EXHIBIT 99.1
AGREEMENT OF PURCHASE AND SALE
DATED AS OF OCTOBER 15, 2003
BETWEEN
SRS MEDICAL CORP.,
AND
▇▇▇▇ MEDICAL TECHNOLOGIES, INC.
THIS AGREEMENT OF PURCHASE AND SALE (this "AGREEMENT"), is entered into
as of October 15, 2003, by and between SRS Medical Corp., a Washington
corporation ("BUYER") and ▇▇▇▇ Medical Technologies, Inc. ("SELLER").
ARTICLE I.
SALE OF ASSETS AND ASSUMPTION OF LIABILITIES
Section 1.01 DEFINITIONS.
(a) "AFFILIATE" means, with respect to any Person, another Person
that directly, or indirectly through one or more
intermediaries, controls, is controlled by or is under common
control with such Person.
(b) "AMENDED INVENTORY SCHEDULE" shall have the meaning set forth
in Section 1.05(f).
(c) "ASSIGNMENT AND ASSUMPTION AGREEMENT" shall have the meaning
set forth in Section 3.01(a)(ii).
(d) "ASSUMED LIABILITIES" shall have the meaning set forth in
Section 1.03.
(e) "BASKET AMOUNT" shall have the meaning set forth in Section
4.05(b).
(f) "▇▇▇▇ OF SALE" shall have the meaning set forth in Section
3.01(a)(i).
(g) "BUSINESS" shall have the meaning set forth in Section
1.05(a).
(h) "BUYER" shall have the meaning set forth in the preamble of
this Agreement.
(i) "CLOSING" shall have the meaning set forth in Section 1.04.
(j) "CLOSING DATE" shall have the meaning set forth in Section
1.04.
(k) "CODE" shall have the meaning set forth in Section 1.06(d).
(l) "CONSENT(S)" shall have the meaning set forth in Section
2.01(e).
(m) "DAMAGES" shall have the meaning set forth in Section 4.02.
(n) "DEFERRED PAYMENT" shall have the meaning set forth in Section
1.05(a).
(o) "INCOME TAXES" shall have the meaning set forth in Section
1.06(a).
(p) "INDEMNIFIED PARTY" shall have the meaning set forth in
Section 4.04(a).
(q) "INDEMNIFYING PARTY" shall have the meaning set forth in
Section 4.04(a).
(r) "INTELLECTUAL PROPERTY ASSIGNMENT" shall have the meaning set
forth in Section 3.01(a)(iii).
(s) "INTELLECTUAL PROPERTY RIGHTS" shall mean all U.S. and foreign
patents, patent applications, registered trademarks and
trademark applications owned by Seller, which relate
exclusively to the Products and are set forth in the
Schedules.
(t) "INVENTORY" shall have the meaning set forth in Section
1.05(f).
(u) "KNOWLEDGE" shall mean as to an entity that such entity shall
be deemed to have Knowledge of a particular fact or other
matter if any individual who is serving as an executive or
corporate-level officer of such entity or its parent entity is
actually aware of such fact or other matter.
(v) "LIENS" shall have the meaning set forth in Section 2.01(d).
(w) "MINIMUM DEFERRED PAYMENT" shall have the meaning set forth in
Section 1.05(a).
(x) "PERMITTED LIENS" shall mean any (i) encumbrance for Taxes not
yet due or delinquent or being contested in good faith by
appropriate proceedings for which adequate reserves have been
established in accordance with generally accepted accounting
principles and (ii) any minor imperfections of title or
similar encumbrances which individually or in the aggregate
with other such encumbrances does not impair the value of the
property subject to such encumbrance.
(y) "PERSON" means any natural person, corporation, general
partnership, limited partnership, limited liability company,
proprietorship, other business organization, trust, union,
association or governmental or regulatory authority.
(z) "PRODUCTS" means Seller's (i) urodynamic devices and all
accessory items; (ii) StepFree devices and all accessory
items; and (iii) C3 devices and all accessory items.
(aa) "PROMISSORY NOTE" shall have the meaning set forth in Section
1.05(a).
(bb) "PURCHASED ASSETS" shall have the meaning set forth in Section
1.02(a).
(cc) "PURCHASE PRICE" shall mean all amounts payable by Buyer
pursuant to Section 1.05.
(dd) "REVENUES" shall mean total gross amounts and other cash and
non-cash consideration invoiced or otherwise charged in
respect of items shipped, sold, transferred or otherwise
distributed by Buyer or its affiliates, net of returns and any
amounts invoiced or otherwise charged for sales taxes, freight
and insurance (such items to be netted being referred to
collectively as "DEDUCTIONS"). Notwithstanding the foregoing,
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with respect to any item shipped, sold, transferred or
otherwise distributed by or on behalf of Buyer to an
affiliate, or otherwise as part of a non-arms-length market
transaction, "Revenues" will be calculated based on the
greater of (a) the actual transfer price of such item and (b)
the fair market value for such item if purchased in an
arms-length market transaction by an unrelated, unaffiliated
party, net of Deductions.
(ee) "SCHEDULE OR SCHEDULES" means the schedules provided by Seller
to Buyer at Closing, which are incorporated herein by
reference.
