter into
an Escrow Agreement in the form of Exhibit E (the "Escrow Agreement") providing
for the establishment of an escrow account (the "Escrow Account") with the
Escrow Agent to secure the obligations of Parent to Buyer (and any Buyer Group
Member) pursuant to Article XI hereof. No right or remedy given by any term of
the Escrow Agreement shall be deemed exclusive, but each shall be cumulative
with all other rights, remedies and elections available under this Agreement, at
law or in equity. At the Closing, there shall be deposited in the Escrow Account
10% of the sum of Preliminary Purchase Price (the "Escrowed Amount"), which
shall be subsequently disbursed in accordance with the terms, conditions and
provisions of the Escrow Agreement. The Escrow Agent=s fees shall be shared
equally by Buyer and Parent.
4.3. Buyer's Additional Deliveries. Subject to fulfillment or waiver
of the conditions set forth in Article IX, at Closing Buyer shall deliver to
MedSurg all the following:
(a) Copies of Buyer's Certificate of Incorporation, as
amended, certified as of a recent date by the Secretary of State of
the State of Delaware;
(b) Certificate of good standing of Buyer issued as of a
recent date by the Secretary of State of the State of Delaware;
(c) Certificate of the secretary or an assistant secretary
of Buyer, dated the Closing Date, in form and substance reasonably
satisfactory to Parent, as to (i) no amendments to the Certificate of
Incorporation of Buyer since a specified date; (ii) the by-laws of
Buyer; (iii) the resolutions of the Board of Directors of Buyer
authorizing the execution and performance of this Agreement and the
transactions contemplated hereby; and (iv) incumbency and signatures
of the officers of Buyer executing this Agreement and any Buyer
Ancillary Agreement;
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(d) Opinions of Buyer's General Counsel and Sidley & Austin
substantially in the forms contained in Exhibit F;
(e) The Instrument of Assumption duly executed by Buyer, as
set forth in Exhibit B-1;
(f) The certificate contemplated by Section 10.1, duly
executed by the President or any Vice President of Buyer;
(g) The Escrow Agreement duly executed by Buyer;
(h) The Supply & License Agreement duly executed by Buyer; and
(i) The Contract Manufacturing Agreement duly executed by
Buyer.
4.4. Parent's Deliveries. Subject to fulfillment or waiver of the
conditions set forth in Article X, at Closing Parent shall deliver to Buyer all
the following:
(a) Copies of the Articles of Incorporation, as amended, of
Parent and MedSurg certified as of a recent date by the Secretary of
State of the State of Georgia;
(b) Certificate of good standing of Parent and MedSurg issued
as of a recent date by the Secretary of State of the State of Georgia;
(c) Certificate of the secretary or an assistant secretary of
Parent, dated the Closing Date, in form and substance reasonably
satisfactory to Buyer, as to (i) no amendments to the Articles of
Incorporation of Parent and MedSurg since a specified date; (ii) the
by-laws of Parent and MedSurg; (iii) the resolutions of the Board of
Directors of Parent and of the Board of Directors and/or stockholders
of MedSurg authorizing the execution and performance of this Agreement
and the transactions contemplated hereby; and (iv) incumbency and
signatures of the officers of Parent and MedSurg executing this
Agreement and any Parent Ancillary Agreement;
(d) Opinion of counsel to Parent substantially in the form
contained in Exhibit G;
(e) The Instrument of Assignment duly executed by MedSurg,
as set forth in Exhibit A-1;
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(f) Certificates of title or origin (or like documents) with
respect to any vehicles or other equipment included in the Purchased
Assets for which a certificate of title or origin is required in order
to transfer title;
(g) Any other assignments or instruments with respect to any
Intellectual Property included in the Purchased Assets for which an
assignment or instrument is required to assign, transfer and convey
such assets to Buyer;
(h) All consents, waivers or approvals obtained by Parent or
MedSurg with respect to the Purchased Assets or the consummation of the
transactions contemplated by this Agreement;
(i) The Supply & License Agreement duly executed by Parent;
(j) The Escrow Agreement duly executed by MedSurg;
(k) The Contract Manufacturing Agreement duly executed by
Parent and MedSurg;
(l) The certificates contemplated by Sections 9.1 and 9.2,
duly executed by the President or any Vice President of Parent;
(m) Such other bills of sale, assignments and other
instruments of transfer or conveyance as Buyer may reasonably request
or as may be otherwise necessary to evidence and effect the sale,
assignment, transfer, conveyance and delivery of the Purchased Assets
to Buyer;
(n) Such lien releases and termination statements or other
reasonable evidence as Buyer may require relating to the release of any
Encumbrances (other than Permitted Encumbrances) which may exist with
respect to any Purchased Assets; and
(o) Documentation deemed adequate by Buyer demonstrating full
compliance with any applicable environmental property transfer act.
In addition to the above deliveries, Parent and MedSurg shall take all steps and
actions as Buyer may reasonably request or as may otherwise be necessary to put
Buyer in actual possession or control of the Purchased Assets.
4.5. Deferred Closing. The closing with respect to the Unfinished
Goods and Trade Payables (the "Deferred Closing") shall be consummated at 10:00
A.M., local time on the first day following the termination of the Contract
Manufacturing Agreement, at the offices of Sidley & Austin, One First National
Plaza, Chicago, IL 60603, or at such other place or at such other time as shall
be agreed upon by Buyer and Parent. At the Deferred Closing:
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(a) MedSurg shall sell, transfer, assign, convey and deliver
to Buyer, and Buyer shall purchase, free and clear of all Encumbrances
(except for Permitted Encumbrances), the Unfinished Goods;
(b) Buyer shall assume all liabilities for the Deferred
Closing Trade Payables and shall deliver to MedSurg the Instrument of
Assumption duly executed by Buyer as set forth in Exhibit B-2;
(c) Parent shall (i) provide any documents, instruments or
assignments, including the Instrument of Assignment as set forth in
Exhibit A-2 and (ii) take all steps and actions as Buyer may reasonably
request or as may be necessary to put Buyer in actual possession or
control of the Unfinished Goods and Trade Payables;
(d) Notwithstanding Sections 2.4(p) or 8.5 of this Agreement,
Buyer shall pay MedSurg on the date of the Deferred Closing as
additional purchase price an amount equal to the lesser of: (i) the sum
of (A) $250,000, and (B) any unused vacation accrued on the books of
MedSurg as of the date of the Deferred Closing and any severance, in
each case payable to the employees of MedSurg as a result of any
termination of employment as of the date of the Deferred Closing; or
(ii) $1,200,000, by wire transfer of immediately available funds to an
account in the United States specified by Parent in writing to Buyer at
least two business days prior to the Deferred Closing; and
(e) MedSurg shall sell, transfer, assign and convey to Buyer,
and Buyer shall purchase free and clear of all Encumbrances (except for
Permitted Encumbrances), the name "MedSurg Industries, Inc." and
MedSurg shall promptly after the Deferred Closing change its corporate
name to a name that does not include "MedSurg" or any variation
thereof.
4.6. Payments in Connection with Certain Personal Property Leases. (a)
Buyer shall pay Computer Associates International, Inc., ("CA") on behalf of
Parent the remaining unpaid license fees in accordance with paragraph 1 of
Exhibit H in connection with the Order Form between Parent and CA dated July 31,
1997, as amended (the "CA License Agreement").
(b) Buyer shall pay IBM Credit Corporation ("IBM") on behalf of Parent
the remaining unpaid license fees in accordance with paragraph 2 of Exhibit H in
connection with the Term Lease Master Agreement between Parent and IBM dated
October 14, 1996, as amended (the "IBM Lease").
(c) To the extent that either the CA License Agreement or the IBM
Lease are modified such that the outstanding license fee payments set forth in
Exhibit H are reduced, Buyer shall only be obligated to pay such reduced license
fee amounts.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND MEDSURG
As an inducement to Buyer to enter into this Agreement and to
consummate the transactions contemplated hereby, Parent and MedSurg represent
and warrant to Buyer and agree as follows:
5.1. Organization of Parent. Parent is a corporation duly organized,
validly existing and in good standing under the laws of the State of Georgia.
Parent is duly qualified to transact business as a foreign corporation and is in
good standing in each of the jurisdictions listed in Schedule 5.1. Such
jurisdictions are the only ones in which the ownership or leasing of its
properties or the conduct of its Business requires such qualification. Except as
set forth in Schedule 5.1, no other jurisdiction has demanded, requested or
otherwise indicated that Parent is required so to qualify. Parent has full
corporate power and authority to own or lease and to operate and use the
Purchased Assets and to carry on the Business as now conducted.
True and complete copies of the certificate or articles of
incorporation and all amendments thereto and of the By-laws, as amended to date,
of Parent have been delivered to Buyer.
5.2. Subsidiaries and Investments. (a) Except for MedSurg, Parent does
not, directly or indirectly, (i) own, of record or beneficially, any outstanding
voting securities or other equity interests in any Person which is involved in,
or relates to, or holds assets used primarily in the Business or (ii) control
any Person which is involved in, or relates to, or holds assets used primarily
in the Business.
(b) MedSurg is a corporation duly organized, validly existing and in
good standing under the laws of the State of Georgia. MedSurg is duly qualified
to transact business as a foreign corporation and is in good standing in each of
the jurisdictions listed in Schedule 5.2(A). Such jurisdictions are the only
ones in which the ownership or leasing of the Purchased Assets or the conduct of
the Business requires such qualification. Except as set forth in Schedule
5.2(A), no other jurisdiction has demanded, requested or otherwise indicated
that MedSurg is required so to qualify on account of the ownership or leasing of
the Purchased Assets or the conduct of the Business. MedSurg has full power and
authority to own or lease and to operate and use the Purchased Assets and to
carry on the Business as now conducted.
All of the outstanding shares of capital stock of MedSurg are validly
issued, fully paid and nonassessable. All of the outstanding shares of capital
stock of MedSurg are owned by Parent of record and beneficially.
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True and complete copies of the articles of incorporation and all
amendments thereto and of the By-laws, as amended to date, of MedSurg have been
delivered to Buyer.
5.3. Authority of Parent. Parent has full power and authority to
execute, deliver and perform this Agreement and each of the Parent Ancillary
Agreements to which it is a party. MedSurg has full power and authority to
execute, deliver and perform each of the Parent Ancillary Agreements to which it
is a party. The execution, delivery and performance of this Agreement and the
Parent Ancillary Agreements by Parent and MedSurg, as the case may be, have been
duly authorized and approved by Parent's board of directors and by the board of
directors and stockholders of MedSurg and do not require any further
authorization or consent of Parent or its stockholders. Assuming that this
Agreement and each of the Parent Ancillary Agreements to which Buyer is a party
constitutes a valid and binding agreement of Buyer, this Agreement has been duly
authorized, executed and delivered by Parent and is the legal, valid and binding
obligation of Parent enforceable in accordance with its terms, and each of the
Parent Ancillary Agreements has been duly authorized by Parent and MedSurg and
upon execution and delivery by Parent or MedSurg, as the case may be, will be a
legal, valid and binding obligation of Parent enforceable in accordance with its
terms.
Except as set forth in Schedule 5.3, neither the execution and
delivery of this Agreement or any of the Parent Ancillary Agreements or the
consummation of any of the transactions contemplated hereby nor compliance with
or fulfillment of the terms, conditions and provisions hereof will:
(i) conflict with, result in a breach of the terms, conditions
or provisions of, or constitute a default, an event of default or an
event creating rights of acceleration, termination or cancellation or a
loss of rights under, or result in the creation or imposition of any
Encumbrance upon any of the Purchased Assets, under (1) the charter or
By-laws of Parent or MedSurg, (2) any Parent Agreement, (3) any other
note, instrument, agreement, mortgage, lease, license, franchise,
permit or other authorization, right, restriction or obligation to
which Parent or MedSurg is a party or any of the Purchased Assets is
subject or by which Parent is bound, (4) any Court Order to which
Parent or MedSurg is a party or any of the Purchased Assets is subject
or by which Parent or MedSurg is bound, or (5) any Requirements of Laws
affecting Parent, MedSurg or the Purchased Assets; or
(ii) require the approval, consent, authorization or act of,
or the making by Parent, MedSurg or the Business of any declaration,
filing or registration with, any Person, except as provided under the
HSR Act.
5.4. Financial Statements. Schedule 5.4 contains (i) the unaudited
balance sheets of the Business as of December 31, 1997 and 1998 and the related
statements of income and cash flows for the years then ended and (ii) the
unaudited balance sheet of the Business as of April 30, 1999 and the related
statements of income and cash flows for the four months then ended. Such balance
sheets and statements of income and cash flow, have been prepared in conformity
with generally accepted accounting principles consistently applied, and such
balance sheets and related statements of income and cash flow present fairly the
financial position and results of operations of the Business as of their
respective dates and for the respective periods covered thereby.
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5.5. Operations Since Balance Sheet Date. (a) Except as set forth in
Schedule 5.5(A), since the Balance Sheet Date, there has been:
(i) no material adverse change in the Facilities, the
Purchased Assets, the Business or the operations, liabilities, profits,
prospects or condition (financial or otherwise) of the Business, and to
the knowledge of Parent or MedSurg no fact or condition exists or is
contemplated or threatened which might reasonably be expected to cause
such a change in the future; and
(ii) no material damage, destruction, loss or claim, whether
or not covered by insurance, or condemnation or other taking adversely
affecting any of the Facilities, the Purchased Assets or the Business.
(b) Except as set forth in Schedule 5.5(B), since the Balance Sheet
Date, each of Parent and MedSurg has conducted the Business only in the ordinary
course and in conformity with past practice. Without limiting the generality of
the foregoing, since the Balance Sheet Date, except as set forth in such
Schedule, neither Parent nor MedSurg has in respect of the Business:
(i) sold, leased (as lessor), transferred or otherwise
disposed of (including any transfers (other than transfers of cash)
from the Business to Parent or any of its Affiliates), or mortgaged or
pledged, or imposed or suffered to be imposed any Encumbrance on, any
of the assets reflected on the Balance Sheet or any assets acquired by
the Business after the Balance Sheet Date, except for Inventory and
minor amounts of personal property sold or otherwise disposed of for
fair value in the ordinary course of the Business consistent with past
practice and except for Permitted Encumbrances;
(ii) canceled any debts owed to or claims held by the Business
(including the settlement of any claims or litigation) or waived any
other rights held by the Business other than in the ordinary course of
the Business consistent with past practice;
(iii) created, incurred or assumed, or agreed to create, incur
or assume, any indebtedness for borrowed money in respect of the
Business (other than money borrowed or advances from Parent or any of
its Affiliates in the ordinary course of the Business consistent with
past practice) or entered into, as lessee, any capitalized lease
obligations (as defined in Statement of Financial Accounting Standards
No. 13);
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(iv) accelerated or delayed collection of notes or accounts
receivable generated by the Business in advance of or beyond their
regular due dates or the dates when the same would have been collected
in the ordinary course of the Business consistent with past practice;
(v) delayed or accelerated payment of any account payable or
other liability of the Business beyond or in advance of its due date or
the date when such liability would have been paid in the ordinary
course of the Business consistent with past practice;
(vi) allowed the levels of Inventory of the Business to vary
in any material respect from the levels customarily maintained in the
Business;
(vii) made, or agreed to make, any payment of cash or
distribution of assets to Parent or any of its Affiliates (other than
cash realized upon collection of receivables in the ordinary course of
the Business);
(viii) instituted any increase in any compensation payable to
any employee of either Parent or MedSurg with respect to the Business
or in any profit-sharing, bonus, incentive, deferred compensation,
insurance, pension, retirement, medical, hospital, disability, welfare
or other benefits made available to employees of either Parent or
MedSurg with respect to the Business;
(ix) made any change in the accounting principles and
practices used by either Parent or MedSurg or the Business;
(x) paid any claims against the Business (including the
settlement of any claims and litigation against the Business or the
payment or settlement of any obligations or liabilities of the
Business) other than in the ordinary course of the Business consistent
with past practice;
(xi) acquired any real property or undertaken or committed to
undertake capital expenditures exceeding $25,000 in the aggregate; or
(xii) entered into or become committed to enter into any other
transaction material to the Business except in the ordinary course of
the Business.
5.6. No Undisclosed Liabilities. Except as set forth in Schedule 5.6,
neither Parent nor MedSurg is subject, with respect to the Business, to any
liability (including, without limitation, unasserted claims, whether known or
unknown) required to be recorded under generally accepted accounting principles,
whether absolute, contingent, accrued or otherwise, which is not shown or which
is in excess of amounts shown or reserved for in the Balance Sheet, other than
(a) liabilities of the same nature as those set forth in the Balance Sheet and
the notes thereto and reasonably incurred in the ordinary course of the Business
after the Balance Sheet Date and (b) liabilities under or reflected in this
Agreement or the Schedules hereto.
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5.7. Taxes. (a) Except as set forth in Schedule 5.7, (i) Parent or
MedSurg has, in respect of the Business and the Purchased Assets, filed all Tax
Returns which are required to be filed prior to the date hereof and have paid
all Taxes which have become due pursuant to such Tax Returns or pursuant to any
assessment which has become payable except such taxes, if any, as not yet due
and are being contested in good faith and which are either fully reserved on the
Balance Sheet or accrued after April 30, 1999; (ii) all such Tax Returns are
complete and accurate and disclose all Taxes required to be paid in respect of
the Business and, the Purchased Assets; (iii) all such Tax Returns have been
examined by the relevant taxing authority or the period for assessment of the
Taxes in respect of which such Tax Returns were required to be filed has
expired; (iv) there is no action, suit, investigation, audit, claim or
assessment pending or, to the knowledge of Parent or MedSurg, proposed or
threatened with respect to Taxes of the Business or, the Purchased Assets, (v)
Parent has not waived or been requested to waive any statute of limitations in
respect of Taxes associated with the Business or the Purchased Assets; (vi) all
monies required to be withheld by Parent from employees for income Taxes and
social security and other payroll Taxes have been collected or withheld, and
either paid to the respective taxing authorities, set aside in accounts for such
purpose, or accrued, reserved against and entered upon the books of the
Business; (vii) no transaction contemplated by this Agreement is subject to
withholding under Section 1445 of the Code and no stock transfer taxes, real
estate transfer taxes, or other similar taxes will be imposed on the transfer of
the Purchased Assets pursuant to this Agreement; (viii) following the Closing
Date, pursuant to any agreement or arrangement entered into by Parent on or
prior to the Closing Date, Buyer will not be obligated to make a payment to an
individual that would be a "parachute payment" to a "disqualified individual" as
those terms are defined in Section 280G of the Code, without regard to whether
such payment is reasonable compensation for personal services performed or to be
performed in the future.
(b) Parent is properly treated as the owner, for all federal, state,
local and other income Tax purposes, of all property of which it is the lessor.
5.8. Availability of Assets. (a) Except as set forth in Schedule 5.8
and except for the Excluded Assets, the Purchased Assets constitute all the
assets used, or held for use in, or otherwise relating to the Business
(including, but not limited to, all books, records, computers and computer
programs and data processing systems). Each tangible asset of the Business has
been maintained in accordance with normal industry practice, is in good
operating condition and repair (subject to normal wear and tear), and is
suitable for the purposes for which it presently is used and presently is
proposed to be used.
(b) Schedule 5.8 sets forth a description of all material services
provided by Parent or any Affiliate of Parent with respect to the Business
utilizing either (i) assets not included in the Purchased Assets or (ii)
employees of Parent or any of its Affiliates.
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5.9. Governmental Permits. Either Parent or MedSurg owns, holds or
possesses all licenses, franchises, permits, registrations, certifications,
privileges, immunities, approvals and other authorizations from a Governmental
Authority which are necessary to entitle it to own or lease, operate and use the
Purchased Assets and to carry on and conduct the Business substantially as
currently conducted (herein collectively called the "Governmental Permits"), and
has made all filings with, or notifications to, all Medical Product Regulatory
Authorities required pursuant to Requirements of Law. Schedule 5.9 sets forth a
list and brief description, including the identity of the holder of such
Governmental Permits, of each Governmental Permit relating to the Purchased
Assets or the Business other than any Governmental Permit that is not material
to the Business and that is readily obtainable by Buyer without undue cost or
delay. Complete and correct copies of all of the Governmental Permits have
heretofore been delivered to Buyer by Parent.
Except as set forth in Schedule 5.9, (i) each of Parent and MedSurg
has fulfilled and performed its respective obligations under the Governmental
Permits, and no event has occurred or condition or state of facts exists which
constitutes or, after notice or lapse of time or both, would constitute a breach
or default under any such Governmental Permit or which permits or, after notice
or lapse of time or both, would permit revocation or termination of any such
Governmental Permit, or which might adversely affect the rights of either Parent
or MedSurg, as the case may be, under any such Governmental Permit; (ii) no
notice of cancellation, of default or of any dispute concerning any Governmental
Permit, or of any event, condition or state of facts described in the preceding
clause, has been received by, or is known to, either Parent or MedSurg; and
(iii) each of the Governmental Permits is valid, subsisting and in full force
and effect and may be assigned and transferred to Buyer in accordance with this
Agreement and will continue in full force and effect thereafter, in each case
without (x) the occurrence of any breach, default or forfeiture of rights
thereunder, or (y) the consent, approval, or act of, or the making of any filing
with, any Governmental Authority.
5.10. Real Property. Neither Parent nor MedSurg (i) owns any real
property, (ii) is presently a party to any agreement to purchase any real
property or (iii) has previously sold or otherwise conveyed any real property,
or terminated a leasehold, under circumstances which could give rise to any
continuing obligation or liability on the part of either Parent or MedSurg
relating to the Purchased Assets or the Business. Schedule 5.10 sets forth a
list of all real property used, or held for use in, or otherwise relating to the
Business previously owned or occupied by Parent or MedSurg disposed prior to the
date hereof and all businesses previously conducted by Parent, MedSurg or to the
knowledge of Parent or MedSurg any of its predecessors discontinued prior to the
date hereof.
5.11. Real Property Leases. Schedule 5.11 sets forth a list and brief
description of each lease or similar agreement under which (i) either Parent or
MedSurg is lessee of, or holds or operates, any real property owned by any third
Person and used, or held for use in, or otherwise relating to the Business or
(ii) either Parent or MedSurg is lessor of any of owned real property used, or
held for use in, or otherwise relating to the Business (the "Leased Real
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Property"). Except as set forth in such Schedule and subject to compliance with
applicable laws and the applicable underlying lease, Parent and MedSurg have the
right to quiet enjoyment of all the real property described in such Schedule for
the full term of each such lease or similar agreement (and any renewal option
related thereto) relating thereto, and the leasehold or other interest of either
Parent or MedSurg in such real property is not subject or subordinate to any
Encumbrance except for Permitted Encumbrances. Complete and correct copies of
any title opinions, surveys and appraisals in Parent or MedSurg's possession or
any policies of title insurance currently in force and in the possession of
either Parent or MedSurg with respect to each such parcel of leased property
included as part of the Purchased Assets have heretofore been delivered by
Parent to Buyer.
5.12. Condemnation. Neither the whole nor any part of any real
property leased, used or occupied in connection with the Business is subject to
any pending suit for condemnation or other taking by any public authority, and,
to the best knowledge of Parent, no such condemnation or other taking is
threatened or contemplated.
5.13. Personal Property. Schedule 5.13 contains a detailed list of all
machinery, equipment, vehicles, furniture and other personal property owned by
either Parent or MedSurg and used, or held for use in, or otherwise relating to
the Business.
5.14. Personal Property Leases. Schedule 5.14 contains a brief
description of each lease or other agreement or right, whether written or oral
(including in each case the annual rental, the expiration date thereof and a
brief description of the property covered), under which either Parent or MedSurg
is lessee of, or holds or operates, any machinery, equipment, vehicle or other
tangible personal property owned by a third Person and used, or held for use in,
or otherwise relating to the Business.
