SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 2001 Commission File Number 0-16093
CONMED CORPORATION
(Exact name of the registrant as specified in its charter)
New York 16-0977505
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
310 Broad Street, Utica, New York 13501
(Address of principal executive offices) (Zip Code)
(315) 797-8375
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ x ] No [ ]
The number of shares outstanding of registrant's common stock, as of
August 1, 2001 is 16,731,492 shares.
CONMED CORPORATION
TABLE OF CONTENTS
FORM 10-Q
PART I FINANCIAL INFORMATION
Item Number Page
Item 1. Financial Statements
- Consolidated Condensed Statements
of Income 1
- Consolidated Condensed Balance Sheets 2
- Consolidated Condensed Statements
of Cash Flows 3
- Notes to Consolidated Condensed
Financial Statements 4
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 16
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 21
Signatures 22
Exhibit Index 23
Item 1.
CONMED CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(in thousands except per share amounts)
(unaudited)
Three Months Ended Six Months Ended
June June
---- ----
2000 2001 2000 2001
-------- -------- -------- --------
Net sales .................... $ 97,878 $104,171 $200,689 $210,080
-------- -------- -------- --------
Cost of sales ................ 47,327 49,965 95,988 99,639
Selling and administrative ... 33,247 33,922 64,009 68,751
Research and development ..... 3,572 3,476 6,978 7,172
-------- -------- -------- --------
84,146 87,363 166,975 175,562
-------- -------- -------- --------
Income from operations ....... 13,732 16,808 33,714 34,518
Interest expense, net ........ 8,238 7,848 16,643 16,179
-------- -------- -------- --------
Income before income taxes ... 5,494 8,960 17,071 18,339
Provision for income taxes ... 1,978 3,226 6,146 6,602
-------- -------- -------- --------
Net income ................... $ 3,516 $ 5,734 $ 10,925 $ 11,737
======== ======== ======== ========
Per share data:
Net Income
Basic .................... $ .23 $ .37 $ .71 $ .76
Diluted .................. .23 .37 .70 .75
Weighted average common shares
Basic .................... 15,311 15,407 15,298 15,389
Diluted .................. 15,551 15,599 15,535 15,568
See notes to consolidated condensed financial statements.
1
CONMED CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands except share amounts)
(unaudited)
December June
2000 2001
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents ..................... $ 3,470 $ 924
Accounts receivable, net ...................... 78,626 84,657
Inventories ................................... 104,612 103,194
Deferred income taxes ......................... 1,761 1,761
Prepaid expenses and other current assets ..... 3,562 3,848
--------- ---------
Total current assets ........................ 192,031 194,384
--------- ---------
Property, plant and equipment, net .............. 62,450 66,758
Goodwill, net ................................... 225,801 222,595
Other intangible assets, net .................... 195,008 193,742
Other assets .................................... 4,281 4,886
--------- ---------
Total assets ................................ $ 679,571 $ 682,365
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt ............. $ 36,068 $ 37,665
Accounts payable .............................. 20,350 19,049
Accrued compensation .......................... 9,913 9,163
Income taxes payable .......................... 1,979 2,823
Accrued interest .............................. 5,130 5,192
Other current liabilities ..................... 4,836 4,468
--------- ---------
Total current liabilities ................... 78,276 78,360
--------- ---------
Long-term debt .................................. 342,680 330,033
Deferred income taxes ........................... 12,154 16,118
Other long-term liabilities ..................... 15,858 17,335
--------- ---------
Total liabilities ........................... 448,968 441,846
--------- ---------
Shareholders' equity:
Preferred stock, par value $.01 per share;
authorized 500,000 shares; none outstanding . -- --
Common stock, par value $.01 per share;
100,000,000 shares authorized; 15,352,186 and
15,433,980 shares issued and outstanding in
2000 and 2001, respectively ............... 153 154
Paid-in capital ............................... 128,062 128,568
Retained earnings ............................. 103,834 115,571
Accumulated other comprehensive loss .......... (1,027) (3,355)
Less 25,000 shares of common stock in treasury,
at cost ..................................... (419) (419)
--------- ---------
Total shareholders' equity .................. 230,603 240,519
--------- ---------
Total liabilities and shareholders' equity .. $ 679,571 $ 682,365
========= =========
See notes to consolidated condensed financial statements.
2
CONMED CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Six Months Ended June 2000 and 2001
(in thousands)
(unaudited)
2000 2001
-------- --------
Cash flows from operating activities:
Net income ....................................... $ 10,925 $ 11,737
-------- --------
Adjustments to reconcile net income
to net cash provided by operations:
Depreciation ............................... 4,612 4,345
Amortization ............................... 9,803 10,740
Increase (decrease) in cash flows
from changes in assets and liabilities:
Accounts receivable .............. (2,361) (5,992)
Inventories ...................... (8,786) (991)
Prepaid expenses and
other current assets ........... (1,308) (311)
Accounts payable ................. 6,893 (1,344)
Income taxes payable ............. 2,753 844
Accrued compensation ............. (840) (736)
Accrued interest ................. 1,952 62
Other assets/liabilities, net .... (2,177) (785)
-------- --------
10,541 5,832
-------- --------
Net cash provided by operating activities .. 21,466 17,569
-------- --------
Cash flows from investing activities:
Purchases of property, plant, and equipment ...... (7,602) (8,655)
-------- --------
Net cash used by investing activities ...... (7,602) (8,655)
-------- --------
Cash flows from financing activities:
Borrowings under revolving credit facility ....... 2,000 7,000
Proceeds from issuance of common stock ........... 442 507
Payments on long-term debt ....................... (16,459) (18,050)
-------- --------
Net cash used by financing activities ...... (14,017) (10,543)
-------- --------
Effect of exchange rate changes
on cash and cash equivalents ................... (241) (917)
-------- --------
Net decrease in cash and cash equivalents .......... (394) (2,546)
Cash and cash equivalents at beginning of period ... 3,747 3,470
-------- --------
Cash and cash equivalents at end of period ......... $ 3,353 $ 924
======== ========
See notes to consolidated condensed financial statements.
3
CONMED CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note 1 - Organization and operations
- ------------------------------------
The consolidated condensed financial statements include the accounts of CONMED
Corporation and its subsidiaries ("CONMED", the "Company", "we" or "us"). All
intercompany accounts and transactions have been eliminated. CONMED Corporation
is a medical technology company specializing in instruments and implants for
arthroscopic sports medicine, and powered surgical instruments, for orthopaedic,
ENT, neuro-surgery and other surgical specialties. We are also a leading
developer, manufacturer and supplier of advanced medical devices, including RF
electrosurgery systems used in all types of surgery, ECG electrodes for heart
monitoring, and minimally invasive surgical devices. Our products are used in a
variety of clinical settings, such as operating rooms, surgery centers,
physicians' offices and critical care areas of hospitals. Our business is
organized, managed and internally reported as a single segment, since our
product offerings have similar economic, operating and other related
characteristics.
Note 2 - Interim financial information
- --------------------------------------
The statements for the three and six months ended June 2000 and 2001 are
unaudited; in our opinion such unaudited statements include all adjustments
(which comprise only normal recurring accruals) necessary for a fair
presentation of the results for such periods. The consolidated condensed
financial statements for the year ending December 2001 are subject to adjustment
at the end of the year when they will be audited by independent accountants. The
results of operations for the three and six months ended June 2001 are not
necessarily indicative of the results of operations to be expected for any other
quarter nor for the year ending December 2001. The consolidated condensed
financial statements and notes thereto should be read in conjunction with the
financial statements and notes for the year ended December 2000 included in our
Annual Report to the Securities and Exchange Commission on Form 10-K. Certain
prior year amounts have been reclassified to conform with the presentation used
in 2001.
