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EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
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ASSET PURCHASE AGREEMENT
BY AND AMONG
QUEST MEDICAL, INC.
ATRION CORPORATION
AND
QMI ACQUISITION CORP.
DATED AS OF DECEMBER 29, 1997
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TABLE OF CONTENTS
PAGE
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ARTICLE 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2 TERMS OF THE TRANSACTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.1 Agreement to Purchase and Sell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.1.1 Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.1.2 Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.2 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.3 Assumed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.4 Aggregate Purchase Price Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.4.1 Closing Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.4.2 Review of Adjustment Statement . . . . . . . . . . . . . . . . . . . . . . . . 13
2.4.3 Asset Value Adjustments Procedure . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF QUEST . . . . . . . . . . . . . . . . . . . . . . . . 14
3.1 Organization; Power and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.2 Authorization; Execution and Validity . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.3 Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.4 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.5.1 Quest Year-End Financial Statements . . . . . . . . . . . . . . . . . . . . . . 15
3.5.2 Quest Interim Financial Statements . . . . . . . . . . . . . . . . . . . . . . 16
3.5.3 Seller Year-End Financial Statements . . . . . . . . . . . . . . . . . . . . . 16
3.5.4 Seller Interim Financial Statements . . . . . . . . . . . . . . . . . . . . . . 16
3.6 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.7 Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.8 No Conflict; Seller Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.9 Condition of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.10 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.11 Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.11.1 Owned Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.11.2 Leased Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.12 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.13 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.14 Litigation; Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.15 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.16 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.17 Medical Device Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.18 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
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3.19 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.19.1 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.19.2 Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.19.3 Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.19.4 Multiemployer Plans and Multiple Employer Plans . . . . . . . . . . . . . . . . 23
3.20 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.21 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.22 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.23 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.24 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.25 Trade Payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.26 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER AND
BUYER PARENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.1 Organization; Power and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.2 Authorization; Execution and Validity . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.3 No Conflict; Buyer Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.4 Litigation; Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.5 Sufficient Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.6 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE 5 COVENANTS OF QUEST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.1 Cooperation by Quest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.2 Pre-Closing Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.3 Operation of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.4 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.5 Governmental Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.5.1 HSR Act Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.5.2 Other Governmental Approvals . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.6 Supplements to Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.7 No-Shop Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.8 Noncompetition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE 6 COVENANTS OF BUYER AND BUYER PARENT . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.1 Cooperation by Buyer and Buyer Parent . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.2 Pre-Closing Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.3 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.4 Governmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.4.1 HSR Act Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.4.2 Other Governmental Approvals . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.5 Noncompetition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE 7 MUTUAL COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.1 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
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7.1.1 Quest's Responsibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.1.2 Buyer's and Buyer Parent's Responsibility . . . . . . . . . . . . . . . . . . . 35
7.1.3 Aggregate Purchase Price Allocation . . . . . . . . . . . . . . . . . . . . . . 35
7.2 Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.2.1 Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.2.2 Retention Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.2.3 Continuing Benefits and Benefit Plans . . . . . . . . . . . . . . . . . . . . . 36
7.2.4 Employee Savings Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.2.5 Bonuses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.3 Cooperation and Exchange of Information . . . . . . . . . . . . . . . . . . . . . . . . 38
7.3.1 Documents, Records and Files . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.3.2 Transition Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.4 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.5 Proration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.6 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.7 Nondisclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.8 Material Review Board Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE 8 CONDITIONS PRECEDENT TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.1 Conditions Precedent to Buyer's and Buyer Parent's Obligations . . . . . . . . . . . . . 41
8.1.1 Accuracy of Representations and Warranties . . . . . . . . . . . . . . . . . . 41
8.1.2 Consents; Performance of Covenants . . . . . . . . . . . . . . . . . . . . . . 41
8.1.3 Deliveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.1.4 Compliance with HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.1.5 No Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.1.6 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.1.7 Title and Survey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.1.8 Lease Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.1.9 Option Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.2 Conditions Precedent to Quest's Obligations . . . . . . . . . . . . . . . . . . . . . . 42
8.2.1 Accuracy of Representations and Warranties . . . . . . . . . . . . . . . . . . 43
8.2.2 Performance of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.2.3 Deliveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.2.4 Compliance with HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.2.5 No Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.2.6 License Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.3 If Conditions Not Satisfied . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE 9 CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.1 Time and Place . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.2 Deliveries by Quest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.3 Deliveries by Buyer and Buyer Parent . . . . . . . . . . . . . . . . . . . . . . . . . . 45
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ARTICLE 10 TERMINATION PRIOR TO CLOSING DATE . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
10.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
10.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE 11 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
11.1 Survival; Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
11.1.1 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . 48
11.1.2 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
11.2 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.3 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.4 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.5 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.6 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.7 No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.8 Other Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
11.9 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
11.10 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
11.11 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
11.12 Interpretation of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
11.12.1 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
11.12.2 Representation; No Reliance . . . . . . . . . . . . . . . . . . . . . . . . 53
11.12.3 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
11.12.4 Interpretation of Provisions . . . . . . . . . . . . . . . . . . . . . . . 54
11.13 Jurisdiction and Consent to Service of Process . . . . . . . . . . . . . . . . . . . . . 54
11.14 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
11.15 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
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EXHIBITS:
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A - Form of License Agreement
B - Form of Lease Agreement
C - Form of Option Agreement
D - Form of Legal Opinion of Seller's Counsel
SCHEDULES:
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1.1(a) - Retention Agreements
1.1(b) - Seller Financial Practices
1.1(c) - Seller's Knowledge
1.1(d) - Specified Account
2.1.1 - Assets
2.1.2 - Excluded Assets
2.3(a) - Closing Date Assumed Liabilities
2.3(b) - Other Assumed Liabilities
2.4.1 - CV Balance Sheet
3.1 - Foreign Qualification
3.4 - Subsidiaries
3.6 - Disclosed Liabilities
3.7 - Certain Changes
3.8 - Seller Consents
3.9 - Condition of Assets
3.10(a) - Real Property
3.10(b) - Leased Real Property
3.11.1 - Disposed Personal Property
3.11.2 - Leased Personal Property
3.12 - Insurance Policies
3.13 - Material Contracts
3.14 - Legal Matters
3.15 - Environmental Matters
3.16 - Permits
3.17 - Medical Device Regulation
3.18 - Intellectual Property
3.19.1 - Employee Benefit Plans
3.20 - Tax Contests
4.3 - Buyer Consents
7.2.1(a) - Transferred Employees
7.2.1(b) - Retained Employees and Certain Benefits
7.3.2 - Specified Employees
8.1.7(a) - Draft Title Commitment
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is made as of December 29, 1997, by and
among QUEST MEDICAL, INC., a Texas corporation ("QUEST"), QMI ACQUISITION
CORP., a Texas corporation ("BUYER"), and ATRION CORPORATION, a Delaware
corporation and parent corporation of Buyer ("BUYER PARENT").
RECITALS
Quest designs, develops, manufactures and markets a variety of
healthcare products used primarily in cardiovascular surgery, interventional
pain management and intravenous fluid delivery applications.
Buyer desires to purchase from Quest, and Quest desires to sell to
Buyer, substantially all of the assets of Quest's cardiovascular surgical
products and intravenous fluid delivery products businesses. Buyer is not
buying, and Quest is not selling, the neuromodulation products business
conducted by Quest's wholly-owned subsidiary, Advanced Neuromodulation Systems,
Inc., a Texas corporation ("ANS"), the capital stock of ANS, the assets used
exclusively in the operations of ANS, or certain other assets described in this
Agreement as Excluded Assets.
Buyer Parent, by virtue of its ownership of Buyer, will receive
substantial direct and indirect benefits from the transactions contemplated by
this Agreement, and Quest has requested that Buyer Parent enter into this
Agreement as a condition to Quest's execution hereof.
For purposes of this Agreement, "SELLER" means Quest and all of its
assets, liabilities and operations, excluding ANS, the capital stock of ANS and
all of ANS's assets, liabilities and operations.
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NOW, THEREFORE, in consideration of the foregoing premises and other
good, valid and binding consideration, the receipt and sufficiency of which are
hereby acknowledged, Quest, Buyer and Buyer Parent, intending to be legally
bound, hereby agree as follows:
AGREEMENT
ARTICLE 1
DEFINITIONS
1.1 Definitions. For purposes of this Agreement, the terms set
forth below shall have the following meanings:
"AAA" means the American Arbitration Association.
"ACTION" means any action, suit, arbitration, inquiry,
proceeding or investigation by or before any Governmental Authority or
arbitrator.
"ADJUSTMENT STATEMENT" shall have the meaning set forth in
Section 2.4.1.
"AFFILIATE" means, with respect to any Person, any other
Person controlling, controlled by, or under common control with such Person.
For purposes of this Agreement, the term "CONTROL" (including, with correlative
meanings, the terms "CONTROLLED BY" and "UNDER COMMON CONTROL WITH" as used
with respect to any Person) means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of
such Person whether through ownership of voting securities, by contract or
otherwise.
"AGGREGATE PURCHASE PRICE" shall have the meaning set forth in
Section 2.2.
"AGREEMENT" means this Agreement, together with the Schedules
and Exhibits hereto.
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"ANS" has the meaning set forth in the Recitals to this
Agreement.
"ANS COMPETITIVE BUSINESS" shall have the meaning set forth in
Section 6.5.
"ANS NONCOMPETITION PERIOD" shall have the meaning set forth
in Section 6.5.
"ASSETS" shall have the meaning set forth in Section 2.1.1.
"ASSUMED LIABILITIES" shall have the meaning set forth in
Section 2.3.
"BUYER" shall have the meaning set forth in the first
paragraph of this Agreement.
"BUYER PARENT" shall have the meaning set forth in the first
paragraph of this Agreement.
"CHARTER DOCUMENTS" means (a) in the case of any corporation,
its articles or certificate of incorporation and its by-laws, (b) in the case
of any partnership, its partnership agreement and partnership certificate, if
any, and (c) in the case of any other Person, its organic and governing
documents, as each has been amended or supplemented from time to time.
"CLOSING" means the consummation of the purchase and sale of
the Assets contemplated hereby.
"CLOSING BALANCE SHEET" means a balance sheet reflecting the
assets and liabilities of Seller as of the close of business on the Closing
Date, which is prepared in accordance with the Seller's Financial Practices and
on the same basis as the CV Balance Sheet (excluding the Excluded Assets).
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"CLOSING DATE" means January 30, 1998 or such later date on
which all the conditions precedent to the Closing set forth in Article 8 have
been met or waived.
"CLOSING DATE ASSET VALUE" means an amount equal to the "Total
Assets" set forth on the Closing Balance Sheet.
"CLOSING DATE ASSUMED LIABILITIES" shall have the meaning set
forth in Section 2.3.
"CODE" means the Internal Revenue Code of 1986, as amended
from time to time.
"COMPETITIVE BUSINESS" shall have the meaning set forth in
Section 5.8(a).
"CONFIDENTIAL INFORMATION" shall have the meaning set forth in
Section 7.7.
"CONFIDENTIALITY AGREEMENT" means the Confidentiality
Agreement dated as of May 22, 1997 between Buyer Parent and Quest.
"CONSENT" means a consent, approval, authorization, waiver or
notification from any Person, including any Governmental Authority.
"CONTRACTS" means all contracts, agreements, instruments,
leases, licenses, commitments and arrangements, except Permits.
"CV BALANCE SHEET" shall have the meaning set forth in Section
2.4.1.
"DAMAGES" means all losses, claims, damages, costs, fines,
penalties, obligations, payments and liabilities (including those arising out
of any Action), together with all reasonable costs and expenses incurred in
connection with any of the foregoing; provided, however, that
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Damages shall in no event include damages arising out of any interruption of
business, loss of profits, loss of use of facilities, claims of customers, loss
of goodwill or other indirect damages.
"DOLLARS" or "$" means lawful currency of the United States.
"EMPLOYEE BENEFIT PLAN" shall have the meaning set forth in
Section 3.19.1.
"ENVIRONMENTAL LAWS" means the Federal Water Pollution Control
Act, the Clean Air Act, the Toxic Substances Control Act, the Solid Waste
Disposal Act, the Comprehensive Environmental Response Compensation and
Liability Act of 1980, the Emergency Planning and Community Right-To-Know Act,
the Safe Drinking Water Act and any other federal, state or local environmental
law, and the rules and regulations thereunder promulgated in final form as
interpreted in accordance with public announcements.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA PLAN" shall have the meaning set forth in Section 3(3)
of ERISA with respect to any employee benefit plan maintained or contributed to
by Quest or any of its Affiliates that currently covers employees of Quest and
is subject to ERISA.
"ESTIMATED ASSETS" shall mean the amount of Assets of the type
described in Schedule 2.1.1 which are reflected on Seller's December 31, 1997
unaudited balance sheet prepared by Quest in accordance with the Seller
Financial Practices.
"ESTIMATED LIABILITIES" shall mean the amount of Liabilities
of the type described in Schedule 2.3(a) which are reflected on Seller's
December 31, 1997 unaudited balance sheet prepared by Quest in accordance with
the Seller Financial Practices.
"EXCLUDED ASSETS" shall have the meaning set forth in Section
2.1.2.
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"FINANCIAL STATEMENTS" shall have the meaning set forth in
Section 3.5.1.
"FORM 10-K" shall have the meaning set forth in Section 3.5.1.
"FORM 10-Q" shall have the meaning set forth in Section 3.5.2.
"GOVERNMENTAL AUTHORITY" means any federal, state or local
government, any of its subdivisions, agencies, authorities, commissions, boards
or bureaus, any federal, state or local court or tribunal and any arbitrator.
"HSR ACT" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976, as amended, and the regulations promulgated thereunder.
"INDEPENDENT FIRM" means one of the six largest national
accounting firms (excluding Ernst & Young, LLP and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, LLP), which
accounting firm shall be jointly selected by Quest and Buyer, or if Quest and
Buyer are unable to agree upon an Independent Firm, selected by lot.
"INTELLECTUAL PROPERTY" means patents, patent applications,
inventions, customized software, trade names, brand names, registered
trademarks, trade secrets, processes, know-how, registered copyrights and
registered service marks and applications therefor.
"INTERIM BALANCE SHEET DATE" means June 30, 1997.
"INTERIM FINANCIAL STATEMENTS" shall have the meaning set
forth in Section 3.5.2.
"LAW" means any statute, rule, regulation or ordinance.
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"LEASE" means any lease or sublease of real or personal
property to or from Seller.
"LEASED PERSONAL PROPERTY" shall have the meaning set forth in
Section 3.11.2.
"LEASED REAL PROPERTY" shall have the meaning set forth in
Section 3.10.
"LIABILITIES" means direct or indirect debts, obligations or
liabilities of any nature, whether absolute, accrued, contingent, liquidated or
otherwise, and whether due or to become due, asserted, known or unasserted or
unknown.
"LIEN" means any lien, mortgage, deed of trust, security
interest, charge, pledge, retention of title agreement, easement, encroachment,
condition, reservation, covenant or other encumbrance affecting title.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on
(a) the business, assets, financial condition or results of operations of
Seller, or (b) the ability of Quest to consummate the transactions contemplated
by this Agreement.
"MATERIAL CONTRACTS" means all of the Contracts to which
Seller is a party or by which any of the Assets are bound and that are material
to Seller, including, without limitation, (a) Contracts pertaining to the
borrowing or investing of money (other than in connection with open invoices
for purchased goods or services) or to mortgaging, pledging, or otherwise
placing a Lien on any of the Seller's assets, (b) Contracts creating guaranties
by Seller, (c) Contracts relating to any single capital expenditure in excess
of $25,000, (d) Contracts for the purchase or sale of real property, any
business or line of business, or for any merger or consolidation, (e) joint
venture or partnership agreements, (f) Contracts that individually require by
their respective terms after the date hereof the payment or receipt of more
than $25,000 during any 12 month period, (g) material license or royalty
agreements, (h) Contracts or groups of related Contracts with the same party or
group of affiliated parties the performance of which involves consideration in
excess of $25,000, (i) Contracts or arrangements under which Seller has made or
received any
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material loans or advances to or from its directors, officers or employees, and
(j) Contracts relating to material employment or consulting services.
"MATERIAL LEASE" means any of (a) a Lease involving a term of
more than one year and, in the case of oral Leases, which is not cancelable
within 30 days notice without penalty, (b) a rental obligation exceeding
$25,000 per annum and, in the case of oral Leases, which is not cancelable
within 30 days notice without penalty, or (c) any arrangement pursuant to which
a customer or potential customer of Seller leases, uses or otherwise has
possession of an MPS(R) myocardial protection system.
"METLIFE" means any of MetLife Capital Financial Corporation,
MetLife Capital Corporation, or any successor of the foregoing.
"METLIFE MORTGAGE" means all of the indebtedness owed to
MetLife by Quest secured by the Real Property and certain furniture, fixtures,
equipment and the HVAC system located on the Real Property.
"NONCOMPETITION PERIOD" shall have the meaning set forth in
Section 5.8.
"ORDER" means any order, judgment, injunction, decree or award
of any Governmental Authority.
"QUEST" means Quest Medical, Inc., a Texas corporation.
"PARTY" means each of Buyer, Buyer Parent and Quest.
"PERMIT" means any permit, license, certificate (including a
certificate of occupancy) registration, authorization or approval issued by a
Governmental Authority.
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"PERMITTED LIENS" means (a) Liens for Taxes that are not yet
due and payable, (b) workers', repairmen's and similar Liens imposed by Law
that have been incurred in the ordinary course of business, (c) with respect to
the Real Property only, easements, encroachments and encumbrances listed on
Schedule B to the MetLife mortgagee title policy on the Real Property in effect
on the date hereof, (d) retention of title agreements with suppliers set forth
on purchase orders or invoices entered into in the ordinary course of business,
(e) prior to the Closing only, Liens in favor of NationsBank of Texas, N.A.,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ or MetLife (collectively, the "LENDER
LIENS"), (f) with respect to the Real Property only, Liens in favor of MetLife
in existence on the date hereof, (g) Liens securing any Assumed Liabilities,
and (h) with respect to the Real Property only, zoning, entitlement, building
and other land use regulations imposed by Governmental Authorities having
jurisdiction over the Real Property that are not violated by the current use
and operations of such Real Property.
"PERSON" means any natural person, corporation, partnership,
limited liability company, trust, unincorporated organization or other entity.
"PRIME RATE" means the rate per annum equal to the publicly
announced prime commercial lending rate of NationsBank of Texas, N.A. in effect
from time to time, changing as such publicly announced rate changes, effective
as of the date such change is publicly announced.
"PRO RATED EXPENSES" shall have the meaning set forth in
Section 7.5.
"PURCHASE PRICE ALLOCATION" shall have the meaning set forth
in Section 7.1.3.
"REAL PROPERTY" shall have the meaning set forth in Section
3.10.
"RETAINED EMPLOYEES" shall have the meaning set forth in
Section 7.2.1.
"RETENTION AGREEMENTS" means the Retention Agreements between
Quest and each of the employees of Quest set forth on Schedule 1.1(a), which
provide for potential
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severance compensation and certain other benefits to such employees for a
specified period upon such employees' termination of employment with Quest, as
more particularly described on Schedule 1.1(a), as such agreements may be
amended in accordance with the terms of Section 5.1.
"RETURNS" means returns, reports and forms together with any
and all supporting documentation for such returns reports or forms, required to
be filed with any taxing authority.
"SELLER" has the meaning set forth in the Recitals to this
Agreement.
"SELLER FINANCIAL PRACTICES" means generally accepted
accounting principles, consistently applied, with the exceptions set forth in
Schedule 1.1(b), which Schedule, notwithstanding the provisions of Section 5.6,
shall not be modified or supplemented.
"SELLER INTERIM FINANCIAL STATEMENTS" shall have the meaning
set forth in Section 3.5.4.
"SELLER'S KNOWLEDGE" means the actual knowledge, without
specific inquiry, of any of the individuals named on Schedule 1.1(c).
"SPECIFIED ACCOUNT" means the bank account of Quest specified
on Schedule 1.1(d).
"SPECIFIED EMPLOYEES" shall have the meaning set forth in
Section 7.3.2.