5.15. Intellectual Property; Software. (a) Schedule 5.15 contains a
list and description (showing in each case any product, device, process,
service, business or publication covered thereby, the registered or other owner,
expiration date and number, if any) of all Copyrights, Patent Rights and
Trademarks (including all assumed or fictitious names under which either Parent
or MedSurg is conducting the Business or has within the previous five years
conducted the Business) owned by, licensed to or used by either Parent or
MedSurg in connection with the conduct of the Business.
(b) Schedule 5.15 contains a list and description (showing in each case
any owner, licensor or licensee) of all Software owned by, licensed to or used
by either Parent or MedSurg in the conduct of the Business, provided that
Schedule 5.15 does not list Software licensed to either Parent or MedSurg that
is available in consumer retail stores and subject to "shrink-wrap" license
agreements.
(c) Schedule 5.15 contains a list and description of all Contracts,
licenses, sublicenses, assignments and indemnities which relate to (i) any
Copyrights, Patent Rights or Trademarks listed in Schedule 5.15, (ii) any
material Trade Secrets owned by, licensed to or used by either Parent or MedSurg
in connection with the conduct of the Business (except implicit Trade Secrets or
other Intellectual Property associated with the distribution of products in the
ordinary course of the Business) or (iii) any Software listed in Schedule 5.15.
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(d) Except as disclosed in Schedule 5.15, either Parent or MedSurg: (i)
owns the entire right, title and interest in and to the Intellectual Property
included in the Purchased Assets, free and clear of any Encumbrance, or (ii) has
the perpetual, royalty-free right to use the same.
(e) Except as disclosed in Schedule 5.15: (i) all registrations for
Copyrights, Patent Rights and Trademarks identified in Schedule 5.15 as being
owned by either Parent or MedSurg are valid and in force, and all applications
to register any unregistered Copyrights, Patent Rights and Trademarks so
identified are pending and in good standing, all without challenge of any kind;
(ii) the Intellectual Property owned by Parent is valid and enforceable; and
(iii) each of Parent and MedSurg has the sole and exclusive right to bring
actions for infringement or unauthorized use of the Intellectual Property and
Software owned by either Parent and MedSurg, as the case may be, and included in
the Purchased Assets. Correct and complete copies of: (x) registrations for all
registered Copyrights, Patent Rights and Trademarks identified in Schedule 5.15
as being owned by either Parent and MedSurg; and (y) all pending applications to
register unregistered Copyrights, Patent Rights and Trademarks identified in
Schedule 5.15 as being owned by either Parent and MedSurg (together with any
subsequent correspondence or filings relating to the foregoing) have heretofore
been delivered by Parent to Buyer.
(f) Except as set forth in Schedule 5.15, no infringement of any
Intellectual Property of any other Person has occurred or results in any way
from the operations of the Business, no claim of any infringement of any
Intellectual Property of any other Person has been made or asserted in respect
of the operations of the Business and neither Parent nor MedSurg has had notice
of, or knowledge of any basis for, a claim against either Parent or MedSurg that
the operations, activities, products, software, equipment, machinery or
processes of the Business infringe any Intellectual Property of any other
Person.
(g) [INTENTIONALLY BLANK]
(h) Except as disclosed in Schedule 5.15, all employees, agents,
consultants or contractors who have contributed to or participated in the
creation or development of any copyrightable, patentable or trade secret
material on behalf of Parent, MedSurg or any predecessor in interest thereto
either: (i) are a party to a "work-for-hire" agreement under which Parent or
MedSurg are deemed to be the original owner/author of all property rights
therein; or (ii) have executed an assignment or an agreement to assign in favor
of Parent (or such predecessor in interest, as applicable) of all right, title
and interest in such material.
(i) Except as disclosed in Schedule 5.15, (i) each microprocessor,
computer, computer program and other item of Software (whether installed on a
computer or on any other piece of equipment, including firmware) that is owned,
licensed or used by either Parent or MedSurg for use in the Business or in any
Product is Year 2000 Compliant, (ii) each microprocessor, computer program and
other item of Software that has been designed, developed, sold, licensed or
otherwise made available to any Person by either Parent or MedSurg is Year 2000
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Compliant, (iii) each of Parent and MedSurg has conducted sufficient Year 2000
compliance testing for each microprocessor, computer, computer program and item
of Software referred to above to be able to determine whether such computer,
computer program and items of Software is Year 2000 Compliant, and have obtained
warranties or other written assurances from each of its suppliers to the effect
that the products and services provided by such suppliers to Parent and MedSurg
are Year 2000 Compliant and (iv) the Business has not sold, licensed or
otherwise made available to any Person products that process data.
5.16. Accounts Receivable; Inventories. All accounts receivable of the
Business have arisen from bona fide transactions by Parent or MedSurg in the
ordinary course of the Business.
Except to the extent reserved on the books and records of the
Business, all Inventory of the Business (i) is in good, merchantable and useable
condition, (ii) is reflected in the Balance Sheet and will be reflected in the
Valuation Date Balance Sheet at the lower of cost or market in accordance with
generally accepted accounting principles and (iii) is, in the case of finished
goods, of a quality and quantity saleable in the ordinary course of the Business
and, in the case of all other Inventory is of a quality and quantity useable in
the ordinary course of the Business. The Inventory obsolescence policies of the
Business are appropriate for the nature of the products sold and the marketing
methods used by the Business, the reserve for Inventory obsolescence contained
in the Balance Sheet fairly reflects the amount of obsolete Inventory as of the
Balance Sheet Date, and the reserve for Inventory obsolescence to be contained
in the Valuation Date Balance Sheet will fairly reflect the amount of obsolete
Inventory as of the Closing Date. Parent has heretofore delivered to Buyer a
list of places where all material Inventory of the Business was located as of
April 30, 1999. The quantity of materials, component parts and finished goods on
hand is generally consistent with the levels of the same historically maintained
by the Business recognizing that such levels will vary from time to time
consistent with the past practices of the Business. Except for Inventory in
transit to Parent from its suppliers, all Inventory is located at the premises
of the Business. Since the Balance Sheet Date, Parent has continued to replenish
the Inventory in a normal and customary manner consistent with prior practice.
No purchase commitments of Parent are in excess of the normal, ordinary and
usual requirements of its business, or were made at any price in excess of the
then current market price, or contain terms and conditions more onerous than
those usual and customary in the conduct of the Business.
5.17. Title to Property. Either Parent or MedSurg has good and
marketable title to all of the Purchased Assets, free and clear of all
Encumbrances, except for Permitted Encumbrances and except as set forth in
Schedule 5.17. Upon delivery to Buyer on the Closing Date of the instruments of
transfer contemplated by Section 4.4, Parent will thereby transfer, or cause to
be transferred, to Buyer good and marketable title to the Purchased Assets
(except for the Unfinished Goods to be transferred pursuant to Section 4.5),
subject to no Encumbrances, except for Permitted Encumbrances and those matters
described in Schedule 5.17.
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5.18. Employees and Related Agreements; ERISA. Parent has no liability
of any kind whatsoever, whether direct, indirect, contingent or otherwise, on
account of (i) any violation of the health care requirements of Part 6 of Title
I of ERISA or Section 4980B of the Code, (ii) under Section 502(i) or Section
502(l) of ERISA or Section 4975 of the Code, (iii) under Section 302 of ERISA or
Section 412 of the Code or (iv) under Title IV of ERISA. No payments under any
employee benefit plans, programs or arrangements of Parent or any of its
Affiliates will be triggered as a result of Buyer's purchase of the Business
assets for which Buyer or any of its Affiliates will bear any liability except
as expressly set forth herein.
5.19. Employee Relations. Except as set forth in Schedule 5.19, each
of Parent and MedSurg has complied in respect of the Business with all
applicable laws, rules and regulations which relate to prices, wages, hours,
discrimination in employment and collective bargaining and is not liable for any
arrears of wages (other than normal accruals reflected in the books and records
of the Business) or any taxes or penalties for failure to comply with any of the
foregoing. Each of Parent and MedSurg is in compliance with the requirements of
the Workers Adjustment and Retraining Notification Act (the "WARN Act") and has
no liabilities pursuant to the WARN Act. Each of Parent and MedSurg believes
that its relations with the employees of the Business are satisfactory. Neither
Parent nor MedSurg is a party to, and the Business is not affected by or
threatened, to the knowledge of Parent and MedSurg, with, any dispute or
controversy with a union or with respect to unionization or collective
bargaining involving the employees of the Business. To the knowledge of Parent
and MedSurg, none of Parent, MedSurg or the Business is materially affected by
any dispute or controversy with a union or with respect to unionization or
collective bargaining involving any supplier or customer of the Business.
Schedule 5.19 sets forth a description of any union organizing or election
activities involving any non-union employees of the Business which have occurred
since April 30, 1994 or, to the knowledge of either Parent or MedSurg, are
threatened as of the date hereof.
5.20. Contracts. Except as set forth in Schedule 5.20 or any other
Schedule hereto, each of Parent and MedSurg, as the case may be, is not as of
the date hereof, with respect to the Business, a party to or bound by:
(i) any Contract for the purchase or sale of real property;
(ii) any Contract for the purchase of raw materials which
involved the payment of more than $50,000 in 1998, which either Parent
or MedSurg reasonably anticipate will involve the payment of more than
$50,000 in 1999 or which extends on a non-cancelable basis by Buyer
beyond April 30, 2000;
(iii) any Contract for the sale of goods or services which
involved the payment of more than $50,000 in 1998, which either Parent
or MedSurg reasonably anticipate will involve the payment of more than
$50,000 in 1999 or which extends on a non-cancelable basis by Buyer
beyond April 30, 2000;
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(iv) any Contract for the purchase, licensing or development
of Software to be used by the Business;
(v) any consignment, distributor, dealer, manufacturers
representative, sales agency, advertising representative or
advertising or public relations Contract;
(vi) any guarantee of the obligations of customers,
suppliers, officers, directors, employees, Affiliates or others;
(vii) any Contract which provides for, or relates to, the
incurrence by the Business of debt for borrowed money (including,
without limitation, any interest rate or foreign currency swap, cap,
collar, hedge or insurance agreements, or options or forwards on such
agreements, or other similar agreements for the purpose of managing
the interest rate and/or foreign exchange risk associated with its
financing);
(viii) any Contract with or for the benefit of any
Governmental Authority;
(ix) any Contract not made in the ordinary course that
involves the expenditure or receipt by the Business of more than
$10,000;
(x) any other Contract which is material to the Business;
(xi) any purchase order with a term of greater than 30 days
or involving more than $10,000 in the aggregate; or
(xii) any sole source supply Contract for the purchase of
raw material or a component that is otherwise not generally available
and that is used in the manufacture of any product.
5.21. Status of Contracts. Except as set forth in Schedule 5.21 or in
any other Schedule hereto, each of the Contracts listed in Schedules 5.11, 5.14,
5.15 and 5.20 (collectively, the "Parent Agreements") constitutes a valid and
binding obligation of the parties thereto and is in full force and effect and
(subject to the qualifications and exceptions set forth in Schedule 5.3 and
except for those Parent Agreements which by their terms will expire prior to the
Closing Date or are otherwise terminated prior to the Closing Date in accordance
with the provisions hereof) may be transferred to Buyer pursuant to this
Agreement and will continue in full force and effect thereafter, in each case
without breaching the terms thereof or resulting in the forfeiture or impairment
of any rights thereunder and without the consent, approval or act of, or the
making of any filing with, any other party. Parent or MedSurg, as the case may
be, has fulfilled and performed its obligations under each of the Parent
Agreements to which it is a party, and neither Parent nor MedSurg is in, or
alleged to be in, breach or default under, nor is there or is there alleged to
be any basis for termination of, any of the Parent Agreements to which it is a
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party and, to the knowledge of Parent and MedSurg no other party to any of the
Parent Agreements has breached or defaulted thereunder, and no event has
occurred and no condition or state of facts exists which, with the passage of
time or the giving of notice or both, would constitute such a default or breach
by Parent, MedSurg or by any such other party. Neither Parent nor MedSurg is
currently renegotiating any of the Parent Agreements or paying liquidated
damages in lieu of performance thereunder. Complete and correct copies of each
of the Parent Agreements as currently in effect, including all pricing terms,
have heretofore been delivered to Buyer by Parent.
5.22. No Violation, Litigation or Regulatory Action. Except as set
forth in Schedule 5.22:
(i) the Purchased Assets and their uses comply with all
applicable Requirements of Laws and Court Orders;
(ii) each of Parent and MedSurg has complied with all
Requirements of Laws and Court Orders which are applicable to the
Purchased Assets or the Business;
(iii) there are no criminal, civil, administrative or
regulatory lawsuits, claims, suits, proceedings or investigations
pending or, to the best knowledge of either Parent or MedSurg,
threatened against or affecting either Parent or MedSurg in respect of
the Purchased Assets or the Business nor, to the best knowledge of
either Parent or MedSurg, is there any basis for any of the same, and
there are no lawsuits, suits or proceedings pending in which either
Parent or MedSurg is the plaintiff or claimant and which relate to the
Purchased Assets or the Business; and
(iv) there is no criminal, civil, administrative or
regulatory action, suit or proceeding pending or, to the best
knowledge of Parent, threatened which questions the legality or
propriety of the transactions contemplated by this Agreement.
5.23. Environmental Matters. Except as set forth in Schedule 5.23:
(i) the operations of the Business comply and have complied
with all applicable Environmental Laws;
(ii) Parent and MedSurg have in respect of the Business,
obtained all environmental, health and safety Governmental Permits
necessary for its operation, and all such Governmental Permits are in
full force and effect and Parent is in compliance with all terms and
conditions of such permits;
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(iii) neither Parent nor MedSurg with respect to the
Business, nor any of the present Facilities or operations, or the past
Facilities or operations, is subject to any on-going investigation by,
order from or agreement with any Person (including without limitation
any prior owner or operator of the Facilities) respecting (i) any
Environmental Law, (ii) any Remedial Action or (iii) any claim of
Losses and Expenses arising from the Release or threatened Release of
Hazardous Materials into the environment;
(iv) Neither Parent nor MedSurg has been, with respect to
the Business, subject to any judicial or administrative proceeding,
order, judgment, decree or settlement alleging or addressing a
violation of or liability under any Environmental Law;
(v) Neither Parent nor MedSurg has with respect to the
Business:
(a) reported a Release of a hazardous substance
pursuant to Section 103(a) of CERCLA, or any state
equivalent;
(b) filed a notice pursuant to Section 103(c) of
CERCLA;
(c) filed notice pursuant to Section 3010 of RCRA,
indicating the generation of any hazardous waste, as that
term is defined under 40 CFR Part 261 or any state
equivalent; or
(d) filed any notice under any applicable
Environmental Law reporting a substantial violation of any
applicable Environmental Law;
(vi) there is not now, nor to the best knowledge of Parent
has there ever been, on or in the Facilities:
(a) any treatment, recycling, storage or disposal
of any hazardous waste, as that term is defined under 40 CFR
Part 261 or any state equivalent, that requires or required
a Governmental Permit pursuant to Section 3005 of RCRA;
(b) any underground storage tank or surface
impoundment or landfill or waste pile; or
(c) any storage on-site or Release of any
Hazardous Materials in quantities sufficient to trigger
reporting obligations under federal Emergency Planning
Community Right-to-Know or any state equivalent.
(vii) there is not now on or in any of the Facilities any
polychlorinated biphenyls (PCB) used in pigments, hydraulic oils,
electrical transformers or other equipment;
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(viii) Neither Parent nor MedSurg has received any notice or
claim under CERCLA or any comparable state law to the effect that it
is or may be liable to any Person as a result of the Release or
threatened Release of Hazardous Materials and there are no facts or
conditions relating to the operation of the Business that could
reasonably be expected to give rise to any such notice or claim;
(ix) no Environmental Encumbrance has attached to any of the
Facilities;
(x) any asbestos-containing material which is on or part of
any of the Facilities is in good repair according to the current
standards and practices governing such material, and its presence or
condition does not violate any currently applicable Environmental Law;
and
(xi) none of the products Parent or MedSurg manufactures,
distributes or sells in connection with the Business, now or in the
past, contains asbestos or asbestos-containing material.
5.24. Insurance. Schedule 5.24 sets forth a list and brief description
(including nature of coverage, limits and deductibles with respect to each type
of coverage) of all policies of insurance maintained, owned or held by either
Parent or MedSurg on the date hereof with respect to the Purchased Assets or the
Business (excluding any of the Excluded Assets). Parent shall keep or cause such
insurance or comparable insurance to be kept in full force and effect through
the Closing Date. Each of Parent and MedSurg has complied with each of such
insurance policies, as the case may be, and has not failed to give any notice or
present any claim thereunder in a due and timely manner. Each of Parent and
MedSurg has made available to Buyer correct and complete copies of the most
recent inspection reports, if any, received from insurance underwriters as to
the condition of the Purchased Assets.
5.25. Customers and Suppliers. Set forth in Schedule 5.25 hereto is
(i) a list of names and addresses of the ten largest customers and the ten
largest suppliers (measured by dollar volume of purchases or sales in each case)
of the Business and the percentage of the Business which each such customer or
supplier represents or represented during each of the years ended December 31,
1997 and 1998 and the period January 1, 1999 through March 31, 1999; and (ii)
copies of the forms of purchase order for Inventory and sales Contracts for
finished goods used in respect of the Business. Except as set forth in Schedule
5.25, there exists no actual or, to the knowledge of Parent and MedSurg,
threatened termination, cancellation or limitation of, or any modification or
change in, the business relationship with any customer or group of customers
listed in Schedule 5.25, or whose purchases individually or in the aggregate are
material to the operations of the Business, or with any supplier or group of
suppliers listed in Schedule 5.25, or whose sales individually or in the
aggregate are material to the operations of the Business, and there exists no
present or future condition or state of facts or circumstances involving
customers, suppliers or sales representatives which Parent can now reasonably
foresee would materially adversely affect the Business or prevent the conduct of
the Business after the consummation of the transactions contemplated by this
Agreement in essentially the same manner in which it has heretofore been
conducted.
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5.26. [INTENTIONALLY BLANK]
5.27. Warranties and Product Liabilities. (a) Each product
manufactured, sold, leased or delivered by the Business has been in conformity
with all applicable contractual commitments and all express and implied
warranties, and the Business has no liability (and there is no basis for any
present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand against any of them giving rise to any liability) for
replacement or repair thereof or other damages in connection therewith, subject
only to the reserve for product warranty claims set forth on the face of the
Balance Sheet rather than in any notes thereto) as adjusted for the passage of
time through the Closing Date in accordance with the past custom and practice of
the Business. No product manufactured, sold, leased, or delivered by the
Business is subject to any guaranty, warranty, or other indemnity beyond the
applicable standard terms and conditions of sale or lease. Schedule 5.27
includes copies of the standard terms and conditions of sale or lease for the
Business (containing applicable guaranty, warranty and indemnity provisions) and
a summary of the warranty expense incurred by the Business during each of the
last three fiscal years.
(b) The Business has no liability (and there is no basis for any
present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand against any of them giving rise to any liability)
arising out of any injury to individuals or property as a result of the
ownership, possession or use of any product manufactured, sold, leased or
delivered by the Business.
5.28. No Finder. Neither Parent nor MedSurg, nor any Person acting on
their behalf, has paid or become obligated to pay any fee or commission to any
broker, finder or intermediary for or on account of the transactions
contemplated by this Agreement.
5.29. No Third Party Options. There are no existing agreements,
options, commitments or rights with, of or to any person to acquire, directly or
indirectly, the Business or any of the Purchased Assets or any interest therein,
except for those Contracts for the sale of Inventory entered into in the normal
course of business consistent with past practice.
5.30. Disclosure. None of the representations or warranties contained
in this Article V and none of the information contained in the Schedules
referred to in Article V, is false or misleading in any material respect or
omits to state a fact herein or therein necessary to make the statements herein
or therein not misleading in any material respect.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Parent and MedSurg to enter into this Agreement
and to consummate the transactions contemplated hereby, Buyer hereby represents
and warrants to Parent and MedSurg and agrees as follows:
6.1. Organization of Buyer. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Buyer is duly qualified to transact business as a foreign corporation and is in
good standing in each of the jurisdictions in which the ownership or leasing of
its properties or the conduct of its business requires such qualification. No
other jurisdiction has demanded, requested or otherwise indicated that Buyer is
required to so qualify. Buyer has full corporate power and authority to own or
lease and to operate and use its properties and assets and to carry on its
business as now conducted.
True and complete copies of the certificate of incorporation and all
amendments thereto and of the By-laws, as amended to date, of Buyer have been
delivered to Parent.
6.2. Authority of Buyer. Buyer has full power and authority to
execute, deliver and perform this Agreement and all of the Buyer Ancillary
Agreements. The execution, delivery and performance of this Agreement and the
Buyer Ancillary Agreements by Buyer have been duly authorized and approved by
Buyer's Board of Directors and do not require any further authorization or
consent of Buyer or its stockholder. This Agreement has been duly authorized,
executed and delivered by Buyer and is the legal, valid and binding agreement of
Buyer enforceable in accordance with its terms, and each of the Buyer Ancillary
Agreements has been duly authorized by Buyer and upon execution and delivery by
Buyer will be a legal, valid and binding obligation of Buyer enforceable in
accordance with its terms.
Neither the execution and delivery of this Agreement or any of the
Buyer Ancillary Agreements or the consummation of any of the transactions
contemplated hereby or thereby nor compliance with or fulfillment of the terms,
conditions and provisions hereof or thereof will:
(i) conflict with, result in a breach of the terms,
conditions or provisions of, or constitute a default, an event of
default or an event creating rights of acceleration, termination or
cancellation or a loss of rights under (1) the Certificate of
Incorporation or By-laws of Buyer, (2) any material note, instrument,
agreement, mortgage, lease, license, franchise, permit or other
authorization, right, restriction or obligation to which Buyer is a
party or any of its properties is subject or by which Buyer is bound,
(3) any Court Order to which Buyer is a party or by which it is bound
or (4) any Requirements of Laws affecting Buyer; or
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(ii) require the approval, consent, authorization or act of,
or the making by Buyer of any declaration, filing or registration
with, any Person, except as provided under the HSR Act.
6.3. No Finder. Neither Buyer nor any Person acting on its behalf has
paid or become obligated to pay any fee or commission to any broker, finder or
intermediary for or on account of the transactions contemplated by this
Agreement.
ARTICLE VII
ACTION PRIOR TO THE CLOSING DATE
The respective parties hereto covenant and agree to take the following
actions between the date hereof and the Closing Date:
7.1. Investigation of the Business by Buyer. Parent shall afford and
cause the Business to afford to the officers, employees and authorized
representatives of Buyer (including, without limitation, independent public
accountants and attorneys) complete access during normal business hours to the
offices, properties, employees and business and financial records (including
computer files, retrieval programs and similar documentation and such access and
information that may be necessary in connection with an environmental audit) of
the Business to the extent Buyer shall deem necessary or desirable and shall
furnish to Buyer or its authorized representatives such additional information
concerning the Purchased Assets, the Business and the operations of the Business
as shall be reasonably requested, including all such information as shall be
necessary to enable Buyer or its representatives to verify the accuracy of the
representations and warranties contained in this Agreement, to verify that the
covenants of Parent contained in this Agreement have been complied with and to
determine whether the conditions set forth in Article IX have been satisfied.
Buyer agrees that such investigation shall be conducted in such a manner as not
to interfere unreasonably with the operations of, Parent, MedSurg or the
Business. No investigation made by Buyer or its representatives hereunder shall
affect the representations and warranties of Parent hereunder.