Note 3 - Other comprehensive income (loss)
- ------------------------------------------
Comprehensive income (loss) consists of the following:
Three months ended Six months ended
June June
---- ----
2000 2001 2000 2001
-------- -------- -------- --------
Net income ................ $ 3,516 $ 5,734 $ 10,925 $ 11,737
Other comprehensive income:
Foreign currency
translation adjustment (99) 171 (262) (892)
Cash flow hedging
(net of income taxes) . -- 114 -- (1,436)
-------- ------- --------- --------
Comprehensive income .... $ 3,417 $ 6,019 $ 10,663 $ 9,409
======== ======= ========= ========
4
Accumulated other comprehensive income (loss) consists of the following:
Accumulated
Cumulative Cash Other
Translation Flow Comprehensive
Adjustments Hedges Income (loss)
----------- ------ -------------
Balance, December 2000 ..................... $(1,027) $ -- $(1,027)
------- ------- -------
Foreign currency translation adjustments (892) -- (892)
Cash flow hedging (net of income taxes) -- (1,436) (1,436)
------- ------- -------
Balance, June 2001 ......................... $(1,919) $(1,436) $(3,355)
======= ======= =======
Note 4 - Inventories
- --------------------
The components of inventory are as follows (in thousands):
December June
2000 2001
---- ----
Raw materials .............................. $ 38,278 $ 39,330
Work-in-process ............................ 12,612 10,465
Finished goods ............................. 53,722 53,399
-------- --------
Total .......................... $104,612 $103,194
======== ========
Note 5 - New accounting pronouncements
- --------------------------------------
In June 2001, the Financial Accounting Standards Board approved Statements of
Financial Accounting Standards No. 141 "Business Combinations" ("SFAS 141") and
No. 142 "Goodwill and Other Intangible Assets" ("SFAS 142") which are effective
for us July 1, 2001 and January 1, 2002, respectively. SFAS 141 requires that
the purchase method of accounting be used for all business combinations
initiated after June 30, 2001. Under SFAS 142, amortization of goodwill,
including goodwill recorded in past business combinations, will discontinue upon
adoption of this standard. In addition, goodwill recorded as a result of
business combinations completed during the six-month period ending December 31,
2001 will not be amortized. All goodwill and intangible assets will be tested
for impairment in accordance with the provisions of the Statement. We are
currently reviewing the provisions of SFAS 141 and SFAS 142 and assessing the
impact of adoption.
5
Note 6 - Earnings per share
- ---------------------------
Basic earnings per share (EPS) is computed based on the weighted average number
of common shares outstanding for the period. Diluted EPS gives effect to all
dilutive potential shares outstanding (ie., options and warrants) during the
period. The following is a reconciliation of the weighted average shares used in
the calculation of basic and diluted EPS (in thousands):
Three months ended Six months ended
June June
---- ----
2000 2001 2000 2001
------ ------ ------ ------
Shares used in the calculation
of Basic EPS(weighted average
shares outstanding) .............. 15,311 15,407 15,298 15,389
------ ------ ------ ------
Effect of dilutive potential
securities ....................... 240 192 237 179
------ ------ ------ ------
Shares used in the calculation
of Diluted EPS ................... 15,551 15,599 15,535 15,568
------ ------ ------ ------
The shares used in the calculation of diluted EPS exclude warrants and options
to purchase shares where the exercise price was greater than the average market
price of common shares for the period. Such shares aggregated 1,515,000 and
2,129,000 for the three months ended June 2000 and 2001, respectively, and
1,485,000 and 2,297,000 for the six months ended June 2000 and 2001,
respectively.
Note 7 - Business acquisitions
- ------------------------------
On November 20, 2000 we acquired certain assets of the disposable minimally
invasive surgical business of Imagyn Medical Technologies, Inc. (the "Imagyn
acquisition") for a purchase price of $6,000,000. The acquisition was funded
through borrowings under our revolving credit facility. Annual sales of the
acquired product lines were approximately $6.5 million. The results of
operations of the acquired business are included in our consolidated results
from the date of acquisition.
On July 6, 2001 we acquired the remaining assets of the minimally invasive
surgical business of Imagyn Medical Technologies Inc. that we did not acquire in
November 2000 (the "second Imagyn acquisition"). Under the terms of the
acquisition agreement, we issued Imagyn 1.3 million shares of CONMED common
stock, valuing the transaction at $33.9 million based on the closing share price
on July 6, 2001. The issued stock is subject to a 90-day lock-up restriction and
certain other sales restrictions. Annual sales of the acquired product lines
were approximately $18.0 million. The results of operations of the acquired
business will be included in our consolidated results beginning in the third
quarter.
Note 8 - Nonrecurring severance charge
- --------------------------------------
During the quarter ended June 2000, we announced we would replace our
arthroscopy direct sales force with non-stocking, exclusive sales agent groups
in certain geographic regions of the United States. As a result, we incurred a
severance charge of $1,509,000, before income taxes, or $.06 per diluted share,
in the second quarter of 2000. This nonrecurring charge is included in selling
and administrative expense.
6
Note 9 - Guarantor financial statements
- ---------------------------------------
Our credit facility and subordinated notes (the "Notes") are guaranteed (the
"Subsidiary Guarantees") by our subsidiaries (the "Subsidiary Guarantors"). The
Subsidiary Guarantees provide that each Subsidiary Guarantor will fully and
unconditionally guarantee our obligations under the credit facility and the
Notes on a joint and several basis. Each Subsidiary Guarantor is wholly-owned by
CONMED Corporation. The following supplemental financial information sets forth
on a condensed consolidating basis, consolidating balance sheet, statement of
income and statement of cash flows for the Parent Company Only, Subsidiary
Guarantors and for the Company as of December 2000 and June 2001 and for the
three and six months ended June 2000 and 2001.