"TAX" or "TAXES" means all income, profits, franchise, gross
receipts' capital, sales, use, withholding, value added, ad valorem, transfer,
employment, social security, disability, occupation, property, severance,
production, excise and other taxes, duties and similar governmental charges and
assessments imposed by or on behalf of any Governmental Authority (including
interest and penalties thereon).
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"TAX ABATEMENT AGREEMENT" means the Ad Valorem Tax Abatement
Agreement, dated August 20, 1993, among Quest, the City of ▇▇▇▇▇ and the ▇▇▇▇▇
Independent School District, as such agreement may be amended.
"TRANSITION PERIOD" shall mean a period of time during which
both Quest and Buyer inhabit Quest's facility located in Allen, Texas.
ARTICLE 2
TERMS OF THE TRANSACTION
2.1 Agreement to Purchase and Sell.
2.1.1 Sale of Assets. Except as provided in Section 2.1.2,
on the terms and subject to the conditions contained in this Agreement, at the
Closing, Quest shall convey, transfer, assign, and deliver to Buyer, and Buyer
agrees to purchase and accept from Quest, all of Quest's legal, beneficial and
other right, title and interest in and to all of Quest's assets, properties,
privileges, claims and contracts of every kind and description (real, personal,
and mixed, tangible and intangible), wherever located, including, without
limitation, those assets listed in Schedule 2.1.1 attached hereto (including,
without limitation, the names "Quest" and "Quest Medical" and the tradenames,
trademarks and other Intellectual Property related thereto, subject to rights
granted to Quest by Buyer under the License Agreement referred to in Section
8.2.6), all as the same shall exist as of the Closing Date (collectively, the
"ASSETS").
2.1.2 Excluded Assets. Notwithstanding the provisions of
Section 2.1.1, Quest will retain and not transfer, and Buyer will not purchase
or acquire at Closing, any of the capital stock of ANS, any of ANS's assets,
Quest's cash or cash equivalents (other than cash in bank accounts in the name
of American Omni Medical, a division of Quest), Quest's marketable securities,
Quest's accounts receivable that arose on or prior to September 30, 1997, the
minute books, the corporate seal or the stock records of Quest, any tax
attributes of Quest or its
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Affiliates, the Real Property or the other assets of Quest listed in Schedule
2.1.2 (collectively, the "EXCLUDED ASSETS"). The Excluded Assets do not include
any tangible personal property used exclusively by Seller.
2.2 Purchase Price. The total consideration for the Assets shall
be an amount equal to (a) $24.5 Million in cash, less (b) the Estimated
Liabilities, plus or minus (c) the amount by which the Estimated Assets are
greater than $13,600,000 or the amount by which $13,600,000 exceeds the amount
of the Estimated Assets, respectively; plus (d) the aggregate out-of-pocket
costs and expenses incurred by Seller in connection with the perfusionist
training seminar for the Quest MPS(R) myocardial protection system conducted by
Seller ($17,658), plus (e) Buyer's pro rata share of any Pro Rated Expenses,
plus or minus (f) the purchase price adjustment amount calculated pursuant to
Section 2.4 (the net amount of the foregoing is referred to herein as the
"AGGREGATE PURCHASE PRICE"). At the Closing, Buyer shall pay to Quest an amount
equal to the net of the amounts referred to in clauses (a), (b), (c), (d), and
(e) of this Section 2.2 by wire transfer of immediately available funds to the
Specified Account.
2.3 Assumed Liabilities. Except as otherwise expressly provided
for in this Agreement, at the Closing Buyer shall assume and agree to pay,
honor and discharge when due, all of the Liabilities set forth on the Closing
Balance Sheet of the type described on Schedule 2.3(a) (the "CLOSING DATE
ASSUMED LIABILITIES") and all other Liabilities relating to the Assets arising
on or after the Closing Date which are set forth in Schedule 2.3(b)
(collectively, the "ASSUMED LIABILITIES"). Except for the Assumed Liabilities,
Buyer shall not assume, and shall have no obligation to pay, honor or
discharge, or be liable for, any Liabilities of Quest, ANS or Seller.
2.4 Aggregate Purchase Price Adjustment.
2.4.1 Closing Balance Sheet. As soon as reasonably
practicable, but not later than 90 days after the Closing Date, Quest shall
deliver to Buyer (a) the Closing Balance Sheet, together with supporting
schedules, prepared on the same basis as the balance sheet of Seller
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dated as of the Interim Balance Sheet Date attached hereto as Schedule 2.4.1
(the "CV BALANCE SHEET") and (b) a statement setting forth the Closing Date
Asset Value and the actual amount of the Closing Date Assumed Liabilities (the
"ADJUSTMENT STATEMENT"). The CV Balance Sheet was, and the Closing Balance
Sheet shall be, prepared in accordance with the Seller Financial Practices.
2.4.2 Review of Adjustment Statement. Within 30 days after
receipt of the Closing Balance Sheet and Adjustment Statement, Buyer shall
inform Quest in writing either (a) that the Adjustment Statement is acceptable
to Buyer or (b) that Buyer objects to the Adjustment Statement, which
objection, if any, shall set forth in reasonable detail its objections and the
basis for those objections. If Buyer so objects and the Parties do not resolve
such objections on a mutually agreeable basis within 30 days after Quest's
receipt of such objection notice, the disagreement shall be resolved within an
additional period of 60 days by the Independent Firm. The decision of the
Independent Firm shall be final and binding upon the Parties. Upon the
agreement of Quest and Buyer, the decision of the Independent Firm, or, if
Buyer fails to deliver a notice to Quest objecting to the Adjustment Statement,
upon expiration of such 30 day period, the Adjustment Statement (as adjusted,
if applicable, by the agreement of Quest and Buyer or the decision of the
Independent Firm) and the determination of the Closing Date Asset Value and the
Closing Date Assumed Liabilities based thereon shall be deemed final. The
Independent Auditor will allocate its costs and expenses in reviewing the
issues in dispute to Quest and Buyer based on the percentage determined by
dividing (i) that portion of the contested amount not awarded to such Party, by
(ii) the amount actually contested by the Parties. For example, if Buyer claims
that the Closing Date Asset Value should be $1,000 lower than the amount set
forth on the initial Adjustment Statement, and Quest contests $500 of the
amount suggested by Buyer, and if the adjusted Adjustment Statement results in
a Closing Date Asset Value of $800 lower than that shown on the initial
Adjustment Statement ($300 lower than the contested amount), then the costs and
expenses of the Independent Auditor will be allocated 60% (i.e., 300 divided by
500) to Quest and 40% (i.e., 200 divided by 500) to Buyer.
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2.4.3 Asset Value Adjustment Procedure. Upon the final
determination of the Closing Date Asset Value and the Closing Date Assumed
Liabilities on the Adjustment Statement in accordance with Section 2.4.2, the
Aggregate Purchase Price shall be increased or reduced, as follows: (a) if the
Closing Date Asset Value is greater than the Estimated Assets, the amount of
such difference shall be paid by Buyer to Quest, (b) if the Closing Date Asset
Value is less than the Estimated Assets, the amount of such difference shall be
paid by Quest to Buyer, (c) if the Closing Date Assumed Liabilities are greater
than the Estimated Liabilities, the amount of such difference shall be paid by
Quest to Buyer, and (d) if the Closing Date Assumed Liabilities are less than
the Estimated Liabilities, the amount of such difference shall be paid by Buyer
to Quest. Payment of the net amount of the amounts referred to in clauses (a),
(b), (c) and (d) of this Section 2.4.3, together with interest thereon from the
Closing Date to the date of payment calculated at a rate equal to the Prime
Rate, shall be made by wire transfer of immediately available funds to an
account designated by the non-paying Party within five business days after the
date that the determination of the Adjustment Statement is deemed final in
accordance with Section 2.4.2.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF QUEST
Quest makes the following representations and warranties regarding
Quest or Seller, as applicable, to Buyer and Buyer Parent:
3.1 Organization; Power and Authority. Quest is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas, and is duly qualified to transact business in each jurisdiction in which
such qualification is required by Law, except where the failure to be so
qualified would not have a Material Adverse Effect. Quest has all corporate
power needed to own or lease its assets and to carry on its business as it is
now being conducted. Set forth on Schedule 3.1 is a list of all jurisdictions
where Quest is qualified to transact business as a foreign corporation.
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3.2 Authorization; Execution and Validity. Quest has all requisite
corporate power to execute, deliver and perform its obligations under this
Agreement and to consummate the transactions contemplated hereby. The
execution, delivery and performance by Quest of this Agreement and the
consummation by Quest of the transactions contemplated hereby have been duly
authorized by all necessary corporate action. This Agreement has been duly and
validly executed and delivered by Quest, constitutes a valid and binding
obligation of Quest and is enforceable against Quest in accordance with its
terms.
3.3 Title. Quest has good and marketable title to the Assets, free
and clear of any Liens other than Permitted Liens. All bills of sale,
assignments and other instruments of transfer to be executed and delivered by
Quest to Buyer at the Closing will transfer to Buyer good and marketable title
to the Assets, free and clear of any Liens other than Permitted Liens.
3.4 Subsidiaries. Except as set forth on Schedule 3.4, Quest does
not own any shares of capital stock, partnership interests or other beneficial
ownership interests in any other Person.
3.5 Financial Statements.
3.5.1 Quest Year-End Financial Statements. Quest has
delivered to Buyer a copy of Quest's Form 10-K for the year ended December 31,
1996 (the "FORM 10-K"). The Form 10-K contains the audited consolidated balance
sheets of Quest as of December 31, 1995 and December 31, 1996, and the related
consolidating statements of operations and cash flows for the fiscal years
ended on such dates and the accompanying notes (collectively, the "FINANCIAL
STATEMENTS"). The Financial Statements have been prepared in accordance with
generally accepted accounting principles and present fairly, in all material
respects, the financial position of Quest and its subsidiaries as of the
periods indicated and the results of their operations and cash flows for the
periods then ended.
3.5.2 Quest Interim Financial Statements. Quest has
delivered to Buyer a copy of Quest's Forms 10-Q for the quarters ended June 30,
1997 and September 30, 1997
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(collectively, the "FORMS 10-Q"). The Forms 10-Q contains the unaudited
consolidated balance sheet of Quest as of June 30, 1997 and September 30, 1997
and the related consolidating statement of operations for the six and nine
month periods then ended (the "INTERIM FINANCIAL STATEMENTS"). The Interim
Financial Statements have been prepared in accordance with generally accepted
accounting principles and present fairly, in all material respects, the
financial position of Quest and its subsidiaries as of the dates thereof and
the results of their operations for the periods then ended, subject to normal
audit adjustments and year-end adjustments in accordance with the Seller
Financial Practices.
3.5.3 Seller Year-End Financial Statement. Quest has
delivered to Buyer a copy of the unaudited statements of operations of Seller
for the twelve month periods ended December 31, 1995 and December 31, 1996.
Such unaudited statements of operations have been prepared in accordance with
the Seller Financial Practices and present fairly, in all material respects,
the results of Seller's operations for the periods then ended, subject to
normal audit adjustments.
3.5.4 Seller Interim Financial Statements. Quest has
delivered to Buyer copies of the unaudited statement of operations of Seller
for the six month period ended on the Interim Balance Sheet Date (collectively
with the CV Balance Sheet, the "SELLER INTERIM FINANCIAL STATEMENTS"). The
Seller Interim Financial Statements have been prepared in accordance with the
Seller Financial Practices and present fairly, in all material respects, the
financial position of Seller as of the date thereof and the results of its
operations for the period then ended, subject to normal audit adjustments, and
year-end adjustments in accordance with the Seller Financial Practices.
3.6 Absence of Undisclosed Liabilities. Seller has no Liabilities
arising out of or related to the Assets except (a) as set forth on Schedule
3.6, (b) as and to the extent disclosed or reserved against in the Seller
Interim Financial Statements and (c) Liabilities that were incurred after the
Interim Balance Sheet Date in the ordinary course of business consistent with
past practice.
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3.7 Absence of Certain Changes. Except as set forth on Schedule
3.7, since the Interim Balance Sheet Date, there has been no (a) event or
occurrence that has had or could reasonably be expected to have a Material
Adverse Effect, (b) material amendment or termination of any Material Contract,
Material Lease or material Permit of Seller, (c) material destruction, damage
or other loss to any of the properties or assets of Seller, (d) sale, lease or
other disposition of any properties or assets of Seller, other than inventory
sold or otherwise disposed of in the ordinary course of business and other
assets with a book value of no more than $15,000 in the aggregate, (e) purchase
or lease by Seller of any properties or assets, other than in the ordinary
course of business, (f) increase in the compensation payable to any of Seller's
employees, except for bonuses paid to officers of Seller, ▇▇▇▇ ▇▇▇▇▇▇▇▇ and
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, and increases in the ordinary course of business consistent
with past practice, (g) grant of any Lien on the Assets other than Permitted
Liens, (h) termination or threatened termination of Seller's relationship with
(i) any customer with sales attributable to such customer in excess of $100,000
for the 12-month period ended September 30, 1997, (ii) any supplier with
payments attributable to such supplier in excess of $50,000 for the 12-month
period ended September 30, 1997 or (iii) any material advertiser, trade
creditor or trade debtor, or (i) to Seller's Knowledge, agreement or commitment
to take any action described in this Section 3.7.
3.8 No Conflict; Seller Consents. Except as set forth on Schedule
3.8, the execution, delivery and performance by Quest of this Agreement will
not (a) violate any Law, (b) violate any Charter Document of Quest, (c) violate
any Order to which Seller is a party or by which it is bound, (d) require any
Consent from any Governmental Authority or any other third party with respect
to any Material Contract, Material Lease or material Permit of Seller, except
to comply with the HSR Act, if applicable, (e) violate or breach any Material
Contract, Material Lease or material Permit of Seller or (f) result in the
creation of any Lien on any assets of Seller.
3.9 Condition of Assets. Except as otherwise set forth on Schedule
3.9, the Assets (including for the purposes of this Section 3.9 the Real
Property) consisting of structures, furniture, fixtures and equipment are
structurally sound with no material defects and are in sufficient operating
order, condition and repair, ordinary wear and tear excepted, for the operation
of Seller's business as
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currently conducted, and none of such structures, furniture, fixtures or
equipment are in need of maintenance or repairs except for ordinary, routine
maintenance and repairs consistent with the age and use of such assets, which
are not, either individually or in the aggregate, material.
3.10 Real Property.
(a) Schedule 3.10(a) describes the real property
currently owned by Quest (the "REAL PROPERTY"), and Schedule 3.10(b) describes
the real property currently leased by Quest (the "LEASED REAL PROPERTY").
(b) Quest has good and indefeasible fee simple title to
the Real Property, free and clear of all Liens except for Permitted Liens.
Quest has good leasehold interests in, and possession of, all Leased Real
Property, subject to the terms of the applicable leases. All of the leases for
Leased Real Property are valid, binding and in full force and effect, and there
has been no breach, which breach has not been cured or waived, of any such
lease by Quest or to Seller's Knowledge, the lessors thereunder.
(c) To Seller's Knowledge, no fact or condition exists
which could result in the termination or reduction of the current access to or
from the Real Property or Leased Real Property to existing roads or the sewer
or other utility services presently serving the Real Property or Leased Real
Property, except for the sale of .0548 acres of the Real Property to the Texas
Department of Transportation for the purpose of widening the public road
adjoining the Real Property.
(d) To Seller's Knowledge, the Real Property and the
Leased Real Property are properly zoned for their current use or uses, and
there are presently no Laws applicable to any parcel of the Real Property or
Leased Real Property which prohibit the use of such Real Property or Leased
Real Property for such purpose or purposes.
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(e) No written notices or requests have been received by
Quest from any insurance company issuing any policy of insurance covering the
Real Property or Leased Real Property requesting the performance of any work,
restoration or repair with respect to the Real Property or Leased Real Property
with which compliance to the satisfaction of such insurance company has not
been made.
(f) Except as may be described in the Permitted Liens and
in the survey of the Real Property previously delivered to Buyer, there is no
dispute concerning the property lines with respect to any portion of the Real
Property or Leased Real Property and no Person other than ANS is in possession
of any portion of the Real Property.
(g) Neither the Real Property nor the Leased Real
Property is subject to any current use or special use assessment or any ad
valorem tax abatement, other than the Tax Abatement Agreement.
(h) To Seller's Knowledge, with respect to the
improvements on the Real Property and Leased Real Property, (i) such
improvements are in conformity in all material respects with all applicable
Laws and no variances or other waivers were obtained or are required to assure
such conformity, and (ii) there are no latent defects regarding such
improvements.
(i) To Seller's Knowledge, no Person is legally entitled
to file a mechanic's, materialmen's, furnisher's, laborer's or similar Lien
against the Real Property or the Leased Real Property, nor are there any
circumstances which would give rise to any such claims.
3.11 Personal Property.
3.11.1 Owned Personal Property. Subject to Permitted Liens,
Quest has good and marketable title to all personal property reflected on the
Seller Interim Financial Statement and all personal property acquired by Seller
since the Interim Balance Sheet Date, other than (a) property disposed of in
the ordinary course of business, (b) property disposed of or to be disposed of
in
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transactions disclosed to Buyer or Buyer Parent prior to the date hereof and
listed on Schedule 3.11.1, and (c) Leased Personal Property.
3.11.2 Leased Personal Property. Schedule 3.11.2 lists all
of the personal property leased to or from Seller pursuant to a Material Lease
(collectively, the "LEASED PERSONAL PROPERTY"). All of the Material Leases of
Leased Personal Property are valid, binding and in full force and effect, and
there has been no breach, which breach has not been cured or waived, of any
such Material Lease by Quest or, to Seller's Knowledge, any other Person. True
and correct copies (or descriptions in the case of oral Material Leases) of all
Material Leases of Leased Personal Property have been delivered to Buyer.
3.12 Insurance. Schedule 3.12 lists all material insurance policies
owned or held by Seller that cover the Assets and such policies are in full
force and effect, all premiums with respect thereto have been paid to the
extent due, and no notice of cancellation or termination has been received with
respect to any such policy (other than policies that have been replaced or are
intended to be replaced prior to the expiration thereof by policies providing
substantially the same coverage).
3.13 Contracts. Except for (a) purchase orders, invoices,
confirmations and similar documents, (b) Leases for Leased Personal Property,
and (c) Employee Benefit Plans, Schedule 3.13 sets forth all of the Material
Contracts. All Material Contracts are valid, binding and in full force and
effect, and there has been no breach, which breach has not been cured or
waived, of any Material Contract by Seller or, to Seller's Knowledge, any other
Person that would have a Material Adverse Effect. True and correct copies (or
descriptions in the case of oral Material Contracts) of all Material Contracts
have been delivered to Buyer.
3.14 Litigation; Orders. Except as set forth on Schedule 3.14,
there is no Action by any Person by or before any Governmental Authority that
is pending or, to Seller's Knowledge, threatened, against or affecting Seller
or any of the Assets. Except as set forth on Schedule 3.14, Seller is not
subject to any Order.
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3.15 Environmental Matters. To Seller's Knowledge, Seller has not
failed to (a) comply with any Environmental Law in any material respect, (b)
maintain in effect and comply with any material Permit required by any
Environmental Law, or (c) comply with any consent agreement or Order to which
it is a party or by which it is bound that relates to any Environmental Law.
Schedule 3.15 sets forth all of the material Permits currently required for
Seller by any Environmental Law and consent agreements and Orders to which
Seller is a party or by which Seller is bound that relate to any Environmental
Law. Seller is not subject to any pending or, to Seller's Knowledge, threatened
Actions related to any Environmental Law. Except as set forth in this Section
3.15, Seller makes no express or implied representation or warranty in this
Agreement concerning environmental matters.
3.16 Permits. Schedule 3.16 lists all Permits (other than the
Permits required to be listed on Schedule 3.15) that are required and material
to the conduct of Seller's business. All Permits that are required and material
to Seller's business are in full force and effect, with no suspension,
revocation or modification pending or, to Seller's Knowledge, threatened, other
than the expiration of Permits in accordance with the terms thereof that may be
renewed in the ordinary course of business without lapsing. True and correct
copies of all Permits listed on Schedule 3.16 have been delivered to Buyer.