7.2. Preserve Accuracy of Representations and Warranties. Each of the
parties hereto shall refrain from taking any action which would render any
representation or warranty contained in Article V or VI of this Agreement
inaccurate as of the Closing Date. Each party shall promptly notify the other of
any action, suit or proceeding that shall be instituted or threatened against
such party to restrain, prohibit or otherwise challenge the legality of any
transaction contemplated by this Agreement. Parent shall promptly notify Buyer
of any lawsuit, claim, proceeding or investigation that may be threatened,
brought, asserted or commenced against Parent or MedSurg which would have been
listed in Schedule 5.22 if such lawsuit, claim, proceeding or investigation had
arisen prior to the date hereof.
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7.3. Consents of Third Parties; Governmental Approvals. (a) Parent
will act diligently and reasonably to secure, before the Closing Date, the
consent, approval or waiver, in form and substance reasonably satisfactory to
Buyer, from any party to any Parent Agreement required to be obtained to assign
or transfer any such Agreements to Buyer or to otherwise satisfy the conditions
set forth in Section 9.5; provided that neither Parent nor Buyer shall have any
obligation to offer or pay any consideration in order to obtain any such
consents or approvals; and provided, further, that Parent shall not make any
agreement or understanding affecting the Purchased Assets or the Business as a
condition for obtaining any such consents or waivers except with the prior
written consent of Buyer. During the period prior to the Closing Date, Buyer
shall act diligently and reasonably to cooperate with Parent to obtain the
consents, approvals and waivers contemplated by this Section 7.3(a).
(b) During the period prior to the Closing Date, Parent and Buyer shall
act diligently and reasonably, and shall cooperate with each other, to secure
any consents and approvals of any Governmental Authority required to be obtained
by them in order to assign or transfer any Governmental Permits to Buyer, to
permit the consummation of the transactions contemplated by this Agreement, or
to otherwise satisfy the conditions set forth in Section 9.4; provided that
Parent shall not make any agreement or understanding affecting the Purchased
Assets or the Business as a condition for obtaining any such consents or
approvals except with the prior written consent of Buyer.
7.4. Operations Prior to the Closing Date. (a) Parent shall, and shall
cause MedSurg to, operate and carry on the Business only in the ordinary course
and substantially as presently operated. Consistent with the foregoing, Parent
shall, and shall cause MedSurg to, keep and maintain the Purchased Assets in
good operating condition and repair and shall use its commercially reasonable
efforts consistent with good business practice to maintain the business
organization of the Business intact and to preserve the goodwill of the
suppliers, contractors, licensors, employees, customers, distributors and others
having business relations with the Business.
(b) Except as expressly contemplated by this Agreement or except with
the express written approval of Buyer, Parent shall not, and shall cause MedSurg
not to:
(i) [INTENTIONALLY BLANK]
(ii) make any capital expenditure in excess of $20,000 in
the aggregate with respect to the Business or enter into any Contract
or commitment therefor;
(iii) enter into any Contract which would have been required
to be set forth in Schedule 5.20 if in effect on the date hereof or
enter into any Contract which cannot be assigned to Buyer or a
permitted assignee of Buyer under Section 13.5;
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(iv) enter into any Contract for the purchase of real
property to be used, or held for use in, or otherwise relating to the
Business or exercise any option to extend a lease listed in Schedule
5.11;
(v) sell, lease (as lessor), transfer or otherwise dispose
of (including any transfers from the Business to Parent or any of its
Affiliates), or mortgage or pledge, or impose or suffer to be imposed
any Encumbrance on, any of the Purchased Assets, other than Inventory
and minor amounts of personal property sold or otherwise disposed of
for fair value in the ordinary course of the Business consistent with
past practice and other than Permitted Encumbrances;
(vi) cancel any debts owed to or claims held by the Business
(including the settlement of any claims or litigation) other than in
the ordinary course of the Business consistent with past practice;
(vii) create, incur or assume, or agree to create, incur or
assume, any indebtedness for borrowed money in respect of the Business
(other than money borrowed or advances from Parent or any of its
Affiliates in the ordinary course of the Business consistent with past
practice) or enter into, as lessee, any capitalized lease obligations
(as defined in Statement of Financial Accounting Standards No. 13)
except as set forth in item 2 of Schedule 5.5(B);
(viii) accelerate or delay collection of any notes or
accounts receivable generated by the Business in advance of or beyond
their regular due dates or the dates when the same would have been
collected in the ordinary course of the Business consistent with past
practice;
(ix) delay or accelerate payment of any account payable or
other liability of the Business beyond or in advance of its due date
or the date when such liability would have been paid in the ordinary
course of the Business consistent with past practice;
(x) allow the levels of Inventory of the Business to vary in
any material respect from the levels customarily maintained in the
Business;
(xi) make, or agree to make, any payment of cash or
distribution of assets to Parent or any of its Affiliates (other than
cash realized upon collection of receivables generated in the ordinary
course of the Business);
(xii) institute any increase in any profit-sharing, bonus,
incentive, deferred compensation, insurance, pension, retirement,
medical, hospital, disability, welfare or other employee benefit plan
with respect to employees of the Business;
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(xiii) make any change in compensation of the employees of
the Business, other than changes made in accordance with normal
compensation practices and consistent with past compensation
practices;
(xiv) make any material change in the accounting policies
applied in the preparation of the financial statements contained in
Schedule 5.4; and
(xv) enter into any agreement or commitment to take any
action prohibited by this Section 7.4.
7.5. Notification by Parent of Certain Matters. During the period
prior to the Closing Date, Parent will promptly advise Buyer in writing of (i)
any material adverse change in the condition of the Purchased Assets or the
Business, (ii) any notice or other communication from any third Person alleging
that the consent of such third Person is or may be required in connection with
the transactions contemplated by this Agreement, and (iii) any material default
under any Parent Agreement or event which, with notice or lapse of time or both,
would become such a default on or prior to the Closing Date and of which Parent
has knowledge.
7.6. Antitrust Law Compliance. As promptly as practicable after the
date hereof, Buyer and Parent shall file with the Federal Trade Commission and
the Antitrust Division of the Department of Justice the notifications and other
information required to be filed under the HSR Act, or any rules and regulations
promulgated thereunder, with respect to the transactions contemplated hereby.
Each party warrants that all such filings by it will be, as of the date filed,
true and accurate and in accordance with the requirements of the HSR Act and any
such rules and regulations. Each of Buyer and Parent agrees to make available to
the other such information as each of them may reasonably request relative to
its business, assets and property (including, in the case of Parent, the
Business) as may be required of each of them to file any additional information
requested by such agencies under the HSR Act and any such rules and regulations.
7.7. Insurance. Until the Closing, Parent shall maintain or cause to
be maintained in force (including necessary renewals thereof) insurance policies
against risk and liabilities to the extent and in the matter heretofore
maintained by Parent with respect to the Business and the Purchased Assets.
7.8. [INTENTIONALLY BLANK]
ARTICLE VIII
ADDITIONAL AGREEMENTS
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8.1. Covenant Not to Compete or Solicit Business. (a) In furtherance
of the sale of the Purchased Assets and the Business to Buyer hereunder by
virtue of the transactions contemplated hereby and more effectively to protect
the value and goodwill of the Purchased Assets and the Business so sold, Parent
covenants and agrees that, for a period ending on the third anniversary of the
Closing Date, neither Parent nor any of its Affiliates will directly or
indirectly (whether as principal, agent, independent contractor, partner or
otherwise) own, manage, operate, control, participate in (other than as a
supplier of components), or otherwise carry on, a business engaged in
assembling, packaging, marketing or selling procedure kits or trays anywhere in
or outside of the United States (it being understood by the parties hereto that
the prohibited activities are not limited to any particular region because such
business has been conducted by Parent throughout and outside the United States
and the prohibited activities may be engaged in effectively from any location in
or outside of the United States): provided, however, that nothing set forth in
this Section 8.1 shall prohibit Parent or its Affiliates from owning not in
excess of 5% in the aggregate of any class of capital stock of any corporation
if such stock is publicly traded and listed on any national or regional stock
exchange or on the NASDAQ national market system.
(b) At all times prior to the Deferred Closing, Parent shall not, and
shall cause MedSurg not to, transfer or cause to be transferred from MedSurg any
of its current employees. Buyer agrees to deliver to Parent no later than 75
days prior to the Deferred Closing a list of any employees of MedSurg to whom
Buyer proposes to offer employment upon termination of the Contract
Manufacturing Agreement (the "Designated Employees"). Parent agrees to cooperate
with Buyer and to use its reasonable efforts to persuade the Designated
Employees to accept positions with Buyer or one of its Affiliates. Parent
covenants that neither Parent nor any of its Affiliates will for a period ending
on the third anniversary of the Closing Date, induce or attempt to persuade any
Designated Employee (except any individual who has not accepted a position with
Buyer or one of its Affiliates within 90 days after the Deferred Closing Date)
or any employee, agent, or customer of the Business to terminate such
employment, agency or business relationship in order to enter into any such
relationship on behalf of any other business relationship with Parent or any of
its Affiliates or in competition with the Business.
(c) In addition, Parent covenants and agrees that neither it nor any of
its Affiliates will divulge or make use of any trade secrets or other
confidential information of the Business other than to disclose such secrets and
information to Buyer or its Affiliates.
(d) In the event Parent or any Affiliate of Parent violates any of its
obligations under this Section 8.1, Buyer may proceed against it in law or in
equity for such damages or other relief as a court may deem appropriate. Parent
acknowledges that a violation of this Section 8.1 may cause Buyer irreparable
harm which may not be adequately compensated for by money damages. Parent
therefore agrees that in the event of any actual or threatened violation of this
Section 8.1, Buyer shall be entitled, in addition to other remedies that it may
have, to a temporary restraining order and to preliminary and final injunctive
relief against Parent or such Affiliate of Parent to prevent any violations of
this Section 8.1, without the necessity of posting a bond. The prevailing party
in any action commenced under this Section 8.1 shall also be entitled to receive
reasonable attorneys' fees and court costs. It is the intent and understanding
of each party hereto that if, in any action before any court or agency legally
empowered to enforce this Section 8.1, any term, restriction, covenant or
promise in this Section 8.1 is found to be unreasonable and for that reason
unenforceable, then such term, restriction, covenant or promise shall be deemed
modified to the extent necessary to make it enforceable by such court or agency.
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8.2. Use of Names. For a period of 6 months after the Deferred Closing
Date, Buyer and its Affiliates shall have the royalty-free right to refer to the
Business as "formerly an Affiliate of Isolyser Company, Inc." and to use such
reference in advertising or in the description or name of any service or product
from time to time purchased, processed, manufactured or sold by Buyer and its
Affiliates in continuation of the Business. Buyer and its Affiliates shall have
the further royalty-free right from and after the Closing Date to sell or
otherwise use or dispose of any Inventory which bears the name "Isolyser
Company, Inc." or "MedSurg Industries, Inc." alone or in combination with other
words if such materials (i) were included in the Purchased Assets, (ii) are
returned to Buyer or its Affiliates after the Closing Date, or (iii) were
contracted for by Parent prior to the Closing Date; provided that such right
shall terminate 12 months after the Closing Date with respect to any such
materials unless the only reference therein to Parent is to its copyright claim,
in which case such right shall be unlimited as to time. Buyer and its Affiliates
shall also have the royalty-free right from and after the Closing Date to use,
for a period of 12 months following the Closing Date, any signs, letterhead,
invoices or other supplies which bear the name "Isolyser Company, Inc." or
"MedSurg Industries, Inc." alone or in combination with other words if such
signs or supplies (i) were included in the Purchased Assets, or (ii) were
contracted for by Parent prior to the Closing Date.
8.3. Taxes. (a) Except to the extent reflected as a liability on the
Valuation Date Balance Sheet and taken into account as a deduction in Net Assets
in connection with the determination of the Purchase Price, Parent shall be
liable for and shall pay or cause to be paid all Taxes (whether assessed or
unassessed) applicable to the Business and the Purchased Assets, in each case
attributable to periods (or portions thereof) ending on or prior to the Closing
Date. Buyer shall be liable for and shall pay (i) all Taxes reflected as a
liability on the Valuation Date Balance Sheet and taken into account as a
deduction in Net Assets in connection with the determination of the Purchase
Price and (ii) all Taxes (whether assessed or unassessed) applicable to the
Business, the Purchased Assets, in each case attributable to periods (or
portions thereof) beginning after the Closing Date. For purposes of this
paragraph (a), any period beginning before and ending after the Closing Date
shall be treated as two partial periods, one ending on the Closing Date and the
other beginning after the Closing Date except that Taxes (such as property
Taxes) imposed on a periodic basis shall be allocated on a daily basis.
(b) Notwithstanding Section 8.3(a), any sales Tax, use Tax, real
property transfer or gains Tax, documentary stamp Tax or similar Tax
attributable to the sale or transfer of the Purchased Assets shall be paid by
Parent, provided that the foregoing shall not include fees payable by Buyer
pursuant to the HSR Act. Buyer agrees to timely sign and deliver such
certificates or forms as may be necessary or appropriate to establish an
exemption from (or otherwise reduce), or make a report with respect to, such
Taxes.
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(c) Parent or Buyer, as the case may be, shall provide reimbursement
for any Tax paid by one party all or a portion of which is the responsibility of
the other party in accordance with the terms of this Section 8.3. Within a
reasonable time prior to the payment of any said Tax, the party paying such Tax
shall give notice to the other party of the Tax payable and the portion which is
the liability of each party, although failure to do so will not relieve the
other party from its liability hereunder.
(d) Any payments made pursuant to this Section 8.3 shall be treated by
Buyer and Parent as an adjustment to the Purchase Price.
8.4. Discharge of Business' Liabilities. Parent covenants and agrees
that it will pay and discharge, and hold Buyer harmless from, each and every
liability and obligation of Parent in respect of the Business or the Purchased
Assets arising from events occurring on or prior to the Closing Date, excepting
only those liabilities and obligations expressly assumed by Buyer at the Closing
pursuant to instruments of assumption delivered to Parent at the Closing, or the
Deferred Closing, as the case may be, it being understood and agreed that Buyer
is assuming no liabilities or obligations of Parent other than liabilities and
obligations so expressly assumed by Buyer.
8.5. Employees and Employee Benefit Plans. (a) No person who is an
employee of Parent or any of its Affiliates (an "Employee") shall transfer
employment to Buyer or any of its Affiliates in connection with Buyer's purchase
of the assets pursuant to this Agreement. Parent shall retain the sole
responsibility for all matters relating to the maintenance of personnel and
payroll records, the withholding and payment of federal, state and local income
and payroll taxes, the payment of workers' compensation and unemployment
compensation insurance, salaries, wages and pension, welfare and other fringe
benefits, including any severance which may be triggered as a result of any
termination employment and the conduct of all other matters relating to labor
relations, including compliance with Parent's obligations under any applicable
collective bargaining agreements and all negotiations and communications with
any union relating to employment of the Employees by Parent. Parent shall retain
liability for compliance with all applicable labor and employment laws relating
to the Employees and shall indemnify Buyer (and its successors, assigns,
officers, directors and employees) for any liability or legal or other expenses
that result from any legal action alleging noncompliance with such laws.
(b) Parent shall cause MedSurg to retain all liabilities under its
employee benefits plans, programs, agreements and arrangements, including (i)
any liabilities relating to any noncompliance with applicable laws, including
the Employee Retirement Income Security Act, the Internal Revenue Code and the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"),
and (ii) any liabilities which arise as a result of Parent's joint and several
liability through its relationship with an Affiliate. Parent shall be solely
responsible to provide continuation coverage under COBRA and other any
applicable state law to any Employee or beneficiary of any Employee who is
entitled to such continuation coverage. Parent shall indemnify Buyer (and its
successors, assigns, officers, directors, employees and employee benefits plans)
for any liability resulting from Parent's failure to provide such continuation
coverage and for any other liability described in the first sentence of this
paragraph.
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(c) Parent shall have the responsibility of giving the Employees any
notice (a "Warn Notice") required under the WARN Act. Parent shall comply with
all applicable requirements of the WARN Act and shall indemnify Buyer (and its
successors, assigns, officers, directors and employees) for any liability or
legal or other expenses resulting from any legal action alleging noncompliance
with such act.
8.6. [INTENTIONALLY BLANK]
8.7. Ancillary Agreements. At the Closing, Buyer Parent and MedSurg
shall execute and deliver the following agreements (the "Ancillary Agreements"):
(i) a Supply & License Agreement substantially in the form
attached as Exhibit C hereto; and
(ii) a Contract Manufacturing Agreement substantially in the
form attached as Exhibit D hereto with such other terms, including
Exhibit C thereto regarding Manufacturing Costs, as are mutually
acceptable to Buyer and Parent.
8.8. Handling of Returned Products. Notwithstanding Section 2.4(l) of
this Agreement, the parties hereto agree that Buyer shall administer and manage
all matters related to the warranty and service on any products manufactured,
distributed or sold by the Business on or prior to the Closing Date. In
addition, notwithstanding Sections 2.4(k) and (l) of this Agreement, Buyer
agrees to replace a de minimis amount of any products manufactured, distributed
or sold by the Business on or prior to the Closing Date which are returned for
replacement by a customer after the Closing Date pursuant to any warranty
obligation of the Business.
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
The obligations of Buyer under this Agreement shall, at the option of
Buyer, be subject to the satisfaction, on or prior to the Closing Date, of the
following conditions:
9.1. No Misrepresentation or Breach of Covenants and Warranties. There
shall have been no material breach by Parent in the performance of any of its
covenants and agreements herein; each of the representations and warranties of
Parent contained or referred to herein shall be true and correct in all material
respects on the Closing Date as though made on the Closing Date, except for
changes therein specifically permitted by this Agreement or resulting from any
transaction expressly consented to in writing by Buyer or any transaction
permitted by Section 7.4; and there shall have been delivered to Buyer a
certificate to such effect, dated the Closing Date, signed on behalf of Parent
by the President or any Vice President of Parent.
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9.2. No Changes or Destruction of Property. Between the date hereof
and the Closing Date, there shall have been (a) no material adverse change in
the Purchased Assets, the Business or the operations, liabilities, profits,
prospects or condition (financial or otherwise) of the Business; (b) no material
adverse federal or state legislative or regulatory change affecting the Business
or its products or services; and (c) no material damage to the Purchased Assets
by fire, flood, casualty, act of God or the public enemy or other cause,
regardless of insurance coverage for such damage; and there shall have been
delivered to Buyer a certificate to such effect, dated the Closing Date and
signed on behalf of Parent by the President or any Vice President of Parent.
9.3. No Restraint or Litigation. The waiting period under the HSR Act
shall have expired or been terminated, and no action, suit, investigation or
proceeding shall have been instituted or threatened to restrain or prohibit or
otherwise challenge the legality or validity of the transactions contemplated
hereby.
9.4. Necessary Governmental Approvals. The parties shall have received
all approvals and actions of or by all Governmental Bodies which are necessary
to consummate the transactions contemplated hereby, which are either specified
in Schedule 5.3 or otherwise required to be obtained prior to the Closing by
applicable Requirements of Laws or which are necessary to prevent a material
adverse change in the Purchased Assets, the Business or the operations,
liabilities, profits, prospects or condition (financial or otherwise) of the
Business.
9.5. Necessary Consents. Parent shall have received consents, in form
and substance reasonably satisfactory to Buyer, to the transactions contemplated
hereby from the other parties to all Contracts, leases, and permits to which
Parent is a party or by which Parent or any of the Purchased Assets is affected
and which are specified in Schedule 9.5.
9.6. Maintenance of Accounts. The revenues of the Business for the
period commencing January 1, 1999 and ending immediately prior to the Closing
Date shall have been equal to or in excess of an annual rate of $55 million
based upon 256 billing days in a year and the number of billing days in the
period from January 1, 1999 to the Closing Date.
9.7. Key Employees. Parent shall have used reasonable efforts to
arrange for the individuals listed in Schedule 9.7 to agree to become employees
of Buyer as of the Closing Date and to enter into employment agreements with
Buyer on terms satisfactory to Buyer. Buyer acknowledges that Parent has no
obligation to ensure that such individuals agree to become employees of Buyer.
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9.8. [INTENTIONALLY BLANK]
9.9. Instrument of Assignment and Ancillary Agreements. Parent shall
have executed and delivered to Buyer all of the necessary deeds and assignments,
including the Instrument of Assignment, necessary to sell, transfer, assign,
convey and deliver to Buyer the Purchased Assets and the Ancillary Agreements.
Parent shall have provided to Buyer such other items acceptable in form and
substance to Buyer and its counsel which Buyer may reasonably request to
consummate the transactions contemplated by this Agreement.
ARTICLE X
CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MEDSURG
The obligations of Parent and MedSurg under this agreement shall, at
the option of Parent and MedSurg, be subject to the satisfaction, on or prior to
the Closing Date, of the following conditions:
10.1. No Misrepresentation or Breach of Covenants and Warranties.
There shall have been no material breach by Buyer in the performance of any of
its covenants and agreements herein; each of the representations and warranties
of Buyer contained or referred to in this Agreement shall be true and correct in
all material respects on the Closing Date as though made on the Closing Date,
except for changes therein specifically permitted by this Agreement or resulting
from any transaction expressly consented to in writing by Parent or any
transaction contemplated by this Agreement; and there shall have been delivered
to Parent a certificate to such effect, dated the Closing Date and signed on
behalf of Buyer by the President or any Vice President of Buyer.
10.2. No Restraint or Litigation. The waiting period under the HSR Act
shall have expired or been terminated, and no action, suit or proceeding by any
Governmental Authority shall have been instituted or threatened to restrain,
prohibit or otherwise challenge the legality or validity of the transactions
contemplated hereby.
10.3. Necessary Governmental Approvals. The parties shall have
received all approvals and actions of or by all Governmental Bodies necessary to
consummate the transactions contemplated hereby, which are required to be
obtained prior to the Closing by applicable Requirements of Laws.
10.4. Purchase Price, Instrument of Assumption and Ancillary
Agreements. Buyer shall have delivered to Parent the amount contemplated by
Section 3.1 and shall have executed and delivered to Parent the Instrument of
Assumption and the Ancillary Agreements.
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ARTICLE XI
INDEMNIFICATION
11.1. Indemnification by Parent. (a) Parent agrees to indemnify and
hold harmless each Buyer Group Member from and against any and all Losses and
Expenses incurred by such Buyer Group Member in connection with or arising from:
(i) any breach or alleged breach by either Parent or MedSurg
of any of its covenants in this Agreement;
(ii) any failure of either Parent or MedSurg to perform any
of its obligations in this Agreement;
(iii) any breach or alleged breach of any warranty or the
inaccuracy of any representation of Parent contained or referred to in
this Agreement or any certificate delivered by or on behalf of Parent
pursuant hereto;
(iv) the failure of Parent to comply with any applicable
bulk sales law, except that this clause shall not affect the
obligation of Buyer to pay and discharge the Assumed Liabilities; or
(v) the failure of Parent to perform or cause to be
performed any Excluded Liability.
(b) The indemnification provided for in Section 11.1(a)(iii) shall
terminate five years after the Closing Date (and no claims for indemnification
hereunder shall be made by any Buyer Group Member under Section 11.1(a)(iii)
thereafter), except that the indemnification by Parent shall continue as to:
(i) any Losses or Expenses of which any Buyer Group Member
has notified Parent in accordance with the requirements of Section
11.3 on or prior to the date such indemnification would otherwise
terminate in accordance with this Section 11.1, as to which the
obligation of Parent shall continue until the liability of Parent
shall have been determined pursuant to this Article XI, and Parent
shall have reimbursed all Buyer Group Members for the full amount of
such Losses and Expenses in accordance with this Article XI;
(ii) the representations and warranties contained in Section
5.7, Section 5.18 and Section 5.23, which shall survive until 90 days
after the expiration of all applicable statutes of limitation; and
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(iii) the representations and warranties contained in
Section 5.17, which shall survive indefinitely.
