Exhibit 10.1
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ASSET PURCHASE AGREEMENT
by and among
PARADIGM MEDICAL INDUSTRIES, INC. ("Purchaser")
and
INNOVATIVE OPTICS, INC. ("Seller")
and
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ INVESTMENTS, L.P.,
the Majority Shareholder of Seller (the "Shareholder")
ASSET PURCHASE AGREEMENT
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THIS ASSET PURCHASE AGREEMENT ("Agreement") dated as of January 31,
2002, is entered into by and among PARADIGM MEDICAL INDUSTRIES, INC., a Delaware
corporation ("Purchaser"), INNOVATIVE OPTICS, INC., a Georgia corporation
("Seller"), and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ INVESTMENTS, L.P., the majority shareholder of
Seller ("Shareholder") (Purchaser, Seller and Shareholder collectively, the
"Parties").
WITNESSETH:
WHEREAS, Seller desires to sell and Purchaser desires to buy all the
assets of Seller used or useful in the business of the development, manufacture
and distribution of an invention known as the microkeratome blade, or the
Innovatome(TM) (the "Business"), except those expressly excluded herein (the
"Assets"), on the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements hereinafter contained, the parties hereto,
each intending to be legally bound hereby, agree as follows:
ARTICLE 1
SUMMARY OF TRANSACTIONS
1.1 Assets Purchased. Purchaser hereby agrees to purchase from Seller
and Seller hereby agrees to sell to Purchaser all of the Assets. The
Assets include, but are not limited to, the following:
(a) the tangible assets of Seller, and all of Seller's deposits,
prepaid expenses, inventories and intangible properties;
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(b) all contract rights, causes of action, claims, refunds and
demands of whatever nature, including rights to returned or repossessed goods
and rights as unpaid vendor arising out of the Business;
(c) all books and records relating to the Business and Seller
(except minute books and stock record books);
(d) all issued and pending patents, patent applications, software
programs, copyrights and copyright applications of Seller;
(e) all rights of Seller in and to all of Seller's trademarks and
trade names, including without limitation, the name "Innovatome(TM)", and all
variants thereof, and all intellectual property and proprietary information of
Seller;
(f) all rights to an assignment among ▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ and Seller assigning certain inventions and
improvements disclosed in an application for Letters Patent entitled,
"Microkeratome," filed in the United States Patent and Trademark Office on April
24, 1998 under Application No. 09/066,496;
(g) all rights to an assignment between ▇▇▇▇ ▇▇▇▇▇▇ and Seller
assigning certain inventions and improvements disclosed in an application for
Letters Patent entitled, "Microkeratome Blade Assembly," filed in the United
States Patent and Trademark Office on September 28, 1999 under Provisional
Application No. 60/156,505.
(h) all of Seller's marketing and sales materials and related
documents; and
(i) all of Seller's intangibles and goodwill.
At Closing, Seller shall deliver to Purchaser a ▇▇▇▇ of sale for the
Assets, substantially in the form of Exhibit "1.1" (the "General Assignment and
▇▇▇▇ of Sale").
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1.2 Excluded Assets. Purchaser and Seller agree that the assets
expressly excluded from the purchase and sale hereunder shall be all of Seller's
cash, bank accounts and equivalents.
1.3 Assumption of Liabilities. At Closing, Purchaser shall enter into
an assignment and assumption agreement, substantially in the form of Exhibit
"1.3" (the "Assignment and Assumption Agreement") providing for Purchaser to
assume those liabilities of Seller described in Section 3.1 hereof. Except as
expressly provided in this Agreement, Purchaser is not assuming any liabilities
of Seller and Seller shall be responsible for those liabilities not assumed by
Purchaser, including but not limited to, sales tax payables, loans payable,
royalty payments and interest payments.
1.4 Non-Competition and Confidentiality Agreement. At Closing,
Shareholder shall enter into a non-competition and confidentiality agreement
with Purchaser, substantially in the form of Exhibit "1.4" (the "Non-Competition
and Confidentiality Agreement").
1.5 Real Property Lease. At Closing, Purchaser shall enter into an
Assignment of Leases Agreement with Seller and Sycamore Associates, the lessor
(the "Lessor") of the real property described in Schedule 5.1.5(D) (the "Real
Property") substantially in the form of Exhibit "1.5," providing for the
assignment of the leases of the Real Property.
ARTICLE 2
PURCHASE CONSIDERATION
2.1 Purchase Consideration. Subject to the terms and conditions of this
Agreement, in reliance upon Seller's representations, warranties, agreements and
covenants contained herein, and in consideration of the sale, transfer,
assignment and delivery of the Assets and Business of Seller to Purchaser as
herein provided, Purchaser shall provide the following purchase consideration
(the "Purchase Consideration") to Seller:
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(a) Shares of Common Stock, par value .001 per share, of Purchaser
("Paradigm Common Stock") in the amount of 1,272,825 shares, subject to
adjustment and the conditions as described below:
(i) One-half of the number of shares of Paradigm Common
Stock that Purchaser is to issue to Seller at Closing pursuant to this
Section 2.1(a), or 636,412 shares, shall remain in an escrow account
maintained at the law firm of Mackey Price & ▇▇▇▇▇▇▇▇ (the "Disbursing
Agent") pursuant to the Escrow Agreement in the form of Exhibit 2.1,
which shall be executed and delivered to Disbursing Agent upon the
execution and delivery of this Agreement, until such time as they are
disbursed in accordance with Section 2.1(a)(ii) and (iii) below.
(ii) Purchaser shall make best efforts to implement, within
ninety (90) days after Closing, Phase I of the Blade Price Reduction
Program as prepared by ▇▇▇▇ ▇▇▇▇▇▇ and as described in Attachment 1 to
Exhibit 2.1. Immediately after such ninety (90) day period, the
Disbursing Agent shall disburse three-fourths of the shares in escrow,
or 477,309 shares, to Seller unless Purchaser has certified that
Purchaser has implemented Phase I of the Blade Price Reduction Program
and, despite best efforts, is unable to manufacture microkeratome
blades at a materials cost of $29.25 or less per blade. If Purchaser
certifies that implementation of Phase I of the Blade Price Reduction
Program has resulted in a materials cost that exceeds $29.25 per blade,
and such certification is not disputed by Seller, the number of
escrowed shares disbursed to Seller shall be reduced by three hundred
(300) shares for every cent ($0.01) the materials cost per blade
exceeds $29.25. If Seller disputes Purchaser's certification, the
dispute shall be resolved in accordance with Section 2.3 of the Escrow
Agreement.
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(iii) Purchaser shall make best efforts to implement,
within six (6) months after Closing, Phase II of the Blade Price
Reduction Program as prepared by ▇▇▇▇ ▇▇▇▇▇▇ and as described in
Attachment 1 to Exhibit 2.1. Immediately after such six (6) month
period, the Disbursing Agent shall disburse the remaining shares in
escrow to Seller unless Purchaser has certified that Purchaser has
implemented Phase II of the Blade Price Reduction Program and, despite
best efforts, is unable to manufacture microkeratome blades at a
materials cost of $17.25 or less per blade. If Purchaser certifies that
implementation of Phase I of the Blade Price Reduction Program has
resulted in a materials cost that exceeds $17.25 per blade, and such
certification is not disputed by Seller, the number of escrowed shares
disbursed to Seller shall be reduced by three hundred (300) shares for
every cent ($0.01) the materials cost per blade exceeds $17.25. If
Seller disputes Purchaser's certification, the dispute shall be
resolved in accordance with Section 2.3 of the Escrow Agreement.
(b) Warrants (the "Warrants") to purchase shares of Paradigm
Common Stock in the amount of 250,000, exercisable at $5.00 per share over a
period of three years from the date of Closing.
(c) Purchaser will file a registration statement with the
Securities and Exchange Commission (the "Commission") within five (5) months of
the Closing Date to register the shares of Common Stock for resale that Seller
will receive as Purchase Consideration pursuant to Section 2.1(a) and the shares
of Common Stock for resale to be issued upon the exercise of the Warrants that
Seller will receive as Purchase Consideration pursuant to Section 2.1(b).