3.17 Medical Device Regulation. Except as set forth in Schedule
3.17, Seller has obtained all applicable licenses, registrations, approvals,
clearances, and authorizations required by Governmental Authorities regulating
the safety, effectiveness and market clearance of Seller's medical devices
which are currently marketed by Seller in respect of the territories in which
such devices are currently marketed. Such licenses, registrations, approvals,
clearances, and authorizations have not been withdrawn, revoked or challenged
and to Seller's Knowledge, Seller has not taken any action with respect to the
design, development, manufacture or distribution of any such medical device
which could reasonably be expected to lead to such withdrawal, revocation or
challenge. Set forth in Schedule 3.17 is information relating to the regulation
of Seller's medical devices that are currently marketed or that have been
approved for marketing
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since November 1, 1994, including inspections and Seller's recalls and product
actions since November 1, 1994 and licenses, registrations, device listings and
Seller's ongoing clinical studies.
3.18 Intellectual Property. Schedule 3.18 sets forth a true and
complete list of all Intellectual Property material to the conduct of Seller's
business and a description of whether such Intellectual Property is owned or
licensed by Seller. Except as set forth on Schedule 3.18, (a) to Seller's
Knowledge, with respect to Intellectual Property owned by Seller, Seller owns
all right, title and interest in and to such Intellectual Property and with
respect to Intellectual Property licensed by Seller and related to products
marketed by Seller, such licenses are exclusive, valid and in good standing and
assignable to Buyer, (b) no licenses, sublicenses, covenants or agreements have
been granted or entered into by Seller in respect of such Intellectual
Property, (c) to Seller's Knowledge, no Person is infringing upon Seller's
rights in such Intellectual Property, (d) to Seller's Knowledge, Seller has not
infringed or misappropriated any Intellectual Property of any other Person, (e)
no Action is pending or to Seller's Knowledge, threatened asserting any such
infringement or misappropriation by Seller, (f) no shareholder, director,
officer or employee of Seller owns or has any interest in any of such
Intellectual Property and (g) to Seller's Knowledge, no shareholder, director,
officer, or employee of Seller has breached the terms of any confidentiality,
nondisclosure or other agreement relating to the protection of such
Intellectual Property.
3.19 Employee Benefits.
3.19.1 Employee Benefit Plans. Schedule 3.19.1 lists each
written pension, retirement, profit-sharing, deferred compensation, bonus,
incentive, performance, stock option, stock appreciation, phantom stock, stock
purchase, restricted stock, medical, hospitalization, vision, dental or other
health, life, disability, severance, termination or other employee benefit
plan, program, arrangement, agreement or policy (including each ERISA Plan)
which currently covers any employee of Seller and which is sponsored,
maintained or contributed to by Seller (each, an "EMPLOYEE BENEFIT PLAN"). Each
Employee Benefit Plan complies in all material respects, and has been operated
and administered in all material respects, in accordance with all
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applicable requirements of all Laws, including ERISA and the Code. Each
Employee Benefit Plan intended to qualify under Section 401(a) of the Code has
received a ruling or determination letter concluding that such Employee Benefit
Plan so qualifies, and to Seller's Knowledge, no event has occurred, amendment
been adopted or action been taken that would cause such Employee Benefit Plan
to lose its qualified status.
3.19.2 Records. Seller has made available to Buyer and Buyer
Parent copies of each Employee Benefit Plan and any amendments thereto and any
related trust agreement, funding agreement and insurance contract relating
thereto and, if applicable, (a) the last filed Form 5500, (b) the summary plan
description currently in effect for each Employee Benefit Plan and all material
modifications thereto, (c) the last financial statements for each Employee
Benefit Plan and its related trust, if any, and (d) the most recent
determination letter issued with respect to each Employee Benefit Plan.
3.19.3 Actions. There are no Actions pending (other than
routine claims for benefits) or, to Seller's Knowledge, threatened, with
respect to any Employee Benefit Plan.
3.19.4 Multiemployer Plans and Multiple Employer Plans. No
Employee Benefit Plan is (a) a "multiple employer" plan within the meaning of
Section 4063 or 4064 of ERISA, (b) a "multiemployer plan" within the meaning of
Section 4001(a)(3) of ERISA or other applicable employee benefit legislation,
or (c) a "defined benefit plan" as defined in Section 3(35) of ERISA.
3.20 Taxes. Seller has filed all Returns required to be filed and
has paid all Taxes required to be paid except such Taxes, if any, as are not
yet due and payable or which are being contested in good faith and by proper
proceedings which contests are described on Schedule 3.20. Seller is not a
party to any Tax allocation or sharing agreement.
3.21 Compliance with Law. To Seller's Knowledge, Seller is in
compliance in all material respects with all Laws, Permits and Orders in
connection with the operation of its
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business and the ownership and maintenance of the Assets. To Seller's
Knowledge, all filings and notices required to be made by Seller with any
Governmental Authority in connection with the operation of its business or the
ownership and maintenance of the Assets (including, without limitation, the
Intellectual Property) have been made or given in a timely fashion.
3.22 Labor Matters. There is no labor strike, slowdown, stoppage or
other labor difficulty actually pending or to Seller's Knowledge, threatened
against Seller. There is no collective bargaining agreement or union contract
binding upon Seller, and there has not been any such agreement or contract in
effect at any time during the preceding five years.
3.23 Accounts Receivable. The accounts receivable to be purchased
by Buyer pursuant to this Agreement have arisen from bona fide sales in the
ordinary course of business and represent bona fide, and to Seller's Knowledge,
undisputed obligations of the respective debtors.
3.24 Inventory. The inventory of Seller consists of a quality and
quantity usable and salable in the ordinary course of business consistent with
Seller's past practice and is reflected in the Interim Financial Statements in
accordance with the Seller Financial Practices.
3.25 Trade Payables. The trade accounts payable of Seller
constituting Assumed Liabilities represent bona fide and undisputed obligations
of Seller and were incurred by Seller in the ordinary course of business.
3.26 Brokers. Except for ▇▇▇▇▇ ▇▇▇▇▇▇ Incorporated (now associated
with Saloman Brothers Incorporated and collectively doing business with Saloman
Brothers Incorporated as ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇) and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Refsnes,
Inc., no Person is or will become entitled to receive any brokerage or finder's
fee, advisory fee or other similar payment for the transactions contemplated by
this Agreement by virtue of having been engaged by or acted on behalf of Quest.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER AND BUYER PARENT
Buyer and Buyer Parent make the following representations and
warranties to Quest:
4.1 Organization; Power and Authority. Each of Buyer and Buyer
Parent is a corporation duly organized, validly existing and in good standing
under the laws of Delaware.
4.2 Authorization; Execution and Validity. Each of Buyer and Buyer
Parent has all requisite corporate power to execute, deliver and perform its
obligations under this Agreement and to consummate the transactions
contemplated hereby to be consummated by it. The execution, delivery and
performance by each of Buyer and Buyer Parent of this Agreement and the
consummation by each of Buyer and Buyer Parent of the transactions contemplated
hereby have been duly authorized by all necessary corporate action. This
Agreement has been duly and validly executed and delivered by each of Buyer and
Buyer Parent, constitutes a valid and binding obligation of each of Buyer and
Buyer Parent and is enforceable against each of Buyer and Buyer Parent in
accordance with its terms.
4.3 No Conflict; Buyer Consents. Except as set forth on Schedule
4.3, the execution, delivery and performance by each of Buyer and Buyer Parent
of this Agreement will not (a) violate any Law, (b) violate any Charter
Document of Buyer or Buyer Parent, (c) violate any Order to which Buyer or
Buyer Parent is a party or by which it is bound, (d) require any Consent from
any Governmental Authority or any other third party except to comply with the
HSR Act, if applicable, or (e) violate or breach any material Contract to which
Buyer or Buyer Parent is a party or by which it is bound.
4.4 Litigation; Orders. There is no Action by any Person by or
before any Governmental Authority that is pending or, to the knowledge of Buyer
or Buyer Parent, threatened by, against or affecting either Buyer or Buyer
Parent or any of its properties, assets, operations or business which would, if
adversely determined, have a material adverse effect on
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Buyer's or Buyer Parent's ability to consummate the transactions contemplated
by this Agreement, nor is Buyer or Buyer Parent subject to any Order which
would have any such effect.
4.5 Sufficient Funds. Buyer has the financial capability to
purchase the Assets on the terms and subject to the conditions set forth in
this Agreement and pay the Assumed Liabilities as they become due and payable.
Buyer Parent has available on hand, from its working capital or currently
available unrestricted credit facilities, all of the cash that Buyer will need
to consummate the purchase of the Assets and pay the Assumed Liabilities as
they become due and payable and will provide Buyer with immediately available
funds if necessary to enable Buyer to satisfy all of Buyer's payment
obligations hereunder when due.
4.6 Brokers. Except for ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Associates, Inc., no
Person is or will become entitled to receive any brokerage or finder's fee,
advisory fee or other similar payment for the transactions contemplated by this
Agreement by virtue of having been engaged by or acted on behalf of Buyer or
Buyer Parent.
ARTICLE 5
COVENANTS OF QUEST
5.1 Cooperation by Quest. From the date hereof through the Closing
Date, Quest shall use all reasonable efforts to take all actions and to do all
things necessary or advisable to consummate the transactions contemplated by
this Agreement and to cooperate with Buyer and Buyer Parent in connection with
the foregoing, including executing and delivering the Lease Agreement described
in Section 8.1.8 and the Option Agreement described in Section 8.1.9 and using
commercially reasonable efforts (a) to assist Buyer in obtaining amendments to
the Retention Agreements by Transferred Employees pursuant to which, among
other things, such Transferred Employees waive any rights to compensation under
the Retention Agreements because their "job responsibilities are significantly
reduced," (b) to assist Buyer in obtaining noncompete agreements from specified
Retained Employees and other persons specifically identified by Buyer (c) to
assist Buyer in obtaining employment agreements and nondisclosure
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agreements from specified Transferred Employees, (d) to obtain assignments to
Buyer of all Permits listed on Schedules 3.15 and 3.16, the Intellectual
Property licensed by Seller listed on Schedule 3.18 and all licenses,
registrations, approvals, clearances and authorizations regulating medical
devices currently marketed by Seller or that have been approved for marketing
since November 1, 1994, to the extent any of the foregoing is assignable by
Seller, and (e) to obtain all Consents required to consummate the transactions
contemplated by this Agreement. However, Quest shall have no obligation to
amend, or cause to be amended, any Contract, to change, or cause to be changed,
any Permit, or to make, or cause to be made, any payment to obtain any of the
foregoing. Except for the amendment to the Retention Agreements referred to in
clause (a) above, the Retention Agreements shall not be amended, supplemented
or modified.
5.2 Pre-Closing Access to Information. From the date hereof
through the Closing Date, Quest shall use all reasonable efforts to respond to
any reasonable inquiry by Buyer concerning the Assets or the operation of
Seller's business and shall afford to Buyer and Buyer Parent, their accountants
and their counsel access, in a reasonable manner, upon reasonable notice and at
reasonable times, to all of the properties, books and records of Seller
(excluding information that is subject to attorney-client privilege). Buyer
shall direct all requests for information to:
Quest Medical, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: F. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ III
5.3 Operation of Business. Prior to the Closing Date, without the
prior written consent of Buyer or Buyer Parent, which consent shall not be
unreasonably withheld, Seller (a) will operate its business only in the
ordinary course and maintain books of account and records in the usual, regular
and ordinary manner consistent with the Seller Financial Practices, (b) will
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use its best efforts to keep intact the business organization of Seller, (c)
will use its best efforts to retain its present employees, (d) will use its
best efforts to maintain the goodwill of the customers, suppliers, vendors and
others having business relations with Seller, (e) will keep in full force and
effect reasonable insurance coverage or other comparable insurance coverage, as
may be necessary to insure the Assets adequately, (f) will give Buyer prompt
written notice of any written communications to or from any Governmental
Authority regarding the Assets or its business, (g) will maintain all Permits
required and material to the conduct of its business, (h) will not increase the
compensation to any of its employees, except for bonuses paid to officers, ▇▇▇▇
▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, (i) will not sell, lease or dispose of any
properties or assets except for inventory sold or disposed of in the ordinary
course of business and other assets with an aggregate value of no more than
$15,000, (j) will not purchase or lease any personal property or assets other
than properties and assets purchased or leased in the ordinary course of
business consistent with past practice, (k) except for capital expenditures
made pursuant to Material Contracts existing on the date hereof, will not
commit to, authorize or engage in any capital projects or capital expenditures
relating to its business or the Assets in excess of $25,000, and (l) will not
make any filings with the United States Patent and Trademark Office, the United
States Copyright Office or any comparable state agencies with respect to the
Intellectual Property listed on Schedule 3.18.
5.4 Further Assurances. Subject to the other terms and conditions
of this Agreement, at any time and from time to time, whether before or after
the Closing, Quest shall execute and deliver all instruments and documents and
take all other action that Buyer or Buyer Parent may reasonably request to
consummate or to evidence the consummation of the transactions contemplated by
this Agreement, including, without limitation, using commercially reasonable
efforts to obtain any Consents and file any documents with Governmental
Authorities or foreign governmental authorities with respect to the transfer of
Intellectual Property items listed on Schedule 3.18 and the approvals described
in Schedule 3.17.
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5.5 Governmental Matters.
5.5.1 HSR Act Compliance. If the parties determine that
such a filing is required, promptly after the date hereof, Quest shall file any
notification required to be filed under the HSR Act to consummate the
transactions contemplated hereby, and shall request early termination of the
waiting period thereunder. In such event, Quest shall use all reasonable
efforts to comply as promptly as practicable with any request made pursuant to
the HSR Act for additional information. Quest shall reasonably cooperate with
Buyer or Buyer Parent in such compliance.
5.5.2 Other Governmental Approvals. Quest shall comply with
any other Laws which are applicable to any of the transactions contemplated
hereby and pursuant to which government notification or approval of such
transaction is necessary. Quest shall cooperate with Buyer and Buyer Parent in
any manner reasonably requested by Buyer or Buyer Parent in providing any
information about Quest which is required for this purpose and in promptly
filing, separately or jointly with Buyer or Buyer Parent, any applications for
such government notification or approval.
5.6 Supplements to Schedules. If, to Seller's Knowledge, any event
occurs or condition changes that causes any of its representations or
warranties in this Agreement to be inaccurate, Seller shall promptly notify
Buyer or Buyer Parent thereof in writing. Seller may amend or supplement the
Schedules to account for any such event or change. If such supplement or
amendment relates to any inaccuracy in the representations or warranties which
would cause the condition in Section 8.1.1 to not be satisfied, then Buyer and
Buyer Parent shall have five business days from the date of Seller's notice in
which to terminate this Agreement by giving Seller a notice of termination. If
Buyer or Buyer Parent fails to timely give such notice of termination, then the
inaccuracy to which said supplement or modification relates shall not be taken
into account in determining whether the condition in Section 8.1.1 has been
satisfied.
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5.7 No-Shop Provisions. From the date hereof until the date this
Agreement is terminated in accordance with Section 10.1, neither Quest nor any
of its respective agents or Affiliates will, directly or indirectly, solicit or
furnish any information to any prospective buyer, commence or conduct
negotiations with any other party, or enter into any agreement with any other
party concerning the sale of all or any material portion of the Assets.
5.8 Noncompetition. Quest agrees that, effective as of the Closing
Date and until the fourth anniversary of the Closing Date (the "NONCOMPETITION
PERIOD"), without the prior approval of Buyer, neither Quest nor any of its
Affiliates will, directly or indirectly, on its own behalf or as an agent of or
an investor in another Person:
(a) engage in the business of inventing, developing,
designing, manufacturing, licensing, selling or distributing any product or
device which is competitive with any of the products invented, developed,
designed or being developed or designed, manufactured or distributed by Seller
immediately prior to the Closing or by Buyer prior to the termination of the
Lease Agreement described in Section 8.1.8 (the "COMPETITIVE BUSINESS");
(b) influence or attempt to influence any (i) customer or
supplier of Buyer or (ii) any customer or supplier of Seller during the three
year period prior to the Closing Date to purchase or supply goods or services
related to the Competitive Business from or to any Person other than Buyer; or
(c) solicit the employment of or hire any person who was
an employee of Buyer within the 12-month period preceding such solicitation or
hiring;
provided, however, that nothing herein shall preclude any Person from engaging
in the business conducted by ANS immediately prior to the Closing or engaging
in any other business which is not a Competitive Business, or from making an
investment in any entity which may engage in the Competitive Business so long
as such investment interest does not exceed five percent of the outstanding
voting securities of such entity and so long as such investment does not
require such
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Person making the investment to provide services with respect to the operation
and affairs of the entity in which such investment is made.
If any provision of this Section 5.8 should be found to be
unenforceable by reason of its being too broad as to the period of time,
territory, and/or scope, then, and in that event, Buyer and Quest agree that
such provision shall nevertheless remain valid and fully effective, but shall
be considered to be amended so that the period of time, territory, and/or scope
set forth shall be changed to be the maximum period of time, the largest
territory, and/or the broadest scope, as the case may be, which would be found
enforceable. Any violation of the provisions of this Section 5.8 shall
automatically toll and suspend the Noncompetition Period for the duration of
such violation.
ARTICLE 6
COVENANTS OF BUYER AND BUYER PARENT
6.1 Cooperation by Buyer and Buyer Parent. From the date hereof
through the Closing Date, each of Buyer and Buyer Parent shall use all
reasonable efforts to take all actions and to do all things necessary or
advisable to consummate the transactions contemplated by this Agreement and to
cooperate with Quest in connection with the foregoing, including executing and
delivering the Lease Agreement described in Section 8.1.8 and the License
Agreement described in Section 8.2.6 and using commercially reasonable efforts
to obtain the Consents required to consummate the transactions contemplated by
this Agreement.
6.2 Pre-Closing Access to Information. Each of Buyer and Buyer
Parent shall comply with the limitations on the disclosure and use of
information set forth in the Confidentiality Agreement with respect to the
information that Quest provides to any of Buyer, Buyer Parent, their
accountants or their counsel in and pursuant to this Agreement. Buyer and
Buyer Parent shall refrain from imposing any undue burden upon Quest and from
interfering with the operations of Quest.
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6.3 Further Assurances. Subject to the other terms and conditions
of this Agreement, at any time and from time to time, whether before or after
the Closing, each of Buyer and Buyer Parent shall execute and deliver all
instruments and documents and take all other action that Quest may reasonably
request to consummate or to evidence the consummation of the transactions
contemplated by this Agreement.
6.4 Governmental Matters.
6.4.1 HSR Act Compliance. If the parties determine that
such a filing is required, promptly after the date hereof, Buyer and Buyer
Parent shall file any notification required to be filed under the HSR Act to
consummate the transactions contemplated hereby, and shall request early
termination of the waiting period thereunder. In such event, Buyer and Buyer
Parent shall use all reasonable efforts to comply as promptly as practicable
with any request made pursuant to the HSR Act for additional information. Buyer
and Buyer Parent shall cooperate with Quest in such compliance and shall pay
all filing fees in connection with the HSR Act.
6.4.2 Other Governmental Approvals. Each of Buyer and Buyer
Parent shall comply with any other Laws which are applicable to any of the
transactions contemplated hereby and pursuant to which government notification
or approval of such transaction is necessary. Each of Buyer and Buyer Parent
shall cooperate with Quest in any manner reasonably requested by Quest in
providing any information about Buyer or Buyer Parent which is required for
this purpose and in promptly filing, separately or jointly with Quest, any
applications for such government notification or approval. Each of Buyer and
Buyer Partner shall use all reasonable efforts to resolve such objections, if
any, as may be asserted by any Governmental Authority with respect to the
transactions contemplated hereby.