11.2. Indemnification by Buyer. (a) Buyer agrees to indemnify and hold
harmless each Parent Group Member from and against any and all Losses and
Expenses incurred by such Parent Group Member in connection with or arising
from:
(i) any breach or alleged breach by Buyer of any of its
covenants or agreements in this Agreement;
(ii) any failure by Buyer to perform any of its obligations
in this Agreement;
(iii) any breach or alleged breach of any warranty or the
inaccuracy of any representation of Buyer contained or referred to in
this Agreement or in any certificate delivered by or on behalf of
Buyer pursuant hereto; or
(iv) any failure of Buyer to perform or cause to be
performed any Assumed Liability.
(b) The indemnification provided for in Section 11.2(a)(iii) shall
terminate five years after the Closing Date (and no claims for indemnification
hereunder shall be made by and Parent Group Member under Section 11.2(a)(iii)
thereafter), except that the indemnification by Buyer shall continue as to any
Losses or Expenses of which any Parent Group Member has notified Buyer in
accordance with the requirements of Section 11.3 on or prior to the date such
indemnification would otherwise terminate in accordance with this Section 11.2,
as to which the obligation of Buyer shall continue until the liability of Buyer
shall have been determined pursuant to this Article XI, and Buyer shall have
reimbursed all Parent Group Members for the full amount of such Losses and
Expenses in accordance with this Article XI.
11.3. Notice of Claims. (a) Any Buyer Group Member or Parent Group
Member (the "Indemnified Party") seeking indemnification hereunder shall give to
the party obligated to provide indemnification to such Indemnified Party (the
"Indemnitor") a notice (a "Claim Notice") describing in reasonable detail the
facts giving rise to any claim for indemnification hereunder and shall include
in such Claim Notice (if then known) the amount or the method of computation of
the amount of such claim, and a reference to the provision of this Agreement or
any other agreement, document or instrument executed hereunder or in connection
herewith upon which such claim is based; provided, that a Claim Notice in
respect of any action at law or suit in equity by or against a third Person as
to which indemnification will be sought shall be given promptly after the action
or suit is commenced; provided further that failure to give such notice shall
not relieve the Indemnitor of its obligations hereunder except to the extent it
shall have been prejudiced by such failure.
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(b) After the giving of any Claim Notice pursuant hereto, the amount of
indemnification to which an Indemnified Party shall be entitled under this
Article XI shall be determined: (i) by the written agreement between the
Indemnified Party and the Indemnitor; (ii) by a final judgment or decree of any
court of competent jurisdiction; or (iii) by any other means to which the
Indemnified Party and the Indemnitor shall agree. The judgment or decree of a
court shall be deemed final when the time for appeal, if any, shall have expired
and no appeal shall have been taken or when all appeals taken shall have been
finally determined. The Indemnified Party shall have the burden of proof in
establishing the amount of Loss and Expense suffered by it.
11.4. Third Person Claims. (a) Subject to Section 11.4(b), the
Indemnified Party shall have the right to conduct and control, through counsel
of its choosing, the defense, compromise or settlement of any third Person
claim, action or suit against such Indemnified Party as to which indemnification
will be sought by any Indemnified Party from any Indemnitor hereunder, and in
any such case the Indemnitor shall cooperate in connection therewith and shall
furnish such records, information and testimony and attend such conferences,
discovery proceedings, hearings, trials and appeals as may be reasonably
requested by the Indemnified Party in connection therewith; provided, that the
Indemnitor may participate, through counsel chosen by it and at its own expense,
in the defense of any such claim, action or suit as to which the Indemnified
Party has so elected to conduct and control the defense thereof; and provided,
further, that the Indemnified Party shall not, without the written consent of
the Indemnitor (which written consent shall not be unreasonably withheld), pay,
compromise or settle any such claim, action or suit. Notwithstanding the
foregoing, the Indemnified Party shall have the right to pay, settle or
compromise any such claim, action or suit without such consent, provided that in
such event the Indemnified Party shall waive any right to indemnity therefor
hereunder unless such consent is unreasonably withheld.
(b) If any third Person claim, action or suit against any Indemnified
Party is solely for money damages or, where Parent is the Indemnitor, will have
no continuing effect in any material respect on the Business or the Purchased
Assets, then the Indemnitor shall have the right to conduct and control, through
counsel of its choosing, the defense, compromise or settlement of any such third
Person claim, action or suit against such Indemnified Party as to which
indemnification will be sought by any Indemnified Party from any Indemnitor
hereunder if the Indemnitor has acknowledged and agreed in writing that, if the
same is adversely determined, the Indemnitor has an obligation to provide
indemnification to the Indemnified Party in respect thereof, and in any such
case the Indemnified Party shall cooperate in connection therewith and shall
furnish such records, information and testimony and attend such conferences,
discovery proceedings, hearings, trials and appeals as may be reasonably
requested by the Indemnitor in connection therewith; provided, that the
Indemnified Party may participate, through counsel chosen by it and at its own
expense, in the defense of any such claim, action or suit as to which the
Indemnitor has so elected to conduct and control the defense thereof.
Notwithstanding the foregoing, the Indemnified Party shall have the right to
pay, settle or compromise any such claim, action or suit, provided that in such
event the Indemnified Party shall waive any right to indemnity therefor
hereunder unless the Indemnified Party shall have sought the consent of the
Indemnitor to such payment, settlement or compromise and such consent was
unreasonably withheld, in which event no claim for indemnity therefor hereunder
shall be waived.
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11.5. Limitations. Notwithstanding anything contained herein to the
contrary, Parent shall be required to indemnify and hold harmless under Section
11.1(a)(iii) with respect to Losses and Expenses incurred by Buyer Group Members
only to the extent that (i) the amount of Loss and Expense suffered by Buyer
Group Members related to any individual claim exceeds $5,000 and (ii) the
aggregate amount of such Losses and Expenses exceeds $100,000.
ARTICLE XII
TERMINATION
12.1. Termination. Anything contained in this Agreement to the
contrary notwithstanding, this Agreement may be terminated at any time prior to
the Closing Date:
(a) by the mutual consent of Buyer and Parent;
(b) by Buyer or Parent if the Closing shall not have
occurred on or before August 31, 1999 (or such late date as may be
mutually agreed to by Buyer and Parent);
(c) by Buyer in the event of any material breach by Parent
of any of Parent's agreements, representations or warranties contained
herein and the failure of Parent to cure such breach within seven days
after receipt of notice from Buyer requesting such breach to be cured;
or
(d) by Parent in the event of any material breach by Buyer
of any of Buyer's agreements, representations or warranties contained
herein and the failure of Buyer to cure such breach within seven days
after receipt of notice from Parent requesting such breach to be
cured.
12.2. Notice of Termination. Any party desiring to terminate this
Agreement pursuant to Section 12.1 shall give notice of such termination to the
other party to this Agreement.
12.3. Effect of Termination. In the event that this Agreement shall be
terminated pursuant to this Article XII, all further obligations of the parties
under this Agreement (other than Sections 13.2 and 13.10) shall be terminated
without further liability of any party to the other, provided that nothing
herein shall relieve any party from liability for its willful breach of this
Agreement.
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ARTICLE XIII
GENERAL PROVISIONS
13.1. Survival of Obligations. All representations, warranties,
covenants, indemnities and obligations contained in this Agreement shall survive
the consummation of the transactions contemplated by this Agreement; provided
that the representations and warranties contained hereon shall survive only
through the period during which claims for indemnification may be made pursuant
to Article XI.
13.2. Confidential Nature of Information. Each party agrees that it
will treat in confidence all documents, materials and other information which it
shall have obtained regarding the other party during the course of the
negotiations leading to the consummation of the transactions contemplated hereby
(whether obtained before or after the date of this Agreement), the investigation
provided for herein and the preparation of this Agreement and other related
documents, and, in the event the transactions contemplated hereby shall not be
consummated, each party will return to the other party all copies of nonpublic
documents and materials which have been furnished in connection therewith. Such
documents, materials and information shall not be communicated to any third
Person (other than, in the case of Buyer, to its counsel, accountants, financial
advisors or lenders, and in the case of Parent, to its counsel, accountants or
financial advisors). No other party shall use any confidential information in
any manner whatsoever except solely for the purpose of evaluating the proposed
purchase and sale of the Purchased Assets; provided, however, that after the
Closing Buyer may use or disclose any confidential information included in the
Purchased Assets or otherwise reasonably related to the Business or the
Purchased Assets. The obligation of each party to treat such documents,
materials and other information in confidence shall not apply to any information
which (i) is or becomes available to such party from a source other than such
party, (ii) is or becomes available to the public other than as a result of
disclosure by such party or its agents, (iii) is required to be disclosed under
applicable law or judicial process, but only to the extent it must be disclosed,
or (iv) such party reasonably deems necessary to disclose to obtain any of the
consents or approvals contemplated hereby.
13.3. No Public Announcement. Neither Buyer nor Parent shall, without
the approval of the other, make any press release or other public announcement
concerning the transactions contemplated by this Agreement, except as and to the
extent that any such party shall be so obligated by law or the rules of any
stock exchange, in which case the other party shall be advised and the parties
shall use their best efforts to cause a mutually agreeable release or
announcement to be issued; provided that the foregoing shall not preclude
communications or disclosures necessary to implement the provisions of this
Agreement or to comply with the accounting and Securities and Exchange
Commission disclosure obligations.
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13.4. Notices. All notices or other communications required or
permitted hereunder shall be in writing and shall be deemed given or delivered
when delivered personally or when sent by registered or certified mail or by
private courier addressed as follows:
If to Buyer, to:
Allegiance Healthcare Corporation
1430 Waukegan Road
MPKB 3A
McGaw Park, Illinois 60085-6787
Attention: General Counsel
Telecopy: (847) 578-4448
with a copy to:
Cardinal Health, Inc.
7000 Cardinal Place
Dublin, Ohio 43017
Attention: Robert D. Walter
Telecopy: 614-717-8919
and
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: John M. O'Hare, Esq.
Telecopy: (312) 853-7036
If to Parent, to:
Isolyser Company Inc.
4320 International Blvd.
Norcross, Georgia 30093
Attention: President
Telecopy: 770 - 806-8869
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with a copy to:
Arnall, Golden & Gregory, LLP
2800 One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309
Attention: Stephen D. Fox
Telecopy: 404-873-8501
or to such other address as such party may indicate by a notice delivered to the
other party hereto.
13.5. Successors and Assigns. (a) The rights of either party under
this Agreement shall not be assignable by such party hereto prior to the Closing
without the written consent of the other, except that the rights of Buyer
hereunder may be assigned prior to the Deferred Closing, without the consent of
Parent, to Cardinal Health, Inc. or any subsidiary thereof; provided that (i)
such assignment shall not result in Buyer or Parent having to amend its
respective Notification and Report Form filed under the HSR Act in connection
with the transactions contemplated hereunder, (ii) the assignee shall assume in
writing all of Buyer's obligations to Parent hereunder, (iii) Buyer shall not be
released from any of its obligations hereunder by reason of such assignment and
(iv) Parent's obligations under this Agreement shall be subject to the delivery
by such assignee, on or prior to the Deferred Closing of a certificate signed on
its behalf containing representations and warranties similar to those made by
Buyer in Article VI and an opinion of counsel reasonably acceptable to Parent
with respect to the assignee which is similar to the opinion with respect to
Buyer set forth in Exhibit F. Following the Deferred Closing, either party may
assign any of its rights hereunder, but no such assignment shall relieve it of
its obligations hereunder.
(b) This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their successors and permitted assigns. The successors
and permitted assigns hereunder shall include without limitation, in the case of
Buyer, any permitted assignee as well as the successors in interest to such
permitted assignee (whether by merger, liquidation (including successive mergers
or liquidations) or otherwise). Nothing in this Agreement, expressed or implied,
is intended or shall be construed to confer upon any Person other than the
parties and successors and assigns permitted by this Section 13.5 any right,
remedy or claim under or by reason of this Agreement.
13.6. Access to Records after Closing. For a period of six years after
the Closing Date, Parent and its representatives shall have reasonable access to
all of the books and records of the Business transferred to Buyer hereunder to
the extent that such access may reasonably be required by Parent in connection
with matters relating to or affected by the operations of the Business prior to
the Closing Date or in connection with Parent's 1999 audit. Such access shall be
afforded by Buyer upon receipt of reasonable advance notice and during normal
business hours. Parent shall be solely responsible for any costs or expenses
incurred by it pursuant to this Section 13.6. If Buyer shall desire to dispose
of any of such books and records prior to the expiration of such six-year
period, Buyer shall, prior to such disposition, give Parent a reasonable
opportunity, at Parent's expense, to segregate and remove such books and records
as Parent may select.
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For a period of six years after the Closing Date, Buyer and its
representatives shall have reasonable access to all of the books and records
relating to the Business which Parent or any of its Affiliates may retain after
the Closing Date. Such access shall be afforded by Parent and its Affiliates
upon receipt of reasonable advance notice and during normal business hours.
Buyer shall be solely responsible for any costs and expenses incurred by it
pursuant to this Section 13.6. If Parent or any of its Affiliates shall desire
to dispose of any of such books and records prior to the expiration of such
six-year period, Parent shall, prior to such disposition, give Buyer a
reasonable opportunity, at Buyer's expense, to segregate and remove such books
and records as Buyer may select.
13.7. Entire Agreement; Amendments; Schedules. This Agreement and the
Exhibits and Schedules referred to herein and the documents delivered pursuant
hereto contain the entire understanding of the parties hereto with regard to the
subject matter contained herein or therein, and supersede all prior agreements,
understandings or letters of intent between or among any of the parties hereto,
except for paragraph 8 of the Confidentiality Agreement. This Agreement shall
not be amended, modified or supplemented except by a written instrument signed
by an authorized representative of each of the parties hereto. The matters
expressly disclosed in the Schedules provided by Parent pursuant to this
Agreement shall be specifically limited to the corresponding representation and
warranty to which such Schedule relates and no implication or inference shall be
made in any other representation or warranty.
13.8. Interpretation. Article titles and headings to sections herein
are inserted for convenience of reference only and are not intended to be a part
of or to affect the meaning or interpretation of this Agreement. The Schedules
and Exhibits referred to herein shall be construed with and as an integral part
of this Agreement to the same extent as if they were set forth verbatim herein.
13.9. Waivers. Any term or provision of this Agreement may be waived,
or the time for its performance may be extended, by the party or parties
entitled to the benefit thereof. Any such waiver shall be validly and
sufficiently authorized for the purposes of this Agreement if, as to any party,
it is authorized in writing by an authorized representative of such party. The
failure of any party hereto to enforce at any time any provision of this
Agreement shall not be construed to be a waiver of such provision, nor in any
way to affect the validity of this Agreement or any part hereof or the right of
any party thereafter to enforce each and every such provision. No waiver of any
breach of this Agreement shall be held to constitute a waiver of any other or
subsequent breach.
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13.10. Expenses. Each party hereto will pay all costs and expenses
incident to its negotiation and preparation of this Agreement and to its
performance and compliance with all agreements and conditions contained herein
on its part to be performed or complied with, including the fees, expenses and
disbursements of its counsel and accountants.
13.11. Partial Invalidity. Wherever possible, each provision hereof
shall be interpreted in such manner as to be effective and valid under
applicable law, but in case any one or more of the provisions contained herein
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such provision shall be ineffective to the extent, but only to the
extent, of such invalidity, illegality or unenforceability without invalidating
the remainder of such invalid, illegal or unenforceable provision or provisions
or any other provisions hereof, unless such a construction would be
unreasonable.
13.12. Execution in Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be considered an original
instrument, but all of which shall be considered one and the same agreement, and
shall become binding when one or more counterparts have been signed by each of
the parties hereto and delivered to each of Parent and Buyer.
13.13. Further Assurances. On the Closing Date and on the Deferred
Closing Parent shall (i) deliver to Buyer such other bills of sale, deeds,
endorsements, assignments and other good and sufficient instruments of
conveyance and transfer, in form reasonably satisfactory to Buyer and its
counsel, as Buyer may reasonably request or as may be otherwise reasonably
necessary to vest in Buyer all the right, title and interest of Parent and its
Affiliates in, to or under any or all of the Purchased Assets, and (ii) take all
steps as may be reasonably necessary to put Buyer in actual possession and
control of all the Purchased Assets. From time to time following the Closing and
the Deferred Closing Parent shall execute and deliver, or cause to be executed
and delivered, to Buyer such other instruments of conveyance and transfer as
Buyer may reasonably request or as may be otherwise necessary to more
effectively convey and transfer to, and vest in, Buyer and put Buyer in
possession of, any part of the Purchased Assets, and, in the case of licenses,
certificates, approvals, authorizations, Contracts, leases, easements and other
commitments included in the Purchased Assets (a) which cannot be transferred or
assigned effectively without the consent of third parties which consent has not
been obtained prior to the Closing, to cooperate with Buyer at its request in
endeavoring to obtain such consent promptly, and if any such consent is
unobtainable, to use its best efforts to secure to Buyer the benefits thereof in
some other manner, or (b) which are otherwise not transferable or assignable, to
use its best efforts jointly with Buyer to secure to Buyer the benefits thereof
in some other manner (including the exercise of the rights of Parent
thereunder); provided, however, that nothing herein shall relieve Parent of its
obligations under Section 7.3. Notwithstanding anything in this Agreement to the
contrary, this Agreement shall not constitute an agreement to assign any
license, certificate, approval, authorization, Contract, lease, easement or
other commitment included in the Purchased Assets if an attempted assignment
thereof without the consent of a third party thereto would constitute a breach
thereof.
-57-
<PAGE>
13.14. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws (as opposed to the conflicts of
law provisions) of the State of Illinois.
13.15. Submission to Jurisdiction. Parent and Buyer hereby irrevocably
submit in any suit, action or proceeding arising out of or related to this
Agreement or any of the transactions contemplated hereby or thereby to the
jurisdiction of the United States District Court for the Northern District of
Illinois and the jurisdiction of any court of the State of Illinois located in
Chicago and waive any and all objections to jurisdiction that they may have
under the laws of the State of Illinois or the United States.
-58-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed the day and year first above written.
ALLEGIANCE HEALTHCARE CORPORATION
By _________________________________________
Name:
Title:
(Corporate Seal)
ATTEST:
____________________________
ISOLYSER COMPANY, INC.
By _________________________________________
Name:
Title:
(Corporate Seal)
ATTEST:
____________________________
MEDSURG INDUSTRIES, INC.
By _________________________________________
Name:
Title:
(Corporate Seal)
ATTEST:
____________________________
::ODMA\PCDOCS\CHICAGO4\840724\13
861986v1
861974v1 Exhibit 2.2
FIRST AMENDMENT
TO
ASSET PURCHASE AGREEMENT
FIRST AMENDMENT dated as of July 12, 1999 (this "Amendment") to ASSET
PURCHASE AGREEMENT dated as of May 25, 1999 (the "Agreement") among Allegiance
Healthcare Corporation, a Delaware corporation ("Buyer"), Isolyser Company,
Inc., a Georgia corporation ("Parent"), and MedSurg Industries, Inc., a Georgia
corporation ("MedSurg").
W I T N E S S E T H:
WHEREAS, the parties have entered into the Agreement whereby Parent
and MedSurg have agreed to sell, and Buyer has agreed to purchase, certain of
the assets of the Business (capitalized terms not defined herein having the
meanings ascribed to them in the Agreement); and
WHEREAS, the parties hereto desire to amend the Agreement as
hereinafter described.
NOW, THEREFORE, in consideration of the premises and the covenants and
other agreements set forth herein, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, each intending to be contractually
bound, hereby agree as follows:
1. Amendment of Section 3.1 to the Agreement.
Section 3.1 shall to the Agreement is hereby amended and replaced with
the following:
" 3.1 Purchase Price. The purchase price for the Purchased
Assets (the "Purchase Price") shall be equal to $31,300,000 (the
"Preliminary Purchase Price"), as adjusted pursuant to Section 3.2
below. The Purchase Price shall be paid by Buyer in cash pursuant to
Section 4.2 hereof."
2. Deletion of Section 3.5 to the Agreement.
Section 3.5 to the Agreement shall be deleted in its entirety
including any definitions solely used and set forth in such section and listed
in Article I.
Section 3.5 to the Agreement is hereby replaced with the following:
"[This Section intentionally left blank]"
3. Amendment of Section 4.6 to the Agreement.
Section 4.6 to the Agreement is hereby amended and replaced in its
entirety with the following:
"4.6. Payments in Connection with Certain Personal Property
Leases.
<PAGE>
Notwithstanding anything to the contrary, including Section 2.1(d),
Buyer and Parent hereby agree that (i) the leases set forth as items 1 and 2 on
Schedule 5.14 shall not be assigned by Parent to Buyer and therefore, shall not
be part of the Purchased Assets and (ii) with respect to such leases, Parent
shall make and be responsible for the timely payment of the amounts set forth in
Exhibit H to the Agreement and Parent shall invoice Buyer for such payments.
Buyer shall promptly pay such invoiced amounts to Parent."
4. Addition of Section 8.9 to the Agreement.
The following new Section 8.9 shall be added to the Agreement:
"Section 8.9. Orex Towel Arrangement. Parent shall sell to Buyer
OREX(R) towels (collectively, the "Towels") set forth on Exhibit A to
the First Amendment to the Agreement out of Parent's existing
inventory of such Towels at the discounted price per towel set forth
on such Exhibit until July 1, 2001. If at July 1, 2001, Buyer has not
enjoyed at least $500,000 of savings in discounted pricing on such
Towels, Parent shall pay to Buyer the lesser of (x) $150,000 or (y)
the difference between $500,000 and the present value of the savings
enjoyed by Buyer at a discount rate of 10% as of July 12, 1999 in
connection with the purchase of Towels."
5. Replacement of Certain Schedules.
The parties hereto agree that Schedule 2.4(B) to the Agreement is
replaced in its entirety by Schedule 2.4(B) attached to this Amendment as
Exhibit B and that such new Schedule shall be a part of the Agreement with the
same force and effect as though attached to the Agreement at the time of
execution thereof.
6. Miscellaneous.
Upon the execution and delivery hereof, the Agreement shall thereupon
be deemed to be amended as hereinabove set forth as fully and with the same
effect as though such amendments were set forth in the Agreement when executed
and delivered, and this Amendment and the Agreement shall henceforth be read,
taken and construed as one and the same instrument. Except as otherwise provided
in this Amendment, the Agreement shall continue in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment on
the date first above written.
ALLEGIANCE HEALTHCARE CORPORATION
By: ______________________________________
Name:
Title:
ISOLYSER COMPANY, INC.
By: ______________________________________
Name:
Title:
MEDSURG INDUSTRIES, INC.
By: ______________________________________
Name:
Title:
::ODMA\PCDOCS\CHICAGO4\900499\3
861974v1
CONFIDENTIAL TREATMENT REQUESTED
Confidential Portions Of This Agreement Which Have Been Redacted Are Marked
With Brackets ("[***]"). The Omitted Material Has Been Filed Separately With The
Securities And Exchange Commission.
Exhibit 2.3
SUPPLY & LICENSE AGREEMENT
THIS Agreement ("Agreement") is effective as of the 12th day of July, 1999
("Effective Date"), by and between Isolyser Company, Inc., a Georgia
corporation, having its principal place of business at 4320 International Blvd.,
Norcross, Georgia 30093 ("Isolyser") and Allegiance Healthcare Corporation, a
Delaware corporation, having its principal place of business at 1500 Waukegan
Road, McGaw Park, Illinois 60085 and its Affiliates (collectively referred to as
"Allegiance"). "Affiliates" means a direct or indirect subsidiary of Allegiance
Healthcare Corporation or its parent company, Allegiance Corporation.