(ff) "SECURITY AGREEMENT" shall have the meaning set forth in
Section 3.01(a).
(gg) "SELLER" shall have the meaning set forth in the preamble of
this Agreement.
(hh) "TAXES" shall have the meaning set forth in Section 1.06(a).
(ii) "TRANSACTION" shall have the meaning set forth in Section
1.09(b).
(jj) "TRANSFER TAXES" shall have the meaning set forth in Section
1.06(a).
Section 1.02 SALE AND PURCHASE OF ASSETS.
(a) ASSETS TO BE PURCHASED. At the Closing, upon satisfaction of
all conditions to the obligations of the parties contained
herein (other than such conditions as will have been waived in
accordance with the terms hereof), Seller shall sell, assign,
transfer, convey and deliver to Buyer and Buyer shall accept
and purchase, all of Seller's right, title and interest in and
to all of the assets set forth on SCHEDULE 1.02 (collectively,
the "PURCHASED ASSETS").
(b) EXCLUDED ASSETS. Buyer and Seller acknowledge and agree that
the only assets of Seller to be sold to Buyer are the
Purchased Assets specifically identified on SCHEDULE 1.02 and
that no other assets of Seller are being sold under this
Agreement.
Section 1.03 ASSUMPTION OF LIABILITIES. Except for the following liabilities
(the "ASSUMED LIABILITIES"): (i) Seller's obligations under purchase orders for
Products which are open and unfulfilled as of the Closing Date, which are set
forth in SCHEDULE 1.03(I); (ii) Seller's warranty obligations arising under
written warranties, the standard forms and a list of which are set forth in
SCHEDULE 1.03(II) ("SELLER'S WRITTEN WARRANTIES"), from sales of the Products,
including without limitation the warranty obligations set forth in the warranty
agreements set forth in SCHEDULE 1.03; and (iii) Seller's obligations under that
certain Service and Support Provider Agreement between the Seller and Diagnostic
Instruments Service Center, dated August 1, 2003, as such agreement relates to
the service and support of UI Diagnostic Products (as defined therein), Buyer
will not assume, and will not be liable for, any liabilities or obligations of
Seller, whether known, unknown, contingent, absolute, determined, indeterminable
or otherwise on the Closing Date, whether incurred or accruing prior to, on or
after the Closing Date.
Section 1.04 CLOSING. The closing of the purchase and sale of the Purchased
Assets (the "CLOSING") will take place on October 14, 2003 (the "CLOSING DATE"),
at the offices of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, unless another date or place is agreed to in writing by
the parties hereto.
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Section 1.05 PURCHASE PRICE. In consideration for the Purchased Assets acquired
hereunder, Buyer shall pay to Seller the aggregate principal amount of
$2,693,638, plus interest on the unpaid balance at the rate of 7.5% per annum
(the "PURCHASE PRICE") as follows:
(a) DEFERRED PAYMENTS. Following the Closing Date, Buyer shall pay
to Seller on a quarterly basis by bank wire transfer in
immediately available funds to such bank account designated by
Seller a deferred Purchase Price payment (each, a "DEFERRED
PAYMENT") equal to the higher of (i) the minimum quarterly
deferred payment set forth in SCHEDULE 1.05 (the "MINIMUM
DEFERRED PAYMENT") or (ii)15% of the Revenues attributable to
Buyer's then-existing urodynamics business, including, without
limitation, any and all Revenues attributable to the
urodynamics assets included in the Purchased Assets and all
improvements and modifications thereto AND 15% of the Revenues
attributable to the incontinence assets included in the
Purchased Assets, consisting exclusively of the StepFree and
C3 assets and all improvements or modifications thereto
(collectively, the "BUSINESS"), but specifically excluding
biofeedback, electrical stimulation and bulking agent
instruments; PROVIDED, that no Minimum Deferred Payment shall
be required until the quarterly period ending March 31, 2004;
and PROVIDED, FURTHER, that the aggregate Deferred Payments
payable under this Agreement shall not exceed the Purchase
Price. Buyer will pay each Deferred Payment no later than 45
days after the end of each quarterly period, or portion
thereof for the first and last periods, ending on March 31,
June 30, September 30 and December 31 of each year. Any
Deferred Payment not paid when due under this Agreement shall
bear interest at one and one-half percent (1.5%) per month,
compounded monthly or, if less, the highest amount permissible
under applicable law. The Purchase Price shall be evidenced by
the secured promissory note set forth in SCHEDULE 3.01(A)(V)
(the "PROMISSORY NOTE").
(b) QUARTERLY INFORMATION REPORT. Buyer shall provide to Seller,
concurrently with each quarterly Deferred Payment, a report
showing in reasonable detail the determination of Revenues for
such quarter. Buyer shall provide Seller with access during
normal business hours and upon reasonable notice to such
additional information as is necessary for Seller to audit and
verify such reports.
(c) ANNUAL CERTIFICATION. No later than sixty (60) days after the
expiration of each calendar year, Buyer shall deliver to
Seller a statement setting forth Buyer's determination of the
Revenues for such calendar year and Buyer's determination of
the Deferred Payments payable or paid to Seller corresponding
to such calendar year, accompanied by a certificate executed
on behalf of Buyer by the chief financial officer of Buyer, to
the effect that, to the best of such officer's Knowledge after
due inquiry, said determinations were made in accordance with
the applicable provisions of this Agreement.