7
CONMED CORPORATION
CONSOLIDATING CONDENSED BALANCE SHEET
December 2000
(in thousands)
Parent
Company Subsidiary Company
Only Guarantors Eliminations Total
-------- -------- --------- --------
ASSETS
Current assets:
Cash and cash equivalents........................ $ - $ 3,470 $ - $ 3,470
Accounts receivable, net......................... 35,218 43,408 - 78,626
Inventories...................................... 20,174 84,438 - 104,612
Deferred income taxes............................ 1,761 - - 1,761
Prepaid expenses and other
current assets............................... 598 2,964 - 3,562
-------- -------- --------- --------
Total current assets....................... 57,751 134,280 - 192,031
-------- -------- --------- --------
Property, plant and equipment, net................... 38,275 24,175 - 62,450
Goodwill, net........................................ 61,651 164,150 - 225,801
Other intangible assets, net......................... 7,498 187,510 - 195,008
Other assets......................................... 473,408 5,217 (474,344) 4,281
-------- -------- --------- --------
Total assets..................................... $638,583 $515,332 $(474,344) $679,571
======== ======== ========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt................ $ 36,068 $ - $ - $ 36,068
Accounts payable................................. 4,398 15,952 - 20,350
Accrued compensation............................. 2,147 7,766 - 9,913
Income taxes payable............................. 1,338 641 - 1,979
Accrued interest................................. 5,130 - - 5,130
Other current liabilities........................ 1,890 2,946 - 4,836
-------- -------- --------- --------
Total current liabilities.................... 50,971 27,305 - 78,276
-------- -------- --------- --------
Long-term debt....................................... 342,680 - - 342,680
Deferred income taxes................................ 12,154 - - 12,154
Other long-term liabilities.......................... 2,175 349,295 (335,612) 15,858
-------- -------- --------- --------
Total liabilities................................ 407,980 376,600 (335,612) 448,968
-------- -------- --------- --------
Shareholders' equity:
Preferred stock.................................. - - - -
Common stock..................................... 153 1 (1) 153
Paid-in capital.................................. 128,062 - - 128,062
Retained earnings................................ 103,834 139,758 (139,758) 103,834
Accumulated other comprehensive
loss......................................... (1,027) (1,027) 1,027 (1,027)
Less common stock in
treasury, at cost............................... (419) - - (419)
-------- -------- --------- --------
Total shareholders' equity................... 230,603 138,732 (138,732) 230,603
-------- -------- --------- --------
Total liabilities and
shareholders' equity....................... $638,583 $515,332 $(474,344) $679,571
======== ======== ========= ========
8
CONMED CORPORATION
CONSOLIDATING CONDENSED BALANCE SHEET
June 2001
(in thousands)
(unaudited)
Parent
Company Subsidiary Company
Only Guarantors Eliminations Total
-------- -------- --------- --------
ASSETS
Current assets:
Cash and cash equivalents........................ $ - $ 924 $ - $ 924
Accounts receivable, net......................... 35,019 49,638 - 84,657
Inventories...................................... 19,377 83,817 - 103,194
Deferred income taxes............................ 1,761 - - 1,761
Prepaid expenses and other
current assets............................... 724 3,124 - 3,848
-------- -------- --------- --------
Total current assets....................... 56,881 137,503 - 194,384
-------- -------- --------- --------
Property, plant and equipment, net................... 43,993 22,765 - 66,758
Goodwill, net........................................ 60,669 161,926 - 222,595
Other intangible assets, net......................... 7,627 186,115 - 193,742
Other assets......................................... 475,442 40,814 (511,370) 4,886
-------- -------- --------- --------
Total assets..................................... $644,612 $549,123 $(511,370) $682,365
======== ======== ========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt................ $ 37,665 $ - $ - $ 37,665
Accounts payable................................. 3,492 15,557 - 19,049
Accrued compensation............................. 1,791 7,372 - 9,163
Income taxes payable............................. 2,520 303 - 2,823
Accrued interest................................. 5,192 - - 5,192
Other current liabilities........................ 2,605 1,863 - 4,468
-------- -------- --------- --------
Total current liabilities.................... 53,265 25,095 - 78,360
-------- -------- --------- --------
Long-term debt....................................... 330,033 - - 330,033
Deferred income taxes................................ 16,118 - - 16,118
Other long-term liabilities.......................... 4,677 376,868 (364,210) 17,335
-------- -------- --------- --------
Total liabilities................................ 404,093 401,963 (364,210) 441,846
-------- -------- --------- --------
Shareholders' equity:
Preferred stock.................................. - - - -
Common stock..................................... 154 1 (1) 154
Paid-in capital.................................. 128,568 - - 128,568
Retained earnings................................ 115,571 149,078 (149,078) 115,571
Accumulated other comprehensive
loss......................................... (3,355) (1,919) 1,919 (3,355)
Less common stock in
treasury, at cost............................... (419) - - (419)
-------- -------- --------- --------
Total shareholders' equity................... 240,519 147,160 (147,160) 240,519
-------- -------- --------- --------
Total liabilities and
shareholders' equity....................... $644,612 $549,123 $(511,370) $682,365
======== ======== ========= ========
9
CONMED CORPORATION
CONSOLIDATING CONDENSED STATEMENT OF INCOME
Three Months Ended June 2000
(in thousands)
(unaudited)
Parent
Company Subsidiary Company
Only Guarantors Eliminations Total
-------- -------- -------- --------
Net sales............................................ $ 18,927 $ 78,951 $ - $ 97,878
-------- -------- -------- --------
Cost of sales........................................ 10,919 36,408 - 47,327
Selling and administrative expense................... 5,412 27,835 - 33,247
Research and development expense..................... 470 3,102 - 3,572
-------- -------- -------- --------
16,801 67,345 - 84,146
-------- -------- -------- --------
Income from operations............................... 2,126 11,606 - 13,732
Interest expense, net................................ - 8,238 - 8,238
-------- -------- -------- --------
Income before income taxes........................... 2,126 3,368 - 5,494
Provision for income taxes........................... 765 1,213 - 1,978
-------- -------- -------- --------
Income before equity in earnings
of unconsolidated subsidiaries..................... 1,361 2,155 - 3,516
Equity in earnings of unconsolidated
subsidiaries....................................... 2,155 - (2,155) -
-------- -------- -------- --------
Net income........................................... $ 3,516 $ 2,155 $ (2,155) $ 3,516
======== ======== ======== ========
10
CONMED CORPORATION
CONSOLIDATING CONDENSED STATEMENT OF INCOME
Three Months Ended June 2001
(in thousands)
(unaudited)
Parent
Company Subsidiary Company
Only Guarantors Eliminations Total
-------- -------- ------------ --------
Net sales............................................ $ 20,503 $ 83,668 $ - $104,171
-------- -------- -------- --------
Cost of sales........................................ 11,816 38,149 - 49,965
Selling and administrative expense................... 6,067 27,855 - 33,922
Research and development expense..................... 350 3,126 - 3,476
-------- -------- -------- --------
18,233 69,130 - 87,363
-------- -------- -------- --------
Income from operations............................... 2,270 14,538 - 16,808
Interest expense, net................................ - 7,848 - 7,848
-------- -------- -------- --------
Income before income taxes........................... 2,270 6,690 - 8,960
Provision for income taxes........................... 817 2,409 - 3,226
-------- -------- -------- --------
Income before equity in earnings
of unconsolidated subsidiaries..................... 1,453 4,281 - 5,734
Equity in earnings of unconsolidated
subsidiaries....................................... 4,281 - (4,281) -
-------- -------- -------- --------
Net income........................................... $ 5,734 $ 4,281 $ (4,281) $ 5,734
======== ======== ======== ========
11
CONMED CORPORATION
CONSOLIDATING CONDENSED STATEMENT OF INCOME
Six Months Ended June 2000
(in thousands)
(unaudited)
Parent
Company Subsidiary Company
Only Guarantors Eliminations Total
-------- -------- -------- --------
Net sales............................................ $ 39,547 $161,142 $ - $200,689
-------- -------- -------- --------
Cost of sales........................................ 21,972 74,016 - 95,988
Selling and administrative expense................... 10,657 53,352 - 64,009
Research and development expense..................... 957 6,021 - 6,978
-------- -------- -------- --------
33,586 133,389 - 166,975
-------- -------- -------- --------
Income from operations............................... 5,961 27,753 - 33,714
Interest expense, net................................ - 16,643 - 16,643
-------- -------- -------- --------
Income before income taxes........................... 5,961 11,110 - 17,071
Provision for income taxes........................... 2,146 4,000 - 6,146
-------- -------- -------- --------
Income before equity in earnings
of unconsolidated subsidiaries..................... 3,815 7,110 - 10,925
Equity in earnings of unconsolidated