Purchaser will use its best efforts to have such registration declared effective
as soon as possible following the filing of a registration statement pursuant to
this Section 2.1(c). In addition, Purchaser will keep such registration
statement current until such time as the shares of Common Stock issuable as
Purchase Consideration and upon exercise of the Warrants are fully tradeable
pursuant to Rule 144(k) promulgated under the Securities Act of 1933, as
amended, all at Purchaser's expense. Except for the filing of a registration
statement pursuant to this Section 2.1(c), Purchaser agrees not to file any
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other registration statements with the Commission within five (5) months of the
Closing Date to register shares of the Company's Common Stock for resale, except
shares of the Company's Common Stock issuable in connection with (i) raising
capital for the Company, including shares of Common Stock issuable upon
conversion or exercise of securities related thereto; (ii) completing the
proposed transaction to purchase a majority of the outstanding shares of common
stock of International Bio-Immune Systems, Inc.; and (iii) compensating
consultants, investment banking firms, and financial services companies,
provided that the shares to be registered for any such consultants, investment
banking firms and financial services companies for services rendered shall not
exceed 100,000 shares of common stock issuable to any individual or entity.
2.2 Payment of Purchase Consideration.
2.2.1 Assumed Liabilities. At the Closing, Purchaser shall assume
the Assumed Liabilities described in Section 3.1 hereof.
2.2.2 Closing Payment. At the Closing, Purchaser shall deliver to
Seller restricted shares of Paradigm Common Stock, subject to adjustment and the
conditions as described in 2.1(a), and the Warrants to purchase shares of
Paradigm Common Stock.
2.3 Certain Definitions. The following terms used in this Agreement
shall have the meanings set forth below:
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"Affiliate" means any person, firm, corporation, partnership or
association controlling, controlled by, or under common control with another
person, firm, corporation, partnership or association.
"Assets" shall have the meaning given to such term in the preamble of
this Agreement and in Section 1.1 hereof.
"Assumed Liabilities" shall have the meaning given to such term in
Section 3.1 hereof.
"Business" shall mean the business of Seller of the development,
manufacture and distribution of the microkeratome blade, known as the
Innovatome(TM).
"Closing" shall have the meaning given to such term in Section 8.1
hereof.
"Closing Date" shall have the meaning given to such term in Section 8.
1 hereof.
"Closing Date Balance Sheet" means a balance sheet as of the Closing
Date and a related statement of income, stockholders' equity, and cash flows for
the period between the last day of Seller's last full fiscal year and the
Closing Date, jointly prepared by Seller and Purchaser within sixty (60) days
after the Closing Date in accordance with generally accepted accounting
principles, consistently applied in accordance with the past practices of
Seller.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Employee Plans" shall have the meaning given to such term in Section
5.1.11 hereof.
"Environmental Laws" shall mean all Legal Requirements relating to the
generation, storage, handling, release, discharge, emission, transportation,
treatment or disposal of solid wastes, hazardous wastes, and hazardous, toxic or
dangerous materials or substances, including, but not limited to, the
Comprehensive Environmental Response, Compensation and Liability Act, the
Superfund Amendments and Reauthorization Act of 1986, the Resource Conservation
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and Recovery Act, the Clean Air Act (as amended), the Federal Water Pollution
Control Act (Clean Water Act), the Safe Drinking Water Act, the Toxic Substances
Control Act, and the Hazardous Materials Transportation Act.
"Environmental Liability" shall mean any obligation or liability
imposed against an owner or operator of property pursuant to the provisions of
any Environmental Laws or pursuant to common law, and shall include all response
costs, costs of remediation, attorneys' fees and expert witness fees to
investigate and defend such claims, personal injuries and any damages to natural
resources and other property. The term "Environmental Liability" shall include
all theories of liability for environmental contamination of property, including
theories arising under statute or common law.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Financial Statements" shall have the meaning given to such term in
Section 5.1.13 hereof.
"Hazardous Substances" shall have the meaning given to such term in
Section 5.1.9 hereof.
"Indemnity Claims" shall have the meaning given to such term in
Sections 6.2.1 and 6.2.2 hereof.
"Legal Requirements" shall mean all judgments, decrees, injunctions,
orders, writs, rulings, laws, ordinances, statutes, rules, regulations, codes
and other requirements of all federal, state and local governmental,
administrative and judicial bodies and authorities.
"Personal Property Leases" shall have the meaning given to such term in
Section 5.1.5(a) hereof.
"Purchaser" shall have the meaning given to such term in the preamble
of this Agreement.
"Purchase Price" shall have the meaning given to such term in Section
2.1 hereof.
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"Real Property Leases" shall have the meaning given to such term in
Section 5.1.5(b) hereof.
"Scheduled Contracts" shall have the meaning given to such term in
Section 5.1.10 hereof.
"Seller" shall have the meaning given to such term in the preamble of
this Agreement.
"Shareholder" shall have the meaning given to such term in the preamble
of this Agreement.
"Wastes" shall have the meaning given to such term in Section 5.1.9
hereof.
Financial terms not defined in this Agreement shall have the meanings
of such terms under generally accepted accounting principles.
ARTICLE 3
ASSUMPTION OF LIABILITIES
3.1 Assumption of Certain Liabilities. As consideration for the
transfer of the Assets and Business to Purchaser, Purchaser agrees to assume at
the Closing the obligations of future performance of Seller under the contracts
and liabilities listed on Schedule 5.1.10 as being assumed by Purchaser, all of
the foregoing liabilities being referred to herein as the "Assumed Liabilities".
3.2 Limitation of Purchaser's Liabilities. Seller and Shareholder agree
that except as expressly set forth in Section 3.1 hereof, the Purchaser will not
assume or pay any debts, liabilities, or obligations of Seller or Shareholder
and, without limiting the generality of the foregoing, will not assume or pay:
(a) any obligations or liabilities to employees of Seller,
including without limitation any obligation or liability under any collective
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bargaining agreement, or any pension, profit-sharing or other employee benefit
plan affecting any employee or former employee of Seller;
(b) any Environmental Liabilities existing prior to Closing;
(c) any contingent liabilities based on Seller's sale or lease of
defective products or equipment, including, but not limited to, Seller's failure
to adequately warn any purchaser or user of its products and equipment or
Seller's breach of any express or implied warranty made in connection with the
sale or lease of any products or equipment;
(d) any tax liabilities (and penalty and interest) of Seller or
Shareholder (excluding, any sales or use taxes arising out of the transfer of
the Assets to Purchaser, which Purchaser shall pay);
(e) any liabilities or obligations incurred by Seller after the
Closing Date;
(f) any liabilities or obligations incurred by Seller or
Shareholder in connection with this Agreement and the transactions provided for
herein, including without limitation, legal and accounting fees;
(g) any liabilities or obligations of Seller under any contract,
lease or other agreement which is not one of the Scheduled Contracts shown on
Schedule 5.1.10 as being assumed by Purchaser; or
(h) any material liabilities or obligations of Seller to the
extent the same is not disclosed or reserved against on Seller's September 30,
2001 balance sheet, or if such liability or obligation is so disclosed or
reserved, the amount by which such liability or obligation as finally determined
exceeds the amount thereof so disclosed or reserved.
3.3 Discharge of Liabilities Not Assumed by Purchaser. Except for those
liabilities set forth in Section 3.1 hereof, Seller agrees to pay or discharge
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when due any and all liabilities of Seller, including but not limited to sales
tax payable, loans payable, royalty payable and interest payable.
3.4 Bulk Sales Law. Purchaser hereby waives compliance by Seller with
the provisions of the Bulk Sales Law of any state, if applicable to the
transactions contemplated hereby; provided, however, that Seller and Shareholder
agree to indemnify Purchaser for claims of creditors of Seller with respect to
liabilities not being assumed by Purchaser pursuant to the express terms of this
Agreement.