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(d) OPERATION OF BUSINESS IN COMMERCIALLY REASONABLE MANNER.
During the period in which any portion of the Deferred
Payments is payable, Buyer shall conduct the Business in a
commercially reasonable manner and shall not take, or allow
its affiliates to take, any action intended to minimize or
diminish the amount of the Deferred Payments payable to
Seller. Without limiting the generality of the foregoing,
Buyer will not: (i) divert the Revenues of the Business into
any of Buyer's other businesses; (ii) sell or otherwise
transfer a controlling interest in the Business or the
Purchased Assets nor enter into any merger, consolidation,
recapitalization, sale or transfer of substantial assets or
sale, exchange or transfer of capital stock or other
securities or other business combination (by operation of law
or otherwise) affecting the Business or the Purchased Assets,
unless the surviving entity from such transaction expressly
agrees, in writing, to assume Buyer's obligation in respect to
the payment of the Deferred Payments; or (iii) take any other
action that could reasonably be expected to degrade the
reputation of the Business or the amount of Revenues earned
following the Closing.
(e) AUDIT. For a period of two (2) years following the expiration
of each calendar quarter (or portion thereof) during which
this Agreement is in effect, Seller may deliver to Buyer a
written notice requesting that independent certified public
accountants selected by Seller and reasonably acceptable to
Buyer review Buyer's determinations of Revenues and the amount
of the corresponding Deferred Payments for a given quarter or
quarters. Buyer shall allow, and cooperate with, such auditors
to prepare, within sixty (60) days after the delivery of such
written notice to Buyer, during normal business hours and not
more than one (1) time per calendar year, a report of the
audit of Buyer's determination of Revenues and the amount of
the corresponding Deferred Payments for a given quarter or
quarters to the effect that said determinations were made in
accordance with the applicable provisions of this Agreement.
In the event that the audit reveals that any Deferred Payment
hereunder was less than the amount actually due, Buyer shall
deliver to Seller the entire shortfall amount within ten (10)
days after the completion of the audit; provided, further that
in the event any Deferred Payment hereunder was less than the
amount actually due and payable by five percent (5%) or more,
then all costs of the audit shall be borne by Buyer. Otherwise
Seller shall bear the cost of the audit, without limitation to
Buyer's obligation to pay any shortfall. In the event that the
audit reveals that any Deferred Payments hereunder exceeded
the amount actually due, Seller shall reimburse the Buyer for
the entire overpayment within ten (10) days after completion
of the audit. Buyer shall keep, and shall cause each Person
which shall use or have access to the Purchased Assets,
including any applicable licensees, sublicensees and
affiliates thereof, to keep full and accurate books of account
containing all particulars that may be necessary for the
purpose of calculating the Deferred Payments. Such books of
account, with all necessary supporting data, shall be kept at
their respective principal places of business.
(f) PURCHASE PRICE ADJUSTMENT. The parties acknowledge that
$505,499 of the Purchase Price represents Seller's good faith
estimate of the direct cost of Seller's raw materials,
work-in-process and finished goods inventory including all
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units on loan (collectively, "INVENTORY") as of the Closing,
as set forth on SCHEDULE 1.02(E) attached hereto. Promptly
after the second week following the Closing, Seller shall
prepare in good faith and deliver to Buyer a revised and
updated Schedule 1.02(E) (the "AMENDED INVENTORY SCHEDULE")
and any additional Inventory set forth therein. If the
aggregate value of such Inventory set forth in the Amended
Inventory Schedule is less than $505,499, then, on the date
that Seller delivers to Buyer the Amended Inventory Schedule,
the difference shall be credited against the principal amount
of the Promissory Note. If the aggregate value of such
Inventory set forth in the Amended Inventory Schedule is more
than $505,499, then, on the date that Seller delivers to Buyer
the Amended Inventory Schedule, the outstanding principal
amount of the Promissory Note shall be increased by the
difference in the aggregate value of such Inventory, and the
parties hereby agree to amend the Promissory Note and take any
other necessary actions to reflect such difference.
Section 1.06 TAX MATTERS.
(a) Notwithstanding any legal requirements to the contrary, Buyer
and Seller shall each be responsible for and pay fifty percent
(50%) of any Transfer Taxes when due, and Buyer shall, at its
own expense, file all necessary Tax returns and other
documentation with respect to all such Transfer Taxes;
PROVIDED, HOWEVER, that, if required by any legal requirement,
Seller will join in the execution of any such Tax returns and
other documentation. "TRANSFER TAXES" shall mean all federal,
state, local or foreign sales, use, transfer, real property
transfer, mortgage recording, stamp duty, value-added or
similar Taxes that may be imposed in connection with the
transfer of Purchased Assets, together with any interest,
additions to Tax or penalties with respect thereto and any
interest in respect of such additions to Tax or penalties; but
excluding all Income Taxes. "INCOME TAXES" shall mean any net
income, gross income, gross receipts, franchise, profits,
gains or alternative or add-on minimum Tax or comparable
governmental fee or other assessment or charge of any kind
whatsoever, together with any interest or any penalty,
addition to Tax or additional amount and any interest on such
penalty, addition to Tax or additional amount, imposed by any
Tax authority. "TAX" (and, with correlative meaning, "TAXES"
and "TAXABLE") shall mean any net income, alternative or
add-on minimum tax, gross income, gross receipts, sales, use,
ad valorem, transfer, franchise, profits, license,
withholding, payroll, employment, excise, severance, stamp,
occupation, premium, property, environmental or windfall
profit tax, custom, duty or other tax, together with any
interest or any penalty, addition to tax or additional amount
and any interest on such penalty, addition to tax or
additional amount, imposed by any Tax authority.