BACKGROUND:
WHEREAS, Isolyser has developed proprietary rights in the manufacture and
sale of certain products which it sells under the OREX(R) trademark (the
"OREX(R) Products") all of which are manufactured from Isolyser's proprietary
degradable polyvinyl alcohol ("PVA") or novel dispersal polymers ("NDP")
material which can be dissolved and then disposed via normal sanitary sewer
systems ("Material"); and
WHEREAS, Isolyser is also the owner of the trademarks ENVIROGUARD and OREX,
for water soluble fabrics and products made therefrom ("Trademarks"), for which
registrations or applications for registrations of said Trademarks have been
filed in various jurisdictions; and
WHEREAS, Isolyser is also the owner of certain Patents (as hereinafter
defined); and
WHEREAS, Isolyser wishes to expand its commercial opportunities through the
manufacture and sale of the Material to Allegiance and by licensing to
Allegiance the Patents and Trademarks relating to the right to make, use,
distribute, sell and dispose healthcare products made from the Material
("Products"); and
WHEREAS, Allegiance desires to distribute and sell the Products under the
Trademarks and Patents and to practice the methods of disposal as described in
the Patents on the Products as Allegiance may deem appropriate; and
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements and covenants hereinafter set forth, and other valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
Allegiance and Isolyser hereby agree as follows:
<PAGE>
1.TERM AND EXTENSIONS
1.1. TERM
Unless otherwise terminated earlier by the parties, the initial term of
this Agreement shall begin on the Effective Date and end the earlier of: (1)
three years from the date on which all necessary regulatory approvals are
obtained to sell at least forty (40) product codes made by Allegiance from the
Material or (2) three years and nine months after the Effective Date (the
"Term").
1.2. EXTENSION OF AGREEMENT
This term may be extended by mutual agreement of the parties. In the event
of a change of control of Isolyser during the Term of this Agreement, the
Agreement shall be automatically extended under its current terms for a period
of three years following the date of such change of control during the extension
period, Allegiance's right to the Material shall be non-exclusive and Allegiance
shall have the right to purchase up to an additional 100 million square yards of
Material over and above the amount of Material that Allegiance is entitled to
purchase prior to the extension period under the same terms and conditions of
this Agreement. For purposes of the foregoing, "change of control" shall mean
the acquisition of more than 50% of the outstanding capital stock of Isolyser or
the purchase of all or substantially all the assets of Isolyser by a person or
entity or group that is not currently an affiliate of Isolyser.
2.PATENT PROVISIONS
2.1. PATENT
2.1.1. PATENT LICENSE FOR PRODUCTS.
Isolyser grants to Allegiance a worldwide exclusive license to
make, use and sell Products embodying or made in accordance with the
inventions claimed in the Patents within and for healthcare
applications. "Products" shall include any healthcare device made from
the Material or an improvement of the Material, including but not
limited to blow molded, injection molded and case extrusion substances
that are dissolvable and are made using PVA or NDP ("Improvements").
"Patents" shall include all patents owned or controlled by Isolyser
relating to the Material and shall include, but not be limited to, the
patents listed in Exhibit 1 together with any patents which may issue
upon any pending applications, continuations, continuations-in-part,
divisions, reissues, reexaminations, or renewals of any such patents,
as well as any patents which may issue on Improvements. The price
terms of Improvements under the Agreement shall be negotiated by the
parties.
<PAGE>
2.1.2. PATENT LICENSE FOR MATERIALS
Isolyser grants to Allegiance a worldwide exclusive royalty free
license for the Term, and any extension thereof, to use the Patents to
make Material or have Material made if Isolyser is unable to meet
Allegiance's requirements. Allegiance shall exercise the foregoing
license only if during any calendar month Isolyser is unable to supply
Material in an amount at least equal to the amount supplied in the
preceding calendar month and Isolyser is unable to supply Material in
such amount during each of the two following calendar months.
Notwithstanding the foregoing, in the event that Isolyser is unable to
meet Allegiance's requirements because of the failure of Isolyser's
suppliers to supply Material to Isolyser or because of demand by
Allegiance in excess of Isolyser's productive capacity, Allegiance
shall not be entitled to exercise its rights under the foregoing
license until six months after written notice from Allegiance to
Isolyser of Isolyser's failure to satisfy the requirements of
Allegiance. If Isolyser has identified an alternative source of
Materials and is satisfying Allegiance's requirements as provided
above within such six month period, Allegiance shall not be permitted
to exercise its rights under the foregoing license.
2.1.3. RIGHT OF FIRST REFUSAL
Isolyser shall submit to Allegiance specifications and, where
possible, samples of any and all Improvements to the Products which
Isolyser may conceive or reduce to practice during the term of this
Agreement. Within ninety (90) days after such submission, Allegiance
may acquire rights to such Improvements by advising Isolyser in
writing that Allegiance is electing to have such Improvements included
within the definition of Products and by entering into an agreement
with Isolyser negotiated at the time which is determined to benefit
both parties and maintains a mutually profitable relationship. In the
event Allegiance does not elect to distribute such new Products,
Isolyser shall have the right to sell those Products as it deems fit
in its sole discretion on terms and conditions no more favorable than
those offered to Allegiance under this section. It being understood
that no up-front license fee shall be required to be paid by
Allegiance.
2.2. TRADEMARK LICENSE
2.2.1. LICENSE GRANT
Isolyser grants to Allegiance a worldwide exclusive license to
the Trademarks for use in conjunction with the Products and
Improvements for healthcare applications, subject to the provisions of
this Agreement.
2.2.2. RESERVATION OF RIGHTS IN TRADEMARKS
The Trademarks are acknowledged by Allegiance to be the exclusive
property of Isolyser. Allegiance agrees that the use of any Trademark
by Allegiance anywhere in the world shall inure to the benefit of
Isolyser. If Allegiance determines that a trademark registration is
desirable in any country, it will so advise Isolyser who may proceed
to seek the appropriate trademark protection in such country, in its
sole discretion.
<PAGE>
[***]- CONFIDENTIAL TREATMENT REQUESTED
2.3. NO REPRESENTATIONS
The Patent and Trademark licenses shall be effective worldwide. However,
Isolyser does not represent that it has patent or trademark rights in any
particular country and Isolyser is not obligating itself by this Agreement to
seek such rights in any country.
2.4. NON-TRANSFERABLE
These licenses shall be non-transferable by Allegiance and shall not be
subject to sublicenses, without the express written permission of Isolyser,
except that there shall be an implied sub-license to any purchaser of Products
to use such products for their intended purpose and except as part of an
assignment not prohibited by Section 5.3.
2.5. ROYALTIES
2.5.1. DISSOLUTION ROYALTY
Allegiance shall pay Isolyser or its designee a dissolution
royalty of [***] of the Net Sales Price of the Products for all
Products which are dissolved by or on behalf of Allegiance's customers
("Royalty"), provided that Isolyser shall provide documentation to
Allegiance regarding the dissolution of such Products in a form
acceptable to Allegiance. The term "Net Sales Price" means the total
receipts by Allegiance from the sale of the Product(s) less all
freight, sales or use taxes, trade discounts, returns and allowances
granted in lieu of returns. In the event the Product is sold as a
component of a kit or other assembly of product, the Net Sales Price
for such Products shall be the average Net Sales Price during the same
calendar quarter for the Product when sold alone or as not part of a
kit.
2.5.2. REPORTS AND RECORDS
Allegiance shall provide Isolyser with tracing reports of sales
of Products by Allegiance. Allegiance shall keep records showing the
sales or other disposition of Products under licenses granted herein
in sufficient detail to enable the Royalties payable hereunder by
Allegiance to be determined, and further agrees to permit such records
to be examined by Isolyser to the extent necessary to verify the
accuracy of the calculation of the Royalty payments above, such
examination to be made at the expense of Isolyser by any certified
public accountant appointed by Isolyser who shall be reasonably
acceptable to Allegiance, provided such certified public accountant
executes a confidentiality agreement covering such books and records.
Such examination shall occur not more than once in any twelve month
period during normal business hours.
2.6. USE OF TRADEMARKS
2.6.1. CONFUSINGLY SIMILAR MARKS
Allegiance shall not use any trademark, mark, name or symbol in
conjunction with the Products which may be confusingly similar to the
Trademarks and shall not use the Trademarks in any manner which could
affect the validity of their registration or Isolyser's exclusive
ownership thereof. Allegiance shall not make or permit any removal or
modification of any Trademarks placed by Isolyser on Products or
associated literature, media, drawings and manuals.
<PAGE>
2.6.2. TRADEMARK INFRINGEMENT
If, as a result of the use of the Trademarks, Allegiance, or any
of Allegiance's customers should be charged with trademark
infringement, Allegiance shall immediately notify Isolyser after
Allegiance receives notice of such charge and Isolyser will assume the
defense and expense of any proceedings instituted pursuant to such
charge. Allegiance shall not institute proceedings for infringement of
the Trademarks in its own name. Allegiance agrees to assist Isolyser
when requested in such defense or protection of the Trademarks.
Isolyser will reimburse Allegiance for out-of-pocket expenses. If any
misuse of the Trademarks comes to the Allegiance's attention, it shall
promptly notify Isolyser and cooperate with Isolyser in trying to
correct such misuse.
2.6.3. MISLEADING CLAIMS
Allegiance shall not make any false, exaggerated, or misleading
claim or statement relating to the Products or the performance of the
Materials. If such claims or statements are made by Allegiance,
Allegiance, upon the request of Isolyser, shall discontinue
immediately any use, display, advertising or promotion of the
Trademark for the Products in conjunction with such false or
misleading claims.
2.6.4. QUALITY ASSURANCE
Allegiance shall permit a designated representative of Isolyser
to periodically visit the manufacturing and warehousing facilities of
Allegiance which manufacture or store the Products, or any other
entity to whom Allegiance has contracted all or a part of the
manufacture of the Products hereunder, for the sole purpose to allow
Isolyser to inspect the quality of the Products in the course of
manufacture or in storage; provided such representative executes a
confidentiality agreement and visits during normal business hours
after reasonable notice.
2.7. INTELLECTUAL PROPERTY RIGHTS AND OBLIGATIONS
2.7.1. ISOLYSER RIGHTS
Nothing in this Agreement shall be construed as:
(a) a warranty or representation by Isolyser as to the validity
of any Patent;
(b) a warranty or representation that any Product made, used, or
sold under any license granted in this Agreement is or will
be free from infringement of the patents of third parties;
(c) A requirement that Isolyser shall file any patent
application, secure any patent or maintain any patent in
force; or
(d) An obligation to bring or prosecute actions or suits against
third parties for infringement.
2.7.2. WARRANTY
Notwithstanding the foregoing, Isolyser warrants that the
Material as manufactured by Isolyser or its disposal by dissolution in
accordance with written guidelines set forth by Isolyser does not to
Isolyser's knowledge infringe the intellectual property rights of any
third party.
<PAGE>
2.7.3. PATENT MARKING
Allegiance agrees to observe the reasonable written requirements
of Isolyser with respect to the marking of Products with the word
'Patent' followed by the specific number or numbers of the Patent or
Patents indicated by Isolyser in writing to be applicable to the
Products or its disposal.
2.8. INFRINGEMENT
2.8.1. INFRINGEMENT BY ALLEGIANCE
Allegiance shall give Isolyser prompt notice of each claim or
allegation that the manufacture, use, or sale of the Product(s)
constitutes an infringement of a patent or patents owned by others.
Isolyser shall defend such claims and allegations at its expense and
shall indemnify Allegiance against any and all liabilities, costs or
expenses arising in connection therewith. If Isolyser does not
undertake within thirty (30) days of such notice to defend such claim
or allegation, Allegiance shall have the right to retain all of the
Royalties otherwise payable to Isolyser, provided Allegiance uses such
Royalties to pay for or defray the costs of defending each claim or
allegation, including the costs of settling or satisfying the claim or
allegation. During the defense of such claims or allegations,
Allegiance shall submit written reports to Isolyser, showing payments
accruing to Isolyser and the expenses of defending against the claims
or allegations of infringement. Upon termination of all proceedings
involving such claims or allegations, Allegiance shall remit the
balance, if any, of the Royalties accrued but not yet paid to Isolyser
and not spent by Allegiance under the terms of this provision. In the
event of any infringement claim or allegation as provided above, upon
the request of Isolyser, Allegiance will cooperate with the defense of
such claim or allegation.
2.8.2. SETTLEMENT OF CLAIM OF INFRINGEMENT
If the settling or satisfying of any claim or allegation of
patent infringement requires the payment by Allegiance to a third
party of any amounts, including royalties for manufacture, use, or
sale of the Product(s), Allegiance shall be entitled to deduct the
amounts so paid to a third party from the Royalties due Isolyser under
this Agreement.
<PAGE>
2.8.3. INFRINGEMENT BY THIRD PARTY
Upon learning of the infringement of a Patent by third parties,
Allegiance shall inform Isolyser in writing of that fact and shall
supply Isolyser with any evidence available pertaining to the
infringement. Isolyser may at its own expense take whatever steps are
necessary to stop the infringement and recover damages therefore, and
shall be entitled to retain all damages so recovered. If Isolyser does
not undertake within thirty (30) days of such notice to enforce the
Patent against the infringement, Allegiance shall have the right to
take whatever action it deems appropriate in Isolyser=s name or in its
own name to enforce the Patent, to retain all of the Royalties
otherwise payable to Isolyser, and to use such Royalties to pay for or
defray the costs of enforcing the Patent against the infringement by
third parties. During proceedings relating to the enforcement of the
Patent, Allegiance shall submit written reports, showing payments
accruing to Isolyser and the expenses of enforcing the Licensed Patent
against the infringement by third parties. Upon termination of all
proceedings involving such claims or allegations, Allegiance shall
remit the balance, if any, of the payments accrued but not yet paid to
Isolyser. The monetary recovery, if any, shall be shared by Isolyser
and Allegiance in the same ratio as they have shared the expenses of
the Licensed Patent enforcement.
3.PROMOTION OF THE PRODUCTS
3.1. ALLEGIANCE PROMOTION
Allegiance may promote the Trademarks in conjunction with the Products.
Such promotions may include activities such as participating in trade shows and
educational seminars. Allegiance agrees to use reasonable commercial efforts to
maintain marketing/sales employees, trained in the marketing and selling of the
Products, who are charged with, among other things, building a market for the
Products.
3.2. PRODUCT INTRODUCTIONS
Allegiance shall market the Products as environmentally friendly, solutions
based products to the extent such claims are supported by appropriate regulatory
approvals and substantiating data. Allegiance agrees that it will employ
reasonable business diligence to introduce within six (6) months from the
Effective Date of this Agreement, forty (40) product codes fabricated from the
Material. Allegiance agrees to use its commercially reasonable business efforts,
to the extent supported by appropriate regulatory approvals, to promote the
environmental and waste disposal benefits of the Material as part of its
on-going sales and marketing strategies. Upon request of Allegiance, Isolyser
shall use commercially reasonable business efforts to actively support
Allegiance's efforts through resources which are either internally or externally
based. Allegiance will reimburse Isolyser for any costs including salaries,
fees, equipment and travel expense incurred by Isolyser in connection with such
actions provided that such costs or expenditures were approved in writing by
Allegiance.
3.3. JOINT DEVELOPMENT AND COMMERCIALIZATION COMMITTEE
Allegiance and Isolyser shall each appoint three members of an eight-member
Joint Development and Commercialization Committee ("JDCC"). The JDCC shall meet
at least twice a year at sites alternating between Allegiance and Isolyser to
discuss and resolve issues related to the development, marketing, promotion and
commercialization of the Products. The initial members of the JDCC for
Allegiance and Isolyser shall be as follows:
<PAGE>
FOR Allegiance: FOR Isolyser:
Susan Harley Mike Mabry
John Behm Martin Paugh
Dave Wagner Frank Stanton
Additional marketing individual to be Wendy Slattery
designated by Allegiance
3.4. PLANS
The JDCC will develop an operating plan and a sales and marketing plan
regarding the Products in the U.S. within sixty (60) days from the Effective
Date of this Agreement. Additionally, a world-wide healthcare market plan will
also be developed within sixty (60) days from the Effective Date of this
Agreement. These plans shall be attached as exhibits to this Agreement after
they have been developed. Allegiance will attempt to provide a 90 day rolling
forecast that will be reviewed and approved by the JDCC. Further, it is
understood that Allegiance may request discussions regarding opportunities for
Allegiance to market products made from the Materials in non-healthcare markets
in addition to the Products covered under this Agreement.
3.5. GOVERNMENTAL APPROVAL
Isolyser shall use commercially reasonable business efforts to gain
approval or consent for disposal of the Products via normal sanitary sewer
systems from the Federal, state/provincial and local regulatory and
environmental bodies, including publicly-owned treatment works, in all of the
United States and Canada. In addition, Isolyser shall use commercially
reasonable business efforts to gain approval or consent for the disposal of the
Products via normal sanitary sewer systems in all European Community countries
and Japan. Isolyser covenants that it already has the necessary approvals or
consents for each of the agencies listed in Exhibit 7 and that it has listed in
Exhibit 7 any locations which it has determined that such disposal is not
allowed. The efforts of Isolyser under this Section 3.5 shall be at the sole
cost and expense of Isolyser.
3.6. GPO ACCEPTANCE
Allegiance will use commercially reasonable business efforts to initiate
GPO acceptance and distribution of the Products.
3.7. ISOLYSER EXPERTISE
Isolyser agrees that it has and shall diligently maintain its expertise for
PVA and NDP materials and will continue to use such expertise to identify
applications for technology and works within the healthcare and other markets to
create materials that will become the basis for environmentally friendly
healthcare products. Also, Isolyser will continue to develop and improve,
through methodologies it deems appropriate and advisable, its waste water
expertise and processor integration technology, and sales and service to support
the expansion of the business base.
3.8. ALLEGIANCE EXPERTISE
Allegiance agrees that it has expertise in the conversion of non-woven roll
stock into medical and industrial garments, surgical drapes and general apparel
as well as expertise in injection molding and general assembly of medical
devices formed from various types of plastic. Allegiance will continue to use
and improve upon its sales and marketing expertise and strategies for the
development of global marketplace opportunities for products made from the
Materials both existing and to be developed. It is understood that, at present,
there is no firm obligation of either party to expand this Agreement's
application to markets or for products not specifically agreed to.
<PAGE>
[***]- CONFIDENTIAL TREATMENT REQUESTED
3.9. NEW PRODUCTS
Subject to Section 3.8, Isolyser agrees to discuss with Allegiance
opportunities for Allegiance to market the Products in non-healthcare markets.
In the event the parties agree to add additional markets to this Agreement, the
parties shall use commercially reasonable efforts to promote and gain approval
for the new products in the new market.
4.MANUFACTURING AND SALES PROVISIONS
4.1. MANUFACTURING FOR ALLEGIANCE
Isolyser shall manufacture and/or supply Material in accordance with
the Specifications set forth in Exhibit 2 to Allegiance ("Specifications").
4.2. PRICES
The prices for the Material shall be $[***] per square yard f.o.b. shipping
point. Allegiance will use reasonable efforts to purchase a [***] product mix
between gown and drape Material. Allegiance will work with Isolyser to attempt
to lower the basis weight of surgical drapes to reduce isolyser's costs. The
cost for purchase exceeding [***] shall be subject to negotiation and agreement
between the parties.
4.2.1. PRICE INCREASES
Isolyser will not increase its prices during the Term of the
Agreement.
4.3. ALLEGIANCE'S DUTIES
4.3.1. PURCHASE EXISTING INVENTORY
Allegiance agrees to purchase Isolyser's existing inventory of
Material ("Isolyser Inventory"), which inventory is described on
Exhibit 4 hereto, during the first nine (9) months of the Term.
Allegiance shall not be obligated to purchase Isolyser Inventory to
the extent it has a cost to Allegiance in excess of two million
dollars ($2,000,000). Allegiance will use commercially reasonable
business efforts to sell the Isolyser Inventory to Allegiance
customers during the first nine months of this Agreement. To the
extent that Allegiance is not able to sell such Isolyser Inventory
during this time period, Isolyser agrees to repurchase any unsold
Isolyser Inventory held by Allegiance 120 days after Allegiance begins
to sell Products under its own 510(k). Isolyser shall purchase such
remaining Isolyser Inventory from Allegiance at Allegiance's original
cost from Isolyser as specified in Exhibit 4. Purchases under this
Section 4.3.1 are not credited against the obligation of Allegiance
under Section 4.3.2.
<PAGE>
[***]- CONFIDENTIAL TREATMENT REQUESTED
4.3.2. REQUIREMENTS AND MINIMUM PURCHASE AMOUNT
Allegiance shall purchase its requirements for a dissolvable
material made from PVA for use in the healthcare field solely from
Isolyser during the Term and any extended term of this Agreement.
Allegiance's requirements shall include a minimum of [***] ("Minimum
Purchase Amount") during the Term of this Agreement; provided Isolyser
has not materially breached this Agreement. Isolyser will seek to
obtain the dissolution approvals specified in Exhibit 7 within 9
months of the Effective Date (18 months in the case of Japan). If any
of the pending approvals are not obtained with such time frames, the
Minimum Purchase Amount will be reduced by three times the amount
specified for each applicable pending approval. If any potential
customer of Allegiance would have to pay an extra fee or surcharge for
disposal of the Products because of the composition of the Products,
the Minimum Purchase Amount shall be reduced by a reasonable estimate
of the total sales amount for Products that could have been sold to
each such customer. In addition, if Isolyser or any of its Affiliates
shall fail to perform in any material manner any of its obligations to
any of Allegiances customers with respect to the disposal of Products
or if any disposal facilities operated or managed by Isolyser or any
of its Affiliates shall fail in any material manner to operate at
anticipated levels, then the Minimum Purchase Amount shall be reduced
by an amount equal to the estimated "normal" purchases of Products by
the affected customer minus the actual purchases by such customer. Any
ORE(R) Products included as a component of any kits/packs shall be
credited toward the Minimum Purchase Amount. In the event Allegiance
purchases less than the Minimum Purchase Amount, Isolyser's sole
remedy shall be to convert this Supply and License Agreement to a
nonexclusive agreement.
4.3.3. SUBMIT ORDERS
Allegiance shall submit its orders for the Minimum Purchase
Amount of Materials during the Term of this Agreement on its standard
purchase order form, a copy of which is attached hereto as Exhibit 5,
the terms and conditions of which are made a part hereof to the extent
consistent with the terms set out in the body of the Agreement.
4.3.4. PAYMENT
Allegiance shall pay for such orders on Allegiance's standard
terms of payment: net thirty (30) days.
4.3.5. INSTRUCTION
Allegiance shall provide instruction to its customers in the use
of the Materials in accordance with Material information provided by
Isolyser.
4.4. ISOLYSER'S DUTIES
Isolyser shall:
4.4.1. SHIP PRODUCT
ship promptly Allegiance's orders for Materials at a service
level of 98% for the requested delivery date;
4.4.2. REPLACEMENT MATERIAL
replace any defective Material manufactured by Isolyser and
provided under this Agreement at no cost to Allegiance or Allegiance's
customer;
4.4.3. ADVERTISING
furnish Allegiance, at no cost, reasonable quantities to be
specified between the parties in the JDCC of Isolyser's literature,
and customer instruction manuals relating to the Materials and furnish
Allegiance, upon written request and at no cost, suitable copy and
camera-ready artwork for use by Allegiance in advertising and
cataloging;
<PAGE>
4.4.4. SAMPLES
provide Allegiance, at no cost, reasonable quantities to be
specified between the parties in the JDCC of sample Materials;
4.4.5. TECHNICAL SUPPORT
provide technical support to the sales effort of Allegiance's
sales force by providing and maintaining training materials and
education where necessary, and providing the technical knowledge of
the Materials to assist Allegiance's sales representatives in the
service of the Materials and Products;
4.4.6. ACCESS TO RECORDS
provide access to and use by Allegiance of only those records,
studies, data and other documents associated with the product
development and manufacturing by Isolyser of Products from Material
that will assist Allegiance in obtaining any necessary regulatory
approval required by Allegiance to sell the Products or to support an
advertising or similar challenge to marketing claims; and
4.4.7. 510(K) SUPPORT
grant Allegiance the right to reference certain records, studies,
data and other documents associated with the product development and
manufacturing of Isolyser products made from Material as is necessary
for Allegiance to file its own 510(k) application or applications for
Products manufactured from Material.