ARTICLE 4
CONDUCT OF SELLER'S BUSINESS
4.1 Conduct of Business Prior to Closing. From and after September 30,
2001, and pending the Closing, Seller and Shareholder covenant and agree that
except as set forth in Schedule 4.1:
(a) Seller's Business has been conducted only in the ordinary and
usual course, including normal commitments for the purchase of supplies and the
sale of goods and services;
(b) No material contract has been entered into by or on behalf of
Seller, other than in the ordinary course of business;
(c) Seller has not made any bonuses or salary or wage increases
nor any contributions to any profit-sharing or pension plan;
(d) Seller and Shareholder have used their best efforts to
maintain the Business of Seller and its customers, Assets and operations as an
ongoing business in accordance with past practices and in accordance with
commercially reasonable business practices, to keep available the services of
Seller's present employees and to preserve Seller's reputation and goodwill and
the goodwill of Seller's suppliers, customers, and others having relations with
Seller;
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(e) No reorganization, declaration, setting aside or payment of
any dividend or other distribution in respect of any of Seller's capital stock,
or any direct or indirect redemption, purchase, or other acquisition of any such
stock has been effected by Seller or any of its shareholders;
(f) Seller has not paid, loaned or advanced any amounts to any of
its shareholders or any member of a shareholder's family, except as disclosed in
this Agreement or a schedule attached hereto;
(g) Seller has not entered into any agreement or arrangement with
any of its shareholders or any member of a shareholder's family, except as
disclosed in this Agreement or a schedule attached hereto.
(h) Seller has not sold, leased or disposed of any of its Assets
or properties, tangible or intangible, except in the ordinary course of its
business;
(i) Seller has not granted a security interest in or otherwise
encumbered in any manner any of its assets or properties;
(j) Seller has not incurred any indebtedness or borrowed any funds
except in the ordinary course of business pursuant to existing lines of credit
listed in Schedule 5.1.10 in a manner, and in amounts, in keeping with
historical practices; and
(k) Seller has maintained the Assets in good condition and repair
and adequately insured.
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ARTICLE 5
REPRESENTATIONS, WARRANTIES AND AGREEMENTS
5.1 Representations. Warranties and Agreements of Seller and
Shareholder. Seller and Shareholder, with respect to Seller, the Assets and the
Business, jointly and severally represent, warrant and agree, as of the date
hereof, that:
5.1.1 Organization and Good Standing. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Georgia, with full corporate power and authority to conduct its business as such
business is now being conducted, and has all requisite corporate power and
authority to execute and perform this Agreement and the transac tions
contemplated hereby. Seller is qualified to do business in all states where the
failure to be so qualified would have a material adverse effect on the Business
or the Assets.
5.1.2 No Violation: No Consents. Seller and Shareholder have taken
or will take prior to Closing all necessary or appropriate action to enable them
to enter into, execute, deliver and perform this Agreement and the transactions
contemplated hereby. The execution and the performance of this Agreement, and
the consummation of the transactions contemplated hereby, will not: (i) violate
any provision of the Articles of Incorporation or Bylaws of Seller; (ii) to the
best knowledge of Seller and Shareholder, violate or result in the breach of any
term or provision of or constitute a default or accelerate maturities under any
loan or any other similar agreement, instrument, indenture, mortgage, deed of
trust, or other restriction to which Seller or the Shareholder is a party or by
which any of the properties of Seller is bound; (iii) violate or result in a
breach of any term or provision of or constitute a default or accelerate the
terms of any right of first refusal agreement or any other similar agreement or
other restriction to which Seller or Shareholder is a party or by which any of
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the Assets of Seller and/or Shareholder is bound; or (iv) cause or permit any
third party to cause any material contract to be canceled or otherwise modified.
5.1.3 Validity of Agreement. This Agreement and the transactions
contemplated hereby have been, or shall have been prior to Closing, duly
authorized and approved by the Board of Directors and the shareholders of
Seller, and this Agreement has been duly executed and delivered by Seller and
the Shareholder and is the legal, valid and binding obligation, enforceable in
accordance with its terms, of Seller and Shareholder. No other proceedings are
necessary to authorize this Agreement and the transactions contemplated hereby,
or the performance or compliance by Seller with any of the terms, provisions or
conditions hereof.
5.1.4 Capitalization. Seller's authorized capital stock consists
solely of 5,000,000 shares of common stock, of which 1,402,500 shares of common
stock are issued and outstanding. The record and beneficial owners of all of the
outstanding shares of Seller, and their shareholdings are as follows:
Shareholder Amount of Shares Date Issued
----------- ---------------- -----------
Dr. ▇▇▇▇▇ ▇▇▇▇ 60,000 12/15/96
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Investments, L.P. 771,000 12/15/96
▇▇▇▇▇ ▇▇▇▇▇ 60,000 01/06/97
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ 20,000 11/22/97
▇▇▇▇▇ ▇▇▇▇▇ 204,000 12/16/96
▇▇▇▇▇▇ International 100,000 11/17/97
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 40,000 12/15/97
▇▇▇▇ ▇▇▇▇▇▇▇▇ 15,000 12/22/97
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 15,000 12/25/97
▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 30,000 12/22/97
▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 30,000 12/22/97
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 15,000 05/15/98
▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 30,000 05/15/98
Rapid Machine Works 12,500 01/06/98
---------
TOTAL 1,402,500
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All of Seller's issued and outstanding shares have been validly issued and are
fully paid and non assessable. Except for the outstanding shares described
above, no person or entity has, or has any right or interest in, or claim to or
by reason of, any equity securities of Seller, and there are no outstanding
options, warrants, agreements, subscriptions or rights of any kind obligating
Seller to issue any equity securities or any securities or debt obligations
convertible into or exchangeable for any equity securities of Seller. Except as
described in Schedule 5.1.4., there is no agreement, restriction or claim
restricting the transfer of, or otherwise relating to, the shares of Seller.
Schedule 5.1.4 contains true and correct copies of Seller's currently effective
Articles of Incorporation and Bylaws, each as amended to date. Seller does not
own or control directly or indirectly, any stock or other securities of, nor in
any manner control, any corporation, association, or business organization.
5.1.5 Assets. (a) Seller has good and marketable title to all the
Assets. All of the machinery, equipment, vehicles and other tangible personal
property owned or used in the Business are listed in Schedule 5.1.5(A). All such
personal property is in good working order and operating condition and is free
and clear of all liens, security interests, mortgages, deeds of trust, pledges,
conditional sales contracts, charges, leases, claims, administrative orders or
decrees or encumbrances whatsoever (except as disclosed in Schedule 5.1.5(B)).
To the best knowledge of Seller and Shareholder, all the Assets are in
compliance with all applicable laws and governmental regulations. All of the
Assets are in the possession of Seller or its customers and, if in the
possession of customers, are held pursuant to binding agreements (whether
written or oral) obligating the customer to return or reimburse Seller for such
property. Seller's demurrage and equipment rental records have been kept in
accordance with Seller's past practice and are accurate, and each of Seller's
customers either possesses the equipment reflected therein or is liable to
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Seller or Seller's assigns for the equipment reflected on such records. Schedule
5.1.5(C) contains a list of all equipment used in Seller's Business which are
leased by Seller from third parties (the "Personal Property Leases").
(b) All real property owned by, leased to or otherwise occupied by
Seller for use in the conduct of the Business (the "Real Property") is listed on
Schedule 5.1.5(D). To the best knowledge of Seller and Shareholder, the present
use of each parcel of Real Property is in compliance with all applicable zoning
ordinances (or variances therefrom) and other applicable government regulations,
and there does not exist any notice of any uncorrected violation of any housing,
building, safety, fire or other ordinance or applicable governmental regulation.
Except for assessments not yet due and payable, Seller is not liable for any
unpaid assessments for any public improvements, whether as owner or lessee of
any Real Property, nor has Seller received any notice from any appropriate
governmental authority of intention to make any public improvement for which
Seller may be assessed directly or by reason of a leasehold interest or
otherwise. The Real Property is free and clear of all liens and free and clear
of all easements, restrictions, building encroachments and other matters
disclosed by an accurate survey of the premises, which would have a material
adverse effect on the value of any of such properties or the use of any such
property in the manner that it is currently being used. All leases for any of
the Real Property subject to a lease (the "Real Property Leases") are listed in
Schedule 5.1.10. No underground tanks currently or formerly used for the storage
of any gas or petroleum products are present at the Real Property and if any
such tanks previously existed and were removed, they were removed in accordance
with all Legal Requirements.
5.1.6 Inventories. All inventories of Seller are useable in the
ordinary course, have been recorded in amounts not in excess of the lower of
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cost paid by Seller for such items or the market value thereof, and are good and
merchantable and readily saleable in the ordinary course of Seller's business.