(b) Except as provided in Section 1.06(a), Seller shall be
responsible for and shall (i) pay any Taxes (and shall be
entitled to all refunds of any Taxes) arising or resulting
from or in connection with the ownership or operation of the
Purchased Assets (including Income Taxes arising from or
relating to the sale of the Purchased Assets hereunder)
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attributable to any Taxable period ending on or before the
Closing Date, or, in the case of any Taxable period which
includes the Closing Date, the portion of such period up to
and including the Closing Date, and (ii) pursuant to Section
4.02, indemnify and hold harmless Buyer and its successors and
assigns for Taxes of Seller that are imposed with respect to
the Purchased Assets relating to any Taxable period or portion
thereof ending on or before the Closing Date (regardless of
whether or not such Taxes result in Liens on the Purchased
Assets). Except as provided in Section 1.06(a), Buyer shall be
responsible for and shall (i) pay any Taxes (and shall be
entitled to all refunds of any Taxes) arising or resulting
from or in connection with the ownership or operation of the
Purchased Assets attributable to any Taxable period beginning
after the Closing Date or, in the case of any Taxable period
which includes, but does not begin on, the Closing Date, the
portion of such period beginning after the Closing Date, and
(ii) pursuant to Section 4.03, indemnify and hold harmless
Seller and its successors and assigns for Taxes of Buyer that
are imposed with respect to the Purchased Assets relating to
any Taxable period or portion thereof ending after the Closing
Date.
(c) All real property, personal property, ad valorem or other
similar Taxes (not including Transfer Taxes or Income Taxes)
levied with respect to the Purchased Assets for a Taxable
period which includes (but does not end on) the Closing Date
shall be apportioned between Seller and Buyer based on the
number of days included in such period up to and including the
Closing Date and the number of days included in such period
beginning after the Closing Date.
(d) Notwithstanding any other provision of this Agreement or the
Promissory Note to the contrary, the portion of the Purchase
Price that shall be treated as interest for Income Tax
purposes, if any, shall be determined by Seller in accordance
with Sections 483 and 1274 of the Internal Revenue Code of
1986, as amended ("Code").
Section 1.07 ALLOCATION OF PURCHASE PRICE. As soon as practicable after the
Closing Date, Buyer shall provide to Seller for Seller's review and approval
(which approval shall not be unreasonably withheld) a proposed allocation of the
Purchase Price among the various classes of Purchased Assets (as such classes
are defined for the purposes of Section 1060 of the Code). All allocations made
pursuant to this Section 1.07 shall be made in accordance with the requirements
of Section 1060 of the Code. None of the parties shall take a position on any
Tax return (including IRS Form 8594), before any Tax authority or in any
judicial proceeding that is in any manner inconsistent with such allocation
without the written consent of the other parties to this Agreement or unless
specifically required pursuant to a determination by an applicable Tax
authority. The parties shall promptly advise each other of the existence of any
tax audit, controversy or litigation related to any allocation hereunder.
Section 1.08 BULK TRANSFERS. The Seller has requested that Buyer waive, and
Buyer hereby agrees to waive, the requirements of the Uniform Commercial Code
concerning bulk transfers, as in effect in the various states in which the
Purchased Assets are located, and Seller agrees to indemnify and hold Buyer
harmless from and against any Damages that Buyer incurs by virtue of Seller's
noncompliance with such applicable laws, if any.
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Section 1.09 PRESS RELEASES.
(a) Neither party hereto shall issue a press release or other
publicity announcing the sale of the Purchased Assets or any
other aspect of the transactions contemplated hereby without
the prior written approval of the other party, which shall not
be unreasonably withheld, except and to the extent that
counsel for such party shall determine that such disclosure is
required (i) by applicable law, including the Securities Act
of 1933, as amended and the Securities Exchange Act of 1934,
as amended, (ii) for financial statement disclosure, or (iii)
pursuant to any applicable securities registration or stock
exchange requirements.
(b) The parties to this Agreement acknowledge that, effective
immediately upon commencement of discussions between them with
respect to the sale and purchase of the Purchased Assets
("TRANSACTION"), each of them (and each of their employees,
representatives, or other agents) has been and is permitted to
disclose to any and all Persons, without limitation of any
kind, the federal tax treatment and federal tax structure of
the Transaction and all materials of any kind (including
opinions or other tax analyses) that are or have been provided
to them relating to such federal tax treatment and federal tax
structure; provided that, with respect to any document or
similar item that in either case contains information
concerning the federal tax treatment or federal tax structure
of the Transaction as well as other information, this
authorization shall only apply to such portions of the
document or similar item that relate to the federal tax
treatment or federal tax structure of the Transaction. This
provision is intended to qualify for the presumption that the
Transaction is not offered under conditions of confidentiality
as set forth in Section 1.6011-4(b)(3)(iii) of the Treasury
Regulations and shall be interpreted to authorize disclosure
only to the extent necessary to so qualify. The parties to
this Agreement acknowledge that this written authorization
does not constitute a waiver by any party of any privilege
held by such party pursuant to the attorney-client privilege
or the confidentiality privilege of Section 7525(a) of the
Code.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES
Section 2.01 REPRESENTATIONS AND WARRANTIES OF SELLER.