6.5 Noncompetition. Buyer and Buyer Parent agree that effective as
of the Closing Date and until the second anniversary of the Closing Date (the
"ANS NONCOMPETITION PERIOD"), without the prior approval of Quest, neither
Buyer nor Buyer Parent, nor any of its Affiliates will, directly or indirectly,
on its own behalf or as an agent of or an investor in another Person:
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(a) engage in the business of inventing, developing,
designing, manufacturing, licensing, selling or distributing any product or
device which is competitive with any of the products invented, developed,
designed or being developed or designed, manufactured or distributed by ANS
immediately prior to the Closing, or by Quest or ANS during the period
beginning on the Closing Date and ending on the date of the termination of the
Lease Agreement described in Section 8.1.8 (the "ANS COMPETITIVE BUSINESS");
(b) influence or attempt to influence any (i) customer or
supplier of ANS or (ii) any customer or supplier of Buyer or Buyer Parent
during the three year period prior to the Closing Date to purchase or supply
goods or services related to the ANS Competitive Business from or to any Person
other than ANS; or
(c) solicit the employment of or hire any person who was
an employee of ANS or Quest (including without limitation Retained Employees
but excluding the Transferred Employees) within the 12-month period preceding
such solicitation or hiring;
provided, however, that nothing herein shall preclude any Person from engaging
in any other business which is not an ANS Competitive Business.
If any provision of this Section 6.5 should be found to be
unenforceable by reason of its being too broad as to the period of time,
territory, and/or scope, then, and in that event, Buyer, Buyer Parent and Quest
agree that such provision shall nevertheless remain valid and fully effective,
but shall be considered to be amended so that the period of time, territory,
and/or scope set forth shall be changed to be the maximum period of time, the
largest territory, and/or the broadest scope, as the case may be, which would
be found enforceable. Any violation of the provisions of this Section 6.5 shall
automatically toll and suspend the ANS Noncompetition Period for the duration
of such violation.
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ARTICLE 7
MUTUAL COVENANTS
7.1 Taxes. The Parties agree and acknowledge that the transactions
contemplated by this Agreement constitute the sale of the entire operating
assets of a separate business or of a separate division, branch or identifiable
segment of a business for sales Tax purposes, and that no sales or use Taxes
are due on such sale.
7.1.1 Quest's Responsibility. Except as otherwise provided
in Section 7.1.2, Quest shall be liable for any and all Taxes attributable to
any taxable period on or before the Closing Date due or payable, now or in the
future, by Seller or its Affiliates with respect to the operations of Seller or
the Assets. Quest shall promptly reimburse Buyer for any transfer, sales, deed,
duties, stamp, use and similar Taxes, if any, resulting from the sale of the
Assets, including fees to record assignments, after receipt of written notice
from Buyer of such Taxes, together with all supporting documentation; provided,
however, that Quest shall have no obligation to reimburse Buyer for such Taxes
unless Buyer has fulfilled its obligations under Section 7.1.2 and either (a)
Quest agrees that Quest owes such Taxes, or (b) Quest has had the opportunity
to contest such Taxes with the appropriate Governmental Authority.
7.1.2 Buyer's and Buyer Parent's Responsibility. Anything
in Section 7.1.1 to the contrary notwithstanding, Buyer and Buyer Parent shall
be liable, jointly and severally, for any and all Taxes attributable to any
period after the Closing Date due or payable by Buyer or by Buyer Parent or
Quest with respect to the operations of Buyer, Buyer Parent or the Assets.
Buyer agrees to notify Quest promptly in writing of Buyer's receipt of any
proposed assessment or notice of Tax due with respect to any sales Tax for
which Buyer will request reimbursement from Seller pursuant to Section 7.1.1
and will allow Quest to assume and control the defense against any such
assessment or notice and Buyer will cooperate with Quest in such defense.
7.1.3 Aggregate Purchase Price Allocation. Buyer shall
prepare an allocation of the Aggregate Purchase Price among the Assets (the
"PURCHASE PRICE ALLOCATION") and provide
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Quest with a written statement of the proposed Purchase Price Allocation at
least five days prior to the Closing Date. Unless Quest reasonably objects to
the Purchase Price Allocation (in which case the Parties will work together in
good faith to resolve such objection and if unable to do so, the Parties shall
submit the matter to arbitration in accordance with the provisions of Section
11.11), Buyer and Quest agree that the Purchase Price Allocation shall be used,
reported and implemented by both Quest and Buyer for federal, state, local and
other tax purposes.
7.2 Employee Matters.
7.2.1 Employment. Effective as of the Closing Date and
subject to Buyer's amendment or termination rights provided in Section 7.2.3,
Buyer shall offer employment to the employees of Seller identified on Schedule
7.2.1(a) at the same or higher salary or wage rates and with medical, life
insurance, retirement savings and other benefits that are listed and described
on Schedule 7.2.1(a). Such salary or wage rates and other benefits shall be in
the aggregate, comparable to (except as otherwise provided for in any
employment agreements between any such employees and Buyer), those provided by
Seller to such persons as of the date of this Agreement (persons accepting such
offers of employment are hereinafter referred to as "TRANSFERRED EMPLOYEES").
The employees of Seller identified on Schedule 7.2.1(b) who will remain as
employees of Quest are hereinafter referred to as the "RETAINED EMPLOYEES."
Neither Buyer nor Buyer Parent shall be liable for any severance payments
asserted against Quest, Buyer or Buyer Parent by, or other liability,
including, without limitation, any liability with respect to health care
continuation coverage under COBRA, or obligation to, any employees or former
employees of Seller who are not Transferred Employees.
7.2.2 Retention Agreements. On the Closing Date, Quest
shall assign and deliver to Buyer, and Buyer shall accept from Quest the
Retention Agreements for each Transferred Employee who is party to a Retention
Agreement and listed on Schedule 1.1(a) (except as otherwise provided for in
any employment agreements between any such Transferred Employee and Buyer),
provided such Retention Agreements have been amended as set forth in Section
5.1(c), and all Liabilities thereunder shall be Assumed Liabilities, which
shall not be deducted
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from the Aggregate Purchase Price. In Section 5.1, Quest agrees to assist Buyer
in obtaining amendments to the Retention Agreements with Transferred Employees
pursuant to which, among other things, the Transferred Employees would waive
any rights to compensation under the Retention Agreements because their "job
responsibilities are significantly reduced." Subject to the Retention
Agreements and Section 7.2.3, nothing herein shall be construed to limit or
modify Buyer's right to terminate the employment of Transferred Employees or to
restrict Buyer's right to apply its own employment practices and policies
(including but not limited to modification of salary or wage rates) with
respect to Transferred Employees.
7.2.3 Continuing Benefits and Benefit Plans. Buyer shall
provide the medical and life insurance benefits to the Transferred Employees
and their dependents effective on the Closing Date pursuant to medical and life
insurance plans sponsored or maintained by Buyer or Buyer Parent; provided,
however, Buyer shall waive any waiting periods, active at work requirements,
non-confinement requirements, and pre-existing conditions clauses that would
apply to a Transferred Employee or his dependent solely as a result of being
treated as a new employee of Buyer and shall credit each Transferred Employee
with all deductible payments and co-payments paid by such Transferred Employee
under Quest's health benefits program prior to the Closing Date during the year
in which the Closing occurs for the purpose of determining the extent to which
any such Transferred Employee has satisfied his or her deductible and whether
he or she has reached the out-of-pocket maximum under Quest's medical plan for
such year. Buyer shall credit Transferred Employees' service with Quest for
purposes of eligibility and vesting under Buyer's or Buyer Parent's employee
benefit plans. Buyer and Buyer Parent retain the right to amend or terminate
any employee pension, welfare, fringe or other benefit plan, program, policy or
arrangement that may apply to any Transferred Employee or any other employees
of Buyer or Buyer Parent; provided, that any termination or amendment made
prior to the first anniversary of the Closing Date shall be consistent with the
foregoing provisions of this Section 7.2.3.
7.2.4 Employee Savings Plan. Effective as of the Closing
Date, each Transferred Employee's account balance in the Quest Employee Savings
Plan shall become fully vested and
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non-forfeitable without regard to such Transferred Employee's length of
service. As soon as practicable following the Closing Date, but in any event by
April 30, 1998, Quest shall cause the accounts of the Transferred Employees in
the Quest Employee Savings Plan to be distributable to them in a lump sum.
Buyer shall provide the Transferred Employees with the option of rolling over
their distributions from the Quest Employee Savings Plan (which qualify as
eligible rollover distributions as defined in Code Section 402(c)(4)) into a
tax-qualified defined contribution plan, including using its reasonable good
faith efforts to provide the option of a direct rollover of any outstanding
participant loans.
7.2.5 Bonuses. Prior to the Closing, Quest shall pay all
bonuses accrued up to the Closing Date to its officers who are Transferred
Employees and to ▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
7.3 Cooperation and Exchange of Information.
7.3.1 Documents, Records and Files. As soon as practicable,
but in any event within 10 days after a Party's request in the case of
documents, records, or files in the control or possession of any other Party,
from and after the Closing Date, the Party to whom the request is directed
shall provide the requesting Party with such cooperation and shall deliver to
the requesting Party, at such requesting Party's cost and expense, such
information and data concerning the Assets and the results of the operation of
the Assets in order to enable the Parties to complete and file all Returns and
filings with the Securities and Exchange Commission or other Governmental
Authority which they may be required to file with respect to the Assets or the
results of the operation of the Assets prior to the Closing or to respond to
audits by any taxing authorities with respect to such operations and to
otherwise enable the parties to satisfy their internal accounting, tax,
securities Laws compliance and other legitimate requirements. The Parties shall
make their employees and facilities available on a mutually convenient basis to
provide explanation of any documents or information provided hereunder.
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7.3.2 Transition Services. During the Transition Period,
the Parties shall use all reasonable efforts to take such actions and do all
things necessary or advisable to enable Buyer and Quest to adequately conduct
their businesses, and for Buyer to operate the Assets in the ordinary course
consistent with Seller's past practices and for Quest to operate the Excluded
Assets in the ordinary course of its business, including using all reasonable
efforts to cause the Retained Employees and the Transferred Employees specified
on Schedule 7.3.2 (the "SPECIFIED EMPLOYEES") to be available to Buyer and
Quest, as applicable, upon reasonable request to assist Buyer and Quest, as
applicable, with the foregoing (the "TRANSITION SERVICES"). Each of Buyer and
Quest shall reimburse the other on a monthly basis for the allocable portion of
such Specified Employees' time as is expended on its behalf (including salaries
and wages, benefit costs, payroll and related Taxes, and other identifiable
employee-related costs). At the end of the Transition Period, Buyer and Quest
will work together in good faith to apportion and allocate to each other in a
fair and equitable manner any tangible assets that they have shared during the
Transition Period that were not specifically identified in Schedules 2.1.1 or
2.1.2 or otherwise as Buyer or Quest assets. The scope, time allotment and cost
and expense of the Transition Services to be provided by Buyer and Quest shall
be determined by a committee comprised of a representative designated by Buyer
and a representative designated by Quest. In each case, the designated
representatives shall be acceptable to the other Party in its reasonable
discretion.
7.4 Public Announcements. The Parties shall agree on the terms of
any press releases or other public announcements related to this Agreement and
shall consult with each other before issuing any press releases or other public
announcements related to this Agreement; provided, however, that any Party may
make a public disclosure if in the opinion of such party's counsel it is
required by Law or the rules of the Nasdaq Stock Market or applicable exchange
to make such disclosure. The Parties agree, to the extent practicable, to
consult with each other regarding any such public announcement in advance
thereof.
7.5 Proration. Quest and Buyer shall prorate, as of the Closing
Date, amounts relating to (a) the personal property Taxes assessed by State or
local Governmental Authorities on the value of the personal property Assets
(inventory, fixed assets, etc.) for the 1998 calendar year,
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based on the value of such Assets as of December 31, 1997, and (b) utilities in
connection with the Leased Real Property (collectively, the "PRO RATED
EXPENSES"). Buyer's share of the Pro Rated Expenses determinable on the Closing
Date shall be added to the Aggregate Purchase Price in accordance with Section
2.2, and the remaining Pro Rated Expenses determined after the Closing Date
shall be promptly reimbursed to the appropriate Party after the determination
of such amount is made.
7.6. Fees and Expenses. Buyer and Quest shall each pay one-half of
each of (a) the out-of-pocket costs and expenses for the survey requested by
Buyer to be conducted on the Real Property prior to Closing and (b) the out-of-
pocket costs and expenses for the preparation of historical audited financial
statements of Quest required to enable Buyer to file a Form 8-K after the
Closing in compliance with securities Laws. Each Party shall pay promptly such
fees, costs and expenses after written notice thereof.
7.7 Nondisclosure. The Parties acknowledge and agree that all
customer, prospect and marketing lists, sales data, intellectual property,
proprietary information and trade secrets of either Quest or Buyer, as
applicable (collectively, the "CONFIDENTIAL INFORMATION"), are valuable,
special and unique assets of Buyer or Quest, as applicable. Buyer and Quest
agree to treat the other Party's Confidential Information as confidential and
not to disclose any such Confidential Information to any Person or make use of
any such Confidential Information for its own purposes or for the benefit of
any other Person (other than such Party owning the Confidential Information),
except to the extent required to enable either Party to perform its obligations
under Section 7.3 (including, without limitation, disclosing such Confidential
Information to the Specified Employees and its other employees), or by
applicable laws and regulations, or by any subpoena or similar legal process or
to the extent such Confidential Information becomes publicly available (other
than as a result of a breach of this Agreement). The Parties further agree
that, following the Closing, (a) the Confidential Information of Buyer shall
include all customer, prospect and marketing lists, sales data, intellectual
property, proprietary information, trade secrets and other Intellectual
Property constituting part of the Assets purchased by Buyer pursuant hereto,
(b) Buyer shall be free to utilize such Confidential Information constituting
part
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of the Assets as it deems appropriate and (c) Quest and its Affiliates shall
keep, and shall cause the Retained Employees along with the respective
officers, directors, employees, agents and representatives of Quest and its
Affiliates to keep, such Confidential Information confidential in accordance
with this Section 7.7.
7.8 Material Review Board Inventory. Approximately $166,000 in
CVS inventory located at various Material Review Board locations is included in
the Excluded Assets, and accordingly, Buyer is not buying such inventory from
Quest at Closing. The Parties agree, however, that Buyer will use its
commercially reasonable efforts to rework this inventory following the Closing,
and that within 90 days of the Closing, Buyer will buy the reworked inventory
that is salable in the ordinary course of business, at Quest's standard cost
less Buyer's cost of reworking such inventory.
ARTICLE 8
CONDITIONS PRECEDENT TO CLOSING
8.1 Conditions Precedent to Buyer's and Buyer Parent's
Obligations. The obligation of Buyer and Buyer Parent to consummate the
transactions contemplated by this Agreement shall be subject to the
satisfaction of the following conditions, any of which may be waived in writing
by Buyer or Buyer Parent.
8.1.1 Accuracy of Representations and Warranties. The
representations and warranties made by Quest in this Agreement shall be true
and correct when made and as of the Closing Date, except for (a)
representations and warranties made as of a specified date, which shall be true
and correct as of the specified date, and (b) breaches and inaccuracies that do
not have, individually or in the aggregate, a Material Adverse Effect.
8.1.2 Consents; Performance of Covenants. Quest shall have
performed and complied with all covenants and agreements required by this
Agreement to be performed by Quest prior to or at the Closing Date, except for
breaches that do not have, individually or in the
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aggregate, a Material Adverse Effect. Schedule 3.8 lists the material Consents
that Quest shall have obtained by the Closing Date.
8.1.3 Deliveries. Quest shall have delivered to Buyer or
caused to be delivered to Buyer the documents required by Section 9.2.
8.1.4 Compliance with HSR Act. If the HSR Act is
applicable, all applicable waiting periods under the HSR Act shall have expired
or been terminated.
8.1.5 No Order. No Order shall be in effect forbidding or
enjoining the consummation of the transactions contemplated hereby, and no suit
or proceeding shall have been instituted against any Party by a non- Affiliate
of any Party to restrain or enjoin the consummation of the transactions
contemplated hereby that has a reasonable likelihood of success on the merits.
8.1.6 Financial Statements. Quest shall have delivered to
Buyer either (a) copies of audited historical financial statements of Seller
necessary to enable Buyer to file its Form 8-K after the Closing in compliance
with securities Laws, or (b) a letter from Ernst & Young, L.L.P. stating that
such audited historical financial statements of Seller will be delivered to
Buyer within 40 days of the Closing Date.
8.1.7 Title and Survey. Quest shall have obtained and
delivered to Buyer (a) an as-built survey of the Real Property satisfying the
requirements of the Texas Surveyors Association Standards and Specifications
for a Category 1A, Condition 11 Survey, and (b) the draft title commitment
attached hereto as Schedule 8.1.7(a), which is subject to the standard
exceptions included in such form and the Permitted Liens.
8.1.8 Lease Agreement. Quest shall have executed and
delivered to Buyer a lease agreement, substantially in the form of Exhibit B,
pursuant to which Buyer will lease from Quest, in common with Quest, the
building located on the Real Property, for the purpose of
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conducting Buyer's business operations after the Closing, and Quest will lease
from Buyer certain other Assets relating to the Real Property.
8.1.9 Option Agreement. Quest shall have executed and
delivered to Buyer an Option Agreement, substantially in the form of Exhibit C,
pursuant to which Buyer shall have an option to purchase the Real Property at
the price and on the terms stated therein, and Buyer shall sell and Quest shall
purchase the assets identified therein as the "Real Property Assets" if such
option is not exercised.
8.2 Conditions Precedent to Quest's Obligations. The obligation of
Quest to consummate the transactions contemplated by this Agreement shall be
subject to the satisfaction of the following conditions, any of which may be
waived in writing by Quest.
8.2.1 Accuracy of Representations and Warranties. The
representations and warranties made by Buyer or Buyer Parent in this Agreement
shall be true and correct when made and as of the Closing Date except for (a)
representations and warranties made as of a specific date, which shall be true
and correct as of the specified date, and (b) breaches and inaccuracies that do
not have, individually or in the aggregate, a material adverse effect on or
with respect to Seller or the transactions contemplated hereunder.
8.2.2 Performance of Covenants. Each of Buyer and Buyer
Parent shall have performed and complied with all covenants and agreements
required by this Agreement to be performed by it prior to or at the Closing
Date, except for breaches that do not have, individually or in the aggregate, a
material adverse effect on Buyer's or Buyer Parent's ability to consummate the
transactions contemplated by this Agreement.
8.2.3 Deliveries. Each of Buyer and Buyer Parent shall have
delivered to Seller the payments and documents required by Section 9.3.
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8.2.4 Compliance with HSR Act. If the HSR Act is
applicable, applicable waiting periods under the HSR Act shall have expired or
been terminated.
8.2.5 No Order. No Order shall be in effect forbidding or
enjoining the consummation of the transactions contemplated hereby, and no suit
or proceeding shall have been instituted against any Party by a non- Affiliate
of any Party to restrain or enjoin the consummation of the transactions
contemplated hereby that has a reasonable likelihood of success on the merits.
8.2.6 License Agreement. Buyer shall have executed and
delivered to Quest a license agreement, substantially in the form of Exhibit A,
pursuant to which Buyer shall grant Quest a non-exclusive license to use the
names "Quest" and "Quest Medical" and the trademarks related thereto in
connection with the marketing and sale of Quest's neuromodulation products and
in the use of the name in Quest Medical, Inc.'s corporate name.
8.3 If Conditions Not Satisfied. In the event that any of the
conditions set forth in this Article 8 are not satisfied, and the Parties
nevertheless consummate the transactions contemplated by this Agreement to take
place at the Closing, each Party shall be deemed to have waived any claim for
Damages or other relief arising from or in connection with any such
nonsatisfaction known to such Party at the time of the Closing.
ARTICLE 9
CLOSING
9.1 Time and Place. On the terms and subject to the conditions of
this Agreement, the Closing shall take place at the offices of Quest's counsel,
▇▇▇▇▇▇ & ▇▇▇▇, L.L.P., located at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇ at 10:00 a.m. local time on the Closing Date or at such other time and
place as the Parties shall agree upon in writing.