5.1.7 Taxes. Within the times and in the manner prescribed by law,
Seller has filed all federal, state and local tax returns and reports required
by law to have been filed by it, and has paid all taxes, assessments, and
penalties due and payable by it. Seller and Shareholder agree to indemnify
Purchaser for any federal, state or local taxes which may become payable after
the Closing to the extent that such payment is attributable to periods prior to
Closing, provided, that Shareholder's total liability for any tax claims shall
be limited to a percentage of the total liability equal to its pro rata
ownership interest in Seller. There are no federal, state or local tax liens
(other than a lien for property taxes not delinquent) against any of the Assets,
nor are there any overdue federal, state or local taxes with respect to the
Business or any of the Assets. At Closing, all taxes and other assessments and
levies which Seller is required by law to withhold or collect, shall have been
duly withheld and collected, and if due, shall be paid over to or deposited with
the proper governmental authorities. Seller has furnished to Purchaser true and
correct copies of all income tax returns of Seller for the three most recent
fiscal years and any subsequent interim fiscal period for which Seller has filed
such tax returns, and true and correct copies of all real estate and personal
property tax bills and tax returns of Seller for the most recent full fiscal
year and period for which Seller has filed such tax returns or received such tax
bills. Seller is not presently under, nor has it received any notice of, any
contemplated investigation or audit by the Internal Revenue Service or any state
or local government or governmental agency concerning Seller's taxes.
5.1.8 Litigation. Except as disclosed in Schedule 5.1.8, neither
Seller nor any employees or officers of Seller nor any of the shareholders of
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Seller is a party to any pending or threatened litigation or administrative
investigation or proceedings which would materially and adversely affect the
Assets or Business, nor, to the best knowledge of Seller and Shareholder, is
there any basis therefor. To the best knowledge of Seller and Shareholder, no
complaints or charges of unlawful conduct have been made against Seller, any
employees or officers of Seller, or any of the shareholders of Seller that
relate in any way to the Assets or Business. Purchaser is not assuming any
liability with respect to any pending or threatened litigation or administrative
investigation or proceeding or with respect to any such complaints or charges of
unlawful conduct.
5.1.9 Compliance with Laws. To the best knowledge of Seller and
Shareholder, the Assets and Business are in compliance in all material respects
with all Legal Requirements. Seller has not received any notice of any
uncorrected violation of any such Legal Requirements. All Real Property, and the
use and occupancy thereof, are, to the best knowledge of Seller and Shareholder,
in compliance with all Legal Requirements and all applicable leases and
insurance requirements. The Real Property has not been used by Seller,
Shareholder, any third party acting at the request or direction of Seller or
Shareholder (a "Directed Third Party") nor, to the best knowledge of Seller and
Shareholder, any other third party, for the generation, manufacture, storage or
disposal of, and there has not been transported to or from the Real Property by
Seller, Shareholder, any Directed Third Party or, to the best knowledge of
Seller and Shareholder, any other third party, any Hazardous Substances or
Wastes (as those terms are hereinafter defined) in violation of any Legal
Requirements; there are no Hazardous Substances or Wastes present on the Real
Property except in compliance with all Legal Requirements; there has been no use
of the Real Property by Seller, Shareholder, any Directed Third Party or, to the
18
best knowledge of Seller and Shareholder, any other third party, that may, under
any federal, state or local law or regulation, require any closure or cessation
of the use of the Real Property or impose upon Seller, its successors or assigns
any monetary obligations; neither Seller nor any of the shareholders of Seller
have been identified by any governmental agency or individual in any pending or
threatened action, litigation, proceeding or investigation as a responsible
party or potentially responsible party for any liability for disposal or
releases of any Hazardous Substances or Wastes, no lien or superlien has been
recorded, asserted or , to the best knowledge of Seller and Shareholder,
threatened against the Real Property for any liability in connection with any
environmental contamination; the Real Property has not been listed on either the
National Priorities List, as defined in CERCLA, or any state listing of
hazardous sites; and the Real Property is in compliance with all Environmental
Laws. For the purposes hereof, "Hazardous Substances" shall mean any flammables,
explosives, radioactive materials, asbestos, ureaformaldehyde, hazardous wastes,
toxic substances or any other elements or compounds designated as a "hazardous
substance", "pollutant" or "contaminant" in the Environmental Laws or any other
Legal Requirements; and "Wastes" shall mean any hazardous wastes, residual
wastes, solid wastes or other wastes as those terms are defined in the
Environmental Laws or any other Legal Requirement.
5.1.10 Contracts. Schedule 5.1.10 is a complete list of each
material contract, agreement, lease, mortgage, note, written purchase order, or
any other obligation or commitment of Seller or of any shareholder of Seller
pertaining to Seller, the Assets or Business (the "Scheduled Contracts"), with
an indication of whether or not such Scheduled Contract is being assumed by
Purchaser hereunder. True and correct copies of each of the Scheduled Contracts
have been furnished to Purchaser. Each of the Scheduled Contracts contains the
entire agreement of the parties thereto, with respect to the subject matter
thereof, is in full force and effect, is valid and enforceable in accordance
with its terms, is adequate to accomplish the purposes for which it is intended
and contains only terms normal and reasonable for the conduct of the Business.
19
No party is in default under any such Scheduled Contract, nor has any event
occurred which, after the giving of notice or the passage of time or both, would
constitute a default under any such Scheduled Contract. Except as noted on
Schedule 5.1.10, all of the Scheduled Contracts shown as being assigned to
Purchaser are assignable to Purchaser without the consent or approval of other
parties or, if such approval is required, Seller will obtain such approval prior
to Closing unless Schedule 5.1.10 states that the assignment of such contract is
not material to the continued operation of the Business.
5.1.11 Employee Benefit Plans. Except as described in Schedule
5.1.11, Seller has no bonus, pension, profit sharing, or retirement income,
stock purchase, stock option, hospitalization insurance or similar agreements,
plans or practices, formal or informal, covering any of the employees employed
in the Business, or under which Seller has any present or future obligation or
liability or under which any current or former employee of Seller has any
present or future rights to benefits ("Employee Plans"). With respect to each
Employee Plan which is an employee pension benefit plan, as defined in Section
3.2 of ERISA, which is intended to be qualified within the meaning of Section
401(a) of the Code ("Pension Plan"), a copy of the latest available summary plan
description, determination letter, and Form 5500 for the most recent plan year
have been made available to Purchaser. Each Pension Plan has been determined by
the Internal Revenue Service to be qualified. Each Employee Plan has been
operated and administered in accordance with the requirements of ERISA and the
Code. No Employee Plan or any trustee or administrator thereof has engaged in a
"prohibited transaction" (as defined in Section 406 of ERISA or in Section 4975
of the Code) which would subject Seller, any Employee Plan, any trust created
thereunder, any trustee or administrator thereof, or any party dealing with any
20
Employee Plan to the liability set forth in Section 409(a) of ERISA or to the
tax or penalty on prohibited transactions imposed by Section 502 of ERISA or
Section 4975 of the Code. Seller is not and has never been a party to a
Multi-Employer Plan and has no current or due "withdrawal liability" with
respect to any such Multi-Employer Plan. Purchaser is not assuming any liability
of Seller to any of Seller's employees or by reason of any Employee Plans,
except as expressly provided herein. Seller is not a party to any collective
bargaining agreements or other labor union or similar agreements, and Seller is
not the subject of or threatened by any strike or other labor disturbance by any
group of employees, and no attempt or plan to organize Seller's employees is
threatened or contemplated. Except as disclosed in Schedule 5.1.8, there are no
claims, nor, to the best knowledge of Seller or Shareholder, has any event
occurred which could be the basis for any claim under workmen's compensation,
occupational safety and health, ERISA or similar laws and regulations.
5.1.12 Customers and Suppliers. Seller has furnished to Purchaser
a complete list of all of Seller's customers with whom Seller has done business
within the past twelve months. No one customer of Seller accounted for more than
5% of Seller's revenues during such period. No customer or supplier of Seller
has indicated that it intends to terminate or modify its relationship with
Seller and Seller agrees to immediately notify Purchaser of any change or
prospective change in any such relationship occurring prior to or after the
Closing. Seller has not engaged in any forward selling or granted any unusual
sales or terms of sale to any customer. There are no customer prepayments or
deposits, except to the extent disclosed in a schedule hereto.