4.5. MATERIAL WARRANTIES
Isolyser warrants that all Materials shipped are free from defects in
workmanship and materials, are fit for their intended purposes, and conform to
the Specifications (or conform to any samples provided to Allegiance). Isolyser
shall bear responsibility for all costs associated with warranty services,
including any freight charges on Materials or Products which do not conform to
the warranties set forth herein. Isolyser shall issue credit for all Materials
or Products returned to Allegiance or returned by customers to Allegiance which
do not conform to the warranties set forth herein and provide Allegiance with
written reports of evaluation of such Materials or Products.
4.6. CONFIDENTIALITY
Any written or verbal information which either party provides to the other
and identifies as "confidential" will be held in confidence by the receiving
party and will not be used for any purpose other than to further the
relationship between the parties under this Agreement. The foregoing
confidentiality obligation shall not apply if the receiving party can
demonstrate that such information: (i) was, at the time of disclosure to it, in
the public domain; (ii) after disclosure to it, is published or otherwise
becomes part of the public domain through no fault of the receiving party; (iii)
was in the possession of the receiving party at the time of disclosure to it
without being subject to an obligation of confidentiality; (iv) was received
after disclosure to it from a third person who had a lawful right to disclose
such information to it; (v) was independently developed by or on behalf of the
receiving party by employees or authorized subcontractors who at no time were
provided with access to confidential information of the disclosing party; (vi)
was required to be disclosed to any governmental body having jurisdiction over
Allegiance or Isolyser or their affiliates or any of their respective clients;
or (vii) that disclosure is necessary by reason of legal, accounting or
regulatory requirements beyond the reasonable control of the receiving party.
<PAGE>
4.7. INDEMNIFICATION AND INSURANCE
4.7.1. INDEMNIFICATION
Isolyser shall indemnify and defend Allegiance against all
claims, liabilities, losses and expenses (including attorneys' fees)
arising out of the manufacture, use or disposal of any Material or
Product or allegedly caused by Isolyser's manufacture, or the use or
disposal of any Material or Product, except to the extent any personal
injury, death or property damage arose from any negligence of
Allegiance in manufacture/handling of the Material or any
misrepresentation by Allegiance concerning the Material's
characteristics, or proper manner of usage. It is understood and
agreed that Allegiance=s use of advertising, training and other
materials provided by Isolyser shall not constitute misrepresentations
by Allegiance hereunder. In the event that any such claims,
liabilities, or losses are expressly found not to be caused by the
manufacture, use, or disposal of any Material, Allegiance shall
reimburse Isolyser for amounts paid by Isolyser under this
indemnification provision.
4.7.2. INSURANCE
Isolyser shall take out and maintain general comprehensive
liability insurance covering each occurrence of bodily injury and
property damage in an amount of not less than Three Million Dollars
($3,000,000) combined single limit with endorsements for: (i) products
and completed operations; (ii) blanket contractual liability (deleting
any exclusion for Materials and completed operations liability); and
(iii) broad form vendor's liability. Isolyser will immediately furnish
to Allegiance a certificate of insurance issued by the carrier
evidencing the foregoing endorsements, coverages and limits, and
stating that such insurance shall not be cancelable without at least
thirty (30) days' prior written notice to Allegiance.
4.8. REGULATORY MATTERS
4.8.1. CONTINUING GUARANTY
Isolyser agrees to execute and comply with the provisions of the
Allegiance Continuing Guaranty, a copy of which is attached hereto as
Exhibit 6, the terms and conditions of which are made a part hereof to
the extent consistent with the terms set out in the body of this
Agreement.
<PAGE>
4.8.2. PRODUCT RECALL
In the event Allegiance or Isolyser recalls any of the Materials
manufactured by Isolyser or Products containing Materials sold or
distributed by Allegiance because the Materials, including Materials
included in Products, are believed to violate any provision of
applicable law, Isolyser shall bear all costs and expenses of such
recall, including, without limitation, expenses or obligations to
third parties, the cost of notifying customers and costs associated
with the shipment of recalled Material or Products containing
Materials from customers to Allegiance or Isolyser. Allegiance shall
maintain complete and accurate records, for such periods as may be
required by applicable law, of all the Materials or Products
containing Materials sold by it. The parties will cooperate fully with
each other in effecting any recall of the Materials or Products
containing Materials, including communications with any purchasers or
users.
4.8.3. CUSTOMER COMPLAINT REPORTING
Isolyser shall be responsible for notifying the appropriate
federal, state and local authorities of any customer complaints or
other occurrences regarding the Materials which are required to be so
reported. Allegiance shall provide Isolyser with any information it
receives regarding such occurrences.
4.8.4. ACCESS
Isolyser agrees to permit a duly authorized representative of
Allegiance to enter and inspect, during normal business hours, the
establishments in which any of the Materials are manufactured,
packaged, labeled or held solely in order to determine whether said
Materials are being manufactured, packaged, labeled or held in
conformity with the terms of this Agreement, (provided such
representative executes an appropriate confidentiality agreement and
visits during normal business hours after reasonable notice) and
further agrees to provide Allegiance with such documents as it may
reasonably require to determine whether the Materials are being
manufactured, packaged, labeled or held in accordance with the
provisions of this Agreement.
5.GENERAL PROVISIONS
5.1. TERMINATION
5.1.1. BREACH
If either party breaches any of the terms of this Agreement, the
non-breaching party shall give the breaching party written notice of
breach and a reasonable opportunity to cure such breach. If the
breaching party fails to cure such breach after written notice and a
reasonable opportunity to cure which in any event shall not be more
than 60 days, then the non-breaching party shall have the right to
terminate this Agreement. If Allegiance is the breaching party, then
during such cure period Isolyser reserves the right, without prejudice
to any other legal rights or remedies, to require the Allegiance to
immediately suspend use of the Trademarks upon Isolyser's written
notice of suspension. The suspension shall terminate if and when
Allegiance cures the breach. In the event Isolyser terminates this
Agreement due to a material breach of the Agreement by Allegiance,
Allegiance shall not sell a dissolvable PVA product in the healthcare
market during the remaining Term.
5.1.2 [INTENTIONALLY OMITTED].
<PAGE>
5.1.3. BANKRUPTCY
Allegiance shall have the right to terminate this Agreement
immediately if Isolyser is dissolved, generally fails to pay or admits
in writing its inability generally to pay its debts as they become due
or is liquidated or ceases for a period of at least sixty (60) days to
conduct business in the ordinary course; makes a general assignment,
arrangement, or composition agreement with or for the benefit of its
creditors; or files a petition in bankruptcy or institutes any action
under federal or state law for the relief of debtors or seeks or
consents to the appointment of an administrator, receiver, custodian,
or similar official, in each case for the dissolution, liquidation or
wind up of its business and not for reconstruction or reorganization
(or has such a petition or action filed against it and such petition
action or appointment is not dismissed or stayed within sixty (60)
days).
5.1.4. 60 DAYS' NOTICE
Allegiance shall have the right to terminate this Agreement upon
sixty (60) days' written notice to Isolyser if Isolyser, upon being
duly notified of a third party's claim for patent infringement or a
third party's manufacture, use, or sale of the Product(s) in the
Territory, does not undertake to defend such claim or take appropriate
action to enforce its Patent.
5.1.5. INVENTORY
Upon termination of this Agreement by either party, Allegiance
shall have the right to use its remaining inventory of Material to
manufacture Products and to sell its remaining stock of Product(s)
provided that Allegiance shall offer Isolyser the first right of
repurchase. The Trademark License granted in 2.2.1 will continue until
all remaining stock of Products is sold.
5.1.6. EFFECTS OF TERMINATION
Upon any termination of this Agreement pursuant to this Section
5.1 all obligations of the parties hereunder shall cease except
obligations with respect to Material sold prior to the time of such
termination including payment and delivery obligations.
5.2. OTHER DISTRIBUTORS--WARRANTY AND INDEMNIFICATION
Isolyser warrants that it has no other distributors for the Products in the
healthcare market during the term of this Agreement. Isolyser shall indemnify
Allegiance for all damages, costs and expenses, including attorneys' fees,
resulting from any claims from any prior distributors of Isolyser of the
Products relating to the rights granted to Allegiance by Isolyser to sell the
Products.
5.3. ASSIGNMENT
This Agreement may not be assigned by either party hereto without the
consent of the other party, except to the transferee of or successor to
substantially all of the business of such party to which this Agreement relates
which transferee or successor shall expressly assume in writing all of the
obligations of the assigning party under this Agreement.
5.4. INTERPRETATION
5.4.1. GOVERNING LAW
The parties agree that all provisions of this Agreement, and any
questions concerning its construction and interpretation, shall be
governed by the laws of the State of Illinois.
<PAGE>
5.4.2. PRIOR AGREEMENTS
This Agreement supersedes any and all previous agreements,
written or oral, between the parties relating to the subject matter
hereof.
5.4.3. AMENDMENTS
No amendment or modification of the terms of this Agreement shall
be binding upon either party unless reduced to writing and signed by
Isolyser and Allegiance.
5.5. NOTICES
All notices, reports and payments made pursuant to this Agreement shall be
addressed to the president with a copy to the general counsel of each party at
the address set forth in the first paragraph of this Agreement unless notice of
a different address is supplied by either party to the other. All notices,
requests and other communications hereunder shall be in writing and shall be
deemed to have been duly given at the time of receipt if delivered by hand or
mailed registered or certified mail, return receipt requested with postage
prepaid, addressed to the President at the address above stated.
5.6. DISPUTE RESOLUTION
5.6.1. ESCALATION
The parties agree that they will attempt to settle any claim or
controversy arising out of this Agreement through good faith
negotiations in the spirit of mutual cooperation between business
executives with authority to resolve the controversy. Each party shall
designate an employee who will be the initial contact for resolving
disputes. Each party shall raise any questions, claim or controversy
with the designated employee of the other party. The designated
employees will work together to resolve the relevant issue in a manner
that meets the interests of both parties, or until the issue is
referred to designated officers of the parties as set forth below in
this Section 5.6.1. The employees initially designated by each party
for purposes of this Section are as follows:
ISOLYSER: Migo Nalbantyan
ALLEGIANCE: Mike Hudson
<PAGE>
The parties may change such designation by giving notice of such
change pursuant to Section 5.5 of this Agreement. If the designated
employees are unable to resolve any claim or controversy, prior to
taking action as provided in Section 5.6.2, the parties shall first
submit such claim or controversy to the appropriate general counsel or
appropriate legal representative of each party for resolution, and if
such general counsel or appropriate legal representative are unable to
resolve such claim or controversy, either party may request that their
respective chief executive officers, or their respective delegees,
attempt to resolve the dispute. The officers or delegees to whom any
such claim or controversy is submitted as provided above shall attempt
to resolve the dispute through good faith negotiations over a
reasonable period, not to exceed 30 days in the aggregate unless
otherwise agreed. Such 30 day period shall be deemed to commence on
the date of a notice from either party describing the particular claim
or controversy.
5.6.2. ARBITRATION
Any dispute that is not resolved by negotiations pursuant to
Section 5.6.1 will, upon the written request of either party, be
resolved by binding arbitration administered by American Arbitration
Association in accordance with the Commercial Arbitration Rules of the
American Arbitration Association by a panel of three arbitrators who
are qualified in the field of healthcare products. Such arbitrator
shall determine a schedule for determination of such dispute,
establish the scope of discovery and establish the length of hearings
that is reasonable under the circumstances. Such arbitrator shall
determine the dispute in accordance with this Agreement and the
substantive rules of law and the rules regarding admissibility of
evidence (but not the rules of procedure) that would be applied by a
federal court sitting in Illinois. The arbitration shall take place in
Nashville, Tennessee. Notwithstanding any choice of law provision
included in this Agreement, the United States Arbitration Act, 9
U.S.C. Sections 1-16 shall govern the interpretation and enforcement
of this arbitration provision. Judgment upon the award rendered by the
arbitrator may be entered by any court having jurisdiction. Where this
Agreement provides for future agreement by the parties, failure to
reach such agreement shall not constitute a dispute subject to the
provisions of this Section 5.6.2 except as expressly provided
otherwise.
5.6.3. INJUNCTIVE RELIEF
Either party may, without inconsistency with this Section 5.6,
apply to any court having jurisdiction hereof and seek provisional,
injunctive or other equitable relief as necessary to prevent serious
and irreparable injury to such party or to others. The parties
acknowledge that this contract evidences a transaction involving
interstate commerce. The use of arbitration procedures will not be
construed under the doctrine of laches, waiver or estoppel to affect
adversely either party's right to assert any claim or defense.
<PAGE>
5.7 FORCE MAJEURE
If performance by either party (the "Performing Party") of any service or
obligation under this Agreement is prevented, restricted, delayed or interfered
with by reason of labor disputes, strikes, acts of God, floods, lightning,
severe weather, shortages of materials, rationing utility or communication
failures, failure or delay in receiving electronic data, earthquakes, war,
revolution, civil commotion, acts of public enemies, blockade, embargo, or any
law, order, proclamation, regulation, ordinance, demand or requirement having
legal effect of any government or any judicial authority or representative of
any such government, or any other act or omission whatsoever, whether similar or
dissimilar to those referred to in this clause, which are beyond the reasonable
control of such Performing Party, then such Performing Party shall be excused
from such performance to the extent that (i) such cause, and the resulting
prevention, restriction, delay or interference, were beyond the reasonable
control of such Performing Party; and (ii) such Performing Party took all
reasonable steps to prevent and mitigate such cause, and the resulting
prevention, restriction, delay or interference. Notwithstanding the foregoing,
if any prevention, restriction, delay or interference under this Section 5.7 of
any material service or obligation of Isolyser continues for at least 60 days,
then Allegiance by written notice to Isolyser may terminate its obligations
under Section 4.3.2 without further obligation.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers on the day and due first written
above.
ISOLYSER COMPANY
By:________________________________
Its:_______________________________
ALLEGIANCE HEALTHCARE
CORPORATION
By:________________________________
Its:_______________________________
::ODMA\PCDOCS\CHICAGO4\868469\5
861995v1
CONFIDENTIAL TREATMENT REQUESTED
Confidential Portions Of This Agreement Which Have Been Redacted Are Marked
With Brackets ("[***]"). The Omitted Material Has Been Filed Separately With The
Securities And Exchange Commission.
EXHIBIT 2.4
CONTRACT MANUFACTURING AGREEMENT
THIS CONTRACT MANUFACTURING AGREEMENT ("Agreement"), dated as of July 12, 1999
(the "Effective Date"), between Allegiance Healthcare Corporation, a Delaware
corporation with offices at 1500 Waukegan Road, McGaw Park, Illinois 60085
("Allegiance"), Isolyser Company, Inc., a Georgia corporation with offices at
4320 International Boulevard, Norcross Georgia 30093 ("Isolyser") and MedSurg
Industries, Inc., a Georgia corporation with offices at located at 251 Exchange
Place, Herndon, Virginia 22070 ("MedSurg").
BACKGROUND
WHEREAS, Isolyser, MedSurg and Allegiance have consummated the
transactions contemplated by the Asset Purchase Agreement dated as of May 25,
1999, as amended (the "Purchase Agreement"), pursuant to which Allegiance agreed
to purchase from Isolyser and Isolyser agreed to sell to Allegiance, certain
assets used in connection with Isolyser's MedSurg business together with certain
liabilities related thereto, all on terms and subject to conditions set forth in
the Purchase Agreement;
WHEREAS, Isolyser has agreed to enter into this Agreement to have
Isolyser's wholly-owned subsidiary MedSurg, manufacture for Allegiance the
Products, as hereinafter defined, all on the terms and subject to the conditions
set forth herein; and
WHEREAS, Isolyser hereby agrees to be jointly and severally liable with
MedSurg for any and all obligations of MedSurg hereunder;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto, intending
to be legally bound, agree as follows:
TERMS AND CONDITIONS
1. PRODUCTS.
(a) The products covered by this Agreement are those products and
accessories set forth in Exhibit A, together with the parts and components
necessary for the repair and replacement of such products and accessories
("Products").
861989v1
<PAGE>
(b) MedSurg shall adequately package and label the Products in
accordance with Allegiance's current instructions and specifications (including
sterilization), a complete and correct copy of which is attached hereto as
Exhibit B (as amended from time to time by Allegiance, the "Specifications")
which shall be those instructions and specifications in place immediately prior
to the Effective Date. Any changes to the artwork for labeling and packaging
the products shall be subject to the review and written approval of Allegiance
prior to implementation.
2. GRANT OF CONTRACT MANUFACTURING. Allegiance hereby grants to MedSurg the
right to manufacture or have manufactured the Products exclusively for
Allegiance as provided in this Agreement and Allegiance shall hire MedSurg as a
contract manufacturer of the Products and MedSurg accepts such grant. This grant
does not include any grant to MedSurg to use any intellectual property owned by
Allegiance for the benefit of any third-party.
3. TERM. This Agreement shall be effective as of the Effective Date and shall
terminate on January 31, 2000 (the "Termination Date"). After the Termination
Date, provided Allegiance shall have given not less than 75 days advance notice
to MedSurg of Allegiance's election to continue this Agreement, MedSurg shall
continue to manufacture all of the Products upon Allegiance's request at the
prices set forth on Exhibit C and pursuant to the terms and conditions of this
Agreement. Notwithstanding anything to the contrary contained in this Agreement,
Allegiance shall give MedSurg not less than 75 days advance notice of any
termination of this Agreement after the Termination Date.
<PAGE>
[***]- CONFIDENTIAL TREATMENT REQUESTED
4. PRICING.
(a) Manufacturing Costs shall be reimbursed by Allegiance to MedSurg as
follows: Manufacturing costs shall be paid on a bi-weekly basis in the amounts
specified in Exhibit D attached hereto (the "Manufacturing Budget"). Any
expenses that exceeded the budgeted amounts must be pre-approved by Allegiance.
As used in the Agreement, the term "Manufacturing Costs" shall mean with respect
to any Product, all Direct Material Costs, Direct Labor Costs, Sterilization and
Overhead required to manufacture such Product as described in more detail on
Exhibit D hereto. "Direct Material Costs" shall mean reasonable costs incurred
in purchasing raw materials (without deduction for waste), including sales and
excise taxes imposed thereon, reasonable and customary process generated scrap,
and all costs of packaging components. "Direct Labor Costs" shall mean the
reasonable cost of temporary and full-time employees engaged in manufacturing
activities who are directly involved in Product manufacturing and packaging and
in quality assurance/quality control. "Sterilization" shall mean reasonable
costs incurred to produce a sterile finished good including all related "Direct
Labor Costs" and "Overhead" allocated specifically to the sterilization of
product. "Overhead" allocated to a Product shall mean indirect costs associated
with the production, testing, packaging, storage and handling of a Product,
including a reasonable allocation of facilities' costs allocable to Product
manufacturing and packaging, including electricity, water, sewer, waste
disposal, property taxes, 6% Virginia rent tax (if applicable), manufacturing
payroll taxes, equipment lease expenses, worker's compensation insurance,
salaries (supervisory, maintenance, engineering and management). The allocation
and calculation of Manufacturing Costs shall be made in accordance with standard
cost and reasonable cost accounting methods in accordance with Generally
Accepted Accounting Principles ("GAAP"), applied in a manner consistent with
Allegiance=s customary practices.
(b) Cost of sales expenses shall be reimbursed by Allegiance to MedSurg
as follows: warehouse salaries shall be paid on bi-weekly basis in the amounts
specified in the cost of sales budget specified on Exhibit E attached hereto
(the "OCOS Budget"). Any expenses that exceed the budgeted amount must be
pre-approved by Allegiance. Allegiance shall have the right to update, amend or
otherwise modify the OCOS Budget throughout the term of this Agreement as
Allegiance deems necessary based on the transition of manufacturing to
Allegiance facilities or as Allegiance reasonably deems appropriate. The OCOS
Budget shall be adjusted for transition of manufacturing for actual Cost of
Goods Sold.
(c) Selling, general and administrative expenses shall be reimbursed by
Allegiance to MedSurg as follows: administrative and customer service salaries,
artwork and customer packaging, licenses, fees, permits, office expenses,
postage and express shipment expenses, supplies, telephone and non-manufacturing
utilities expenses shall be paid on a bi-weekly basis in the amounts specified
in the SG&A Budget specified on Exhibit F attached hereto (the "SG&A Budget"),
until the Termination Date. Any expenses that exceed the budgeted amount must be
pre-approved by Allegiance. Allegiance shall have the right to update, amend or
otherwise modify the SG&A Budget throughout the term of this Agreement as it
deems necessary based on the transition of manufacturing to Allegiance
facilities or as Allegiance reasonably deems appropriate.
(d) MedSurg shall provide to Allegiance all supporting documents and
calculations that Allegiance may require to support the calculations of the
expenses within the scope of this Section 4. Such documentation shall be
delivered to Allegiance promptly upon request. Allegiance shall have the right,
at its option, to inspect, review and audit (or have its representatives
inspect, review and audit), at reasonable times, all books, records, documents
and other data of Isolyser for the purpose of verifying or confirming the
expenses within the scope of this Section 4. MedSurg shall give Allegiance or
any such representative reasonable access to MedSurg's premises and books,
records, documents and other data.
(e) Isolyser shall institute an incentive/retention program for all of
MedSurg's employees (the "Program"). Terms of the Program shall be mutually
agreed to by the parties. Isolyser shall pay up to $[***] for bonuses to be paid
pursuant to the Program, which bonuses shall not be reimbursed by Allegiance.
Allegiance will review proposals for additional bonuses in the Manufacturing
Budget.
(f) The prices at which Allegiance sells Products shall be solely in
the discretion of Allegiance.
<PAGE>
[***]- CONFIDENTIAL TREATMENT REQUESTED
5. WORKING CAPITAL DEPOSIT. On the date hereof, Allegiance has delivered to
Isolyser a working capital deposit equal to $[***]. Isolyser may use such
deposit to cover the costs of reimbursable expenses within the scope of Section
4, but shall refund any amounts so used out of reimbursements received from
Allegiance. Upon the termination of this Agreement, Isolyser shall refund the
working capital deposit to Allegiance without interest.
6. TRANSITION SUPPORT.
(a) In addition to its manufacturing duties hereunder, MedSurg shall
continue to order and manage raw materials, schedule daily manufacturing,
perform quality control procedures and provide engineering support for the
Products prior to and during asset transfer until Termination. MedSurg shall
also endeavor to maintain service levels and fill rates consistent with those
levels achieved prior to the Effective Date recognizing that its ability to do
so will be impacted by circumstances not within its control. If service levels
and/or fill rates drop below those levels achieved prior to the Effective Date,
Allegiance may direct Isolyser and MedSurg in any actions necessary to improve
such service levels and fill rates. Allegiance shall bear the costs and expenses
for any such actions required to be taken by Isolyser or MedSurg.
(b) Isolyser and MedSurg will provide support for the transition of the
Products to Allegiance. Such support shall include, but not necessarily be
limited to:
(i) technical support and consulting required for training Allegiance
engineering, quality, and manufacturing personnel;
(ii) technical support and consulting required to develop Allegiance
internal product and process specifications; and
(iii) project management support in developing and implementing
transfer plans and schedules.