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9.2 Deliveries by Quest. At the Closing, Quest shall deliver to
Buyer the following:
(a) bills of sale and other instruments of assignment,
transfer and conveyance and such other documents duly executed, necessary to
transfer good and marketable title to the Assets to Buyer, subject only to
Permitted Liens;
(b) the recorded Charter Documents of Quest, recently
certified by the Secretary of State of the State of Texas and a certificate of
good standing of Quest dated within 10 business days of the Closing Date issued
by the Texas Comptroller of Public Accounts;
(c) a certificate of the Secretary of Quest, dated the
Closing Date, certifying (i) Quest's Charter Documents and good standing, (ii)
the adoption of resolutions by Quest's board of directors authorizing the
transactions contemplated by this Agreement and (iii) the incumbency and
signatures of officers, all in form and substance reasonably satisfactory to
Buyer;
(d) a certificate of an executive officer of Quest, dated
the Closing Date, certifying that (i) each of the representations and
warranties made by Seller in this Agreement is true and correct when made and
as of the Closing Date (except for representations and warranties made as of a
specified date, each of which is true and correct as of the specified date) in
all material respects and (ii) all of the terms, covenants and conditions of
this Agreement to be complied with and performed by Quest on or before the
Closing Date have been complied with and performed in all material respects;
(e) a summary of the Estimated Assets and Estimated
Liabilities, together with supporting schedules;
(f) evidence that the personal property Taxes
constituting Pro Rated Expenses have been paid;
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(g) a written opinion addressed to Buyer from counsel for
Quest substantially in the form of Exhibit D;
(h) the Lease described in Section 8.1.8 hereof;
(i) the Option Agreement described in Section 8.1.9
hereof; and
(j) such other documents, instruments and certificates as
Buyer may reasonably request for the transactions contemplated by this
Agreement.
9.3 Deliveries by Buyer and Buyer Parent. At the Closing, Buyer
and Buyer Parent shall deliver to Quest the following:
(a) the net amount referred to in the last sentence of
Section 2.2 by wire transfer of immediately available funds to the Specified
Account;
(b) an assignment and assumption agreement pursuant to
which Buyer will assume the Assumed Liabilities;
(c) the recorded Charter Documents of Buyer, recently
certified by the Secretary of State of the State of Texas, and a certificate of
good standing of Buyer dated within 10 business days of the Closing Date issued
by the Secretary of State of the State of Texas;
(d) the recorded Charter Documents of Buyer Parent,
recently certified by the Secretary of State of the State of Delaware, and a
certificate of good standing of Buyer Parent dated within 10 business days of
the Closing Date issued by the Secretary of State of Delaware;
(e) a certificate of the Secretary of Buyer, dated the
Closing Date, certifying (i) Buyer's Charter documents and good standing, (ii)
the adoption of resolutions by buyer's board
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of directors authorizing the transactions contemplated by this Agreement, and
(iii) the incumbency and signatures of officers, all in form and substance
reasonably satisfactory to Seller;
(f) a certificate of the Secretary of Buyer Parent dated,
the Closing Date, certifying (i) Buyer Parent's Charter Documents and good
standing, (ii) the adoption of resolutions by Buyer Parent's board of directors
authorizing the transactions contemplated by this Agreement, and (iii) the
incumbency and signatures of officers, all in form and substance reasonably
satisfactory to Seller;
(g) a certificate of an executive officer of Buyer and an
executive officer of Buyer Parent, dated the Closing Date, certifying that (i)
each of the representations and warranties made by Buyer and Buyer Parent in
this Agreement is true and correct when made and as of the Closing Date (except
for representations and warranties made as of a specified date, each of which
is true and correct as of the specified date) in all material respects and (ii)
all of the terms, covenants and conditions of this Agreement to be complied
with and performed by Buyer and Buyer Parent on or before the Closing Date have
been complied with and performed in all material respects;
(h) the License Agreement described in Section 8.2.6
hereof; and
(i) such other documents, instruments and certificates as
Quest may reasonably request for the transactions contemplated by this
Agreement.
ARTICLE 10
TERMINATION PRIOR TO CLOSING DATE
10.1 Termination. This Agreement may be terminated prior to the
Closing Date only as follows: (a) by Buyer or Buyer Parent as provided in
Section 5.6, (b) by the mutual written consent of the Parties; (c) by Quest, on
the one hand, or Buyer and Buyer Parent, on the other hand, immediately upon
written notice to the other Parties if the Closing has not occurred on or
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before February 15, 1998 and such failure to occur is not caused by a breach of
this Agreement by the Party electing to terminate this Agreement; provided,
however, if all conditions to the Closing other than consents, approvals or
waivers from any Governmental Authority have been satisfied or waived, such
date shall be extended to March 31, 1998; or (d) by Quest, on the one hand, or
Buyer and Buyer Parent, on the other hand, immediately upon written notice to
the other Parties if an Order is issued that enjoins or prohibits the Closing
and becomes final and non-appealable. No Party has the right to terminate this
Agreement pursuant to clause (c) above if the Party seeking to terminate is, at
the time of such attempted termination, in material breach of any of its
representations, warranties, covenants or agreements under this Agreement.
10.2 Effect of Termination. If this Agreement is validly terminated
pursuant to Section 10.1, this Agreement will forthwith become null and void,
except that the provisions of Sections 7.4, 11.8 and 11.11 will continue to
apply following any such termination. No Party will be relieved of any
liability for Damages that such Party may have to any other Party by reason of
such Party's breach of this Agreement.
ARTICLE 11
MISCELLANEOUS
11.1 Survival; Indemnification.
11.1.1 Survival of Representations and Warranties.
Notwithstanding anything contained in this Agreement to the contrary, the
representations and warranties set forth in Articles 3 and 4 shall expire
immediately after the Closing; provided, however, that this Section 11.1 shall
not preclude Quest, Buyer or Buyer Parent from asserting any claims for Damages
arising from negligent misrepresentation or fraud in connection with such
representations and warranties.
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11.1.2 Indemnity.
(a) Quest agrees to indemnify and hold Buyer and
Buyer Parent harmless from and against any and all claims, costs, expenses
(including reasonable attorneys' fees), damages, losses or liabilities arising
out of, relating from or related to third party claims that the design or
manufacture of any of Seller's products shipped or manufactured by Seller prior
to Closing have caused damage to such third party.
(b) Promptly after Buyer or Buyer Parent becomes
aware of any claim, demand, action, proceeding, event or condition with respect
to which a claim for indemnification may be made pursuant to this Section
11.1.2, Buyer or Buyer Parent shall, if a claim in respect thereof is to be
made against Quest, give written notice to Seller of the nature of the matter
for which a right to indemnification is claimed (an "INDEMNIFICATION CLAIM"),
including a reasonably detailed description of the claim and the basis for
indemnification; provided, however, that the failure of Buyer or Buyer Parent
to give notice as provided herein shall not relieve Quest of any obligations,
except to the extent (and only to the extent) Quest is actually prejudiced
thereby. Quest may, following notice and consultation with Buyer, (i) assume
the defense of any such claim or litigation in such manner as it may deem
appropriate, and (ii) compromise or settle such litigation or claim with
Buyer's prior written consent, which shall not be unreasonably withheld. In the
event Quest does not elect to defend such claim, then Buyer may defend the same
and may compromise or settle such litigation with Quest's prior written
consent, which consent shall not be unreasonably withheld. If Buyer defends
against the claim, Quest shall promptly reimburse the Buyer or Buyer Parent for
the amount of all costs, expenses (including reasonable attorneys' fees),
damages, losses or liabilities incurred by the Buyer or Buyer Parent in
connection with the defense against, investigation of and settlement of any
such claim or litigation.
(c) In no case shall Quest's liability to make
indemnification payments hereunder exceed, in the aggregate, $5 million, and
the liability to make indemnification payments shall extend only to claims made
by Buyer or Buyer Parent within the applicable statute of limitations period
for the underlying claim giving rise to indemnification hereunder. In addition,
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(i) in the event damages are caused in part by Buyer's or Buyer Parent's acts
or omissions, Quest's indemnity obligation under this Section 11.1.2 shall be
limited to such proportion of the damages as is appropriate to reflect the
relative fault of Seller or compared to that of Buyer or Buyer Parent, and (ii)
Quest shall have no obligation to indemnify Buyer or Buyer Parent to the extent
Buyer or Buyer Parent recover the amount of damages from any third parties,
including insurers (except to the extent that such recovery results in an
adjustment of Buyer's insurance premium, in which case Quest will bear the cost
of such adjustments for the period referred to in the first sentence of this
Section 11.1.2(c)). This Section 11.1.2 sets forth the exclusive remedy for
monetary damages owing from Quest to Buyer or Buyer Parent that arise from such
claims. Notwithstanding the limitation set forth in Section 11.1.2(ii) above,
neither Buyer nor Buyer Parent is required to file a claim against its product
liability insurer as a condition to make an indemnity claim under this Section
11.1.2.
11.2 Severability. If any provision of this Agreement as applied to
any part or to any circumstance shall be held invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions of this Agreement and the application of such provision to any other
part or to any other circumstance shall not be affected or impaired thereby.
11.3 Successors and Assigns. The terms and conditions of this
Agreement including, without limitation, the provisions of Section 5.8, shall
inure to the benefit of and be binding upon the successors and permitted
assigns of the Parties; provided, however, that this Agreement may not be
assigned by any Party without the prior written consent of the other Party. For
purposes of this Section 11.3, the term successors and assigns shall mean a
successor and assign by virtue of a sale of stock, merger, consolidation or
sale of all or a substantial part of the assets of the applicable Party.
11.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall for all purposes be deemed to be an original
and all of which when taken together shall constitute the same instrument.
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11.5 Headings. The table of contents, captions and headings used in
this Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction or
interpretation hereof.
11.6 Waiver. Any of the terms or conditions of this Agreement may
be waived in writing at any time by the Party which is entitled to the benefits
thereof. No waiver of any of the provisions of this Agreement shall be deemed
or shall constitute a waiver of such provision at any time in the future or a
waiver of any other provision hereof.
11.7 No Third-Party Beneficiaries. Nothing in this Agreement,
express or implied, shall create or confer upon any Person (including but not
limited to any employees of any Party), other than the Parties or their
respective successors and permitted assigns, any rights, remedies, obligations
or liabilities, except as expressly provided herein.
11.8 Other Expenses. Except as otherwise expressly provided herein,
each of the Parties shall each pay all costs and expenses incurred by it or on
its behalf in connection with this Agreement and the transactions contemplated
hereby, including fees and expenses of its own financial consultants,
accountants and legal counsel.
11.9 Notices. Unless otherwise provided herein, any notice,
request, instruction, consent or other document required or permitted to be
given pursuant to this Agreement shall be in writing and delivered personally,
by telecopy or sent by a nationally-recognized overnight courier service or by
registered or certified mail, postage prepaid, as follows:
If to Quest:
Quest Medical, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: F. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ III
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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With a copy to:
▇▇▇▇▇▇ & ▇▇▇▇, L.L.P.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
If to Buyer or Buyer Parent:
Atrion Corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Berkowitz, Lefkovits, ▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇.▇. ▇▇▇▇▇▇▇▇, ▇▇.
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address for a Party as shall be specified in writing by that
Party. Any notice, request, instruction, consent or other document delivered as
provided herein shall be deemed effectively given upon actual receipt by the
Party (but not necessarily the individual person) to be notified.
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11.10 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS APPLICABLE TO AGREEMENTS
MADE AND TO BE PERFORMED WHOLLY WITHIN SUCH JURISDICTION, WITHOUT GIVING EFFECT
TO ANY CONFLICT-OF-LAWS RULE OR PRINCIPLE THAT MIGHT RESULT IN THE APPLICATION
OF THE LAWS OF ANOTHER JURISDICTION.
11.11 Arbitration. To the extent that the Parties are unable to
resolve their disputes or controversies arising out of or relating to this
Agreement, or the performance, breach, validity, interpretation or enforcement
of this Agreement, through discussion and negotiation, all such disputes and
controversies will be resolved by binding arbitration in accordance with Title
9 of the U.S. Code (United States Arbitration Act) and the Commercial
Arbitration Rules of the AAA, and subject to Section 11.13, judgment upon the
award rendered by the arbitrator may be entered in any court having
jurisdiction thereof. A Party may initiate arbitration by sending written
notice of its intention to arbitrate to the other Parties and to the AAA office
located in Dallas, Texas (in the case of such dispute arising following the
Closing) and the AAA office located in Memphis, Tennessee (in the case of any
other dispute). Such written notice will contain a description of the dispute
and the remedy sought. The arbitration will be conducted at the offices of the
AAA in Dallas, Texas (in the case of such dispute arising following the
Closing) and the AAA office located in Memphis, Tennessee (in the case of any
other dispute) before an independent and impartial arbitrator acceptable to all
Parties. If such dispute relates to either Section 8.1.5 or 8.2.5, the Parties
agree to initiate the arbitration immediately and to request that the
arbitrator to reach a conclusion within three business days of commencement,
unless the Parties agree otherwise. The Party initiating arbitration shall pay
the costs and expenses of the arbitration, unless otherwise determined by the
arbitrator. The decision of the arbitrator will be final and binding on the
Parties and their successors and assignees. The Parties intend that this
agreement to arbitrate be irrevocable.
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11.12 Interpretation of Agreement.
11.12.1 References. Unless specifically stated otherwise,
references to Articles, Sections, Exhibits and Schedules refer to Articles,
Sections, Exhibits and Schedules in this Agreement. References to "includes"
and "including" mean "includes without limitation" and "including without
limitation."
11.12.2 Representation; No Reliance. Each Party is a
sophisticated legal entity that was advised by experienced counsel and, to the
extent it deemed necessary, other advisors in connection with this Agreement.
Accordingly, each Party hereby acknowledges that no party has relied or will
rely in respect of this Agreement or the transactions contemplated hereby upon
any document or written or oral information previously furnished to or
discovered by it or its representatives, other than this Agreement (including
the Exhibits and Schedules and items described or referenced in the Agreement,
Exhibits or Schedules) or the documents and instruments delivered at the
Closing.
11.12.3 Disclosure. Any item disclosed in one Section or
Schedule shall be deemed to be disclosed in any other Section or Schedule where
such disclosure is relevant, even if there is no express cross-reference,
provided that the relevance of the disclosure is reasonably apparent.
Disclosure of items that may or may not be required to be disclosed by this
Agreement does not mean that such items are material or create a standard of
materiality and shall not be deemed an admission that any such disclosed matter
is or may give rise to a breach of any Contract or violation of any Law.
Notwithstanding the foregoing, Seller shall make a reasonable effort to set
forth express cross references when preparing its Schedules to this Agreement.
11.12.4 Interpretation of Provisions. No provision of this
Agreement shall be interpreted in favor of, or against, either of the Parties
by reason of the extent to which either such Party or its counsel participated
in the drafting thereof or by reason of the extent to which any such provision
is inconsistent with any prior draft hereof or thereof.
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11.13 Jurisdiction and Consent to Service of Process. The Parties
agree that any Action to enforce an arbitration award arising out of or
relating to this Agreement or the transactions contemplated hereby shall be
instituted in a federal or state court sitting in any state bearing a
reasonable relation to the Parties or subject matter of the dispute, other than
Alabama. Each Party waives any objection which such party may now or hereafter
have to the laying of venue of any such Action, and irrevocably submits to the
jurisdiction of any such court in any such Action. Any and all service of
process and any other notice in any such Action shall be effective against such
Party when transmitted in accordance with Section 11.9. Nothing contained
herein shall be deemed to affect the right of any Party to serve process in any
manner permitted by Law.
11.14 Entire Agreement. This Agreement, together with the Schedules
and Exhibits hereto, constitutes the sole understanding of the Parties with
respect to the matters contemplated hereby and thereby and supersedes and
renders null and void all prior agreements and understandings, written and
oral, between the Parties with respect to such matters, other than the
Confidentiality Agreement, which will continue in accordance with its terms. No
Party shall be liable or bound to any other Party in any manner by any
promises, conditions, representations, warranties or covenants except as
specifically set forth herein or therein.
11.15 Amendment. No amendment, modification or alteration of the
terms or provisions of this Agreement, including any Schedules and Exhibits,
shall be binding unless the same shall be in writing and duly executed by the
Party against whom such amendment, modification or alteration is sought to be
enforced, except as provided in Section 5.6.
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed as of the date first written above.
SELLER:
QUEST MEDICAL, INC.
By: /s/ F. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ III
-----------------------------
Name: F. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ III
------------------------
Title: Senior Vice President-
-----------------------
Finance, Secretary and
-----------------------
Treasurer
-----------------------
BUYER:
QMI ACQUISITION CORP.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------
Title: President
------------------------
BUYER PARENT:
ATRION CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------
Title: Chairman, President and
------------------------
Chief Executive Officer
------------------------
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EXHIBIT A
LICENSE AGREEMENT
This License Agreement (this "Agreement"), dated as of January 30, 1998
is by and between QMI Medical, Inc., a Texas corporation formerly known as QMI
Acquisition Corp. ("Licensor"), and Quest Medical, Inc., a Texas corporation
("Licensee").
R E C I T A L S
This Agreement is the License Agreement contemplated by the Asset
Purchase Agreement, dated as of December 29, 1997, by and among Licensee,
Licensor and Atrion Corporation, a Delaware corporation and parent corporation
of Licensor (the "Purchase Agreement"), pursuant to which Licensee will sell
substantially all of the assets of its cardiovascular division to Licensor
subject to the terms and conditions set forth therein.
Licensor owns rights in and to the names "Quest", "Quest Medical",
"QMED" and the trademarks related thereto, as such trademarks more particularly
described on attached Exhibit A. Said names and trademarks and the registrations
therefore are hereinafter collectively referred to as the "Marks."
It is a condition precedent to the transactions contemplated by the
Purchase Agreement that Licensor grant Licensee a non-exclusive license to use
the Marks in connection with Licensee's operation of its business, and Licensor
and Licensee, by this Agreement, now desire to formalize the terms and
conditions of their licensing relationship with respect to the Marks.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises hereinafter set forth, Licensor and Licensee agree as follows:
AGREEMENT
1. Grant of License. Subject to the terms and conditions of this
Agreement, Licensor hereby grants to Licensee a royalty-free, non-exclusive
license and right to use the Marks in connection with marketing and selling its
neuromodulation products and to use the name "Quest" and "Quest Medical" in its
corporate name.
2. Ownership of Marks. Licensee shall do nothing that will adversely
affect Licensor's rights in the Marks or Licensor's exclusive ownership of the
Marks. Licensee acknowledges that the Marks, all rights therein, and the
goodwill associated therewith, are, and shall remain, the exclusive property of
Licensor and that Licensor will also continue to use the Marks to market its
cardiovascular and other healthcare products to its customers following the sale
of the assets sold to Licensor pursuant to the Purchase Agreement. Licensee
agrees that all use of the Marks shall inure to the benefit of Licensor and be
on behalf of Licensor, and agrees to assist Licensor in recording this Agreement
with appropriate governmental authorities, if requested by Licensor. Nothing
herein shall give Licensee any proprietary interest in the Marks
63
other than the right to use the Marks in accordance with this Agreement, and
Licensee agrees that it will not attack the title of Licensor to the Marks or
attack the validity of this Agreement.
3. Quality Standards. Licensee shall use the Marks only in accordance
with good trademark practice. Licensee agrees that the nature and quality of the
products and services offered by Licensee in connection with this Agreement
shall conform to good industry standards and Licensee shall not manufacture or
market any products or services that do not conform to good industry standards.
To insure compliance with this Section 3, Licensee agrees to permit reasonable
inspection of Licensee's operation, and, upon Licensor's request, to supply
Licensor with specimens of intended use of the Marks on product packaging or
advertisements prior to such use. Licensee shall also comply with all applicable
laws and regulations and obtain appropriate government approvals pertaining to
the sale, distribution or advertising of such products and services.
4. Transferability. The license hereby granted to use the Marks is
solely for Licensee's own use, and Licensee shall not have the right to license
others to use the Marks. The license hereby granted to use the Marks is
non-transferable (whether by operation of law or otherwise). Any attempted
transfer in violation of this paragraph shall be void and ineffective for all
purposes.