21
5.1.13 Financial Information. Attached as Schedule 5.1.13 are
balance sheets and related statements of income, stockholders' equity, and
changes in cash flow of Seller for the fiscal years ending September 30, 1999,
2000 and 2001 (the "Financial Statements"). The Financial Statements have been
prepared in accordance with generally accepted accounting principles,
consistently applied, are true and correct in all material respects, contain no
untrue statements of a material fact, do not omit any material fact necessary in
order to make such Financial Statements not misleading, and are a true and
accurate reflection of the operations of Seller for the periods described
therein in accordance with generally accepted accounting principles consistently
applied. Since September 30, 2001, there has not been, and as of the Closing
Date there will not have been, any material adverse changes in the Assets, or
Business or Seller's earnings, financial or other condition, or business
prospects of Seller (whether or not in the ordinary course of business), nor has
there been any damage, destruction or loss adversely affecting the Assets or
Business; nor has there been any other event or condition of any nature which
reasonably could be expected to have a material and adverse effect on the Assets
or Business.
5.1.14 Absence of Undisclosed Liabilities. There are no
liabilities of Seller which have not been disclosed in the Financial Statements
or this Agreement or the schedules attached hereto which could materially and
adversely affect the Assets or Business. To the best knowledge of Seller and
Shareholder, there is no basis for the assertion against Seller of any liability
of any nature or in any amount which is not fully reflected or reserved against
in the Financial Statements.
5.1.15 Books of Account. Returns and Reports. Seller's books of
account reflect all items of income and expense, and all of Seller's assets,
liabilities and accruals.
22
5.1.16 Transactions with Affiliates. Except as disclosed in this
Agreement or a schedule attached hereto, neither Seller nor any of its
shareholders, officers or directors, nor any relative of any of its
shareholders, officers or directors owns any shares of stock or other securities
of, or has any other direct or indirect interest in, any person, firm,
corporation or entity which has a material business relationship (as creditor,
lessor, or otherwise) with Seller.
5.1.17 Franchises. Permits and Licenses. Schedule 5.1.17 contains
a complete and correct list or summary description of all material franchises,
permits, licenses, approvals and other authorizations from federal, state and
local governmental authorities held by Seller in connection with the conduct of
the Business or the Real Property as presently conducted. Seller has sole and
exclusive rights to any such franchises, permits, licenses, approvals and
authorizations. True and complete copies of each such written franchise, permit,
license, approval and authorization have been delivered to Purchaser. No claim
is pending or threatened to revoke or refuse renewal of any of said franchises,
permits, licenses, approvals, and other authorizations or to declare them
invalid in any respect. There are no additional material franchises, permits,
licenses, approvals or authorizations necessary for the conduct of the Business
or the Real Property as presently conducted.
5.1.18 Employees. Schedule 5.1.18 is a complete list of all the
employees of Seller employed in the Business and, for each such employee, his or
her current title, exempt or nonexempt status, salary or wage, dates of birth
and hire, and bonuses and salary increases within the past year. There are no
employment contracts with any of the employees that require Seller to employ an
employee for a fixed term or restrict the right of Seller to terminate such
employee.
5.1.19 Insurance. Seller has in full force and effect the
insurance coverages listed in Schedule 5.1.19. Said insurance is in compliance
with all the leases and contracts of Seller and will adequately insure the
Assets and Business of Seller through the Closing. Except as disclosed in
23
Schedule 5.1.19, there are no outstanding requirements or recommendations by any
insurer or underwriter with respect to the Assets, the Business or the Real
Property which require or recommend changes in the conduct of the Business or
work to be performed with respect to any of the Assets or the Real Property.
5.1.20 Patents. The issued and pending patents, trademarks, trade
names, copyrights and applications therefor of Seller and any licenses,
assignments or agreements with others relating thereto, are set forth in
Schedule 5.1.20. Seller has sole and exclusive rights to such issued and pending
patents, trademarks, trade names and copyrights. There is no basis for any third
party claim that Seller is infringing on any patent, trademark, trade name or
copyright in the conduct of the Business as presently conducted. Seller has the
full right to use its corporate name and all trade names currently in use in all
places where it now does business and to convey such right to Purchaser as part
of the Assets.
5.1.21 Conditions Affecting Seller. To the best knowledge of
Seller and Shareholder, there are no conditions existing with respect to
Seller's markets, products, facilities, personnel or raw material supplies which
might materially and adversely affect the Assets, the Business or business
prospects of Seller, other than such conditions as may affect the industry in
which Seller participates as a whole.
5.1.22 Disclosure. No representation or warranty by Seller or
Shareholder herein or in any statement, certificate, schedule or document
furnished or to be furnished by Seller or Shareholder to Purchaser pursuant
hereto or in connection with the transactions contemplated hereby contains or
will contain any untrue statement of a material fact, or omits or will omit to
state a material fact necessary to make the statements contained herein or
therein not misleading.
24
5.1.23 Knowledge. For purposes of this Agreement, the term "to the
best knowledge of Seller and Shareholder" or similar knowledge or awareness
qualifiers shall be understood to refer to all matters that are known or, in the
exercise of reasonable business judgment, should be known to Seller or
Shareholder. For purposes hereof, Seller and Shareholder shall be deemed to have
knowledge of all acts and circumstances regarding Seller, the Assets, the Real
Property, and the Business that are known or, in the exercise of reasonable
conduct, should be known by Shareholders or Seller's officers, directors, and
senior level management.
5.2 Representations. Warranties and Agreements of Purchaser. Purchaser
hereby represents, warrants and agrees, as of the date hereof, that:
5.2.1 Organization and Good Standing. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of
Delaware, with full corporate power and authority to conduct its business as
such business is now being conducted, and has requisite corporate power and
authority to execute and perform this Agreement and the transactions
contemplated hereby.
5.2.2 No Violation: No Consents. Purchaser has taken or will take
prior to Closing all necessary or appropriate action to enable Purchaser to
enter into, execute, deliver and perform this Agreement. The execution and the
performance of this Agreement, and the consummation of the transactions
contemplated hereby, will not violate any provision of the Certificate of
Incorporation or Bylaws of Purchaser, and will not violate or result in the
breach of any term or provision of, or constitute a default or accelerate
maturities under any loan or other similar agreement, instrument, indenture,
mortgage, deed of trust, or other restriction to which Purchaser is a party or
by which any of Purchaser's property is bound.
25
5.2.3 Validity of Agreement. This Agreement and the transactions
contemplated hereby have been, or shall have been prior to Closing, duly
authorized and approved by the Board of Directors of Purchaser, and this
Agreement has been duly executed and delivered by Purchaser and is the legal,
valid and binding obligation, enforceable in accordance with its terms, of
Purchaser. No vote of the shareholders of Purchaser or other proceedings are
necessary to authorize this Agreement and the transactions contemplated hereby,
or the performance or compliance by Purchaser with any of the terms, provisions
or conditions hereof.
5.2.4 Absence of Undisclosed Liabilities. There are no liabilities
of Purchaser that have not been disclosed to Seller which could materially and
adversely affect the business of Purchaser. To the best knowledge of Purchaser,
there is no basis for the assertion against Purchaser of any material liability
that has not been publicly disclosed.
5.2.5 Disclosure. No representation or warranty by Purchaser
herein or in any statement, certificate, schedule or document furnished or to be
furnished by Purchaser to Seller pursuant hereto or in connection with the
transactions contemplated hereby contains or will contain any untrue statement
of a material fact, or omits or will omit to state a material fact necessary to
make the statements contained herein or therein not misleading.
5.2.6 Knowledge. For purposes of this Agreement, the term "to the
best knowledge of Purchaser" or similar knowledge or awareness qualifiers shall
be understood to refer to all matters that are known or, in the exercise of
reasonable business judgment, should be known to Purchaser. For purposes hereof,
Purchaser shall be deemed to have knowledge of all acts and circumstances
regarding Purchaser that are known or, in the exercise of reasonable conduct,
should be known by Purchaser's officers, directors, and senior level management.