Seller represents and warrants to, and agrees with, Buyer as follows
(except as set forth on SCHEDULE 2.01, which exceptions shall be deemed to be
representations and warranties as if made hereunder):
(a) ORGANIZATION. Seller is a corporation duly incorporated,
validly existing and in good standing under the laws of the
state of Delaware.
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(b) AUTHORIZATION. Seller has all requisite corporate power and
authority to enter into and perform its obligations under this
Agreement and to carry out the transactions contemplated
hereby. The Board of Directors of Seller has duly authorized
the execution and delivery of this Agreement and the other
transactions contemplated hereby and, no other corporate
proceedings on the part of Seller are necessary to authorize
this Agreement and the transactions contemplated hereby. This
Agreement has been duly executed and delivered by Seller and
constitutes a valid and binding obligation of Seller
enforceable in accordance with its terms, except as may be
limited by (a) applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general
application affecting enforcement of creditors' rights
generally, and (b) laws relating to the availability of
specific performance, injunctive relief, or other equitable
remedies.
(c) NON-CONTRAVENTION. Neither the execution and delivery by
Seller of this Agreement nor the performance by Seller of its
obligations hereunder, will, or with the giving of notice or
the lapse of time or both would, (i) conflict with, result in
a breach of, or constitute a default under, any provision of
the charter or other organizational or governing documents of
Seller or any material contract, indenture, lease, sublease,
loan agreement, Lien (other than Permitted Liens) or other
obligation or liability to which it is a party or by which any
of the Purchased Assets is affected or bound; or (ii) result
in the creation or imposition of any Lien upon the Purchased
Assets (other than Permitted Liens).
(d) TITLE. Except as set forth in SCHEDULE 2.01(D), Seller has
good and marketable title to all of the Purchased Assets, in
each case free and clear of all mortgages, liens, security
interests, pledges, charges or encumbrances of any nature
whatsoever ("LIENS") other than Permitted Liens. At the
Closing, Seller will transfer to Buyer good and marketable
title to all of the Purchased Assets, in each case free and
clear of all Liens other than Permitted Liens.
(e) CONSENTS AND APPROVALS. Except for filings required for the
assignment of the Intellectual Property Rights set forth on
SCHEDULE 1.02 and as otherwise set forth in SCHEDULE 2.01(E),
no consent, approval, order or authorization of or from, or
registration, notification, declaration or filing with
(hereinafter sometimes separately referred to as a "CONSENT"
and sometimes collectively as "CONSENTS") of any individual or
entity, including without limitation any governmental
authority, is required in connection with the execution,
delivery or performance of this Agreement by the Seller or the
consummation by the Seller of the transactions contemplated
herein.
(f) LITIGATION. Except as set forth in SCHEDULE 2.01(F), there is
no action, suit, proceeding at law or in equity by any Person,
or any arbitration or any administrative or other proceeding
by or before (or any investigation by) any governmental
authority, pending or, to Seller's Knowledge, threatened,
against Seller relating directly to any of the Purchased
Assets. Seller is not subject to any judgment, order or decree
entered in any lawsuit or proceeding to which it is a party
relating directly to the Purchased Assets.
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(g) INTELLECTUAL PROPERTY. The Seller has not received written
notice, and does not otherwise have Knowledge, of any pending
or threatened suit, action or proceeding that either does or
would limit, cancel or question the validity of, or Seller's
rights in and to, any of the Intellectual Property Rights.
(h) DISTRIBUTORS. SCHEDULE 2.01(H) sets forth in all materials
respects a true, accurate and complete list of each
distributor through which Seller currently distributes the
Products. The Seller has not received written notice, and does
not otherwise have Knowledge, that any current distributor
identified in SCHEDULE 2.01(h) may cease dealing with Seller.
Section 2.02 REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer represents and warrants to, and agrees with, Seller as follows:
(a) ORGANIZATION AND ASSETS. Buyer is a corporation duly
incorporated, validly existing and in good standing under the
laws of the state of Washington. Buyer is a wholly-owned
subsidiary of SRS Medical Systems, Inc. ("PARENT"). Except for
the ownership of the assets of the In-Flow product line as set
forth in SCHEDULE 2.02 attached hereto by Parent (or Parent's
wholly-owned subsidiary, as the case may be), Buyer owns all
of the collective assets of Parent and Parent's Affiliates.