(c) In furtherance of the transition support to be provided by Isolyser
and MedSurg hereunder, Isolyser and MedSurg agree that Allegiance shall have
reasonable access to and support of the following employees of MedSurg during
the transition period: Plant Manager, Plant Controller and direct reports, and
Quality Manager. These employees shall at all times remain employees of MedSurg
and not of Allegiance while performing such transition services, and their
compensation and benefits shall remain the sole obligation of Isolyser, subject
to Isolyser's right to include their compensation and benefits in Direct Labor
Costs and Overhead pursuant to Section 4(a) above.
7. ISOLYSER'S DUTIES. Isolyser shall or shall cause MedSurg to:
<PAGE>
(a) ship promptly orders for Products F.O.B. Virginia by the most
efficient method of ground shipment, when reasonably necessary to meet delivery
dates confirmed by MedSurg or to replace Products pursuant to Sections 11 or
14(b) (but not including Product returns); and
(b) without Allegiance's prior written consent, make no modifications
to the Products or their key components, including: (i) composition or source of
any raw material; (ii) method of producing, processing or testing; (iii) change
in subcontractors for producing, processing or testing; and (iv) site of
manufacture;
(c) comply with all laws, regulations and/or statutes applicable to the
manufacture of the Products and the operation of the Facilities and Equipment;
(d) provide the information system functions described in Schedule 5.8
of the Purchase Agreement;
(e) service customer requirements, including order taking, order
tracking, kit version changes, kit quoting, invoicing customers, managing
customer credits and cash application; and
(f) maintain books and records in accordance with GAAP reflecting all
costs reimbursable hereunder.
8. ALLEGIANCE'S DUTIES. Allegiance shall accept orders for Products submitted by
MedSurg in accordance with the provisions of Section 7(d) above within a
reasonable time of submission.
<PAGE>
9. USE OF FACILITIES AND EQUIPMENT. In connection with the performance by
MedSurg and Isolyser of their respective responsibilities under this Agreement,
MedSurg and Isolyser shall possess, use and occupy the premises described on
Exhibit G hereto (the "Facilities"). The parties acknowledge that the tenant's
interest in the MSI Lease described on said Exhibit G has been assigned to
Allegiance, but that the tenant's interest in the Curtis Lease described on said
Exhibit G is currently held by MedSurg. In order to facilitate the performance
by Isolyser and MedSurg of their responsibilities under this Agreement,
Allegiance shall, during the period prior to the termination of this Agreement,
make available to MedSurg and shall permit Isolyser to possess and occupy the
premises described covered by the MSI Lease, as well as the machinery,
equipment, appliances, vehicles, tools, spare parts, accessories, furniture and
other personal property listed or referred to in Exhibit H hereto (the
"Equipment"). To the extent that the tenant's interest in the Curtis Lease is
assigned to Allegiance after the date hereof but prior to the date on which this
agreement terminates, Allegiance shall also make available to MedSurg and shall
permit Isolyser to possess and occupy the premises covered by the Curtis Lease
during the period prior to the termination of this Agreement. Isolyser will
cause MedSurg to operate the Facilities and the Equipment in a commercially
reasonable manner and maintain them in good and serviceable condition and repair
(subject to normal wear and tear) and in accordance with normal industry
practice. Isolyser and MedSurg agree to comply with all of the terms of the
leases to which the Facilities are subject listed on Exhibit G applicable to the
lessee. Upon the termination of this Agreement, Isolyser and MedSurg shall
immediately deliver possession of the Facilities (except that, if the tenant's
interest in the Curtis Lease has not been assigned to Allegiance prior to said
termination of this Agreement, then Isolyser and MedSurg shall not deliver
possession of the Facility covered by the Curtis Lease to Allegiance) and the
Equipment to Allegiance. As between Allegiance and Isolyser and MedSurg, and
without regard to insurance coverage, Isolyser and MedSurg shall bear all
reasonable risk of loss of, other than mutually agreed deductibles any tangible
Purchased Assets (as defined in the Purchase Agreement) while such Purchased
Assets remain in the possession of Isolyser or MedSurg. Notwithstanding the
foregoing, Allegiance shall be permitted access to the Facilities at all times
during the term of this Agreement.
10. STANDARD OF CARE. Isolyser will cause MedSurg to perform the manufacturing
duties described in this Agreement with the same degree of skill, care and
prudence customarily exercised by similarly situated persons performing similar
functions, and shall refrain and shall cause its employees, agents and
representatives to refrain from engaging in any negligent acts or omissions in
the performance of such services which result in material damages. Isolyser
agrees to indemnify and hold harmless Allegiance and its Affiliates from and
against any and all claims, damages, liabilities, losses, costs, obligations,
awards, judgments, fines, penalties, fees, expenses or other charges (including
fees of counsel and other out-of-pocket costs) arising from Isolyser=s failure
to perform its obligations under this Section 10.
11. PRODUCT WARRANTIES. Isolyser warrants that the Products manufactured for or
otherwise supplied to Allegiance under this Agreement shall: (i) have been
manufactured in accordance with all applicable statutes, ordinances and
regulations, including without limitation, the U.S. Food, Drug & Cosmetic Act
and the regulations promulgated thereunder (the "Act") including the Good
Manufacturing Practice regulations which are now in force or are subsequently
adopted ("Good Manufacturing Practices") by the U.S. Food and Drug
Administration (the "FDA"), the Medical Device Directive regulations, and the
Quality System Regulations ("QSR") which are now in force or are subsequently
adopted by the European Union (the "Medical Device Directive"); (ii) unless
otherwise agreed by the parties, have been manufactured at Isolyser's facilities
in Herndon, VA and Sterling, VA; (iii) conform to the Specifications; (iv) be
free from defects in materials, manufacture and workmanship attributable to
MedSurg or its suppliers; and (v) when shipped from the Facilities, not be
adulterated or misbranded within the meaning of any applicable law, except to
the extent that any such adulteration or misbranding is attributable to
Allegiance.
<PAGE>
12. INSPECTION AND ACCEPTANCE.
(a) Isolyser will cause MedSurg to test and inspect each lot of
Product for compliance with the Specifications prior to the release and shipment
thereof to Allegiance or its customer. Isolyser will cause MedSurg to provide a
certificate of analysis with each shipment of each lot of Product signed by the
responsible MedSurg quality official. This certificate of analysis must include
the results (whether numerical or otherwise) for each test performed that verify
that the applicable lot of Product is in compliance with the Specifications, as
well as a statement that the subject lot was manufactured in compliance with the
requirements enumerated in Section 11 above.
(b) Allegiance shall periodically, in its sole discretion, test and
inspect certain lots of Products upon receipt thereof. Upon any such testing and
inspection, Allegiance may reject any lot of Products if it does not comply with
the Specifications by giving Isolyser written notice of such rejection. Any
written notice of rejection by Allegiance given to MedSurg shall include
identification of the lot number and a description of the Specification failure.
(c) Following receipt of written notice of rejection of a particular
lot of Product, MedSurg shall, at Allegiance's option, and at MedSurg's expense,
provide a credit, refund or prompt replacement of product to Allegiance;
provided, however that if MedSurg does not agree with Allegiance's claim of
noncompliance with the Specifications, then the parties shall designate a
mutually acceptable third-party laboratory to make a determination on such
matter from a sample obtained from the lot shipped to Allegiance or its
customer. The decision of the third-party laboratory shall be binding on all
parties hereto and all expenses related to such third-party laboratory
investigation shall be borne by the party found to have been mistaken as to
compliance or noncompliance of the Product. Should such third-party laboratory
confirm Allegiance's claim, Isolyser shall at Allegiance's request, promptly
provide Allegiance with a credit, refund or prompt replacement of Product.
(d) Allegiance or its customers shall return any rejected products to
MedSurg, at MedSurg's expense, to an address that Isolyser may designate within
forty-five (45) days of MedSurg receiving written notice of rejection; provided,
however, that if MedSurg does not agree with Allegiance's claim of noncompliance
with Specifications, Allegiance shall not be obligated to return the rejected
Products to Isolyser until within forty-five (45) days after a final
determination is made by a third-party laboratory that such Products do not
comply with Specifications as provided in subparagraph (c) above. Absent such
designation of address, Allegiance shall ship rejected product to the
Facilities. All reasonable freight, insurance and other costs of such shipment,
along with any risk of loss, shall be borne by Isolyser.
<PAGE>
13. PRODUCT LIABILITY.
(a) Indemnification. Isolyser shall indemnify and hold Allegiance
harmless against all claims, actions, costs, expenses (including court costs and
legal fees on a full indemnity basis) and other liabilities ("Liabilities")
arising out of or in connection with (a) any product liability claim with
respect to any Product; (b) MedSurg's failure to comply with the Specifications;
(c) any Liabilities incurred by Allegiance relating to MedSurg's manufacture,
storage, packaging, handling or shipping of any Product; and (d) any breach of
any representation, warranty or covenant contained in this Agreement made by
Isolyser or MedSurg to Allegiance.
(b) Insurance. Isolyser shall take out and maintain comprehensive
general liability insurance on an occurrence form covering each occurrence of
bodily injury and property damage in an amount approved by Allegiance and not
less than Three Million Dollars ($3,000,000) combined single limit with
endorsements providing coverage for: (i) products and completed operations
liability; (ii) blanket contractual liability (deleting any exclusion for
products and completed operations liability); and (iii) vendor's liability.
Isolyser shall cause MedSurg and Allegiance to be named as an additional insured
on such policy. Upon execution of this Agreement, Isolyser will immediately
furnish to Allegiance a certificate of insurance issued by the carrier
evidencing the foregoing endorsements, coverages, limited, and stating that such
insurance shall not be cancelable without at least thirty (30) days prior
written notice to allegiance.
14. REGULATORY MATTERS.
(a) Quality Assurance. Each lot of Product to be supplied to Allegiance
hereunder shall be subject to a quality assurance inspection by MedSurg to
ensure that the Products meet the requirements of Section 12.
(b) Process Change Provisions and Procedure. All modifications,
changes, additions or deletions to the (i) Product Specifications; (ii) changes
in the expiration period for the Products; (iii) composition or source of any
raw materials; (iv) methods of producing, processing or testing; or (v) change
in subcontractors for producing, processing or testing; (vi) site of
manufacture; which MedSurg intends to carry out must be evaluated and documented
by MedSurg. At least ninety (90) days prior to implementation of any such
change, MedSurg agrees to advise Allegiance in writing of such and to obtain
Allegiance's prior written consent to do so, which consent shall not be
unreasonably withheld. Upon the implementation of any change contemplated by
this Section 14(b), Allegiance shall make any appropriate notifications to the
FDA and/or any other applicable regulatory authority or agency and shall provide
copies of such notification to MedSurg as promptly as practicable, provided that
Allegiance may exclude any information deemed confidential or competitively
sensitive.
(c) Validation. MedSurg shall be responsible to ensure that all
facilities, utilities, equipment and the processes utilized to manufacture the
Products are satisfactorily validated according to the FDA guidelines, to the
extent applicable, except to the extent that such facilities, equipment and
processes were not so validated as of the date hereof.
<PAGE>
(d) Batch Records. Records which include the information relating to
the manufacturing, packaging and quality operations for each lot of Product
shall be prepared by Isolyser or MedSurg for each lot at the time such
operations occur. Such records shall be prepared in accordance with Good
Manufacturing Practices and Isolyser's standard operating procedures. These
documents for each lot may be reviewed during normal business hours by
Allegiance at Isolyser's sites of manufacturing of the Products upon Allegiance
giving seven (7) days written notice of its intent to review such documents.
Allegiance shall be permitted to review such documents as soon as practicable
after giving notice to Isolyser of its intent to do so. MedSurg shall keep batch
records for each lot of Product for a period of time required by any and all
applicable statutes, ordinances and regulations, including with limitation, the
Act and the regulations promulgated by the FDA.
(e) Regulatory Visits and Inspections. MedSurg shall permit FDA and
other regulatory agents to perform routine inspections of the Facilities and any
other facilities which contain the manufacturing operations for the Products and
shall immediately notify Allegiance of any such regulatory inspections and the
results thereof that affect the manufacturing processes of the Products or that
may impair MedSurg's ability to supply Products to Allegiance. Should any issues
arise in the course of such inspection, Isolyser and Allegiance shall consult
with each other in resolving such issues. Upon reasonable advance notice to
MedSurg's plant manager at the applicable facility, Isolyser shall allow a duly
authorized representative of Allegiance to enter and inspect such facility from
time to time during normal business hours to monitor MedSurg's adherence to
quality assurance and regulatory compliance standards.
(f) Regulatory Correspondence. Isolyser shall deliver to Allegiance all
copies of correspondence between Isolyser or MedSurg and any regulatory agencies
or authorities that in any way may impair the ability of Isolyser or MedSurg to
comply with their obligations under this Agreement. Isolyser shall deliver such
correspondence to Allegiance within five (5) business days of distributing or
receiving such correspondence, as the case may be.
(g) No Debarred Service Providers. To their knowledge after reasonable
inquiry, Isolyser and MedSurg have not and will not use the services of
employees or subcontractors who have been debarred by the FDA, in connection
with complying with its obligations under this Agreement.
<PAGE>
(h) Product Complaints. In the event that Isolyser or MedSurg receives
any complaints regarding the Products, it shall promptly notify Allegiance of
such. Isolyser shall be responsible for evaluating and investigating these
complaints and communicating the results thereto to Allegiance in writing within
ten (10) business days of notification; provided that, if any such investigation
requires more than ten (10) business days to complete, Isolyser shall so notify
Allegiance of such in writing within the aforesaid ten (10) business days.
Isolyser will make a preliminary evaluation of each complaint received and will
conduct all follow-up, communications and maintenance of records with respect to
such complaints as required by applicable law and will cooperate with Allegiance
in the resolution of such product complaints. Allegiance shall be responsible
for making all necessary reports to the FDA and/or any other applicable
regulatory agency or authority and shall provide copies of such reports to
Isolyser as promptly as practicable, provided that Allegiance may exclude any
information deemed confidential or competitively sensitive.
(i) Recall Action.
(i) In the event Allegiance should be required or should
voluntarily decide to initiate a recall, Product withdrawal, or field correction
of any of the Products, Allegiance shall notify Isolyser and provide a copy of
its recall letter. In conjunction with such recall, Isolyser and MedSurg shall
assist in the investigation to determine the cause and extent of the problem and
the parties shall fully cooperate with each other concerning the necessity and
nature of such action.
(ii) In the event that Isolyser independently believes that a
recall, Product withdrawal or field of correction for any of the Products may be
necessary or appropriate, Isolyser shall notify Allegiance of Isolyser's belief,
and the parties shall fully cooperate with each other concerning the necessity
and nature of such action.
(iii) All coordination of any recall or field correction
activities involving any of the Products shall be handled by Allegiance whether
or not such action was initially requested by Isolyser.
(iv) In the event that any Product is recalled as a result of
the supply by Isolyser or MedSurg of Product that does not conform to
Specifications and/or the warranties set forth in Section 11 of this Agreement
or the negligent or intentionally wrongful act or omission of Isolyser or
MedSurg or their representatives, then, Isolyser shall bear all of the
reasonable costs and expenses of such recall, including without limitation,
expenses related to communications and meetings with all required regulatory
agencies, expenses of replacement stock, the cost of notifying customers and
costs associated with shipment of recalled Product from customers and shipment
of an equal amount of replacement Product to those same customers.
(j) Manufacturing Facility. Isolyser hereby agrees to maintain with the
FDA the registration as a device manufacturing establishment of the facilities
located in Herndon, VA and Sterling, VA, and shall maintain the existing ISO9002
and ISO9001 certification for such facilities respectively. Allegiance hereby
agrees to cooperate with Isolyser to the extent reasonably requested by Isolyser
in order to make the filings and maintain the certifications contemplated by
this Section 14(j).
<PAGE>
15. TRADEMARKS AND TRADE NAMES. Isolyser recognizes that Allegiance is the owner
of the trademarks and trade names placed on or supplied with the Products by or
at the request of Allegiance ("Allegiance Trademarks"). Isolyser and MedSurg
have no right or interest in such Allegiance Trademarks. Isolyser and MedSurg
recognize that any and all use of such Allegiance Trademarks by Isolyser or
MedSurg is under license from Allegiance and that all such use inures to the
benefit of Allegiance. Upon termination of this Agreement, Isolyser and MedSurg
shall discontinue the use of such Allegiance Trademarks. Except in the manner
specified in the Specifications, neither party shall use any trademark or trade
name of the other party or a confusingly similar trademark or trade name during
or after the term of this Agreement.
16. YEAR 2000 COMPLIANCE. Except as provided on the applicable disclosure
schedule to the Purchase Agreement, Isolyser represents and warrants to
Allegiance that all computer software and hardware owned or used by Isolyser, or
licensed by Isolyser as licensor or as licensee is Year 2000 Compliant (as
defined below). For the purposes of this Agreement, "Year 2000 Compliant" shall
mean (i) all such software and hardware shall operate in four-digit year format,
without errors in the recognition, calculation and processing of date data
relating to century recognition, leap years, single and multi-century formulae,
date values and interfaces of date-related functionalities, (ii) all date
processing shall be conducted in a four-digit year format and all date sorting
that includes a "year filed" or "year category" shall be based upon a four-digit
year format; and (iii) any date arithmetic programs or calculators in the
software and hardware shall operate in accordance with the related user
documentation in the Year 2000 and the years following without degrading
functionality or performance.
17. EMPLOYEES.
(a) MedSurg is the employer of all persons (the "Employees") rendering
services which relate, either directly or indirectly, to the manufacture of the
Products or the otherwise provided by Isolyser or MedSurg hereunder. Isolyser
shall have the sole responsibility for all matters relating to the maintenance
of personnel and payroll records, the withholding and payment of federal, state
and local income and payroll taxes, the payment of workers' compensation and
unemployment compensation insurance, salaries, wages and pension, welfare and
other fringe benefits, including any severance which may be triggered as a
result of any termination employment (including termination relating to the
termination of this Agreement) and the conduct of all other matters relating to
labor relations, including compliance with Isolyser's and MedSurg's obligations
under any applicable collective bargaining agreements and all negotiations and
communications with any union relating to employment of the Employees by
MedSurg. Isolyser shall be solely responsible for compliance with all applicable
labor and employment laws relating to the Employees and shall indemnify
Allegiance (and its successors, assigns, officers, directors and employees) for
any liability or legal or other expenses that result from any legal action
alleging noncompliance with such laws.
(b) During the term of this Agreement, Isolyser and MedSurg shall
provide and keep in full force and effect worker's compensation insurance with
respect to the Employees consistent with the coverage maintained by Isolyser
immediately prior to the execution of this Agreement.
<PAGE>
(c) Isolyser may maintain such liability insurance coverage as it shall
deem appropriate with respect to liabilities arising out of the acts and
omissions of the Employees in the performance of their services.
(d) Isolyser and MedSurg shall be solely responsible for the
administration of all their employee benefits plans, programs, agreements and
arrangements and compliance with all requirements of all applicable laws,
including the Employee Retirement Income Security Act, the Internal Revenue Code
and the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"), as
amended. Isolyser and MedSurg shall be solely responsible to provide
continuation coverage under COBRA or any applicable state law to any Employee or
beneficiary of any Employee who is entitled to such continuation coverage, and
shall indemnify Allegiance (and its successors, assigns, officers, directors,
employees and employee benefits plans) for any liability resulting from
Isolyser's failure to provide such continuation coverage.
(e) Isolyser and MedSurg shall have the responsibility of giving the
Employees any notice (a "Warn Notice") required under the Worker Adjustment and
Retraining Notification Act of 1988, as amended (the "WARN Act"). Isolyser and
MedSurg shall comply with all applicable requirements of the WARN Act and shall
indemnify Allegiance (and its successors, assigns, officers, directors and
employees) for any liability or legal or other expenses resulting from any legal
action alleging noncompliance with such act.
(f) Isolyser and MedSurg shall have sole responsibility for the
employment and daily supervision of the Employees. Such responsibilities shall
include, without limitation, the hiring, termination, transfer, promotion,
demotion and job responsibilities of the Employees, as well as the determination
of the staffing levels needed to satisfy the production schedule and other
operating requirements.
18. CONFIDENTIALITY. As part of the ongoing relationship between Allegiance and
Isolyser and MedSurg it is contemplated that the parties will exchange valuable
information, some of which is proprietary or confidential. Any and all such
information deemed confidential by a disclosing party shall be identified as
confidential at the time of disclosure. Each party agrees not to disclose such
confidential information to any third party or use such confidential information
for any purpose other than performance under this Agreement. This obligation
shall not apply to information which is or becomes generally available to the
public through no fault of the receiving party, is possessed by the receiving
party prior to receipt of the information from the disclosing party, becomes
known to the receiving party from a third party who has no obligation of
confidentiality to the disclosing party or is developed by the receiving party
independently of the information received from the disclosing party.
19. NON-COMPETITION. During the Term of this Agreement, Isolyser and MedSurg
agree not to use any of the Facilities or Equipment for any purpose other than
the manufacture or supply of Products to Allegiance pursuant to this Agreement.
<PAGE>
20. TERMINATION. Either party shall have the right to terminate this Agreement
on written notice if the other party (i) commits or suffers any act of
bankruptcy or insolvency or (ii) fails to cure any material breach in the
provisions of this Agreement within thirty (30) days after written notice of
such breach has been given.
21. NOTICES. Any notice, consent, waiver, or other communication that is
required or permitted hereunder shall be sufficient if it is in writing, signed
by or on behalf of the party giving such notice, consent, waiver or other
communication, and delivered personally or by overnight courier, postage
prepaid, to the addresses set forth below, or to such other addressee or address
as shall be set forth in a notice given in the same manner:
If to Allegiance: if to Isolyser or MedSurg:
Allegiance Healthcare Corporation Isolyser Company Inc.
1430 Waukegan Road 4320 International Blvd.
McGaw Park, Illinois 60085-6787 Norcross, Georgia 30093
Attention: General Manager Attention: President
With a copy to: With a copy to:
Allegiance Healthcare Corporation Arnall, Golden & Gregory, LLP
1430 Waukegan Road 2800 One Atlantic Center
McGaw Park, Illinois 60085-6787 1201 West Peachtree Street
Attention: General Counsel Atlanta, Georgia 30309
Attention: Stephen D. Fox
22. EXISTING OBLIGATIONS. Isolyser and MedSurg represent and warrant that the
terms of this Agreement do not violate any existing obligations or contracts of
Isolyser or MedSurg. Isolyser shall defend, indemnify and hold harmless
Allegiance from and against any and all claims, demands, actions or causes of
action which are hereafter made or brought against Allegiance and which allege
any such violation.
23. GOVERNING LAW. This Agreement shall be governed by the laws of the State of
Illinois, applicable to contracts made and to be performed in that state.
Isolyser hereby submits to the jurisdiction of the courts of that state for
purposes of resolving any dispute.
24. ATTORNEY'S FEES. In the event of a controversy, claim or dispute between the
parties hereto arising out of or relating to this Agreement or any of the
documents provided for herein, or the breach thereof, the prevailing party shall
be entitled to recover from the losing party reasonable attorney's fees,
expenses and costs.
<PAGE>
25. ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit
of, the parties hereto and their respective successors, permitted assigns, heirs
and personal representatives. Isolyser and MedSurg may not assign their rights
or obligations under or related to this Agreement without the prior written
consent of Allegiance. Allegiance shall not assign this Agreement other than to
one of its affiliates.
26. ENTIRE AGREEMENT. This Agreement and the other documents and instruments
referred to in this Agreement embody the entire agreement and understanding of
the parties to the this Agreement relating to the subject matter of this
Agreement and supersedes any previous oral or written agreements between the
parties.