26
ARTICLE 6
SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
6.1 Survival of Representations and Warranties. The representations and
warranties of the parties contained in this Agreement or in any schedule or
exhibit or other writing delivered pursuant to the provisions of this Agreement
or in connection with the transactions contemplated hereby, shall survive the
Closing for a period of two (2) years after the Closing Date except for
representations and warranties with respect to taxes and title, which shall
survive for the applicable statute of limitations, and representations and
warranties with respect to environmental matters, which shall survive
indefinitely. Liability for intentional misrepresentation shall survive without
regard to the foregoing limitation. Nothing contained in this Section 6.1 shall
be deemed to affect the continuing obligations of the parties hereto, including,
without limitation, the obligations of the parties under Section 6.2 hereof
6.2 Indemnification. The parties agree to indemnify each other as
follows:
6.2.1 Seller's and Shareholder's Indemnity. Seller and Shareholder
agree to indemnify and defend Purchaser, and its successors and assigns, and to
hold them harmless from and against any and all damages, claims, deficiencies,
losses, liabilities, obligations, and expenses (including reasonable attorneys'
fees) of every kind and description arising from or relating to (i) the
operation of the Business prior to the Closing; (ii) any misrepresentation or
breach of warranty hereunder by Seller or Shareholder; (iii) other
nonfulfillment of any of Seller's or Shareholder's obligations under this
Agreement; or (iv) any environmental remediation required at the Real Property
arising out of any pre-Closing refining, processing, generating, storing,
recycling, transporting, disposing of or releasing into the environment of any
Hazardous Substances or Wastes ("Indemnity Claims") for a period of two years
after the Closing Date, except with respect to Indemnity Claims arising under
27
clause (iv) of this subsection; provided, that Shareholder's total liability for
Indemnity Claims shall be limited to a percentage of the total liability equal
to its pro rata ownership interest in Seller.
6.2.2 Purchaser's Indemnity. Purchaser agrees to indemnify and
defend Seller, and its successors and assigns, and Shareholder, and to hold them
harmless from and against any and all damages, claims, deficiencies, losses,
liabilities, obligations, and expenses (including reasonable attorneys' fees) of
every kind and description arising from or relating to (i) the operation of the
Business by Purchaser subsequent to the Closing; (ii) any misrepresentation or
breach of warranty hereunder by Purchaser; (iii) other nonfulfillment of any of
Purchaser's obligations under this Agreement; or (iv) any environmental
remediation required at the Real Property arising out of any post-Closing
processing or disposing of or releasing into the environment of any Hazardous
Substances or Wastes ("Indemnity Claims").
6.2.3 Notice and Defense of Indemnity Claims. A party hereto
agreeing to be responsible for or to indemnify against any matter pursuant to
this Agreement is referred to herein as the "Indemnifying Party" and a party
entitled to indemnification hereunder is referred to as the "Indemnified Party."
An Indemnified Party under this Agreement shall give written notice to the
Indemnifying Party hereunder with respect to any assertion by the Indemnified
Party or by a third party of any liability which the Indemnified Party has
reason to believe might give rise to an Indemnity Claim under this Agreement.
Such notice shall set forth in reasonable detail the nature of such action or
claim, and include copies of any written complaint, summons, correspondence or
other communication from the party asserting the claim or initiating the action.
As to any such Indemnity Claim which involves a third party, the Indemnifying
Party shall assume and thereafter control the defense of such Indemnity Claim.
The Indemnified Party shall be entitled, together with the Indemnifying Party,
to participate in the defense, compromise or settlement of any such matter
28
through the Indemnified Party's own attorneys and at its own expense, but the
Indemnifying Party shall have control thereof. The Indemnified Party shall
provide such cooperation and such access to its books, records and properties as
the Indemnifying Party shall reasonably request with respect to such matters and
the parties hereto agree to render each other such assistance as they may
reasonably require of each other in order to ensure the proper and adequate
defense thereof. An Indemnifying Party shall not make any settlement of any
Indemnity Claims, other than Indemnity Claims strictly for monetary damages as
to which the Indemnifying Party agrees to be responsible, without the written
consent of the Indemnified Party, which consent shall not be unreasonably
withheld. Without limiting the generality of the foregoing, it shall not be
deemed unreasonable to withhold consent to a settlement involving injunctive or
other equitable relief against the Indemnified Party or its assets, employees or
business.
6.2.4 Manner of Indemnification. Any disputed Indemnity Claims
shall be submitted to arbitration in accordance with this Section 6.2.4. Except
as expressly provided herein, the arbitration shall be conducted in Salt Lake
City, Utah in accordance with the rules of the American Arbitration Association.
Within thirty (30) days of the hearing, the arbitrator(s) shall render a
decision concerning all contested issues considered during the arbitration and
the arbitrator(s) shall notify the parties in writing of their decision, setting
forth the dollar amount, if any awarded. The arbitrators' decision shall be
final and binding on the parties, and notice of award, if any, shall be given to
the parties not later than thirty (30) days after the date set for the hearing.
In the event that there shall be more than one dispute to be arbitrated, the
parties agree that all pending disputes shall be consolidated to the extent
29
feasible. In the event of an arbitration decision in favor of the Indemnified
Party, the amount of the dollar award, if any, plus all reasonable attorneys'
fees of the prevailing party, shall be paid in cash by the Indemnifying Party to
the Indemnified Party, within ten (10) days following the date of such award. In
the event that payment is not made within the time period provided herein, the
prevailing party shall have the right to commence an action, at law or in
equity, in any state or federal court of competent jurisdiction to have the
decision of the arbitrator(s) enforced. In the event such an action is filed,
the costs of such action (including reasonable attorneys' fees) shall be borne
by the party against whom such performance is sought.
6.2.5 Brokers. Each party hereto agrees to indemnify the other and
agrees to hold the other harmless against any claim or claims for brokerage or
other commission relative to the transactions contemplated herein due to any
acts or things done by its employees, agents or consultants.
6.3 Purchaser's Right of Setoff. In the event of (i) an undisputed
Indemnity Claim against Seller and/or Shareholder, or (ii) an Indemnity Claim
against Seller and/or Shareholder after judgment or award or adverse to Seller
and/or Shareholder as provided above, which remains uncured or unsettled for 60
days or more after notice of the Indemnity Claim is given by Purchaser to Seller
and/or Shareholder, then Purchaser and/or its affiliates shall have the right,
but not the obligation, to set off the amount of the Indemnity Claim against any
then remaining obligation of Purchaser and/or its affiliates to Seller and/or
Shareholder, regardless of the source of such obligation.
30
ARTICLE 7
CONDITIONS PRECEDENT TO THE CLOSING
7.1 Conditions To Purchaser's Performance. Purchaser's obligations to
purchase and pay the Purchase Consideration for the Assets are subject to the
following express conditions:
7.1.1 Satisfactory Review. A complete and satisfactory review by
Purchaser, at Purchaser's discretion, of the books, records, Business and
affairs of Seller.
7.1.2 Absence of Material Change in Financials. The absence of any
material adverse change in the financial condition, results of operations,
Business, Assets, prospects or liabilities of Seller from that reflected in the
Financial Statements of Seller as of September 30, 2001.
7.1.3 Representations and Warranties True. The representations and
warranties of Seller and Shareholder contained in this Agreement shall be true
and correct on and as of the Closing Date.
7.1.4 Covenants Performed. All of the covenants of Seller and
Shareholder set forth herein and which were to be performed at or prior to the
Closing Date shall have been duly performed.
7.1.5 Litigation. There shall not have been instituted or
threatened, on or before the Closing Date, any action or proceeding before any
court or governmental agency or body or by a public authority with respect to
the acquisition of the Assets or Business as contemplated hereby.
7.1.6 Termination of Consulting Services Agreement. Seller shall
have obtained a termination agreement terminating the Consulting Services
31
Agreement dated April 14, 1997 with Dr. ▇▇▇▇▇ ▇▇▇▇ providing among other things
for a two percent royalty on gross revenues from all sales of Seller's
microkeratome.
7.1.7 Termination and Settlement Agreements. Seller shall have
entered into agreements with ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇ to terminate the Agreement
dated April 8, 1999 between Seller and ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇ relating to
royalty payments on sales of the Microkeratome and to settle the lawsuit brought
by ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇ against Seller in the First Judicial ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇, ▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ entitled ▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇
vs. Innovative Optics, Inc., No. D-0101-CU-200001834.
7.1.8 Other Agreements. All agreements between Purchaser and
another party hereto shall have been fully executed and delivered. Seller shall
have executed and delivered the General Assignment and ▇▇▇▇ of Sale and other
instruments provided for herein, and such other documents, reasonably
satisfactory to Purchaser's counsel, as shall be necessary or appropriate to the
transfer of the Assets and Business to Purchaser.