(b) BINDING OBLIGATION. Buyer has all requisite corporate power
and authority to enter into and perform its obligations under
this Agreement and to carry out the transactions contemplated
hereby. The Board of Directors of Buyer has duly authorized
the execution and delivery of this Agreement and the other
transactions contemplated hereby and, no other corporate
proceedings on the part of Buyer are necessary to authorize
this Agreement and the transactions contemplated hereby. This
Agreement has been duly executed and delivered by Buyer and
constitutes a valid and binding obligation of Buyer
enforceable in accordance with its terms, except as may be
limited by (a) applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general
application affecting enforcement of creditors' rights
generally, and (b) laws relating to the availability of
specific performance, injunctive relief, or other equitable
remedies.
(c) CONSENTS AND APPROVALS. No Consents of any individual or
entity, including without limitation any governmental
authority, is required in connection with the execution,
delivery or performance of this Agreement by the Buyer or the
consummation by the Buyer of the transactions contemplated
herein.
(d) LITIGATION. There is no action, suit, proceeding at law or in
equity by any Person, or any arbitration or any administrative
or other proceeding by or before (or any investigation by) any
governmental authority, pending or, to Buyer's Knowledge,
threatened, against Buyer which questions or challenges the
validity of this Agreement or would prevent Buyer from
completing the transactions contemplated by the Agreement.
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(e) COVERED ENTITY. Buyer is or will be as of the Closing a
"covered entity" as defined in Title 45, Section 160.103, of
the Code of Federal Regulations, as amended from time to time.
ARTICLE III.
CLOSING OBLIGATIONS
Section 3.01 SELLER CLOSING DELIVERIES. Notwithstanding any other provision of
this Agreement to the contrary, the obligation of Buyer to complete the
transactions contemplated herein will be subject to the satisfaction at or prior
to the Closing of each of the following conditions:
(a) Seller shall deliver, or cause to be delivered, to Buyer at or
prior to the Closing the following documents:
(i) a ▇▇▇▇ of sale for all of the Purchased Assets
substantially in the form of SCHEDULE 3.01(A)(I) (the
"▇▇▇▇ OF Sale") executed by Seller;
(ii) an assignment and assumption agreement substantially
in the form of SCHEDULE 3.01(A)(II) (the "ASSIGNMENT
AND ASSUMPTION AGREEMENT") executed by Seller;
(iii) one or more intellectual property assignments, each
substantially in the form of SCHEDULE 3.01(A)(III)
(together, the "INTELLECTUAL PROPERTY ASSIGNMENTS")
executed by Seller; and
(iv) a security agreement from Buyer granting to Seller a
security interest in the Purchased Assets to secure
Buyer's payment of the Deferred Payments
substantially in the form of SCHEDULE 3.01(A)(IV)
(the "SECURITY AGREEMENT").
Section 3.02 BUYER CLOSING DELIVERIES. Notwithstanding any other provision of
this Agreement to the contrary, the obligation of Buyer to complete the
transactions contemplated herein will be subject to the satisfaction at or prior
to the Closing of each of the following conditions:
(a) Buyer shall deliver, or cause to be delivered, to Seller at or
prior to the Closing the following documents:
(i) the Assignment and Assumption Agreement executed by
Buyer;
(ii) the Promissory Note; and
(iii) the Security Agreement.
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ARTICLE IV.
SURVIVAL, INDEMNIFICATION AND NONSOLICITATION
Section 4.01 SURVIVAL. The representations, warranties and covenants of each
party contained in this Agreement, and all claims in respect of any breach of
any such representation, warranty or covenant, will survive the Closing and
shall expire upon that date which is twelve (12) months after the Closing Date,
except that the covenants set forth in Sections 1.03, 1.05 and 4.06 and all
representations and warranties of Seller relating to Section 2.01(d) (Title)
shall survive indefinitely. Notwithstanding the foregoing, any representation,
warranty or covenant that would otherwise terminate in accordance with this
Section 4.01 shall continue to survive, if a notice of Claim pursuant to this
Article 4 shall have been timely given under Section 4.04 on or prior to such
termination date, until the related claim has been satisfied or otherwise
resolved as provided herein. The right to indemnification or any other remedy
based on representations, warranties, covenants and obligations in this
Agreement will not be affected by any investigation conducted, whether before or
after the execution and delivery of this Agreement or the Closing Date, with
respect to the accuracy or inaccuracy of or compliance with, any such
representation, warranty, covenant or obligation. The waiver of any condition
expressly based on the accuracy of any representation or warranty, or on the
performance of or compliance with any covenant or obligation, will not affect
the right to indemnification based on such representations, warranties,
covenants and obligations.
Section 4.02 INDEMNIFICATION BY SELLER. Except as hereinafter set forth, Seller
shall indemnify and hold harmless Buyer and its successors and assigns and its
and their respective officers, directors, shareholders, employees and agents,
against, and in respect of, any and all damages, claims, losses, liabilities and
expenses, including, without limitation, reasonable legal, accounting and other
expenses (collectively, "DAMAGES"), which may arise out of: (a) any
misrepresentation or other breach or violation of this Agreement by Seller; (b)
Seller's ownership or operation of the Purchased Assets prior to the Closing,
other than the Assumed Liabilities; or (c) any product liability claim or other
third party claim relating to the Products, whether presently in existence or
arising hereafter from acts, events, conditions or circumstances existing or
occurring prior to the Closing Date.