5. Infringement Proceedings. Licensee agrees to notify Licensor of any
unauthorized use of the Marks by others promptly as it comes to Licensee's
attention. At the request of the Licensor or with the Licensor's approval,
Licensee shall, at its expense, promptly bring infringement or unfair
competition proceedings with regard to any unauthorized use of the Marks.
Licensor shall have the right to join in any such proceeding at its expense.
6. Term. The license rights granted to Licensee in this Agreement shall
be effective for the period from the date hereof until the fourth anniversary of
this Agreement provided Licensee is not in default of any of the quality
standards set forth in Paragraph 3 or of any of the other agreements set forth
herein and provided further that the license rights granted to Licensee to use
the Marks in connection with its corporate name and trading symbol shall
terminate ten days following the date of Licensee's change of its corporate name
to a name which does not include any of the Marks (the "Corporate Name Change").
Should any such default occur and remain uncured following thirty (30) days
written notice thereof by Licensor, Licensor may immediately terminate this
Agreement prior to the expiration of such four year period.
7. Effect of Termination. Upon termination of the rights granted in
this Agreement due to an uncured material default in Licensee's obligation to
comply with Licensor's quality standards, Licensee shall immediately (a)
discontinue all use of the Marks and any name or ▇▇▇▇ confusingly similar
thereto, excluding, however, the use of the names "Quest", "Quest Medical" and
"QMED" in connection with its corporate name or trading symbol unless the right
to use such names has already terminated due to a Corporate Name Change, (b)
delete the Marks from, and destroy, all advertising and sales literature and any
other item bearing a ▇▇▇▇, excluding, however, the use of the names "Quest",
"Quest Medical" and "QMED" in connection with its corporate name or trading
symbol unless the right to use such names has already terminated due
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to a Corporate Name Change, and (c) shall take whatever other actions may be
necessary to insure that all rights in the Marks and the goodwill connected
therewith shall remain Licensor's property. Upon a Corporate Name Change,
Licensee shall (i) within ten days thereof discontinue all use of the Marks and
any name or ▇▇▇▇ confusingly similar thereto in connection with its corporate
name or trading symbol and (ii) take whatever other actions as may be necessary
to insure that all rights in the Marks and the goodwill connected therewith
remain Licensor's property.
8. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT GIVING EFFECT TO ANY
CONFLICT OF LAWS RULE OR PRINCIPLE THAT MIGHT RESULT IN THE APPLICATION OF THE
LAWS OF ANOTHER JURISDICTION.
9. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to its subject matter and may be waived
or modified only in writing.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, and intending to be legally bound hereby, the
parties have executed this Agreement as of the date first above written.
LICENSOR:
QMI MEDICAL, INC.
-------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
LICENSEE:
QUEST MEDICAL, INC.
-------------------------------
F. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, III,
Senior Vice President - Finance,
Secretary and Treasurer
4
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EXHIBIT A
▇▇▇▇▇
▇▇▇▇ U.S. Trademark Registration No.
----------------------------------- -------------------------------
QUEST 1,226,236
Q DESIGN 1,190,586
A-1
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EXHIBIT B
LEASE AGREEMENT
This Lease Agreement (this "Lease") made and entered into on this 30th
day of January, 1998 by and between QMI MEDICAL, INC., a Texas corporation
formerly known as QMI Acquisition Corp. ("Tenant"), and QUEST MEDICAL, INC., a
Texas corporation ("Landlord").
Landlord is the owner of certain real property located in Collin
County, Texas described on Exhibit "A" (the "Property") and the building (the
"Building") and other improvements located on the Property. As part of the
consideration for the sale of certain assets by Landlord to Tenant, Landlord
has agreed to lease the Building to Tenant, in common with Landlord, on the
terms set forth herein. In addition, because Tenant is buying certain assets
that Landlord desires to use in common with Tenant, Tenant has agreed to lease
certain equipment located in the Building to Landlord, in common with Tenant,
on the terms set forth herein.
1. Grant: Landlord hereby leases to Tenant and Tenant hereby
leases from Landlord the Building, in common with Landlord, together with
appurtenances thereto including the right to use the lobby, entrances, loading
docks, cafeterias and restrooms located in the Building and the parking lots
and driveways located on the Property. Tenant hereby leases to Landlord, and
Landlord hereby leases from Tenant, the equipment located in the Building and
described on Exhibit "B" (the "Equipment"), in common with Tenant.
2. Term: The term of this Lease (the "Term") shall commence
January 30, 1998 (the "Commencement Date"), and end on the earlier of (i)
January 30, 1999 and (ii) the date on which Tenant purchases the Property
pursuant to the exercise of the option referred to in Paragraph 32 hereof, upon
the terms, conditions and covenants contained herein.
3. Rent: During the Term, Tenant agrees to pay Landlord rent for
the Building at the rate of $24,606 per month in advance, and Landlord agrees
to pay Tenant rent for the Equipment at the rate of $13,175 per month in
advance. For convenience, Tenant agrees to pay Landlord the net amount of
these two amounts, or $11,431, per month in advance. One monthly installment
of rent shall be due and payable on or before the Commencement Date of this
Lease, and a like monthly installment shall be due and payable on or before the
first day of each succeeding calendar month during the Term hereof; provided
that, in the event the Term hereof shall commence or end on a day that is not
the first or last day of a calendar month, rent for any partial calendar month
following the Commencement Date or preceding the end of the Term of this Lease
shall be prorated by the number of days in said partial calendar months.
4. Acceptance of the Building: Tenant accepts the Building and
Landlord accepts the Equipment as suitable for the purposes for which the same
are leased in their present condition, provided Landlord represents and
warrants that the Building is in good operating condition and repair,
reasonable wear and tear excepted.
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5. Compliance with Law: Tenant shall comply in all material
respects with all governmental laws, ordinances and regulations applicable to
Tenant's use of the Building. Landlord shall comply in all material respects
with all governmental laws, ordinances and regulations applicable to the
Building or the Property, including Landlord's use of the Building and the
Property.
6. Real Estate Taxes: Landlord agrees to pay before they become
delinquent all taxes (both general and special), assessments or governmental
charges of any kind and nature whatsoever lawfully levied or assessed against
the Building or the Property (collectively, the "Property Taxes"). Tenant
agrees to pay before they become delinquent all taxes with respect to the
Equipment (the "Equipment Taxes").
7. Repairs and Maintenance: (a) Tenant shall during the Term
maintain and repair the Equipment. Subject to the provisions of Paragraph 10
below, Tenant shall, at its own cost and expense, repair or replace, as
applicable, all portions of the Building damaged or destroyed by Tenant's, its
employees', agents' or invitees' actions during the Term, and Landlord shall,
at its own cost and expense, repair or replace, as applicable, all portions of
the Equipment damaged or destroyed by Landlord's, its employees', agents' or
invitees' actions during the Term.
(b) Landlord shall during the Term of this Lease keep, maintain,
and repair all portions of the Building and the Property, including, without
limitation, the foundations, the interior and exterior surface of exterior
walls of the Building, all windows, doors and plate glass in the Building,
downspouts, gutters and roof of the Building, and all plumbing facilities, HVAC
and electrical systems in the Building.
8. Alterations, Additions and Improvements: Tenant shall not
create any openings in the roof or exterior walls, or make any material
alterations, additions or improvements to the Building, without the prior
written consent of Landlord, provided that Tenant may affix its signage to the
exterior of the Building at the location and in a manner approved by Landlord.
Landlord shall not unreasonably withhold, delay or condition its approval. At
the expiration or termination of this Lease, Tenant shall have the right to
remove any items installed in the Building by Tenant with Landlord's consent
provided that Tenant shall, after removal of such items, repair in a good and
workmanlike manner any damage caused by installation or removal thereof. All
alterations, additions or improvements in or to the Building shall become the
property of Landlord at the expiration or termination of this Lease unless
previously removed by Tenant.
9. Insurance: (a) Landlord agrees to maintain insurance covering
the Building, and Tenant agrees to maintain insurance covering the Equipment,
in an amount not less than 100% of the "replacement cost" thereof insuring
against the perils of fire, lightning, extended coverage, vandalism and
malicious mischief, issued by an insurance company or companies admitted in the
State of Texas for the writing of such insurance on risks located within Texas.
Each party shall, upon the other party's written request, provide the other
party with a copy of a certificate of insurance evidencing the insurance
carried pursuant to this Paragraph 9(a).
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(b) If the Building should be damaged or destroyed by any peril
covered by the insurance to be provided by Landlord under Paragraph 9(a) above,
Landlord shall proceed with reasonable diligence to rebuild and repair the
Building to substantially the condition in which it existed prior to such
damage or destruction. The rent payable hereunder shall be abated during the
period the Building (or portion thereof) is untenantable (including during any
periods of such rebuilding and repair) in proportion to the portion of the
Building rendered untenantable due to such damage or destruction.
Notwithstanding anything to the contrary contained in this Paragraph 9(b),
Tenant shall have the right to terminate this Lease and all its obligations
hereunder if, pursuant to its reasonable estimation, the repair or rebuilding
required to be done by Landlord hereunder will exceed 30 days.
(c) If the Building should be damaged or destroyed by a casualty
other than a peril covered by the insurance to be provided by Landlord under
Paragraph 9(a) above, Landlord shall have the option to (i) proceed with
reasonable diligence to rebuild and repair the Building to substantially the
condition in which it existed prior to such damage or destruction, except that
Landlord shall not be required to rebuild, repair or replace any part of the
partitions, fixtures, additions or other improvements that may have been placed
in, on or about the Building by Tenant or (ii) terminate this Lease by 30 days
advance written notice to Tenant, whereby this Lease shall be terminated as of
the date specified in such notice and the parties shall have no further
obligations one unto the other after such date. Landlord shall exercise its
option hereunder within 30 days after being notified by Tenant of such damage
or casualty. Rent payable hereunder shall be abated during the period the
Building (or portion thereof) is untenantable (including during any periods of
such rebuilding and repair) in proportion to the portion of the Building
rendered untenantable due to such damage or destruction; provided, however,
that Tenant shall have the right to terminate this Lease and all its
obligations hereunder if, pursuant to its reasonable estimation, the repair or
rebuilding required to be done by Landlord hereunder will exceed 30 days. If
Landlord elects to terminate this Lease pursuant to this Paragraph 9(c), then
Tenant's obligation to pay rent shall be deemed terminated as of the date of
the damage to or destruction of the Building.
(d) If the Equipment should be damaged or destroyed by any peril
covered by the insurance to be provided by Tenant under Paragraph 9(a), Tenant
shall proceed with reasonable diligence to repair or replace such Equipment.
(e) Landlord and Tenant each shall maintain general liability
insurance, including personal injury and property damage in an amount of not
less than $1,000,000.00 per occurrence combined single limit for personal
injuries and death of persons and property damage occurring in or about the
Building and the Property, plus umbrella coverage of at least $2,000,000.00 per
occurrence. Each policy shall name the other party hereto as an additional
insured. Each party shall, upon written request of the other party, provide the
other party with a copy of a certificate of insurance evidencing the insurance
carried by such party pursuant to this Paragraph 9(e).
10. Waiver of Subrogation: Landlord and Tenant each hereby waives
any and all rights of recovery against the other, and against the officers,
employees, agents, representatives and business visitors of such other party
for loss of or damage to such waiving party or its
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property or the property of others under its control, arising from any cause
insured against under any policy of insurance required to be carried by such
waiving party pursuant to the provisions of this lease (or any other policy of
insurance carried by such waiving party in lieu thereof) at the time of such
loss or damage. The foregoing waiver shall be effective whether or not a
waiving party actually obtains and maintains the insurance which such waiving
party is required to obtain and maintain pursuant to this Lease (or any
substitute therefor). Landlord and Tenant shall, upon obtaining the policies
of insurance which they are required to maintain hereunder, give notice to
their respective insurance carrier or carriers that the foregoing mutual waiver
of subrogation is contained in this Lease.
11. Utilities and Services; Operating Costs: (a) Landlord shall
provide or cause to be provided to Tenant the existing water, sewer, gas,
electricity, waste disposal, telephone and other ordinary utility services used
in operating, repairing and maintaining the Building. In addition, Landlord
shall provide necessary pest control, janitorial and plant maintenance to be
provided to the Building and the Property, and electricity to operate the
Equipment.
(b) Within 10 days of its receipt of an invoice from Landlord,
Tenant shall reimburse Landlord for one-half of the costs or expenses that, in
Tenant's reasonable determination, have been properly charged to the ledger
accounts of Landlord described in Exhibit "C" in connection with the utilities
and services described in Paragraph 11(a).
(c) Tenant shall provide or shall cause to be provided maintenance
and other services and shall pay all Equipment Taxes and insurance with respect
to the Equipment. Within ten (10) days of its receipt of an invoice from
Tenant, Landlord shall reimburse Tenant for one-half of the costs or expenses
set forth on Exhibit C that, in Landlord's reasonable determination, have been
properly charged to the ledger accounts of Tenant.
12. Hazardous Waste: (a) Tenant shall be responsible for the
proper disposal of any hazardous waste created by Tenant's use of the Building
at its own expense and shall indemnify, hold harmless and defend Landlord from
any and all claims or expense arising from or relating to such hazardous waste
created by Tenant's use of the Building. However, Tenant shall not be liable in
any manner, nor does Tenant indemnify Landlord, to the extent any hazardous
waste or hazardous substance claim arises due to any cause other than Tenant's
use of the Property.
(b) Landlord shall and hereby does indemnify and hold Tenant
harmless from and against any and all loss, including diminution in value,
damages, expenses, fees, claims, costs and liabilities (including but not
limited to, attorney fees and costs of litigation) arising out of or in any
manner related to the "release" or "threatened release" of, and for any cleanup
responsibility and for any personal or property damage imposed or sought to be
imposed upon Tenant by any third party claimant or under any federal, state or
local law, ordinance, rule or regulation now or hereafter in effect, with
respect to, any hazardous waste or hazardous substance, or any pollutant, or
other contaminant on, in, under from or about the Property if such release or
threatened release occurs as a result of Landlord's or its employees', agents'
or invitees' actions during the Term of this Lease.
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13. Assignment and Subleasing: Tenant may not assign this Lease
or sublet the Building or any portion thereof, without the prior written
consent of Landlord, which (i) in the event Landlord or any of its affiliates
occupies any portion of the Building at the time of the request for consent,
shall be in Landlord's sole and absolute discretion and (ii) in the event
Landlord or any of its affiliates does not so occupy the Building, shall not be
unreasonably withheld, conditioned or delayed, except Tenant may assign this
Lease or sublet the Building or a portion thereof to Atrion Corporation, a
Delaware corporation and parent of Tenant ("Parent"). In no event shall any
assignment or subletting release Tenant from its obligations hereunder.
Landlord shall not assign or sublet its leasehold interest in the Equipment
without the prior written consent of Tenant.
14. LIABILITY AND INDEMNIFICATION. EXCEPT FOR ANY CLAIMS, RIGHTS
OF RECOVERY AND CAUSES OF ACTION THAT TENANT HAS WAIVED OR RELEASED, LANDLORD
SHALL INDEMNIFY, PROTECT, HOLD HARMLESS AND DEFEND TENANT, ITS AGENTS,
EMPLOYEES, CONTRACTORS, PARTNERS, DIRECTORS, OFFICERS AND ANY AFFILIATES OF THE
ABOVE-MENTIONED PARTIES (COLLECTIVELY, THE "TENANT AFFILIATES") AGAINST ANY AND
ALL CLAIMS OR LIABILITY (INCLUDING, WITHOUT LIMITATION, ALL COSTS, ATTORNEYS'
FEES, AND EXPENSES INCURRED IN CONNECTION THEREWITH) (I) FOR ANY INJURY OR
DAMAGE TO ANY PERSON IN, ON OR ABOUT THE BUILDING WHEN SUCH INJURY OR DAMAGE
SHALL BE CAUSED BY THE ACT, NEGLECT, FAULT, OR OMISSION OF ANY DUTY WITH
RESPECT TO THE SAME BY LANDLORD, ITS AGENTS, SERVANTS AND EMPLOYEES OR (II)
ARISING FROM A BREACH, VIOLATION OR NONPERFORMANCE OF ANY TERM, PROVISION,
COVENANT OR AGREEMENT OF LANDLORD HEREUNDER, OR A BREACH OR VIOLATION BY
LANDLORD OF ANY COURT ORDER OR ANY LAW, REGULATION OR ORDINANCE OF ANY FEDERAL,
STATE, OR LOCAL AUTHORITY (UNLESS THE INDEMNIFIED LOSS IS CAUSED WHOLLY OR IN
PART BY THE NEGLIGENCE OR INTENTIONAL MISCONDUCT OF TENANT AND/OR ANY TENANT
AFFILIATES, IN WHICH EVENT THIS INDEMNITY SHALL NOT APPLY TO THE ALLOCABLE
SHARE OF SUCH LOSS RESULTING FROM THE NEGLIGENCE OR INTENTIONAL MISCONDUCT OF
TENANT AND/OR ANY TENANT AFFILIATES). EXCEPT FOR ANY CLAIMS, RIGHTS OF
RECOVERY AND CAUSES OF ACTION THAT LANDLORD HAS WAIVED OR RELEASED, TENANT
SHALL INDEMNIFY, PROTECT, HOLD HARMLESS AND DEFEND LANDLORD, ITS AGENTS,
EMPLOYEES, CONTRACTORS, PARTNERS, DIRECTORS, OFFICERS AND ANY AFFILIATES OF THE
ABOVE-MENTIONED PARTIES (COLLECTIVELY THE "LANDLORD AFFILIATES") FROM AND
AGAINST ANY AND ALL OBLIGATIONS, SUITS, LOSSES, JUDGMENTS, ACTIONS, DAMAGES,
CLAIMS OR LIABILITY (INCLUDING, WITHOUT LIMITATION, ALL COSTS, ATTORNEYS' FEES,
AND EXPENSES INCURRED IN CONNECTION THEREWITH) IN CONNECTION WITH ANY LOSS,
INJURY OR DAMAGE (I) TO ANY PERSON OR PROPERTY WHATSOEVER OCCURRING IN, ON OR
ABOUT THE BUILDING WHEN SUCH INJURY OR DAMAGE SHALL BE CAUSED BY THE ACT,
NEGLECT, FAULT OF, OR OMISSION OF ANY DUTY WITH RESPECT TO THE SAME BY TENANT,
OR ANY TENANT AFFILIATES, OR INVITEES, OR (II) ARISING FROM A BREACH, VIOLATION
OR NON-PERFORMANCE OF ANY TERM, PROVISION, COVENANT OR AGREEMENT OF TENANT
HEREUNDER, OR A BREACH OR VIOLATION BY TENANT OF ANY COURT ORDER OR ANY LAW,
REGULATION, OR ORDINANCE OF ANY FEDERAL, STATE OR LOCAL AUTHORITY
(COLLECTIVELY, THE "LOSSES"), EXCEPT TO THE EXTENT THE LOSSES ARE CAUSED WHOLLY
OR IN PART BY THE NEGLIGENCE OR INTENTIONAL MISCONDUCT OF LANDLORD AND/OR
LANDLORD AFFILIATES IN WHICH EVENT THIS INDEMNITY SHALL NOT APPLY TO THE
ALLOCABLE SHARE OF SUCH LOSSES RESULTING FROM THE NEGLIGENCE OR INTENTIONAL
MISCONDUCT OF LANDLORD AND/OR LANDLORD AFFILIATES. IF ANY CLAIM IS MADE
AGAINST LANDLORD OR LANDLORD AFFILIATES, OR AGAINST TENANT OR TENANT AFFILIATES
(AS APPLICABLE), THE INDEMNIFYING PARTY, AT ITS SOLE COST AND EXPENSE, SHALL
DEFEND ANY SUCH
5
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CLAIM, SUIT OR PROCEEDING BY OR THROUGH ATTORNEYS SATISFACTORY TO THE
INDEMNIFYING PARTY. THE PROVISIONS OF THIS PARAGRAPH 13 SHALL SURVIVE THE
EXPIRATION OR TERMINATION OF THIS LEASE WITH RESPECT TO ANY CLAIMS OR LIABILITY
OCCURRING PRIOR TO SUCH EXPIRATION OR TERMINATION.