7.1.9 Consents. Seller shall have obtained all required consents
or approvals in writing of all parties whose consent or approval is necessary
for the assignment of Scheduled Contracts to be assigned to Purchaser hereunder
as provided in Section 5.1.10, and for the assignment of the Personal Property
Leases and the Real Property Leases in Section 5.1.5.
7.1.10 Opinion of Counsel. Counsel for Seller shall have delivered
to Purchaser a favorable opinion, dated as of the Closing Date and in form and
substance satisfactory to Purchaser.
7. 1.11 Audits and Inspections. Seller shall have permitted
Purchaser to make such audits and inspections as Purchaser deems reasonably
appropriate as provided for in Article 4 hereof. Such audits and inspections by
32
Purchaser shall not affect any of the representations and warranties made by
Seller and Shareholder in this Agreement and shall not, under any circumstances
constitute a waiver of Purchaser's indemnification rights under Article 6 hereof
or otherwise relieve Seller or Shareholder of any liability thereunder.
7.2 Conditions to Seller's Performance. Seller's obligations pursuant
to this Agreement are subject to the following conditions:
7.2.1 Representations and Warranties True. The representations and
warranties of Purchaser contained in this Agreement shall be true and correct on
and as of the Closing Date.
7.2.2 Covenants Performed. All of the covenants of Purchaser set
forth herein and which were to be performed at or prior to the Closing Date
shall have been duly performed.
7.2.3 Litigation. There shall not have been instituted or
threatened, on or before the Closing Date, any action or proceeding before any
court or governmental agency or body or by a public authority with respect to
the acquisition of the Assets or Business as contemplated hereby.
7.2.4 Other Agreements. All agreements described in Article 1
between Purchaser and any other party hereto shall have been fully executed and
delivered.
7.2.5 Opinion of Counsel. Counsel for Purchaser shall have
delivered to Seller a favorable opinion, dated as of the Closing Date and in
form and substance satisfactory to Seller.
33
ARTICLE 8
THE CLOSING
8.1 Closing Date. Subject to the terms and conditions herein contained,
the parties agree to close this transaction (the "Closing") at the offices of
Purchaser's counsel ▇▇▇▇▇▇, Price & ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ II, ▇▇ ▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, on January 31, 2002 (the "Closing Date") or
on such other date and at such other place as the parties may agree upon in
writing. Seller and Purchaser may agree to extend the Closing for a reasonable
period of time not to exceed thirty (30) days, such agreement not to be
unreasonably withheld.
8.2 Seller's Deliveries at Closing. Seller shall deliver or cause to be
delivered to Purchaser at the Closing the following:
8.2.1 Duly executed copies of the General Assignment and ▇▇▇▇ of
Sale, together with appropriate certificates of title or other evidences of
Seller's ownership of the Assets, and duly executed copies of all instruments
and agreements among or between Purchaser, Seller and Shareholder provided for
herein.
8.2.2 Certified copies of resolutions of the Board of Directors of
Seller and its shareholders, authorizing the making, execution, and delivery of
this Agreement and the consummation of the transactions contemplated hereby.
8.2.3 A certificate of good standing from the Secretary of State
of the State of Georgia for Seller.
8.2.4 A termination agreement terminating the Consulting Services
Agreement with Dr. ▇▇▇▇▇ ▇▇▇▇ per Section 7.2.6 hereof.
8.2.5 Termination and settlement agreements per Section 7.1.7
hereof.
8.2.6 The opinion of counsel described in Section 7.1.10 hereof.
34
8.3 Purchaser's Deliveries at Closing. Purchaser shall deliver or cause
to be delivered to Seller and Shareholder at Closing the following:
8.3.1 A stock certificate issued to Seller in the amount of shares
of Paradigm Common Stock as set forth in Section 2.1(a) hereto (other than the
Paradigm Stock to be placed in escrow pursuant to Section 2.1(a)(ii)) and
Warrants issued to Seller to purchase shares of Paradigm Common Stock in the
amount and subject to the conditions as set forth in Section 2.1(b) hereof.
8.3.2 Duly executed copies of all instruments and agreements among
or between Purchaser, Seller and Shareholder provided for herein.
8.3.3 Certified copies of resolutions of the Board of Directors of
Purchaser authorizing the making, execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby.
8.3.4 A certificate of good standing from the Secretary of State
of the State of Delaware for Purchaser.
8.3.5 The opinion of counsel described in Section 7.2.5 hereof.
8.3.6 Provision for delivery of stock into Escrow per Section
2.1(a)(ii) hereof.
ARTICLE 9
FEES AND EXPENSES
9.1 Expenses. Whether or not the transactions contemplated by this
Agreement are consummated, each of the Parties hereto shall bear its own
expenses, including the payment of the fees and expenses of such Party's
respective counsel, accountants, other experts and any other expenses incurred
by such Party incident to the negotiation, preparation and execution of this
Agreement. All sales and transfer taxes, including, but not limited to, vehicle
35
sales and transfer taxes, arising by reason of the transactions contemplated by
this Agreement shall be borne by Purchaser.
9.2 Break Up Fee. If the Closing does not occur and Seller enters into
an agreement to sell the Assets or Business in whole or in part with any other
party other than Purchaser within a 100 day period of the date of this
Agreement, the Seller shall pay a $250,000 break up fee to Purchaser.
ARTICLE 10
CONSTRUCTION
10.1 Choice of Laws. This Agreement and the agreements appended hereto
and delivered herewith shall be governed by and construed and enforced in
accordance with the laws of the State of Utah.
10.2 Headings. All headings contained in this Agreement are for
reference only and shall not affect the meaning or interpretation of this
Agreement in any manner.
10.3 Invalid Provisions. Should any part of this Agreement for any
reason be declared invalid, such decision shall not affect the validity of any
other portion, which remaining portion shall remain in force and effect as if
this Agreement had been executed with the invalid provisions thereof eliminated,
and it is the declared intention of the parties hereto that they would have
executed the remaining portion of the Agreement without including therein any
such part or portion which may be declared invalid.
ARTICLE 11
ASSIGNABILITY
11.1. Binding Agreement. This Agreement shall be binding upon and inure
to the benefit of each of the parties hereto, their successors and permitted
assigns.
36
11.2 Assignability. This Agreement shall not be assignable in whole or
in part by either party except with the consent in writing of the other party,
which consent shall not be unreasonably withheld. Any purported assignment
without such consent shall be void. Notwithstanding the foregoing, Purchaser may
assign its rights and obligations hereunder to an Affiliate of Purchaser without
the necessity of obtaining such consent.
ARTICLE 12
NOTICES
12.1 Written Notices. All notices pursuant to this Agreement shall be
in writing.
12.2 Notice to Purchaser. A notice to Purchaser shall be sufficient in
all respects if delivered, or mailed by first class registered or certified
mail, postage and fees prepaid, or if sent by a nationally recognized overnight
courier providing proof of delivery, addressed to the following or such other
address as provided by written notice made pursuant to this Article:
Paradigm Medical Industries, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chairman
and Chief Executive Officer
with a copy thereof to its Counsel:
Mackey Price & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ II
▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
12.3 Notice to Seller. A notice to Seller or Shareholder shall be
sufficient in all respects if delivered, or mailed by first class registered or
certified mail, postage and fees prepaid, or if sent by a nationally recognized
overnight courier providing proof of delivery, addressed to the following or
such other address provided by written notice made pursuant to this Article:
37
Innovative Optics, Inc.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chief Executive Officer
and with a copy thereof to its counsel:
Wright, Robinson, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, PC
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III, Esq.
ARTICLE 13
PRESS RELEASES AND DISCLOSURE
13.1 Press Releases. The Parties agree that they will not issue any
press releases or other disclosure of the Agreement or the transaction
represented by this Agreement without prior approval of the other Parties
unless, in the good faith opinion of Purchaser's counsel, such disclosure is
required by law.
ARTICLE 14
FURTHER CONDITIONS AND MISCELLANEOUS
14.1 Proration of Fees and Taxes. Purchaser and Seller agree that they
shall prorate all fees and/or taxes paid by Seller and Purchaser to the Arizona
and New Mexico tax commissions as shown on Schedule 14.1 hereof for the 2002
calendar year.