subsidiaries....................................... 7,110 - (7,110) -
-------- -------- -------- --------
Net income........................................... $ 10,925 $ 7,110 $ (7,110) $ 10,925
======== ======== ======== ========
12
CONMED CORPORATION
CONSOLIDATING CONDENSED STATEMENT OF INCOME
Six Months Ended June 2001
(in thousands)
(unaudited)
Parent
Company Subsidiary Company
Only Guarantors Eliminations Total
-------- -------- -------- --------
Net sales............................................ $ 40,973 $169,107 $ - $210,080
-------- -------- -------- --------
Cost of sales........................................ 24,299 75,340 - 99,639
Selling and administrative expense................... 12,165 56,586 - 68,751
Research and development expense..................... 732 6,440 - 7,172
-------- -------- -------- --------
37,196 138,366 - 175,562
-------- -------- -------- --------
Income from operations............................... 3,777 30,741 - 34,518
Interest expense, net................................ - 16,179 - 16,179
Income before income taxes........................... 3,777 14,562 - 18,339
Provision for income taxes........................... 1,360 5,242 - 6,602
-------- -------- -------- --------
Income before equity in earnings
of unconsolidated subsidiaries..................... 2,417 9,320 - 11,737
Equity in earnings of unconsolidated
subsidiaries....................................... 9,320 - (9,320) -
-------- -------- -------- --------
Net income........................................... $ 11,737 $ 9,320 $ (9,320) $ 11,737
======== ======== ======== ========
13
CONMED CORPORATION
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
Six Months Ended June 2000
(in thousands)
(unaudited)
Parent
Company Subsidiary Company
Only Guarantors Eliminations Total
------- ------- ------- --------
Net cash flows from operating
activities.......................................... $ 8,881 $12,585 $ - $ 21,466
------- ------- ------- --------
Cash flows from investing activities:
Distributions from subsidiaries.................... 10,138 - (10,138) -
Purchases of property, plant and
equipment.................................... (5,600) (2,002) - (7,602)
------- ------- ------- --------
Net cash provided (used)
by investing activities.................. 4,538 (2,002) (10,138) (7,602)
------- ------- ------- --------
Cash flows from financing:
Distributions to parent.......................... - (10,138) 10,138 -
Borrowings under revolving
credit facility.............................. 2,000 - - 2,000
Proceeds from issuance of
common stock................................. 442 - - 442
Payments on long-term debt....................... (16,459) - - (16,459)
Net cash provided (used) by
------- ------- ------- --------
financing activities...................... (14,017) (10,138) 10,138 (14,017)
------- ------- ------- --------
Effect of exchange rate changes on cash
and cash equivalents............................... - (241) - (241)
------- ------- ------- --------
Net increase (decrease) in cash and
cash equivalents.................................... (598) 204 - (394)
Cash and cash equivalents at
beginning of period................................. 598 3,149 - 3,747
------- ------- ------- --------
Cash and cash equivalents at
end of period....................................... $ 0 $ 3,353 $ - $ 3,353
======= ======= ======= ========
14
CONMED CORPORATION
CONSOLIDATING STATEMENT OF CASH FLOWS
Six Months Ended June 2001
(in thousands)
(unaudited)
Parent
Company Subsidiary Company
Only Guarantors Eliminations Total
------- ------- ------- --------
Net cash flows from operating
activities.......................................... $ 7,037 $10,532 $ - $ 17,569
------- ------- ------- --------
Cash flows from investing activities:
Distributions from subsidiaries.................... 10,689 - (10,689) -
Purchases of property, plant and
equipment.................................... (7,183) (1,472) - (8,655)
Net cash provided (used)
------- ------- ------- --------
by investing activities................. 3,506 (1,472) (10,689) (8,655)
------- ------- ------- --------
Cash flows from financing:
Distributions to parent.......................... - (10,689) 10,689 -
Borrowings under revolving
credit facility.............................. 7,000 - - 7,000
Proceeds from issuance of
common stock................................. 507 - - 507
Payments on long-term debt....................... (18,050) - - (18,050)
------- ------- ------- --------
Net cash provided (used)by
financing activities...................... (10,543) (10,689) 10,689 (10,543)
------- ------- ------- --------
Effect of exchange rate changes on cash
and cash equivalents............................... - (917) - (917)
------- ------- ------- --------
Net decrease in cash and
cash equivalents.................................... - (2,546) - (2,546)
Cash and cash equivalents at
beginning of period................................. - 3,470 - 3,470
------- ------- ------- --------
Cash and cash equivalents at
end of period....................................... $ - $ 924 $ - $ 924
====== ======== ======= ========
15
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q contains certain forward-looking statements
(as such term is defined in the Private Securities Litigation Reform Act of
1995) and information that is based on the beliefs of management, as well as
assumptions made by and information currently available to management.
When used in this Form 10-Q, the words "estimate", "project", "believe",
"anticipate", "intend", "expect", and similar expressions are intended to
identify forward-looking statements. These statements involve known and unknown
risks, uncertainties and other factors, including those discussed in our Annual
Report on Form 10-K for the year ended December 2000, that may cause our actual
results, performance or achievements, or industry results, to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such factors include, among others,
the following: general economic and business conditions; changes in customer
preferences; competition; changes in technology; the introduction of new
products; the integration of any acquisition; changes in business strategy; the
possibility that United States or foreign regulatory and/or administrative
agencies might initiate enforcement actions against us or our distributors; our
indebtedness; quality of our management and business abilities and the judgment
of our personnel; the availability, terms and deployment of capital; the risk of
litigation, especially patent litigation as well as the cost associated with
patent and other litigation and changes in regulatory requirements.
You are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof. We do not undertake any
obligation to publicly release any revisions to these forward-looking statements
to reflect events or circumstances after the date of this Form 10-Q or to
reflect the occurrence of unanticipated events.
Three months ended June 2001 compared to three months ended June 2000
Sales for the quarter ended June 2001 were $104.2 million, an increase of 6.4%
compared to sales of $97.9 million in the same quarter a year ago.
Sales in our orthopaedic businesses grew 5.9% to $66.4 million from $62.7
million in the comparable quarter last year. Arthroscopy sales, which represent
approximately 57.2% of total orthopaedic revenues, grew 5.3% to $38.0 million
from $36.1 million in the same period a year ago. Powered surgical instrument
sales, which represent approximately 42.8% of orthopaedic revenues, grew 6.8% to
$28.4 million from $26.6 million in the same quarter last year. Adjusted for
constant foreign currency exchange rates, orthopaedic sales growth in the second
quarter of 2001 would have been approximately 7.7% compared with the second
quarter of 2000.
Patient care sales for the three months ended June 2001 were $17.6 million, a
4.8% increase from $16.8 million in the same period a year ago, as sales of our
surgical suction product lines have stabilized compared to the same period a
year ago.
Electrosurgery sales for the three months ended June 2001 were $17.1 million, an
increase of 1.8% from $16.8 million in the second quarter of last year,
reflecting increased disposable product sales.
Sales of minimally invasive surgery (MIS) products increased 87.5% to $3.0
million in the three months ended June 2001 from $1.6 million in the same period
a year ago. Substantially all of the increase in MIS sales is a result of our
November 2000 Imagyn acquisition (Note 7 to the condensed consolidated financial
statements).
Cost of sales increased to $49,965,000 in the current quarter as compared to
$47,327,000 in the same quarter a year ago as a result of the increased sales
volumes described above. Gross margin percentage improved to 52.0% in the second
16
quarter of 2001 compared to 51.6% in the second quarter of 2000, primarily as a
result of increased sales volumes in our orthopaedic product lines which carry
higher gross margins than certain of our other product lines.
Selling and administrative expenses increased to $33,922,000 in the second
quarter of 2001 as compared to $33,247,000 in the second quarter of 2000. As a
percentage of sales, selling and administrative expenses totaled 32.6% in the
second quarter of 2001 compared to 34.0% in the second quarter of 2000. In the
second quarter of 2000, we announced a plan to replace our arthroscopy direct
sales force with non-stocking exclusive sales agent groups in certain geographic
regions of the United States (Note 8 to the condensed consolidated financial
statements). As a result, we incurred a nonrecurring severance charge of
$1,509,000, before income taxes, which is included in selling administrative
expense. Excluding this nonrecurring charge, selling and administrative expenses
in the second quarter of 2000 totals approximately 32.4% which is consistent
with the second quarter of 2001.