15. Condemnation: If, during the Term of this Lease or any
extension or renewal thereof, all or a substantial part of the Building should
be taken for any public or quasi-public use under any governmental law,
ordinance, regulation or by right of eminent domain, or should be sold to the
condemning authority under threat of condemnation, this Lease shall terminate
and the rent shall be abated during the unexpired portion of this Lease,
effective from the date of taking of the Building by the condemning authority.
If less than a substantial part of the Building is taken for public or
quasi-public use under any governmental law, ordinance or regulation, or by
right of eminent domain, or is sold to the condemning authority under threat of
condemnation, Landlord, at its option, may either (i) terminate this Lease by
notice to Tenant, or (ii) promptly at its sole expense restore and reconstruct
the Building so taken (other than leasehold improvements made by Tenant or any
assignee, subtenant or other occupant of the Building) in order to make the
same reasonably tenantable and suitable for the uses for which the Building are
leased. The rent payable hereunder during the unexpired portion of this Lease
shall be adjusted equitably.
Landlord and Tenant shall be entitled to receive and retain such
separate awards and portions of lump sum awards as may be allocated to their
respective interests in any condemnation proceedings. The termination of this
Lease shall not affect the rights of the respective parties to such awards.
16. Default by Tenant: (a) The following events shall be deemed
to be events of default (collectively, "Events of Default") under this Lease:
(i) Failure of Tenant to pay any installment of the rent
or other monetary sum payable to Landlord hereunder and such failure shall not
be cured within 10 days after written notice thereof to Tenant.
(ii) Failure of Tenant to comply with any term, condition
or covenant of this Lease, other than the payment of rent or other monetary
sum, and such failure shall not be cured within 30 days after written notice
thereof to Tenant, or such additional time if required so long as Tenant is
diligently proceeding with such cure, in no event to exceed 60 days in the
aggregate, which notice shall specify the nature of such non-monetary default
and the steps required to cure same.
(b) Upon the occurrence of any of the Events of Default listed in
this Paragraph 15 which continues after the applicable notice and cure periods
as set forth herein, Landlord may, in addition to any other remedies at law or
in equity, terminate this Lease.
17. Default by Landlord: (a) In the event Landlord fails to pay
rent or any other monetary sum payable to Tenant hereunder with respect to the
Equipment (whether pursuant to
6
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Paragraph 3 or 32) and such failure is not cured within 10 days after written
notice thereof to Landlord, such event shall be deemed an event of default by
Landlord under this Lease. In such event, Tenant may in addition to any other
remedies at law or in equity, terminate this Lease with respect to the
Equipment.
(b) Landlord shall not be deemed to be in default in the
performance of any obligation required to be performed by it hereunder unless
and until it has failed to perform such obligation within 10 days after written
notice by Tenant to Landlord specifying wherein Landlord has failed to perform
such obligation; provided, however, that if the nature of Landlord's obligation
is such that more than 10 days are reasonably required for its performance,
then Landlord shall not be deemed to be in default if it shall commence such
performance within such 10 day period and thereafter diligently prosecute the
same to completion. If Landlord has failed to perform its obligations within
said 10-day period (or failed to commence such performance and diligently
prosecute the same to completion within said 30-day period if such obligation
reasonably requires more than 10 days for its completion), then Tenant shall
have the right, at its option, to terminate this Lease by providing written
notice to Landlord or to perform such obligation on behalf of, and for the
account of, Landlord, and Landlord shall reimburse Tenant for its reasonable
expenses incurred in connection with completing such performance within 10 days
after receiving an itemized ▇▇▇▇ therefor. If Landlord fails to pay such
expenses within said 10-day period, Tenant may deduct the amount of such
expenses from the next installment(s) of rent becoming due under this Lease
until all such expenses have been completely recovered by Tenant.
Notwithstanding the foregoing, Tenant shall not be required to give prior
notice to Landlord in connection with Tenant's remediation of any emergency
situation (i.e., a situation involving a clear and present threat to person or
property), and Tenant shall have its offset rights as contained herein with
respect to amounts so expended by Tenant in emergency situations upon the
failure of Landlord to pay the same as provided herein.
18. Attorneys' Fees: If, on account of any breach or default by
Landlord or Tenant of their respective obligations under this Lease, it shall
become necessary for the other to employ an attorney to enforce or defend any
of its rights or remedies hereunder, and should such party prevail, the
prevailing party shall be entitled to recover from the nonprevailing party any
reasonable attorneys' fees and costs of court incurred in connection therewith.
19. Quiet Enjoyment; Nondisturbance: Landlord warrants that it
has full right and power to execute and perform this Lease and to grant the
estate herein and that Tenant, on payment of rent and performing the covenants
herein contained, shall peaceably and quietly have, hold and enjoy the
Building, in common with Landlord, during the full Term of this Lease and any
extension or renewal hereof. In the event that Landlord desires to subordinate
this Lease to any mortgage, deed of trust or ground lease now or hereafter
placed upon the Building, said subordination is expressly conditioned upon
Tenant entering into a nondisturbance agreement, in form and substance
reasonably acceptable to Tenant, with the mortgagee, beneficiary or ground
lessor, as applicable. Concurrently with the execution hereof, Landlord shall
deliver a nondisturbance agreement in form reasonably acceptable to Tenant from
all of Landlord's mortgagees, beneficiaries and ground lessors with respect to
the Building as of the date hereof.
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20. Waiver of Default: No waiver by the parties hereto of any
default or breach of term, condition or covenant of this Lease shall be deemed
to be waiver of any subsequent default or breach of the same or any other term,
condition or covenant contained herein.
21. Force Majeure: In the event performance by Landlord or Tenant
of any term, condition or covenant in this Lease is delayed or prevented by any
Act of God, strike, lockout, shortage of material or labor restriction by any
governmental authority, civil riot, flood, and any other cause not within the
control of Landlord or Tenant, respectively, the period for performance of such
term, condition or covenant shall be extended for a period equal to the period
Landlord or Tenant is so delayed or hindered.
22. Exhibits: All exhibits, attachments, annexed instruments and
addenda referred to herein shall be considered a part hereof for all purposes
with the same force and effect as if copied at full length herein.
23. Use of Language: Words of any gender used in this Lease shall
be held and construed to include any other gender and words in the singular
shall be held to include the plural, unless the context otherwise requires.
24. Captions: The captions or headings of Paragraphs in this
Lease are inserted for convenience only, and shall not be considered in
construing the provisions hereof if any question of intent should arise.
25. Successors: The terms, conditions and covenants contained in
this Lease shall apply to, inure to the benefit of, and be binding upon the
parties hereto and their respective successors and assigns.
26. Severability: If any provision in this Lease should be held
to be invalid or unenforceable, the validity and enforceability of the
remaining provisions of this Lease shall not be affected thereby.
27. Notices: Any notice required or permitted to be delivered
hereunder may be delivered in person and, if so delivered, shall be deemed
given when received. Otherwise, any such notice shall be deemed given, whether
actually received or not, on the third (3rd) day after such notice is deposited
in the United States mail, postage prepaid, registered or certified mail,
return receipt requested, addressed to the parties at the addresses indicated
below, or at such other addresses as may have been specified by written notice
delivered in accordance herewith.
If to Landlord: QUEST MEDICAL, INC.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
If to Tenant: QMI MEDICAL, INC.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
8
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28. Holding Over: Should Tenant, or any of its successors in
interest, fail to surrender the Building, or any part thereof, on the
expiration of the Term of this Lease, such holding over shall constitute a
tenancy from month to month at a monthly rental equal to the rent paid for the
last month of the Term of this Lease.
29. Brokers: Landlord and Tenant warrant and represent to each
other that no brokers are entitled to receive a commission in connection with
this Lease. Each party hereto ("First Party") hereby indemnifies and holds the
other party hereto harmless from and against any and all claims for realtors'
or brokers' commissions in connection with this Lease made by parties claiming
by, through or under the First Party.
30. Counterparts. This document may be executed in multiple
counterparts.
31. Waiver of Landlord's Lien: Landlord hereby waives any and all
Landlord's liens (whether granted pursuant to statute, constitution, common law
or otherwise), and agrees to execute such additional instruments as Tenant
shall reasonably request to further evidence such waiver.
32. Option Agreement:
(a) Landlord and Tenant have entered into an Option Agreement for
the Purchase and Sale of Real Property dated of even date herewith (the "Option
Agreement"), pursuant to which Landlord has granted to Tenant an option to
purchase the Property ( the "Option Property"), as such term is defined in the
Asset Purchase Agreement among Landlord, Tenant and Parent dated December 29,
1997 (the "Asset Purchase Agreement"), exercisable by delivering written notice
to Landlord within nine months following the Closing Date (as defined in the
Asset Purchase Agreement). If Tenant exercises the option, Landlord shall have
six months following its receipt of notice of such exercise to vacate and to
surrender the Option Property to Tenant in the condition in which the same
existed as of the date of such exercise, reasonable wear and tear excepted.
Under the Option Agreement, Tenant is required to close the purchase of the
Real Property by the earlier of (i) six months following the exercise of the
Option or (ii) the first anniversary of the Commencement Date.
(b) If Tenant delivers notice of its exercise of the option on a
date which is more than six (6) months following the Commencement Date and
accordingly, Landlord is entitled to continue to occupy the Option Property
following the end of the Term, such period of continued occupancy by Landlord
shall be referred to as the "Landlord Holdover Period." During the Landlord
Holdover Period, the positions of the parties hereunder shall be reversed so
that Landlord shall be deemed to be the tenant hereunder and, as such, shall
use and occupy the Option Property subject to all of the terms and conditions
to be observed and performed by, and have all of the rights of, Tenant
hereunder; provided, however, Landlord, as "tenant," shall be obligated to pay
(i) rent in the amount of $35,000 per month and otherwise in accordance with
Paragraph 3 above and (ii) 50% of the expenses described in, and otherwise in
accordance with, Paragraph 11(b), and Tenant shall be deemed to be the
"landlord" hereunder and, as such, shall
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76
observe and perform all of the terms and conditions to be observed and
performed by, and have all of the rights of, Landlord hereunder.
(c) During the Landlord Holdover Period, Landlord shall continue
to observe all of the terms and conditions to be observed and performed as
"tenant" with respect to the Equipment.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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EXECUTED to be effective as of the date set forth above.
LANDLORD:
QUEST MEDICAL, INC.,
a Texas corporation,
By:
------------------------------------------
F. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ III,
Senior Vice President - Finance,
Secretary and Treasurer
TENANT:
QMI MEDICAL, INC.,
a Texas corporation formerly known as
QMI Acquisition Corp.,
By:
------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
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EXHIBIT "A"
Legal Description
(See Attached)
A-1
79
EXHIBIT "B"
Equipment
1. Mainframe computer system and software applications.
2. Office modules and furniture, including, without limitation, desks,
chairs, bookshelves, credenzas and filing cabinets.
3. Personal computer systems, including, without limitation, printers and
software applications.
4. Office equipment, including, without limitation, copiers, fax machines
and telephone systems, and office supplies necessary to maintain such
office equipment.
5. Conference, reception and cafeteria facilities.
B-1
80
EXHIBIT "C"
Operating Expense Accounts
(See Attached)
C-1
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EXHIBTIT C
OPTION AGREEMENT FOR THE PURCHASE
AND SALE OF REAL PROPERTY
THIS AGREEMENT is made as of the 30th day of January, 1998, by and
between QUEST MEDICAL, INC., a Texas corporation ("Quest"), and QMI MEDICAL,
INC. (formerly QMI Acquisition Corp.), a Texas corporation ("Buyer").
RECITALS
Quest is the owner of certain real property located in Collin County,
Texas, more particularly described on EXHIBIT A attached hereto, a portion of
which has been condemned and purchased by the Texas Department of
Transportation, as set forth on Exhibit A (the "Property") and, pursuant to
that certain Asset Purchase Agreement among Buyer, Atrion Corporation, and
Quest dated as of December 29, 1997 (the "Asset Purchase Agreement"), Buyer
intends to acquire certain assets used in connection with the Property which
are set forth on Exhibit B attached hereto (the "Real Property Assets").
In connection with the purchase and sale of assets provided for
therein, the parties intend to enter into a Lease Agreement covering the
Property and the Real Property Assets (the "Lease").
Quest desires to grant to Buyer an option to purchase the Property
subject to terms and conditions set forth below.
In the event Buyer does not exercise the aforementioned option, the
Buyer agrees to sell and Quest agrees to purchase the Real Property Assets,
subject to the terms and conditions set forth below.
All capitalized terms used herein and not otherwise defined shall have
the meanings given to them in the Asset Purchase Agreement.
NOW THEREFORE, in consideration of the premises and the mutual
covenants set forth below, the parties hereby agree as follows.
1. OPTION TO PURCHASE. Subject to the terms and conditions
hereinafter set forth, Quest does hereby give and grant to Buyer, its
successors and assigns, the exclusive continuing option and right to buy (the
"Option") the Property, together with all interest of Quest in and to all
buildings, improvements, fixtures, easements and appurtenances pertaining
thereto.
2. TERM. The term of the Option shall be for a period of nine
(9) months beginning on the date of Closing under the Asset Purchase Agreement
(the "Option Period"). The Option shall be exercisable by delivering written
notice to Quest at the address and in the manner provided for notices set forth
in the Asset Purchase Agreement. If the Option is not exercised within the
Option Period, all
82
rights and obligations hereunder will terminate as to all parties and their
assignees except as otherwise set forth in paragraph 12 below.
3. CONSIDERATION. In the event Buyer elects to exercise the
Option, the purchase price (the "Purchase Price") for the Property shall be Six
Million Five Hundred Thousand and 00/100 Dollars ($6,500,000.00) subject to the
adjustments provided herein and prorations at closing and subject to a
deduction for any debt assumed pursuant to paragraph 5 below.
4. CLOSING.
(a) DATE OF CLOSING. The consummation of the purchase and sale of
the Property is referred to herein as the "Property Closing." If the Option is
exercised as provided herein, the Property Closing shall occur on the earlier
of (i) the date which is six (6) months after the date of the exercise of the
Option or (ii) the expiration of the term of the Lease, such Property Closing
to take place at the offices located at the Property.
(b) CONVEYANCE. Quest shall convey, by special warranty deed,
good and indefeasible fee simple title to the Property free and clear of all
liens and encumbrances except for the Permitted Liens (as defined below). As
used herein, the term "Permitted Liens" shall mean any of the following: (i)
liens for taxes not yet due and payable, (ii) easements, encroachments and
encumbrances listed in the draft title commitment dated November 4, 1997 issued
by Lawyers Title Insurance Corporation, a copy of which is attached hereto as
EXHIBIT C (the "Title Commitment"), (iii) liens in favor of MetLife if assumed
by Buyer in accordance with paragraph 5 below, and (iv) zoning, entitlement,
building and other land use regulations imposed by Governmental Authorities
having jurisdiction over the Property. Quest covenants that, except as
otherwise disclosed in the Title Commitment, it has not assigned or conveyed
and will not assign or convey any interest, including, without limitation, any
easement or leasehold interest, in the Property or permit any liens or other
encumbrances to attach thereto prior to the Property Closing. If there should
be filed against the Property any such lien or encumbrance or if, any exception
to title appears in the Title Commitment other than a Permitted Lien, Buyer may
elect either (i) to rescind this Option or (ii) to close the purchase and sale
transaction without regard to such title objections but with a mutually-agreed
upon adjustment to the Purchase Price. If the parties are unable to agree upon
such adjustment, then such dispute shall be resolved by arbitration as provided
in paragraph 11 below. Liens affecting the Property (other than the Permitted
Liens) which are dischargeable by the payment of money shall be paid by Quest
at the Property Closing. Additionally, Quest covenants to maintain the Property
in good condition and repair, normal wear and tear excepted. In the event of a
breach of the foregoing covenant, Buyer may elect either (i) to rescind this
Option or (ii) to close the purchase and sale transaction without regard to
such damage but with a mutually-agreed upon reduction in the Purchase Price.
If the parties are unable to agree upon such adjustment, then such dispute
shall be resolved by arbitration as provided in paragraph 11 below.
(c) PROPERTY CLOSING DOCUMENTS. At the Property Closing and as a
condition precedent thereto, the parties shall execute and deliver such closing
statements, affidavits and other documents necessary to consummate the purchase
and sale of the Property pursuant to the terms hereof, including,
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83
without limitation, a certificate of Quest certifying that the representations
and warranties contained in Sections 3.9, 3.10 and 3.15 of the Asset Purchase
Agreement are true and correct as of the date of the Property Closing. Quest
shall use its reasonable good faith efforts to revise the Title Commitment in
accordance with the memorandum attached hereto (the Title Commitment as so
revised being hereinafter referred to as the "Revised Title Commitment").
Quest shall deliver to Buyer at the Property Closing a title commitment that
conforms to the Title Commitment (or the Revised Title Commitment if Quest has
been successful in obtaining the aforementioned revisions), with such
additional changes as may be acceptable to Quest and Buyer, subject only to the
Permitted Liens. Quest and Buyer shall share equally the fee for such title
policy.
(d) PROPERTY CLOSING COSTS AND PRORATIONS. Buyer shall pay any
deed taxes and recording fees imposed on the conveyance of the Property and
one-half of the title insurance premium. Quest shall pay one-half of the title
insurance premium. Each party shall be responsible for its own legal fees and
costs. All real estate ad valorem taxes for the year in which the Property
Closing occurs shall be prorated as of the date of the Property Closing. All
unpaid assessments applicable to the Property assessed as of the date of the
Property Closing shall be paid at the Property Closing by Quest without regard
to when the same shall be due and payable. Any assessments arising after the
Property Closing shall be the sole responsibility of Buyer. The provisions of
this paragraph 4(d) shall survive the Property Closing.
(e) POSSESSION. Subject to any term of the Lease to the contrary,
Quest shall deliver sole possession of the Property to Buyer on the date of the
Property Closing.
5. METLIFE MORTGAGE. The parties acknowledge that as of the date
hereof the Property and certain furniture, fixtures, equipment and the HVAC
system located on the Property are subject to liens securing the MetLife
Mortgage. Buyer, at its sole option, may assume the MetLife Mortgage and
accept conveyance of the Property subject thereto, and in such event, such
liens shall continue to encumber the Property and shall be a Permitted Lien.
If Buyer assumes the MetLife Mortgage, such assumption will be given in
novation and extinguishment of Quest's obligations thereunder. If Buyer does
not elect to assume the MetLife Mortgage, Quest shall transfer the Property and
such furniture, fixtures, equipment and HVAC system to Buyer free and clear of
any liens in favor of MetLife to Buyer. Quest and Buyer shall share equally
any assumption fee charged by MetLife.
6. TAX ABATEMENT AGREEMENT. After receipt of the notice of
Buyer's exercise of the Option and prior to the Property Closing, Quest shall
use all reasonable efforts and do all things necessary or advisable to obtain
an assignment to and assumption by Buyer of the Tax Abatement Agreement and an
agreement from the City of ▇▇▇▇▇ and The ▇▇▇▇▇ Independent School District
waiving all Taxes abated for periods prior to January 1, 1998. If Quest does
not obtain such assignment of the Tax Abatement Agreement and the waiver
referred to in the immediately preceding sentence, Quest shall indemnify and
hold harmless Buyer to the extent such abated Taxes are assessed to and
required to be paid by Buyer for periods prior to January 1, 1998. In the
event Buyer is notified by any taxing authority that such abated Taxes are
required to be paid, Quest shall either pay the
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84
amount of such abated Taxes directly to the taxing authority within the time
designated for payment or pay such amount to Buyer within five (5) business
days following Buyer's written notice to Quest.
7. ASSIGNMENT. Buyer may assign its rights hereunder, provided
that any such assignment shall not release Buyer from its obligations hereunder
and that written notice of such assignment shall be given to Quest. Subject to
the preceding sentence, this agreement shall be binding upon and inure to the
benefit of the successors and assigns of the parties hereto.