27. AMENDMENTS. No amendment or modification of the terms of this Agreement
shall be binding on either party unless reduced to writing and signed by an
authorized officer of the party to be bound.
28. COUNTERPARTS. This Agreement may be executed in two or more counterparts,
and by different parties on separate counterparts, and each such counterpart
shall be deemed to be an original, but all such counterparts shall together
constitute but one and the same Agreement.
29. INVALID OR UNENFORCEABLE PROVISION. The invalidity or unenforceability of
any provision of this Agreement shall not effect the other provisions hereof,
and this Agreement shall be construed in all respects as if such invalid or
unenforceable provision was omitted.
30. EXPENSES. Each party to this Agreement shall pay its or their own expenses,
including, but not limited to the expenses of its or their own counsel and
accountants, in connection with the consummation of the transactions
contemplated by this Agreement.
31. ANNOUNCEMENTS. All press releases or other public communications of any sort
relating to this Agreement and the transactions contemplated hereby, including
the method of release for the publication thereof, shall require the prior
written approval of both Allegiance and Isolyser unless otherwise required by
laws, rules or regulations or the rules of any stock exchange.
32. WAIVER. No waiver of any of the provisions of this Agreement shall be deemed
or shall constitute a waiver of any other provision hereof (whether or not
similar), nor shall such waiver constitute a continuing waiver unless otherwise
expressly provided in writing.
<PAGE>
33. INDEPENDENT CONTRACTOR. The relationship created hereby between the parties
shall be that of independent contractors. Neither party shall be the legal agent
of the other for any purpose whatsoever and therefore has no right or authority
to make or underwrite any promise, warranty or representation, to execute any
contract or otherwise to assume any obligation or responsibility in the name of
or on behalf of the other party, except to the extent specifically authorized in
writing by the other party. Neither party shall be bound by or liable to any
third party for acts or obligations or debts incurred by the other toward such
third party, except to the extent specifically agreed to in writing by the party
to be so bound.
* * * * *
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their authorized representatives named below.
Allegiance Healthcare Corporation
By ___________________________
Name:
Title:
Date:
Isolyser Company, Inc.
By ___________________________
Name:
Title:
Date:
MedSurg Industries, Inc.
By ___________________________
Name:
Title:
Date:
::ODMA\PCDOCS\CHICAGO4\869986\8
861989v1
861978v1 Exhibit 2.5
ESCROW AGREEMENT
THIS ESCROW AGREEMENT, dated as of July 12, 1999 (this "Agreement"),
between Allegiance Healthcare Corporation, a Delaware corporation ("Buyer"), The
First National Bank of Chicago, as Escrow Agent (the "Escrow Agent"), and
Isolyser Company, Inc. ("Parent").
W I T N E S S E T H:
WHEREAS, Buyer, Parent and MedSurg Industries, Inc., a Georgia
corporation ("MedSurg") are parties to the Asset Purchase Agreement, dated as of
May 25, 1999, as amended (the "Purchase Agreement"), pursuant to which Buyer has
agreed to purchase and Parent has agreed to sell the Business and certain of the
assets of the Business, together with certain liabilities related thereto, all
on the terms and subject to the conditions set forth therein;
WHEREAS, under the Purchase Agreement, Parent has agreed to indemnify
and hold harmless Buyer (and each Buyer Group Member) to the extent provided in
Article XI of the Purchase Agreement;
WHEREAS, to ensure that funds will be available to indemnify and hold
harmless Buyer as required by Article XI of the Purchase Agreement. The Purchase
Agreement provides that $3,130,000 (the "Escrow Fund") be delivered pursuant to
the terms of Section 4.2 of the Purchase Agreement and shall be deposited in an
escrow account established pursuant to this Agreement and held and subsequently
disbursed in accordance with the terms of this Agreement;
WHEREAS, the Escrow Agent has agreed to hold and disburse the Escrow
Fund so deposited pursuant to the terms of this Agreement; and
WHEREAS, capitalized terms used but not defined herein shall have the
meanings assigned to them in the Purchase Agreement.
NOW THEREFORE, in consideration of the mutual promises and covenants
herein contained, the parties hereto agree as follows:
Section 1. Appointment of Escrow Agent. Parent and Buyer hereby
appoint The First National Bank of Chicago to act as Escrow Agent under this
Agreement, and The First National Bank of Chicago hereby accepts such
appointment.
Section 2. Deposit of Escrow Fund. Buyer, on behalf of Parent, is
delivering to the Escrow Agent, and the Escrow Agent acknowledges that it has
received the Escrow Fund.
The Escrow Agent will hold the Escrow Fund in escrow upon the terms and
conditions set forth in this Agreement.
<PAGE>
Section 3. Cash and Investments. The Escrow Agent shall invest and
reinvest the Escrow Fund in such savings accounts, certificates of deposit,
money market accounts or funds (including without limitation government and
other short-term corporate obligations and funds managed by the Escrow Agent or
one of its Affiliates) as Parent and Buyer shall mutually agree and shall
instruct the Escrow Agent in writing, so long as the Escrow Fund is available
for disbursement by wire transfer or certified check within ten (10) business
days after the Escrow Agent is authorized to release any amount of the Escrow
Fund pursuant to this Agreement. In the absence of such an agreement and written
instructions, the Escrow Fund will be invested by the Escrow Agent in the One
Group Treasury Cash Management Money Market Fund or a successor or similar fund.
Any interest or other earnings realized from investment of the Escrow Fund shall
be considered, and be disposed of by the Escrow Agent as part of the Escrow.
Uninvested funds held hereunder shall not earn or accrue interest. Any loss or
expense incurred as a result of any such investment will be borne by the Escrow
Fund.
Section 4. Taxes. Parent shall be responsible for and pay any and all
taxes, assessments and other governmental charges imposed on or with respect to
any income or gain generated by the Escrow Fund; Buyer shall be responsible for
any other assessments or governmental charges imposed on or with respect to the
Escrow Fund.
Section 5. Claims.
(a) Buyer may give written notice (each, an "Indemnification Notice")
to the Escrow Agent and Parent of the assertion of any claim, or the
commencement of any suit, action or proceeding, which it discovers or of which
it receives notice which might give rise to a claim against Parent under Article
XI of the Purchase Agreement (each, a "Claim"). The Escrow Agent is not
responsible for determining that any Claim meets the requirements of the
Purchase Agreement. Such Indemnification Notice shall specify the nature of the
Claim and, to the extent known, the basis for the Claim and an estimate of the
amount of Damages (as defined in Section 5(b) below). The right of Buyer to
indemnification from the Escrow Fund while it is held by the Escrow Agent shall
apply only to those Claims as to which Buyer shall have given an Indemnification
Notice to the Escrow Agent and Parent. Any covenant, agreement, representation
or warranty which is the subject of a Claim shall continue to survive until such
Claim is finally determined as herein provided.
(b) Parent shall have a period of ten (10) business days from the date
of evidence of receipt of an Indemnification Notice to object and provide
written notice to Buyer and the Escrow Agent of an objection ("Object" or an
"Objection") to a Claim identified in an Indemnification Notice. Any such
Objection shall be to the merits or the amount of the Claim or to both the
merits and the amount of the Claim. If Parent fails to furnish notice of an
Objection within such ten (10) business day period, Parent shall be conclusively
presumed to have agreed to indemnify and hold Buyer harmless with respect
thereto, and Buyer shall be entitled to be indemnified for all losses, damages,
liabilities, costs and expenses (including without limitation reasonable
attorneys fees and expenses of investigation) (collectively, "Damages") with
respect to such Claim. Buyer shall be entitled to receive directly from the
Escrow Agent the dollar amount of Damages with respect to any Claim. Buyer and
Parent may discuss any Claim as to which Parent Objects. To the extent that
Buyer and Parent agree that indemnification with respect to any such Claim is
required and agree on the amount of Damages, they shall give joint written
notice to the Escrow Agent to that effect. If Buyer and Parent fail to agree as
to whether indemnification with respect to any such Claim is required and/or the
amount of such indemnification, or fail to give notice to the Escrow Agent that
they agree that indemnification with respect to any such Claim is required and
the amount of any Damages, within twenty (20) business days (which period may be
extended upon the written agreement of Buyer and Parent and notice thereof given
to the Escrow Agent) after the date of the notice of Objection is given to Buyer
and the Escrow Agent, Parent or Buyer may thereafter proceed to resolve the
matters which have not been agreed upon as provided in Article XI of the
Purchase Agreement, provided that the notice of Objection shall be deemed to
constitute notice of a Dispute.
<PAGE>
(c) In the event the Indemnification Notice relates to a claim by a
third party and Parent acknowledges in writing to Buyer without qualification or
condition the obligation of Parent to indemnify Buyer with respect to such claim
and any party provides a copy of such writing to the Escrow Agent, all Damages
incurred in respect of any such claim shall be paid from the Escrow Fund in
accordance with Section 6 and consistent with the provisions of Section 5(b)
above.
Section 6. Release of Escrow Fund.
(a) The Escrow Agent shall release the Escrow Fund from the escrow
under this Agreement as set forth below:
(i) Not more than ten (10) business days following receipt
of a written notice of Final Determination (as defined in Section 6(b)
below), the Escrow Agent shall distribute to Buyer (or to such other
person or entity as Buyer may instruct) the dollar amount from the
Escrow Fund equal to the amount of Damages with respect to such Final
Determination. In the case of a Claim for which an Indemnification
Notice has been provided to the Escrow Agent but for which a Final
Determination has not been made, the Escrow Agent shall continue to
hold an amount of cash from the Escrow Fund equal to the amount of
Damages specified by Buyer (including without limitation any
additional Damages which Buyer from time to time notifies the Escrow
Agent have been incurred or are expected to be incurred) or, if such
amount exceeds the Escrow Fund, the entire Escrow Fund, in escrow
until a Final Determination of such Claim has been made, at which time
the Escrow Agent shall distribute to Buyer cash from the Escrow Fund
as set forth in the first sentence hereof.
(ii) Not more than ten (10) business days following the
Escrow Termination Date (as defined in Section 7 below), that portion
of the Escrow Fund remaining in escrow on such date shall be released
by the Escrow Agent, and the Escrow Agent shall distribute the Escrow
to Parent.
(b) For the purpose of this Agreement with respect to any Claim, a
"Final Determination" shall mean receipt by the Escrow Agent of (i) an
Indemnification Notice pursuant to Section 5(a) hereof as to which Parent fails
to Object on a timely basis pursuant to Section 5(b) of this Agreement and
written notice from Buyer setting forth an amount of Damages, (ii) a copy of a
writing in which Parent acknowledges that indemnification is required without
regard to the amount of Damages or of up to a particular amount of Damages and
notice from Buyer setting forth an amount of Damages, (iii) a notice of a
written agreement signed by Buyer and Parent setting forth the amount of
Damages, (iv) a copy of a final arbitration award or final order, judgment or
decree reflecting the right of Buyer to indemnification and a notice from Buyer
setting forth an amount of Damages which Buyer represents is consistent with
such award or final order, judgment or decree or (v) a copy of a final
arbitration award or final order, judgment or decree reflecting no right of
indemnification.
Section 7. Term. The term of this Agreement shall expire at 11:59 p.m.
(central time) one year after the date hereof (the "Claim Date"), or, if as of
the Claim Date a Claim (or Claims) made pursuant to this Agreement is (or are)
pending, upon the resolution and payment of all such Claims as certified jointly
by Buyer and Parent (the "Escrow Termination Date").
Section 8. Escrow Agent.
(a) The Escrow Agent shall be entitled to receive such fees as set
forth on Exhibit A hereto, and shall be reimbursed for all reasonable
out-of-pocket expenses incurred by the Escrow Agent in the performance of its
duties hereunder. All such fees and reimbursements shall be shared equally by
Parent and Buyer.
(b) The Escrow Agent may resign at any time by giving notice of such
resignation to Buyer and Parent specifying a date not earlier than thirty (30)
days later, when such resignation is desired. Parent and Buyer by mutual
agreement may at any time and with or without cause remove the Escrow Agent upon
at least ten (10) days written notice to the Escrow Agent. If the Escrow Agent
resigns, is removed or is unable to serve or fails to serve as the Escrow Agent,
Buyer and Parent shall appoint a successor Escrow Agent by mutual agreement. If
the Escrow Agent resigns and Buyer and Parent are unable to agree upon a
successor Escrow Agent within thirty (30) days after such notice of resignation,
the Escrow Agent shall have the right to petition a court of competent
jurisdiction for the appointment of a successor escrow agent. The Escrow Agent
shall continue to serve until its successor accepts the escrow and receives the
Escrow Fund. Any successor Escrow Agent shall execute an instrument accepting
the appointment as Escrow Agent hereunder and agreeing to be bound by the
provisions of this Agreement.
(c) The Escrow Agent undertakes to perform only such duties as are
specifically set forth herein and may conclusively rely, and shall be protected
in acting or refraining from acting, on any written notice, instrument or
signature believed by it to be genuine and to have been signed or presented by
the proper party or parties duly authorized to do so.
(d) The Escrow Agent shall not be liable for any action taken or
omitted by it in good faith and believed by it in good faith to be authorized
hereby or within the rights or powers conferred upon it hereunder, nor for
action taken or omitted by it in good faith and in accordance with advice of
counsel (which counsel may be of the Escrow Agent's own choosing), and the
Escrow Agent shall not be liable for any mistake of fact or error of judgment or
for any acts or omissions of any kind unless caused by its fraudulent or wilful
misconduct or gross negligence.
(e) The Escrow Agent shall be obligated to perform only such duties as
are expressly set forth in this Agreement. No implied covenants or obligations
shall be inferred from this Agreement against the Escrow Agent.
(f) Buyer and Parent jointly and severally, hereby indemnify and hold
harmless the Escrow Agent from and against any and all loss, liability, cost,
damage and expense, including, without limitation, reasonable counsel fees,
which the Escrow Agent may suffer or incur by reason of any action, claim or
proceeding brought against the Escrow Agent arising out of or relating in any
way to this Agreement or any transaction to which this Agreement relates unless
such action, claim or proceeding is the result of the fraudulent or wilful
misconduct, gross negligence or bad faith of the Escrow Agent.
(g) The Escrow Agent shall not have any right, claim or interest in
any portion of the Escrow Fund except in its capacity as Escrow Agent hereunder.
(h) The Escrow Agent shall have no responsibility to inquire into or
determine the genuineness, authenticity, or sufficiency of any securities,
checks, or other documents or instruments submitted to it in connection with its
duties hereunder.
(i) The Escrow Agent shall be entitled to deem the signatories of any
documents or instruments submitted to it hereunder as being those purported to
be authorized to sign such documents or instruments on behalf of the parties
hereto, and shall be entitled to rely upon the genuineness of the signatures of
such signatories without inquiry and without requiring substantiating evidence
of any kind.
(j) The Escrow Agent shall be entitled to refrain from taking any
action contemplated by this Agreement in the event that it becomes aware of any
disagreement between the parties hereto as to any facts or as to the happening
of any contemplated event precedent to such action.
(k) The Escrow Agent shall have the right, but not the obligation, to
consult with counsel of choice and shall not be liable for action taken or
omitted to be taken by the Escrow Agent either in accordance with the advice of
such counsel or in accordance with any opinion of counsel to the Settlor
addressed and delivered to the Escrow Agent.
<PAGE>
(l) The Escrow Agent shall have the right to perform any of its duties
hereunder through agents, attorneys, custodians or nominees.
(m) Any banking association or corporation into which the Escrow Agent
may be merged, converted or with which the Escrow Agent may be consolidated, or
any corporation resulting from any merger, conversion or consolidation to which
the Trustee shall be a party, shall succeed to all the Escrow Agent's rights,
obligations and immunities hereunder without the execution or filing of any
paper or any further act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding.
Section 9. Miscellaneous.
(a) All notices or other communications required or permitted
hereunder shall be in writing and shall be deemed given or delivered (i) when
delivered personally, (ii) if transmitted by facsimile when confirmation of
transmission is received or (iii) if sent by registered or certified mail,
return receipt requested, or by private courier when received; and shall be
addressed as follows:
(i) if to Buyer, to:
Allegiance Healthcare Corporation
1430 Waukegan Road
McGaw Park, IL 60085
Attention: General Counsel
Telecopier: (847) 578-4416
(ii) if to Parent, to:
Isolyser Company, Inc.
4320 International Blvd. N.W.
Norcross, GA 30093
Attention: President
Telecopier: (770) 806-8869
(iii) if to the Escrow Agent:
The First National Bank of Chicago
One First National Plaza, Mail Code IL1-0126
Chicago, Illinois 60670
Attention: Corporate Trust Services Division,
Renee K. Maron
Telecopier: (312) 407-8929
<PAGE>
Any party may add or change parties for receiving notice in the manner provided
herein given to the others named above.
(b) This Agreement shall be governed by, and construed, enforced and
interpreted in accordance with, the substantive laws (without regard to its
conflicts of laws provisions) of the State of Illinois.
(c) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(d) No party may assign (except by operation of law) any of its rights
or obligations under this Agreement without the written consent of all of the
other parties, which consent shall not be unreasonably withheld.
(e) This Agreement, and the rights and obligations of the parties
hereunder, shall inure to the benefit of and be binding on the parties hereto
and their respective successors and assigns.
(f) No amendment, waiver or consent with respect to any provision of
this Agreement shall in any event be effective, unless the same shall be in
writing and signed by the parties hereto, and then such amendment, waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given. Any party's lack of enforcement of any provision herein
shall not be construed as a waiver and the non-breaching party may elect to
enforce any such provision at any time in the event of a past, repeated or
continuing breach. The rights and remedies herein are the exclusive rights and
remedies that any party may have upon a breach of this Agreement.
(g) In case any provision of this Agreement shall be invalid, illegal
or unenforceable, it shall, to the extent possible, be modified in such manner
as to be valid, legal and enforceable but so as to most nearly retain the intent
of the parties, and if such modification is not possible, such provision shall
be severed from this Agreement, and in either case the validity, legality and
enforceability of the remaining provisions of this Agreement shall not in any
way be affected or impaired thereby.
(h) Nothing in this Agreement shall in any way restrict the
obligations and rights of any party under the Purchase Agreement. No right,
remedy or election given by any term of this Agreement shall be deemed
exclusive, but each shall be cumulative with all other rights, remedies and
elections available at law or in equity.
(i) This Agreement and the documents referred to herein express the
entire agreement and understandings among the parties with respect to the
subject matter hereof, and all promises, representations, understandings,
arrangements and prior agreements are merged herein and therein and superseded
hereby and thereby.
<PAGE>
(j) The term "including" shall mean "including without limitation."
The term "person" shall be broadly construed to mean any individual, trust,
partnership, corporation, limited liability company, organization, joint venture
or any other entity or body of any nature. The Article, Section and other
headings contained herein are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
(k) Buyer and Parent shall each deliver to the Escrow Agent an
Internal Revenue Service Form W-9.
IN WITNESS WHEREOF, the parties hereby have duly executed and
delivered this Agreement as of the date first above written.
ALLEGIANCE HEALTHCARE CORPORATION
By: ______________________________
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO
By: ______________________________
Name:
Title:
ISOLYSER COMPANY, INC.
By: ______________________________
Name:
Title:
::ODMA\PCDOCS\CHICAGO4\884244\4
861978v1
FOR IMMEDIATE RELEASE Contact: Stacy Seiders
Isolyser Company, Inc.
(770) 806-9898
Donna J. Gaidamak
Allegiance Corporation
(847) 578-4434
ISOLYSER ANNOUNCES COMPLETION OF ITS SALE
OF MEDSURG INDUSTRIES AND LICENSE OF
OREX TECHNOLOGY TO ALLEGIANCE
NORCROSS, Georgia, July 13, 1999 - Isolyser Company, Inc. (Nasdaq:
OREX) today announced the completion of the sale of the assets of its MedSurg
Industries, Inc. subsidiary to a unit of Allegiance Healthcare Corporation, a
subsidiary of Allegiance Corporation, and the grant to Allegiance of a worldwide
exclusive license to convert, use and sell products made with Isolyser's
proprietary degradable materials known as OREX(R) and Enviroguard(TM) for
distribution in the healthcare marketplace for a total of $31.3 million.
Under the terms of the three-year License Agreement, Isolyser will be
the sole supplier to Allegiance of dissolvable material made from PVA, the raw
material used to manufacture Isolyser's OREX(R) and Enviroguard(TM) products,
for use in the health care field. Allegiance is committed to purchase a certain
quantity of Enviroguard(TM) fabric. Also under the Agreement, Allegiance will
pay Isolyser a royalty equal to a percentage of the net sales price of product
sold by Allegiance to customers who utilize the product's unique dissolution
technology.
Migo Nalbantyan, president and chief executive officer of Isolyser,
stated, "We are very pleased with our agreement with Allegiance and are
committed to serve our health care customers with many innovative new products.
Also, as a result of our much improved financial condition, we are now better
positioned to accelerate the strategic growth of our technology into other
markets."
"Allegiance is delighted to add Isolyser's innovative OREX(R) and
Enviroguard(TM) technology to our leading line of surgical apparel and
supplies," said Mike Hudson, president of Allegiance's Convertors and Custom
Sterile businesses. "We believe there is significant potential for a line of
clinically superior single use medical products that are also environmentally
friendly. The combination of Allegiance's Sales and Marketing skills coupled
with Isolyser's Research and Development should result in increased demand for
the Enviroguard(TM) family of products. We envision this product family to
include: nonwoven drapes and apparel, textiles, injection-molded devices and
plastic type film products. Our intent is to cover a large percentage of the
disposable products used in the Operating Room, Labor and Delivery and Cath
Lab."
Both companies are finalizing a product introduction, marketing and
manufacturing schedule related to the introduction of new products. It is
expected that this process will be completed over the next several months.
Isolyser will use funds from the sale to eliminate the remaining
balance of its revolving credit facility as well as provide additional operating
funds and capital for investment in its technology.
MedSurg Industries, Inc. assembles and distributes sterile and
non-sterile procedure trays and packs for hospitals and other healthcare
institutions. Isolyser acquired MedSurg in 1993. Isolyser's OREX division, OREX
Technologies International (OTI), possesses an extensive knowledge of polyvinyl
alcohol polymer and its associated properties and specializes in the development
and commercialization of materials that are engineered with characteristics that
facilitate their disposal (bio-cycle). OTI also has a range of capabilities in
the area of point-of-use waste treatment and disposal.
Based in McGaw Park, Illinois, Allegiance Corporation
(www.allegiance.net), is America's leading provider of health care products and
cost management services needed by hospitals, laboratories and others in health
care. Allegiance is a subsidiary of Cardinal Health, Inc. (NYSE: CAH), of
Dublin, Ohio. Cardinal is a leading provider of services supporting health care.
This press release contains forward-looking statements made pursuant to
the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. Such statements may be significantly affected by certain risks and
uncertainties described in the Company's annual report on Form 10-K and
elsewhere, including without limitation, the risks described in Risk Factors in
the Company's Annual Report on Form 10-K for the period ending December 31, 1998
under the captions "Risks of New Products," "Manufacturing and Supply Risks,"
"Protection of Technologies," "Competition," "Risks of Technological
Obsolescence," "Reliance Upon Distributors," "Regulatory Risks," and "Product
Liability," and risks associated with any failure of Isolyser to timely fulfill
Allegiance's purchase orders and otherwise perform Isolyser's obligations under
the license agreement. The Company's actual results could differ materially from
such forward-looking statements.
Isolyser has developed and manufactures OREX(R) Degradables, a series
of ecologically safe products made from a thermoplastic, hot water soluble
polymer that can be configured into an array of products such as woven and
nonwoven fabrics, film, thermoformed and extruded items. The Company believes
that its products provide protection to people and the environment while
providing cost-effective solutions to the problems associated with waste
reduction and disposal. The Company also manufactures infection control
products.
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864859v1