Research and development expense decreased slightly to $3,476,000 in the second
quarter of 2001 as compared to $3,572,000 in the second quarter of 2000. As a
percentage of sales, research and development expense decreased to 3.3% in the
current quarter compared to 3.6% in the same quarter a year ago.
Interest expense in the second quarter of 2001 was $7,848,000 compared to
$8,238,000 in the second quarter of 2000. The decrease in interest expense is a
result of lower total borrowings during the current quarter as compared to the
same period a year ago, as total current and long-term debt outstanding
decreased to approximately $367,698,000 at June 2001 compared to $380,210,000 at
June 2000. Additionally, the weighted average interest rates on our term loans
and revolving credit facility have declined (6.23% and 6.01%, respectively at
June 2001 as compared to 8.26% and 8.27%, respectively at June 2001) resulting
in decreased interest expense. (See Liquidity and Capital Resources section of
Management's Discussion and Analysis of Financial Condition and Results of
Operations).
Six months ended June 2001 compared to six months ended June 2000
Sales for the six months ended June 2001 were $210.1 million, an increase of
4.7% compared to sales of $200.7 million in the same quarter a year ago.
Sales in our orthopaedic businesses grew 4.3% to $137.2 million from $131.5
million in the comparable period last year. Arthroscopy sales, which represent
approximately 57.0% of total orthopaedic revenues, grew 3.6% to $78.2 million
from $75.5 million in the same period a year ago. Powered surgical instrument
sales, which represent approximately 43.0% of orthopaedic revenues, grew 5.4% to
$59.0 million from $56.0 million in the same period last year. Adjusted for
constant foreign currency exchange rates, orthopaedic sales growth in the first
half of 2001 would have been approximately 6.2% compared with the first half of
2000.
Patient care sales for the six months ended June 2001 were $35.2 million, a 0.8%
decline from $35.5 million in the same period a year ago, reflecting expected
declines in sales of our surgical suction product lines as a result of increased
competition and pricing pressures.
Electrosurgery sales for the six months ended June 2001 were $32.1 million, an
increase of 4.6% from $30.7 million in the first half of last year, reflecting
improved generator and disposable product sales.
Sales of MIS products increased 89.7% to $5.5 million in the six months ended
June 2001 from $2.9 million in the same period a year ago. Approximately 82.8%
of the total increase in MIS sales is a result of our November 2000 Imagyn
acquisition (Note 7 to the condensed consolidated financial statements), while
6.9% is a result of internal growth.
17
Cost of sales increased to $99,639,000 in the first half as compared to
$95,988,000 in the same period a year ago as a result of the increased sales
volumes described above. Gross margin percentage improved to 52.6% in the first
half of 2001 compared to 52.2% in the first half of 2000, primarily as a result
of increased sales volumes in our orthopaedic product lines which carry higher
gross margins than certain of our other product lines.
Selling and administrative expenses increased to $68,751,000 in the first half
of 2001 as compared to $64,009,000 in the first half of 2000. As a percentage of
sales, selling and administrative expenses totaled 32.7% in the first half of
2001 compared to 31.8% in the first half of 2000. In the second quarter of 2000,
we announced a plan to replace our arthroscopy direct sales force with
non-stocking exclusive sales agent groups in certain geographic regions of the
United States (Note 8 to the condensed consolidated financial statements). This
plan resulted in greater sales force coverage in the affected geographic
regions. The increase in selling and administrative expense is a result of
higher commission and other costs in the first half of 2001 as compared to 2000
associated with the change to exclusive sales agent groups as well as increased
spending on sales and marketing programs.
Research and development expense increased to $7,172,000 in the first half of
2001 as compared to $6,978,000 in the first half of 2000. As a percentage of
sales, research and development expense decreased to 3.4% in the current period
compared to 3.5% in the same period a year ago.
Interest expense in the first half of 2001 was $16,179,000 compared to
$16,643,000 in the first half of 2000. The decrease in interest expense is a
result of lower total borrowings during the current quarter as compared to the
same period a year ago, as total current and long-term debt outstanding
decreased to approximately $367,698,000 at June 2001 as compared to $380,210,000
at June 2000. Additionally, the weighted average interest rates on our term
loans and revolving credit facility have declined (6.23% and 6.01%,
respectively, at June 2001 as compared to 8.26% and 8.27%, respectively, at June
2001) resulting in decreased interest expense. (See Liquidity and Capital
Resources section of Management's Discussion and Analysis of Financial Condition
and Results of Operations).
Liquidity and Capital Resources
Our net working capital position increased to $116,024,000 at June 2001 compared
to $113,755,000 at December 2000. Net cash provided by operations was
$17,569,000 for the first six months of 2001 compared to $21,466,000 for the
same period a year ago. Operating cash flow in the first half of 2001 was
positively impacted by depreciation, amortization and an increase in income
taxes payable. Operating cash flow in the first half of 2001 was negatively
impacted primarily by an increase in accounts receivable.
Net cash used by investing activities for the six months ended June 2001 and
2000 consisted of $8,655,000 and $7,602,000, respectively, in capital
expenditures.
Financing activities during the six months ended June 2001 consisted primarily
of scheduled payments of $18,050,000 on our term loans and $7,000,000 in
borrowings on our revolving credit facility. Financing activities during the six
months ended June 2000 consisted primarily of scheduled payments of $16,459,000
on our term loans and $2,000,000 in borrowings on our revolving credit facility.
Our term loans under our credit facility at June 2001 aggregate $182,893,000.
Our term loans are repayable quarterly over remaining terms of approximately
four years. Our credit facility also includes a $100,000,000 revolving credit
facility which expires and is expected to be renegotiated prior to December
2002, of which $46,000,000 was available at June 2001. The borrowings under the
credit facility carry interest rates based on a spread over LIBOR or an
18
alternative base interest rate. The covenants of the credit facility provide for
increase and decrease to this interest rate spread based on our operating
results. The weighted average interest rates at June 2001 under the term loans
and the revolving credit facility were 6.23% and 6.01%, respectively.
Additionally, we are obligated to pay a fee of .375% per annum on the unused
portion of the revolving credit facility.
We use an interest rate swap, a form of derivative financial instrument, to
manage interest rate risk. We have designated as a cash-flow hedge, an interest
rate swap which effectively converts $50,000,000 of LIBOR-based floating rate
debt under our credit facility into fixed rate debt with a base interest rate of
7.01%. The interest rate swap expires in June 2003 and is included in
liabilities on the balance sheet with a fair value approximating $2,243,000.
There were no material changes in our market risk during the quarter ended June
2001. For a detailed discussion of market risk, see our Annual Report on Form
10-K for the year ended December 2000, Part II, Item 7A, Quantitative and
Qualitative Disclosures About Market Risk.
The credit facility is collateralized by all of our personal property. The
credit facility contains covenants and restrictions which, among other things,
require maintenance of certain working capital levels and financial ratios,
prohibit dividend payments and restrict the incurrence of certain indebtedness
and other activities, including acquisitions and dispositions. We are also
required to make mandatory prepayments from net cash proceeds from any issue of
equity and asset sales. Mandatory prepayments are to be applied first to the
prepayment of the term loans and then to reduce borrowings under the revolving
credit facility.
The Notes are in aggregate principal amount of $130,000,000 and have a maturity
date of March 15, 2008. The Notes bear interest at 9.0% per annum which is
payable semi-annually. The indenture governing the Notes has certain restrictive
covenants and provides for, among other things, mandatory and optional
redemptions by us.