8. NOTICES. All communications, notices and demands of any kind
which either party may desire or be required to give or to serve upon the other
party shall be made in writing and delivered to such party at the address and
in the manner set forth in the Asset Purchase Agreement for the giving of
notices.
9. RISK OF LOSS.
(a) The risk of loss, damage or destruction to the Property,
including, without limitation, any loss or damage due to the location or
placement of any substance regulated by local, state or federal law, shall
remain with Quest until the date of the Property Closing. Quest shall deliver
possession of the Property at the Property Closing in the same condition
existing on the date of complete execution hereof, except for normal wear and
tear, and Buyer shall be responsible for any damage to the Property caused by
Buyer. In the event of any loss, damage or destruction to the Property
occurring prior to the date of the Property Closing (other than damaged caused
by Buyer), Buyer may elect either (i) to rescind this Option or (ii) to close
the purchase and sale transaction without regard to such loss, damage or
destruction but with a mutually-agreed upon reduction in the Purchase Price.
If the parties are unable to agree upon such adjustment, then such dispute
shall be resolved by arbitration as provided in paragraph 11 below.
(b) The risk of loss, damage or destruction to the Real Property
Assets shall remain with Buyer until the Real Property Assets are conveyed to
Quest pursuant to paragraph 12 below. If Buyer does not exercise the Option,
Buyer shall deliver possession of the Real Property Assets in the same
condition existing on the date of complete execution hereof, except for normal
wear and tear, and Quest shall be responsible for any damage to such Real
Property Assets caused by Quest. In the event of any loss, damage or
destruction to the Real Property Assets occurring prior to such conveyance
(other than damage caused by Quest), Quest may elect (i) to refuse to purchase
any item of the Real Property Assets so damaged or (ii) to close the
transaction without regard to such loss, damage or destruction but with an
mutually-agreed upon reduction in the purchase price. If the parties are
unable to agree upon such adjustment, then such dispute shall be resolved by
arbitration as provided in paragraph 11 below.
10. ENTIRE AGREEMENT. This Agreement contains the entire
agreement of the parties hereto with respect to the subject matter hereof, and
no prior agreement or understanding pertaining to any such matter shall be
effective for any purpose. No provision hereof may be amended except by an
agreement in writing signed by the parties hereto or their respective
successors in interest.
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11. ARBITRATION. The arbitration provisions of Section 11.11 of
the Asset Purchase Agreement are hereby incorporated herein as if freely set
forth in this paragraph 11.
12. REPURCHASE OF REAL PROPERTY ASSETS.
(a) Conveyance. In the event that Buyer does not exercise the
Option, then on the date of termination of the Lease (the "Real Property Assets
Closing"), the Buyer shall sell, transfer and convey to Quest and Quest shall
purchase from the Buyer, the Real Property Assets, free and clear of all liens,
mortgages and encumbrances, for the purchase price and upon the terms and
conditions set forth below. The Real Property Assets Closing shall take place
at the offices located at the Property.
(b) Purchase Price. The purchase price for Real Property Assets
shall be their Net Book Value, as defined on Exhibit B attached hereto, as of
the [insert date which is nine months following the Closing Date under the
Asset Purchase Agreement].
(c) Delivery at Closing. At the Real Property Assets Closing and
as a condition precedent thereto, the Buyer shall deliver a ▇▇▇▇ of sale and
any other documents necessary to convey the Real Property Assets to Quest.
(d) Prorations. All ad valorem taxes relating to the Real
Property Assets shall be prorated as of the date of the Real Property Assets
Closing.
(e) Remedies. In the event that Quest defaults in its obligation
to repurchase the Real Property Assets, then Buyer may take possession and
remove all the Real Property Assets from the Property, in addition to any other
remedies available to Buyer at law or equity.
IN WITNESS WHEREOF, Buyer and Quest have executed and delivered this
Agreement as of the day and year first above written.
QUEST MEDICAL, INC.
By:
------------------------
Its:
-----------------------
QMI MEDICAL, INC.
By:
------------------------
Its:
-----------------------
5
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STATE OF TEXAS )
_______________ COUNTY )
Before me _________________________________________ on this day
personally appeared ________________________, known to me (or proved to me on
the oath of ___________) to be the person whose name is subscribed to the
foregoing instrument, and known to me to be the president of Quest Medical,
Inc., a Texas corporation, and acknowledged to me that he executed said
instrument for the purposes and consideration therein expressed, and as the act
of said corporation. Given under my hand and seal of office this _____ day of
____________________, 19___.
----------------------------------
NOTARY PUBLIC
MY COMMISSION EXPIRES: ___________
STATE OF TEXAS )
_______________ COUNTY )
Before me ________________________ on this day personally appeared
________________________, known to me (or proved to me on the oath of
___________) to be the person whose name is subscribed to the foregoing
instrument, and known to me to be the president of QMI Medical, Inc., a Texas
corporation, and acknowledged to me that he executed said instrument for the
purposes and consideration therein expressed, and as the act of said
corporation. Given under my hand and seal of office this _____ day of
____________________, 19___.
----------------------------------
NOTARY PUBLIC
MY COMMISSION EXPIRES: ___________
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EXHIBIT D
January 30, 1998
Atrion Corporation
QMI Medical, Inc.
1426 ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
Gentlemen:
We have acted as corporate counsel to Quest Medical, Inc., a Texas
corporation ("Seller"), in connection with Seller's negotiation, execution and
delivery of the Asset Purchase Agreement, dated December 29, 1997 (the
"Agreement"), by and among Seller, QMI Medical, Inc., a Texas corporation
formerly known as QMI Acquisition Corp. ("Buyer"), and Atrion Corporation, a
Delaware corporation and parent corporation of Buyer ("Buyer Parent"), pursuant
to which Seller has agreed to sell, and Buyer has agreed to purchase,
substantially all of the assets of Seller, other than the capital stock of
Seller's subsidiaries, the assets necessary to operate such subsidiaries and
certain other assets described in the Agreement. This opinion is being furnished
to you pursuant to Section 9.2(g) of the Agreement. Except as otherwise defined
herein, or unless the context requires otherwise, terms used herein will have
the respective meanings stated in the Agreement.
In connection with this opinion, we have reviewed the Agreement, the
License Agreement, dated the date hereof between Seller and Buyer (the "License
Agreement"), the Lease Agreement, dated the date hereof between Seller and Buyer
(the "Lease Agreement"), the Option Agreement, dated the date hereof between
Seller and Buyer (the "Option Agreement"), certain records of Seller,
certificates and/or statements of Seller, officers of Seller and public
officials, and we have taken such additional steps and reviewed such additional
documents and matters of law as we deemed necessary in order to enable us to
render this opinion.
Based on the foregoing and subject to the assumptions, qualifications and
limitations set forth herein, we are of the opinion that:
1. Seller is a corporation validly existing and in good standing under the
laws of the State of Texas and has all corporate power needed to own or lease
its assets and to carry on its
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business as is now being conducted. Seller is duly qualified to transact
business in California, which is the only foreign jurisdiction identified to us
by Seller where qualification is required by Law.
2. Seller has all requisite corporate power to execute, deliver and perform
its obligations under the Agreement, the License Agreement, the Lease Agreement
and the Option Agreement and to consummate the transactions contemplated
thereby. The execution, delivery and performance by Seller of the Agreement, the
License Agreement, the Lease Agreement and the Option Agreement and the
consummation of Seller of the transactions contemplated thereby have been duly
authorized by all necessary corporate action on the part of Seller. The
Agreement, the License Agreement, the Lease Agreement and the Option Agreement
have been duly and validly executed and delivered by Seller and constitutes
valid and binding obligations of Seller, enforceable against Seller in
accordance with their terms.
3. The execution and delivery of the ▇▇▇▇ of sale, trademark assignment,
patent assignment and other instruments of assignment, transfer and conveyance
by Seller at the Closing are sufficient to convey to and vest in Buyer all of
Seller's rights, title and interest in and to the Assets, subject to the
Permitted Liens.
4. Except as described in Schedule 3.8 to the Agreement, the execution,
delivery and performance of the Agreement, the License Agreement, the Lease
Agreement and the Option Agreement will not (a) violate any Law; (b) violate any
Charter Document of Seller; (c) to our knowledge, violate any Order to which
Seller is a party or by which it is bound; (d) require any Consent from any
Governmental Authority, except to comply with the HSR Act, if applicable; and
(e) violate or breach any Material Contract, Material Lease or material Permit
of Seller listed in Schedules 3.11.2, 3.13 and 3.16, as applicable, of the
Agreement; or (f) to our knowledge, result in the creation of any Lien on any
assets of Seller.
5. Except as set forth on Schedule 3.14 to the Agreement, there is no
Action by any Person or before any Governmental Authority that is pending or, to
our knowledge, threatened against or affecting Seller or any of the Assets.
Except as set forth on Schedule 3.14 to the Agreement, Seller is not subject to
any Order.
The foregoing opinions are also subject to the following assumptions,
qualifications and limitations:
(a) The opinions are subject to the effect of any applicable bankruptcy,
receivership, insolvency, fraudulent conveyance or transfer, equitable
subordination, reorganization,
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conservatorship, moratorium or similar laws or court decisions affecting the
enforcement of creditors' rights generally and to the effect of general
principles of equity, including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing (regardless of whether considered in
a proceeding in equity or at law).
(b) We have assumed the genuineness of all signatures (except for those of
Seller) on all original documents, the authenticity and completeness of all
documents submitted to Seller as originals, and the conformity to and
authenticity and completeness of all documents submitted to Seller as copies. We
have assumed the accuracy of the factual matters contained in the documents we
examined. In addition, we have relied upon certificates of public officials as
to corporate existence, qualification and good standing and upon certificates
and statements of Seller and officers of Seller as we considered appropriate, as
well as the representations and warranties made by Seller in the Agreement, with
respect to the accuracy of factual matters which were not independently
established.
(c) We have assumed that Buyer and Buyer Parent have all requisite power
and authority and have taken all necessary action to execute, deliver and
perform the Agreement, the License Agreement, the Lease Agreement and all
documents and agreements executed in connection therewith to which they are a
party and to effect the transactions contemplated thereby. We have also assumed
that the Agreement, the License Agreement and the Lease Agreement are valid
obligations of, and are enforceable against all parties thereto (other than
Seller).
(d) We express no opinion herein concerning the enforceability of the
noncompetition provisions set forth in Sections 5.8 and 6.5 of the Agreement.
(e) We express no opinion herein concerning the laws of any jurisdiction
other than the federal law of the United States and the laws of the State of
Texas.
(f) As used in this opinion, the phrase "to our knowledge" refers to the
conscious awareness of facts or other information, without independent
investigation, by the lawyers in our firm who have had active involvement in
representing Seller in connection with the sale of the Assets pursuant to the
Agreement.
(g) This opinion is limited to matters expressly set forth herein and no
opinion is implied or is to be inferred beyond the matters expressly so stated.
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This letter is furnished solely for your benefit in connection with the
transactions referred to in the Agreement, the License Agreement, the Lease
Agreement and the Option Agreement and may not be relied upon for any other
purpose, or furnished to, used by, circulated to, quoted to or referred to by,
any other person without our prior express written consent in each instance.
Without limiting the foregoing, without our written consent: (i) no person other
than you may rely on this letter for any purpose; (ii) this letter may not be
cited or quoted in any financial statement, prospectus, private placement
memorandum or similar document; (iii) this letter may not be cited or quoted in
any other document or communication which might encourage reliance upon this
letter by any person or for any purpose excluded by the restrictions in this
paragraph; and (iv) copies of this letter may not be furnished to anyone for
purposes of encouraging such reliance.
All of the opinions expressed herein are rendered as of the date hereof and
are limited to present statutes, laws and regulations and to the facts as they
currently exist. We assume no obligation to update such opinions to reflect any
facts or circumstances that may hereafter come to our attention or any changes
in law that may hereafter occur.
Very truly yours,
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SCHEDULE 2.1.1 - ASSETS
Subject to Schedule 2.1.2, the Assets shall consist of the following:
(a) Seller's accounts receivable, installment sales
agreements and any other amounts owed to Seller for any reason, and
all rights, claims, grievances or causes of action relating thereto (a
list of Seller's accounts receivable as of November 30, 1997 is
attached hereto for Buyer's information);
(b) subject to rights granted by Buyer to Quest under the
Lease Agreement referred to in the Agreement, Seller's machinery,
equipment, leasehold improvements, construction in progress, parts,
furniture, furnishings, office equipment, computer equipment and
installations and software (such assets as of November 30, 1997 are
described in the attached fixed asset listing for Buyer's
information)(collectively, the "FIXED ASSETS");
(c) Seller's inventories and all raw materials, work in
and materials ordered and held for shipment or in transit to or from
Seller with respect thereto (a list of Seller's inventory as of
November 30, 1997 is attached hereto for Buyer's information);
(d) the fixtures and other improvements or interests in real
property leased by American Omni Medical, a division of Quest, and not
otherwise included in the Fixed Assets;
(e) all of Seller's (i) trademarks, service marks, trade
names and product names (subject to rights granted by Buyer to Quest
under the License Agreement); (ii) licenses, foreign letters patent,
patents, patent applications, know-how, patent and know-how licenses,
and unpatented proprietary developmental records; (iii) trademark
registrations and applications therefor, common law trademarks, service
▇▇▇▇ registrations and applications therefor (and any associated
goodwill necessary for Buyer to preserve, protect and enjoy such names
and marks); (iv) copyright registrations, copyrights and licenses and
applications for any of the foregoing; (v) trade secrets and
proprietary information, technology and other intangible assets and
rights of Seller which are related to the products currently being
developed or manufactured by Seller; and (vi) all engineering
information, drawings, designs, technical data, process and material
specifications, parts lists, operating instructions and other
manufacturing and clinical information and know-how used by Seller on
or prior to the Closing Date in the manufacture of the products
currently produced or being developed by Seller, whether or not
registered with any governmental authority (see Schedule 3.18 for a
list of material Intellectual Property);
(f) all of Seller's rights in (i) each Material Lease
described in Schedule 3.11.2 and each Material Contract described in
Schedule 3.13, (ii) each Contract or Lease,
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written or oral, related to the operation of Seller's business and
entered into in the ordinary course of business and not required to be
listed on Schedule 3.11.2 or 3.13 (the "IMMATERIAL CONTRACTS"), (iii)
each other Contract or Lease, written or oral, related to the operation
of Seller's business and entered into after the date hereof by Seller in
compliance with Section 5.3 and (iv) to the extent assignable, all of
Seller's Permits;
(g) to the extent assignable, all of Seller's rights in and
to all service agreements, maintenance agreements and express and
implied warranties of third parties with respect to any of the Assets;
(h) Seller's cash in bank accounts in the name of American
Omni Medical, a division of Quest, but no other cash of Seller;
(i) Seller's security deposits and prepaid expenses,
including, without limitation, dues, subscriptions, payments under
maintenance agreements and advances to Transferred Employees; and
(j) all of Seller's books, records, forms and files relating
to the Assets or the operation of Seller's business.
The Assets include all property necessary for the operation of Seller's
and all property used exclusively by Seller in the operation of its business,
but expressly exclude the Excluded Assets.
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ACCOUNTS RECEIVABLE LISTING
(See Attached)
94
FIXED ASSET LISTING
(See Attached)
95
INVENTORY LISTING
(See Attached)
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SCHEDULE 2.1.2 - EXCLUDED ASSETS
The following assets of Quest are Excluded Assets and are hereby
expressly excluded from the definition of "Assets":
(a) any of the capital stock of ANS or any other
subsidiary of Quest set forth on Schedule 3.4 (collectively, the
"SUBSIDIARIES"), or any of the Subsidiaries' assets, whether real,
personal, mixed, tangible or intangible (such fixed assets of the
Subsidiaries as of November 30, 1997 are described in the attached
excluded fixed asset listing for Buyer's information);
(b) any of the assets of Quest used exclusively by Quest
in the operation of the Subsidiaries;
(c) subject to the rights granted by Quest to Buyer under
the Lease Agreement referred to in the Agreement, the Real Property,
the fixtures and the improvements on the Real Property and any other
interest of Quest in the Real Property (other than those fixtures,
improvements and interests listed or described on Schedule 2.1.1);
(d) all of Quest's cash (other than cash in bank accounts
in the name of American Omni Medical, a division of Quest), cash
equivalents, marketable securities, accrued interest on Quest's cash
and marketable securities, checkbooks, cancelled checks, bank accounts,
deposits in transit, corporate minute books, corporate seal or the
stock records of Quest, general corporate-wide records (including
without limitation, accounting records, but excluding accounting
records relating to the Assets and the operation of Seller's business)
and corporate-wide income and franchise tax returns;
(e) claims by Quest for adjustments, credits or refunds
from vendors, landlords and other providers of goods or services
rendered prior to the Closing Date under Contracts or Leases and with
respect to goods and all claims of Quest for adjustments, credits or
refunds from Tax, licensing or any other Governmental Authorities with
respect to Taxes or other charges applicable to Quest paid or accrued
prior to and including the Closing Date;
(f) accounts receivable of Quest that arose on or prior to
September 30, 1997, accounts receivable of Quest due from the Medical
Device Manufacturers Association and accounts or notes receivable of
Quest due from ANS or any other Subsidiary and all rights, claims,
grievances or causes of action relating thereto;
(g) inventory of Quest located at Material Review Board
locations as described in Section 7.8 of the Agreement;
(h) any tax attributes of Quest or its Affiliates,
including but not limited to net operating loss carryforwards,
investment tax credits and research and development credits;
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(i) prepaid insurance and any refunds due from any
insurance company;
(j) prepaid expenses relating to general corporate
activities of Quest, including without limitation, accounting, audit,
shareholder enhancement and other professional services, payments
related to indebtedness, franchise tax payments, advances to Retained
Employees and fees paid to the Nasdaq Stock Market; and
(k) intangible assets of Quest that are not listed in
Schedule 2.1.1 and are not specifically identifiable as being necessary
for the operation of Quest's cardiovascular surgical products and
intravenous fluid delivery products businesses.
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EXCLUDED FIXED ASSET LISTING
(See Attached)
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SCHEDULE 2.3(a) - CLOSING DATE ASSUMED LIABILITIES
In addition to the Liabilities referred to in Schedule 2.3(b), the
following Liabilities of Seller are Assumed Liabilities:
(a) Liabilities under service agreements, maintenance
agreements and warranty agreements (to the extent of Seller's warranty
reserve); and
(b) accounts payable and accrued expenses of Seller
outstanding on the Closing Date including Liabilities for accrued
vacation, sales commission, payroll and related Taxes of the
Transferred Employees (the aggregate amount of which Quest estimates
will not exceed $819,213).
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SCHEDULE 2.3(b) - OTHER ASSUMED LIABILITIES
In addition to the Liabilities referred to in Schedule 2.3(a), the
following Liabilities of Seller are Assumed Liabilities:
(a) To the extent assigned to Buyer, Liabilities under (i)
each Material Lease described in Schedule 3.11.2 and each Material
Contract described in Schedule 3.13 (other than the promissory notes
listed in items 1 through 7 on such Schedule), (ii) each Immaterial
Contract (as defined in Schedule 2.1.1), (iii) each Permit relating to
Seller's business, and (iv) each other Contract or Lease, written or
oral, related to the operation of Seller's business and entered into
after the date hereof by Seller in compliance with Section 5.3 (other
than Liabilities resulting from any breach, default or claimed breach
or default by Seller arising out of acts or omissions of Seller
occurring prior to the Closing and other Liabilities consisting of
payment obligations which accrued prior to the Closing);
(b) sales orders for products or services received prior
to the Closing in the ordinary course of Seller's business, to the
extent not filled as of the Closing Date;
(c) purchase orders incurred in the ordinary course of
business in connection with the purchase by Seller of assets,
inventory, materials and supplies;
(d) Liabilities in excess of Seller's reserve therefor
under Seller's service agreements, maintenance agreements and express
and implied warranties to customers or other third parties relating to
products of Seller; and
(e) Liabilities for sick pay of Transferred Employees.