Section 4.03 INDEMNIFICATION BY BUYER. Except as hereinafter set forth, Buyer
shall indemnify and hold harmless Seller and its successors and assigns and its
respective officers, directors, shareholders, employees and agents, against, and
in respect of, any and all Damages, which may arise out of: (a) any
misrepresentation or other breach or violation of this Agreement by Buyer; (b)
Buyer's ownership or operation of the Purchased Assets after the Closing; (c)
the Assumed Liabilities; or (d) any product liability claim or other third party
claim relating to the Products, whether presently in existence or arising
hereafter from acts, events, conditions or circumstances existing or occurring
on or after the Closing Date.
Section 4.04 CLAIMS FOR INDEMNIFICATION.
(a) GENERAL. The parties intend that all indemnification claims be
made as promptly as practicable by the party seeking
indemnification (the "INDEMNIFIED PARTY"). Whenever any claim
arises for indemnification hereunder the Indemnified Party
will promptly notify the party from whom indemnification is
sought (the "INDEMNIFYING PARTY") of the claim and, when
known, the facts constituting the basis for such claim. The
failure to so notify the Indemnifying Party will not relieve
the Indemnifying Party of any liability that it may have to
the Indemnified Party except to the extent the Indemnifying
Party demonstrates that the defense of such action is
prejudiced thereby.
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(b) CLAIMS BY THIRD PARTIES. With respect to claims made by third
parties, if the Indemnifying Party admits to the Indemnified
Party and agrees in writing that it will be obligated under
the terms of its indemnity hereunder in connection with such
claim, the Indemnifying Party will be entitled to assume
control of the defense of such action or claim, at its sole
expense, with counsel reasonably satisfactory to the
Indemnified Party; provided, however, that:
(i) the Indemnified Party will be entitled to participate
in the defense of such claim and to employ counsel at
its own expense to assist in the handling of such
claim;
(ii) no Indemnifying Party will consent to the entry of
any judgment or enter into any settlement that: (A)
does not include as an unconditional term thereof the
giving by each claimant or plaintiff to each
Indemnified Party of a release from all liability in
respect of such claim; or (B) would result in the
imposition against the Indemnified Party of
injunctive or other equitable relief; or (C) could
materially interfere with the business, operations or
assets of the Indemnified Party; and
(iii) if the Indemnifying Party does not assume control of
the defense of such claim in accordance with the
foregoing provisions within ten (10) business days
after receipt of notice of the claim, the Indemnified
Party will have the right to defend such claim in
such manner as it may deem appropriate at the
reasonable cost and expense of the Indemnifying
Party, and the Indemnifying Party will promptly
reimburse the Indemnified Party therefor in
accordance with this Section 4.04; provided that the
Indemnifying Party and the Indemnified Party will not
consent to the entry of any judgment or enter into
any settlement without the written consent of the
Indemnifying Party, which consent will not be
unreasonably withheld or delayed, and that: (A) does
not include as an unconditional term thereof the
giving by each claimant or plaintiff to each
Indemnified Party of a release from all liability in
respect of such claim; or (B) would result in the
imposition against the Indemnified Party of
injunctive or other equitable relief; or (C) could
materially interfere with the business, operations or
assets of the Indemnified Party; provided, further,
that if the Indemnified Party assumes the defense of
such claim, the Indemnified Party will keep the
Indemnifying Party reasonably informed of the
progress of any such defense, compromise or
settlement and will consult with and consider
reasonable advice from the Indemnifying Party.
Section 4.05 INDEMNIFICATION LIMITS.
(a) Except for fraud and Buyer's obligations under Sections 1.03,
1.05 and 4.06, the indemnification provisions set forth in
this Article 4 shall be the exclusive remedy for the
Indemnified Party for a breach of any representation, warranty
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or covenant by the Indemnifying Party and shall be in lieu of
any rights the Indemnified Party may have under law or in
equity with respect to any such breaches or otherwise. Except
for fraud and Buyer's obligations under Sections 1.03, 1.05
and 4.06, the liability of each party as an Indemnifying Party
hereunder shall not exceed $1,000,000 in the aggregate.
(b) Except for fraud and Buyer's obligations under Sections 1.03,
1.05 and 4.06 and except for Seller's obligations under
Section 1.08, none of Seller or Buyer, as the case may be,
will be entitled to indemnification for any Damages under this
Article 4 unless the aggregate of all Damages is more than
Fifty Thousand Dollars ($50,000) (the "BASKET AMOUNT"). When
the aggregate amount of all such Damages hereunder equals or
exceeds the Basket Amount, Buyer or Seller, as the case may
be, will be entitled to full indemnification of all claims,
including the Basket Amount. The parties hereto agree that the
Basket Amount is not a deductible amount, nor that the Basket
Amount will be deemed to be a definition of "material" for any
purpose in this Agreement.
Section 4.06 NONSOLICITATION BY BUYER AND ITS AFFILIATES.
(a) In addition to Seller's other remedies set forth in this
Agreement, in the event of Buyer's breach of its obligations
under Section 1.05, Seller shall have the right, but not the
obligation, to require Buyer and its Affiliates to cease
contracting or doing business with, contacting or attempting
to contact, diverting or attempting to divert, soliciting or
attempting to solicit, and interfering or attempting to
interfere with any (i) customer (or their respective
Affiliates) of the Products and (ii) Person employed by Seller
or any of its Affiliates who has conducted or conducts
business with such customer.