The credit facility and Notes are guaranteed by each of our subsidiaries. The
Subsidiary Guarantees provide that each Subsidiary Guarantor will fully and
unconditionally guarantee our obligations on a joint and several basis. Each
Subsidiary Guarantor is wholly-owned by CONMED Corporation. Under the credit
facility and Note indenture, our subsidiaries are subject to the same covenants
and restrictions that apply to us (except that the Subsidiary Guarantors are
permitted to make dividend payments and distributions, including cash dividend
payments, to us or another Subsidiary Guarantor).
As discussed in Note 7, we completed a second Imagyn acquisition in the third
quarter of 2001. We expect to record a nonrecurring charge to expense totaling
approximately $1.2 million in the second half of 2001 for incremental transition
costs associated with the acquisition.
As of August 3, 2001, we effectively purchased the Largo, Florida property which
our Linvatec subsidiary had been leasing from a third party for an aggregate
purchase price of approximately $23.0 million. We assumed the current debt on
the property for the majority of the purchase price and financed the remainder
with the seller.
In the third quarter of 2001, through a newly formed special-purpose subsidiary,
we expect to enter into a sales agreement that provides us with a five-year $50
million revolving accounts receivable securitization facility. The proceeds will
be used to repay a portion of our term loans.
We believe that cash generated from operations, our current cash resources and
funds available under our credit facility will provide sufficient liquidity to
ensure continued working capital for operations, debt service and funding of
capital expenditures in the foreseeable future.
19
Foreign Operations
Our foreign operations are subject to special risks inherent in doing business
outside the United States, including governmental instability, war and other
international conflicts, civil and labor disturbances, requirements of local
ownership, partial or total expropriation, nationalization, currency
devaluation, foreign exchange controls and foreign laws and policies, each of
which may limit the movement of assets or funds or result in the deprivation of
contract rights or the taking of property without fair compensation.
20
Item 6. Exhibits and Reports on Form 8-K
List of Exhibits
Exhibit No. Description of Instrument
- ----------- -------------------------
10.1 The Asset Purchase Agreement, dated as of June 11, 2001 by and
between CONMED Corporation and Imagyn Medical, Inc., et al.
(included in EDGAR filing only)
10.2 The Agreement of Purchase and Sale, dated as of February 5, 2001 by
and between Linvatec Corporation and Largo Lakes I, II and IV, Inc.,
et al. (included in EDGAR filing only)
Reports on Form 8-K
None
21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CONMED CORPORATION
(Registrant)
Date: August 8, 2001
/s/ Robert D. Shallish, Jr.
---------------------------
Robert D. Shallish, Jr.
Vice President - Finance
(Principal Financial Officer)
22
Exhibit Index
Sequential Page
Exhibit Number
- ------- ------
10.1 The Asset Purchase Agreement, dated as of June 11, 2001 by and
between CONMED Corporation and Imagyn Medical, Inc. et al. (included in EDGAR
filing only)
10.2 The Agreement of Purchase and Sale, dated as of February 5,
2001 by and between Linvatec Corporation and Largo Lakes, I, II
and IV, Inc., et al. (included in EDGAR
filing only)
23
Exhibit 10.1
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of this 11th day of June, 2001 by and between CONMED Corporation, a New
York corporation (the "Buyer" or "CONMED"), and Imagyn Medical, Inc., a Delaware
corporation, Imagyn Medical Technologies California, Inc., a California
corporation, Imagyn Medical Technologies, Inc., a Delaware corporation,
Microsurge, Inc., a Delaware corporation, and Dacomed Corporation, a Minnesota
Corporation, individually and as successor by merger to Advanced Surgical, Inc.,
formerly a Delaware corporation, (collectively the "Seller" or "Imagyn);
WHEREAS, Imagyn engages in the business of the development, manufacture
and sale of disposable, reposable and/or reusable minimally invasive surgical
("MIS") products, certain of which disposable products were sold to CONMED
pursuant to an Asset Purchase Agreement dated as of October 30, 2000;
WHEREAS Imagyn retained the rights to develop, manufacture and sell
disposable, reposable and/or reusable products including certain other surgical
products, not sold to CONMED (or to any third party), with such retained
products known as the Imagyn Products (as hereinafter defined) (the design,
development, manufacture, distribution and sale of such Imagyn Products being
herein called the "Business");
WHEREAS, Imagyn now desires to exit the Business and Buyer desires to
purchase and acquire the assets of the Business, in a manner that causes as
little disruption as possible to customers of, and the profitability of, the
Business, all on the terms and conditions set forth in this Agreement; and
WHEREAS, Imagyn either owns, or holds licenses to, the patents and
other Intellectual Property (as hereinafter defined) necessary for the
manufacture, distribution and sale of the Products (as hereinafter defined), and
intends to convey or assign all of its right, title and interest in such
Intellectual Property (as hereinafter defined) in connection with this
Agreement, all on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties, agreements and conditions contained herein, the
parties agree as follows:
1
Article 1
Definitions
-----------
1.01 Assumed Liabilities.
-------------------
The term "Assumed Liabilities", or any variation thereof as used in
this Agreement, shall mean the liabilities and obligations, if any, to be
assumed by the Buyer pursuant to Article IV hereof.
1.02 Excluded Assets.
---------------
The term "Excluded Assets", or any variation thereof as used in this
Agreement, shall mean the assets specified in Schedule 2.01(a)(ii) or Section
2.02 as not to be sold, assigned, transferred and conveyed by Imagyn to the
Buyer pursuant to Article II hereof.
1.03 Imagyn Products.
---------------
The term "Imagyn Products" or "Imagyn Product Line", or any variation
thereof as used in this Agreement, shall mean those Imagyn products related to
the Business, manufactured or sold through Imagyn, or any of its Affiliates (as
hereinafter defined), relating to Imagyn's disposable, reposable and/or reusable
laparoscopic devices, including products employing similar or related
technology, including any improvement or modification to the Imagyn Technologies
(as hereinafter defined), including those products described in the attached
Schedule 1.03.
1.04 Imagyn Technologies.
-------------------
The term "Imagyn Technologies" shall refer to any know-how,
Intellectual Property (as hereinafter defined), including United States and the
corresponding foreign patents, patent applications, reissues, continuations or
extensions, trade secrets, manufacturing or design processes owned by or
otherwise licensed to Imagyn relating to the Imagyn Products, including any
improvement or modification to the aforementioned know-how and Intellectual
Property (as hereinafter defined).
1.05 Intellectual Property.
---------------------
The term "Intellectual Property" means patents, patent applications,
utility model registrations, design patents, trademarks trade secrets and
know-how relating to the Business as of the Closing Date (as hereinafter
defined), including those that are listed in
2
Schedule 1.05, including any improvements or modifications thereto that
are discovered before or after the Closing Date.
1.06 Intellectual Property Agreements.
--------------------------------
The term "Intellectual Property Agreements" shall mean those agreements
listed in Schedule 1.06.
1.07 Inventors.
---------
The term "Inventor" shall refer to each individual who, or corporation
which, other than Imagyn, owns the rights to any Intellectual Property
Agreements.
1.08 Inventory.
---------
The term "Inventory" shall refer to Raw Material (as hereinafter
defined), and current, non-obsolete work-in-process and finished goods of the
Business in quantities required, for each product, to ensure a smooth transition
and, with respect to the Imagyn Products, in the aggregate to be valued in an
amount specified in Sections 2.01(b), 5.01(q) and 7.09.