14.2 Seller's Name. At Closing Seller shall convey and assign to
Purchaser all of Seller's right, title and interest in and to its corporate
name, "Innovative Optics, Inc.", and all variants thereof, and Seller shall
promptly amend its Articles of Incorporation to adopt a dissimilar name.
14.3 Further Agreements and Cooperation. Each party hereto agrees to
execute such further papers or agreements and to take such other actions as may
38
be necessary to effect the purposes of this Agreement and carry out its
provisions, including without limitation such documents and actions as shall
ensure the orderly transfer of the customers of the Business to Purchaser. Each
party further acknowledges that the Exhibits and Schedules referenced herein
have not been completed as of the date of this Agreement and are subject to
final approval by the parties. Each party covenants and agrees to use best
efforts to prepare, and obtain final approval of, such Exhibits and Schedules
prior to the date of Closing.
14.4 Audited Business. Audited financial statements of Seller for the
Business may be required for Purchaser to comply with the requirements of Rule
3-05 of Regulation S-X and Form 8-K of the Securities and Exchange Commission.
Seller will cooperate with Purchaser to allow completion (no later than 60 days
following the Closing Date) of audited financial statements of the Business to
be prepared by Purchaser's auditors at Purchaser's expense. Seller's cooperation
shall include execution, if necessary, of a mutually agreeable "letter of
representation" by Seller's management.
14.5 Entire Agreement. No Oral Change. This Agreement, together with
the schedules and exhibits hereto, embodies the entire agreement between the
parties hereto and supersedes any and all prior agreements and understandings
between the parties hereto. This Agreement may only be changed by written
instrument signed by the party to be charged.
14.6 Risk of Loss. Pending Closing, Seller shall bear the risk of loss
of or damage to the Assets. Seller shall promptly notify Purchaser of any such
loss.
14.7 Conditions Subsequent. Following the Closing of this transaction,
Seller agrees to provide information on a timely basis to Purchaser in response
to reasonable inquiries or requests for information from Purchaser concerning
the Business and Assets to be purchased pursuant to this Agreement. Purchaser
39
shall have the right following the Closing to hire any of Seller's employees on
a part-time or full-time basis as employees of Purchaser.
14.8 Attorney's Fees. In the event any party hereto institutes
litigation to enforce its rights under this Agreement, the party prevailing in
such litigation shall be entitled to receive an award from the non-prevailing
party of the prevailing party's reasonable attorney's fees and costs incurred in
connection with such litigation.
14.9 Access to Records after Closing. After the Closing, Seller and
Shareholder, their employees, accountants and agents shall have the right from
time to time, during normal business hours and upon reasonable notice, to
inspect, copy, make abstracts of and inspect the books and records transferred
to Purchaser under this Agreement in order to wind up its operations, prepare
tax returns and complete its accounting of Seller's business for the period
ending on the Closing Date and an opportunity to take possession of any such
books and records if Purchaser shall ever plan to destroy any of them.
14.10 Counterparts. This Agreement may be executed in a number of
counterparts, each of which, when so executed, shall constitute an original copy
hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
40
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
PURCHASER:
PARADIGM MEDICAL INDUSTRIES, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chairman
and Chief Executive Officer
SELLER:
INNOVATIVE OPTICS, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chief Executive
Officer
SHAREHOLDER:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ INVESTMENTS, L.P.
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Managing Partner
41
TABLE OF CONTENTS
-----------------
ARTICLE 1
SUMMARY OF TRANSACTIONS..................................................................................1
1.1 Assets Purchased................................................................................1
1.2 Excluded Assets.................................................................................3
1.3 Assumption of Liabilities.......................................................................3
1.4 Non-Competition and Confidentiality Agreement...................................................3
1.5 Real Property Lease.............................................................................3
ARTICLE 2
PURCHASE CONSIDERATION...................................................................................3
2.1 Purchase Consideration..........................................................................3
2.2 Payment of Purchase Consideration...............................................................6
2.3 Certain Definitions.............................................................................6
ARTICLE 3
ASSUMPTION OF LIABILITIES................................................................................9
3.1 Assumption of Certain Liabilities...............................................................9
3.2 Limitation of Purchaser's Liabilities...........................................................9
3.3 Discharge of Liabilities Not Assumed by Purchaser..............................................10
3.4 Bulk Sales Law.................................................................................11
ARTICLE 4
CONDUCT OF SELLER'S BUSINESS............................................................................11
4.1 Conduct of Business Prior to Closing...........................................................11
ARTICLE 5
REPRESENTATIONS, WARRANTIES AND AGREEMENTS..............................................................13
5.1 Representations. Warranties and Agreements of Seller and Shareholder...........................13
5.2 Representations. Warranties and Agreements of Purchaser........................................25
ARTICLE 6
SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.........................................................................................27
6.1 Survival of Representations and Warranties.....................................................27
6.2 Indemnification................................................................................27
6.3 Purchaser's Right of Setoff....................................................................30
ARTICLE 7
CONDITIONS PRECEDENT TO THE CLOSING.....................................................................31
7.1 Conditions To Purchaser's Performance..........................................................31
7.2 Conditions to Seller's Performance.............................................................33
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ARTICLE 8
THE CLOSING.............................................................................................34
8.1 Closing Date...................................................................................34
8.2 Seller's Deliveries at Closing.................................................................34
8.3 Purchaser's Deliveries at Closing..............................................................35
ARTICLE 9
FEES AND EXPENSES.......................................................................................35
9.1 Expenses.......................................................................................35
9.2 Break Up Fee...................................................................................36
ARTICLE 10
CONSTRUCTION............................................................................................36
10.1 Choice of Laws.................................................................................36
10.2 Headings.......................................................................................36
10.3 Invalid Provisions.............................................................................36
ARTICLE 11
ASSIGNABILITY...........................................................................................36
11.1. Binding Agreement..............................................................................36
11.2 Assignability..................................................................................37
ARTICLE 12
NOTICES.................................................................................................37
12.1 Written Notices................................................................................37
12.2 Notice to Purchaser............................................................................37
12.3 Notice to Seller...............................................................................37
ARTICLE 13
PRESS RELEASES AND DISCLOSURE...........................................................................38
13.1 Press Releases.................................................................................38
ARTICLE 14
FURTHER CONDITIONS AND MISCELLANEOUS....................................................................38
14.1 Proration of Fees and Taxes....................................................................38
14.2 Seller's Name..................................................................................38
14.3 Further Agreements and Cooperation.............................................................38
14.4 Audited Business...............................................................................39
14.5 Entire Agreement. No Oral Change...............................................................39
14.6 Risk of Loss...................................................................................39
14.7 Conditions Subsequent..........................................................................39
14.8 Attorney's Fees................................................................................40
14.9 Access to Records after Closing................................................................40
14.10 Counterparts...................................................................................40
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EXHIBITS
--------
Exhibit 1.1 General Assignment and ▇▇▇▇ of Sale
Exhibit 1.3 Assignment and Assumption Agreement
Exhibit 1.4 Non-Competition and Confidentiality Agreement
Exhibit 1.5 Sublease Agreement
Exhibit 2.1 Escrow Agreement
SCHEDULES
--------- Page
----
Schedule 4.1 Conduct of Business...................................................................10
Schedule 5.1.4 Agreements Restricting Shares, Articles of Incorporation, Bylaws, Etc.................14
Schedule 5.1.5(A) Tangible Personal Property............................................................14
Schedule 5.1.5(B) Tangible Personal Property Exceptions.................................................14
Schedule 5.1.5(C) Personal Property Leases..............................................................14
Schedule 5.1.5(D) Real Property .....................................................................14
Schedule 5.1.8 Litigation............................................................................16
Schedule 5.1.10 Scheduled Contracts...................................................................15
Schedule 5.1.11 Employee Benefit Plans................................................................18
Schedule 5.1.13 Financial Statements..................................................................18
Schedule 5.1.17 Franchises, Permits and Licenses......................................................20
Schedule 5.1.18 Employees.............................................................................22
Schedule 5.1.19 Insurance.............................................................................22
Schedule 5.1.20 Patents, Trademarks, Etc..............................................................22
Schedule 13.1 Fees and Taxes........................................................................36
iii