(b) It is the understanding of the parties that the scope of the
covenants contained in this SECTION 4.06 are necessary to
protect the rights of Seller in the event of Buyer's breach of
its obligations under Section 1.05. It is the parties'
intention that these covenants be enforced to the greatest
extent (but to no greater extent) in time, area, and degree of
participation as is permitted by the law of that jurisdiction
whose law is found to be applicable to any acts in breach of
these covenants.
(c) The parties agree that, in the event of breach or threatened
breach of Buyer's covenants in this SECTION 4.06, the damage
or imminent damage to Seller will be irreparable and extremely
difficult to estimate, making any remedy at law or in damages
inadequate. Accordingly, the parties agree that Seller shall
be entitled to injunctive relief against Buyer in the event of
any breach or threatened breach of any of such covenants by
Buyer, in addition to any other relief (including damages)
available to Seller under this Agreement or under applicable
law.
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ARTICLE V.
GENERAL PROVISIONS
Section 5.01 FURTHER ASSURANCES; COOPERATION. Each of the parties hereto will,
until, during, and after Closing, execute and deliver such instruments and take
such other actions as the other party or parties, as the case may be, may
reasonably require in order to carry out the intent of this Agreement. Without
limiting the generality of the foregoing, at any time after the Closing, at the
reasonable request of Buyer and without further consideration, Seller will
execute and deliver such instruments of sale, transfer, conveyance, assignment
and confirmation and take such action as Buyer may reasonably deem necessary or
desirable in order to more effectively transfer, convey and assign to Buyer, and
to confirm Buyer's title to, all of the Purchased Assets, and to put Buyer in
actual possession and operating control thereof.
Section 5.02 NOTICES. All notices, requests, demands, claims and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given (i) if
personally delivered, when so delivered, (ii) if mailed, two business days after
having been sent by registered or certified mail, return receipt requested,
postage prepaid and addressed to the intended recipient as set forth below,
(iii) if given by facsimile, once such notice or other communication is
transmitted to the facsimile number specified below and electronic confirmation
is received, provided that such notice or other communication is promptly
thereafter mailed in accordance with the provisions of clause (ii) above or (iv)
if sent through an overnight delivery service in circumstances to which such
service guarantees next day delivery, the day following being so sent:
If to Seller:
▇▇▇▇ Medical Technologies, Inc.
c/o Endocare, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Fax (▇▇▇) ▇▇▇-▇▇▇▇
with a required copy to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Fax (▇▇▇) ▇▇▇-▇▇▇▇
If to Buyer:
SRS Medical Corp.
▇▇▇▇▇ ▇.▇. ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Chief Executive Officer
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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with a required copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & Fish, LLP
World Trade Center West
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Section 5.03 AMENDMENTS; NO WAIVERS. Any provision of this Agreement may be
amended or waived if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by all parties hereto, or in the case of a
waiver, by the party against whom the waiver is to be effective. No waiver by a
party of any default, misrepresentation or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend to any prior or
subsequent default, misrepresentation or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent occurrence. No failure or delay by a party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.
Section 5.04 EXPENSES. All costs, fees and expenses incurred in connection with
the negotiation, preparation, execution, delivery and performance of this
Agreement and in closing and carrying out the transactions contemplated hereby
shall be paid by the party incurring such cost or expense.
Section 5.05 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. No party hereto may assign either this Agreement or any of
its rights, interests or obligations hereunder without the prior written
approval of each other party.
Section 5.06 GOVERNING LAW. This Agreement shall be governed by, construed and
enforced in accordance with the internal laws of the State of California
(regardless of the laws that might otherwise govern under applicable principles
of conflicts of law).
Section 5.07 COUNTERPARTS. This Agreement may be signed in any number of
counterparts and the signatures delivered by facsimile, each of which shall be
an original, with the same effect as if the signatures thereto and hereto were
upon the same instrument.
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Section 5.08 ENTIRE AGREEMENT. This Agreement (including all Exhibits and
Schedules and all other agreements referred to herein or therein which are
hereby incorporated by reference and the other agreements executed
simultaneously herewith) constitutes the entire agreement between the parties
with respect to the subject matter hereof and supersedes all prior agreements,
understandings and negotiations, both written and oral, between the parties with
respect to the subject matter of this Agreement. Neither this Agreement nor any
provision hereof is intended to confer upon any Person other than the parties
hereto any rights or remedies hereunder.
Section 5.09 SEVERABILITY. If any provision of this Agreement shall be held by a
court of competent jurisdiction to be invalid, unenforceable or void, the
remainder of this Agreement shall remain in full force and effect only if, after
excluding the portion deemed to be unenforceable, the remaining terms shall
provide for the consummation of the transactions contemplated hereby in
substantially the same manner as originally set forth at the later of the date
this Agreement was executed or last amended.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
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IN WITNESS WHEREOF, Buyer and Seller have executed this Agreement as of
the date first written above.
SRS MEDICAL CORP.
By: /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: PRESIDENT
▇▇▇▇ MEDICAL TECHNOLOGIES, INC.
By: /S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title:
[SIGNATURE PAGE TO AGREEMENT OF PURCHASE AND SALE]
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