1.09 Key Employees.
-------------
The term "Key Employees" shall refer to employees to be identified by
CONMED, with Imagyn's assistance, after the execution of this Agreement and up
until Closing (as hereinafter defined), who are, in CONMED's reasonable
estimation, important to the research and development, manufacture, marketing
sale, or design of products used in, manufactured in, or under development in,
the Business.
1.10 Material Adverse Effect.
-----------------------
The term "Material Adverse Effect" shall mean any event, including any
action by a regulatory agency, customer or other person or entity, that presents
a reasonable probability of an adverse impact on the operations or profitability
of the Business such that a reasonable buyer could consider the event to be
material.
1.11 Purchased Assets.
----------------
The term "Purchased Assets", or any variation thereof as used in this
Agreement, shall mean the assets to be sold, assigned, transferred and conveyed
by Imagyn to the Buyer pursuant to Article II hereof.
3
1.12 Raw Material.
------------
The term "Raw Material" shall mean all current, non-obsolete supplies
and raw materials used in manufacturing the Imagyn Products, including any
allocated share of raw materials used in manufacturing, on one hand, the Imagyn
Products or in the Business and also used, on the other hand, in the manufacture
by Imagyn of other products unrelated to the Business.
1.13 Transfer Period.
---------------
The term "Transfer Period" shall mean that period of time, which shall
extend until three (3) months after the termination of the Supply Agreement (as
hereinafter defined) and in no event beyond nine (9) months after the Closing
(as hereinafter defined), during which CONMED may request, and will receive,
assistance from Imagyn with warehousing, regulatory matters such as CE marking,
establishing validation protocols, investigation of complaints, and product
registrations, invoicing and processing orders, sales and sales reports with
respect to the Business, as well as the design, manufacture and distribution of
the Imagyn Products
1.14 U.S. Surgical Settlement.
------------------------
The term "U.S. Surgical Counterclaims" shall refer to any and all
claims that were or could have been asserted by U.S. Surgical with respect to
certain Imagyn Products, that were the subject of a certain lawsuit between U.S.
Surgical and Imagyn, namely the lawsuit initially captioned Imagyn Medical
Technologies California, Inc. v. United States Surgical Corp., initially pending
in the United States District Court of the Eastern District of Virginia (No.
97-1644-A), involving claims and/or counterclaims, including (without
limitation) those relating to patents 5,336,206; 5,304,143; 5,104,383;
5,144,942; 5,611,780; 5,327,318; and 5,423,835.
Article 2
Sale of Assets
--------------
2.01 Purchased Assets.
-----------------
Subject to the terms and conditions hereof, Imagyn agrees to sell,
assign, transfer and convey to the Buyer, and the Buyer agrees to purchase and
acquire from Imagyn, at
4
the Closing (as hereinafter defined), all of Imagyn's right, title and
interest in and to the following assets, wherever located:
(a) fixed assets, machinery, manufacturing equipment (including
manufacturing and inspection equipment), laboratory and test equipment, tooling,
computers, work stations, molds, vehicles, furniture, Imagyn Product
specifications, drawings and manufacturing processes documents and office
equipment used in the Business, wherever located, including, without limitation,
those listed on Schedule 2.01(a)(i), but excluding those specified in Schedule
2.01(a)(ii);
(b) the Inventory and parts relating to the Imagyn Products, which
shall be in amount valued at no less than $8.394 million, subject to and
including reserves for obsolete, slow-moving and any other impairments of value
with such reserves valued at $4.161 million, as provided for in Section 5.01(q)
and Section 7.09, and product prototypes and developments, samples,
demonstration units, product labels and packaging materials, as well as obsolete
inventory and raw material;
(c) the technology and know-how related to the manufacture of the
Imagyn Products, including documents reflecting the current manufacturing
process;
(d) the records related to the Imagyn Products and the Purchased
Assets;
(e) the patents, applications for patents, utility model registrations,
design patents, patent continuations and extensions that are related to the
Business as conducted on the Closing Date, including the Intellectual Property
identified on the attached Schedule 1.05;
(f) the customer purchase orders to the extent related to the Imagyn
Products, the Purchased Assets or the Business issued to Imagyn in the ordinary
course of business;
(g) the rights of Imagyn relating to the leases, contracts and written
agreements related to the sales and manufacture of the Imagyn Products, the
Purchased Assets or the Business as conducted on the Closing Date, including
customer lists and sales tracings, to the extent transferable (all
non-assignable contracts are identified in Schedule 2.01(g)), with Imagyn being
required to undertake all commercially reasonable efforts, at its own expense,
to secure the assignment or transfer of all such agreements;
5
(h) any registered or unregistered trademarks including the Richard
Allan name or mark, except
(i) with respect to certain products distributed domestically and in
Europe by Aspen Surgical Products, Inc., and (ii) the trade name Richard Allan
Scientific, in both cases as further specified on Schedule 2.01(h), (and the
goodwill of the business in which any such trademarks are used and which is
symbolized by said trademarks), copyrights, CE marks, patent licenses and trade
secrets that are related to the Business as conducted on the Closing Date owned,
licensed or used by Imagyn to the extent transferable by Imagyn, with Imagyn
being required to undertake all commercially reasonable efforts, at its own
expense, to secure the assignment or transfer of all such agreements, trademarks
and other matters to Buyer following the Closing; (i) all documents or other
tangible materials embodying technology or intellectual property rights owned
by, licensed to or otherwise controlled by Imagyn and to the extent that they
are used in connection with the Business, whether such properties are located on
Imagyn's business premises or on the business premises of Imagyn's suppliers or
customers, including, without limitation, all personal computers, work stations,
terminals, software programs (including both source and object codes) and
related documentation for software to the extent used in or developed for
support of the Business and all master device records;
(j) All (i) patterns, plans, designs, research data, trade secrets and
other proprietary know-how, formulae and manufacturing processes, commercially
practiced processes and inventions, in each case whether or not patentable in
any jurisdiction and (ii) operating manuals, drawings, technology, manuals,
data, records, procedures and research and development records, and any right to
use or exploit any of the foregoing, in each case to the extent that they relate
to the Business on the Closing Date;
(k) Imagyn's warranty repair reserve, its reserve for product returns
and/or allowances and amounts relating to prepaid sales and deposits related to
sales;
(l) The release and covenant not to sue provided by United States
Surgical Corporation to Imagyn Medical Technologies California, Inc., as well as
the concurrent obligations and rights, as set forth in a Settlement Agreement
dated as of September 29, 1999;
(m) All marketing, labelling, printed materials, including materials
for displays at tradeshows;
6
(n) All notebook or other computers used by the sales force or
otherwise related to the Endocap Program or otherwise related to or used in the
Business; and
(o) The website text, graphics and images relating to the Imagyn
Products.
2.02 Excluded Assets.
---------------
The following assets of the Business are excluded from the Purchased
Assets: (i) cash; (ii) accounts receivable; (iii) accounts payable; (iv)
corporate minute books of Imagyn; and (v) any items listed in Schedule
2.01(a)(ii).
2.03 No Assumption of Liabilities.
----------------------------
Except as expressly set forth in Article IV and as contemplated by the
indemnity provision set forth in Section 10.03 (a) (iv), it is understood and
agreed that, other than the obligations for warranty claims relating to the
Imagyn Products, CONMED assumes no liabilities as a result of this Agreement
that existed prior to the Closing Date.
2.04 Trade Name and Trademark Restrictions.
-------------------------------------
It is understood and agreed that this Agreement does not constitute an
agreement to transfer to the Buyer the right to use: (i) Imagyn names and/or
marks, (ii) any Imagyn corporate logo alone, or (iii) any combination of any
other mark or symbol with any of the marks in this section, except during the
Transfer Period, or as provided for in this Section. Notwithstanding any other
provision in this Agreement to the contrary, Buyer shall be entitled to continue
to use the Imagyn corporate name, logo and any other mark for so long as such
use may be required to maintain product registrations for the Imagyn Products,
provided that CONMED shall have made reasonable efforts to obtain registrations
for products without such trademark or trademarks, it being understood that
reasonable efforts in any particular country shall require CONMED or its
distributors to have filed for registration within six (6) months following
Closing. In addition, with respect to Italy, CONMED shall be permitted to use
the Imagyn trade name and mark, along with the Imagyn logo, for so long as the
distribution agreement between CONMED and InnovaMedica srl remains in effect and
to the extent reasonably necessary to maintain product registrations.
Notwithstanding any other provision of this Agreement, CONMED agrees to
indemnify Imagyn for any losses or claims as a result of Buyer's sale of
products with the Imagyn mark, with CONMED's obligation to indemnify Imagyn
7
under this section to end six (6) months following Buyer's last sale of
product with the Imagyn mark, unless Imagyn can demonstrate that the specific
product involved in a particular claim was sold by CONMED.
2.05 Retention of Certain Records.
----------------------------
It is understood and agreed that Imagyn reserves the right to retain
copies or written records for the purpose of defending any claims, losses,
causes of action or lawsuits, including those related to the sale of the Imagyn
Product Line and Articulating Technologies Products by Imagyn, and for the
purpose of preparing any tax returns or financial statements or reports,
provided that Imagyn shall maintain the confidentiality of such documents and
shall promptly notify CONMED of any lawsuit or claim served upon Imagyn relating
to the Business and/or records or documents.
Article 3
Purchase Price and Other Payments
3.01 Purchase Price, Assignment and License Fee and Commission Payments.
------------------------------------------------------------------
In consideration for the Purchased Assets, the Buyer agrees to pay to
Imagyn one million three hundred thousand (1,300,000) shares of Conmed
Corporation common stock (the "Shares") (the "Purchase Price"), subject to
adjustment as provided in Section 3.04, and further subject to the terms of this
Agreement;
3.02 Allocation of Total Purchase Price.
----------------------------------
It is understood and agreed by the parties that, except as hereinafter
provided, the Purchase Price shall be allocated among the Purchased Assets in
accordance with the attached Schedule 3.02, which Schedule is to be completed
within 90 days after the Closing, and that said allocation will be used for
state and federal tax purposes. Each party acknowledges that such allocation is
consistent with the requirements of Section 1060 of the Internal Revenue Code
1986, as amended, and the regulations thereunder. Each party agrees (i) to
jointly complete and separately file Form 8594 with its federal income tax
return for the tax year in which the Closing Date occurs, and (ii) that such
party will not take a position on any income, transfer or gains tax return
before any governmental agency charged with the collection of any such tax or in
any judicial proceeding, that is in any manner inconsistent with the terms of
such allocation without the written consent of the
8
other party. Notwithstanding anything to the contrary provided herein,
neither party shall be bound by such allocation in the event the Internal
Revenue Service or another tax authority successfully challenges the allocation.
In the event of any challenge to such allocation by the Internal
Revenue Service or another tax authority, the parties will give each other
notice of the challenge and advise each other periodically of the status of such
challenge and reasonably cooperate with each other with respect to such
challenge.
3.03 Sales, Use and Transfer Taxes.
-----------------------------
The Seller shall be responsible for all sales, use and transfer taxes,
deed taxes and recording fees, if any, in each case applicable to the sale and
transfer of the Purchased Assets hereunder. If requested, the Buyer will furnish
Imagyn at the Closing with properly executed exemption certificates, dated the
Closing Date, relating to the Inventory, supplies and manufacturing equipment
being transferred pursuant to this Agreement as to which Buyer is claiming an
exemption from sales, use or other transfer taxes.
3.04 Purchase Price Adjustment - Inventory;
-------------------------------------
(a) In conjunction with the payment called for in Section 3.01, the
Buyer shall be entitled to offset any other of its obligations owed to Imagyn in
the transactions contemplated by this Agreement by an amount equal to the value
by which the Inventory of Imagyn Products is at the Closing less than the amount
provided for in Section 2.01(b), provided that any such shortage is greater than
$100,000 (any shortage less than $100,000 is not subject to offset) but not
greater than $400,000 in value (in which case the parties will renegotiate) with
Buyer being entitled to withhold such amount for a period of up to thirty (30)
days following the Closing or until the Parties shall have completed an
inventory reconciliation relating to the Inventory of Imagyn Products. Any
amount withheld or to be paid under this Section shall correspond, to the
dollar, the amount by which the Inventory is less than or more than the amount
specified in Section 2.01(b) , respectively.
(b) Any disputes as to the reconciliation of Inventory shall be
resolved pursuant to Section 11.12, with Buyer being entitled to withhold
payment until such dispute, if any, shall be resolved.
9
3.05 Setoff Rights.
-------------
All payment terms under this Agreement or any related agreements are
subject to setoff by CONMED and Imagyn.
Article 4
Assumption of Liabilities
-------------------------
4.01 Assumption of Liabilities.
-------------------------
Subject to the terms and conditions thereof, and other than the
indemnification obligation set forth in Section 10.03 (a) (iv), at the Closing,
the Buyer shall assume and agree to carry out and perform only the following
liabilities and obligations which have not been paid, performed or discharged
prior to the effective time of the Closing by Imagyn:
(a) Those obligations, and only those obligations, of Imagyn payable or
performable after the Closing Date under any of the purchase orders for sales of
Imagyn Products, leases, contracts, or written agreements included in the
Purchased Assets and that are specified in Schedule 4.01(a);
(b) All warranty obligations of Imagyn with respect to Imagyn Products
sold on or prior to the Closing Date, as set forth in Imagyn's Standard Warranty
Agreement and
(c) Such other liabilities related to the Purchased Assets or the
Business arising after the Closing.
(d) The language of Section 4.01(a)-(c) notwithstanding, Buyer shall
not be responsible for any taxes, liens or claims upon the Purchased Assets that
arise from pre-Closing facts or circumstances. If any third party asserts any
right arising under lien laws and/or federal, state, local or other tax laws,
Imagyn shall be responsible to pay to Buyer, or Buyer may claim as a setoff, an
amount equal to the asserted lien or tax obligation, which payment shall also be
reflected in the adjustment to the Purchase Price contemplated by Section 3.04.
Imagyn also agrees to complete any other documents necessary to show that Buyer
did not assume assets with liens or outstanding tax obligations.
10
Article 5
Representations and Warranties
------------------------------
5.01 Imagyn Representations.
----------------------
Imagyn hereby represents and warrants that, except as discussed in the
attached disclosure schedules, as follows:
(a) Organization of Imagyn. Each of the individual corporations named
as Seller is a corporation duly organized, validly existing and in good standing
under the laws of the state of its incorporation.
(b) Authority of Seller. Imagyn has full corporate power and authority
to execute, deliver and perform this Agreement and each of the Transaction
Documents (as hereinafter defined) to be entered into by it at the Closing, and
such execution, delivery and performance have been duly authorized by all
necessary and proper corporate action of Imagyn. This Agreement has been duly
executed and delivered by Imagyn, and (assuming due authorization, execution and
delivery hereof by the Buyer) is the valid and binding obligation of Imagyn
enforceable against Imagyn in accordance with its terms. Upon execution and
delivery thereof by Imagyn at the Closing (and assuming due authorization,
execution and delivery thereof by the Buyer, to the extent applicable), each of
the Transaction Documents to be entered into by Imagyn at the Closing will be
the valid and binding obligation of Imagyn enforceable against Imagyn in
accordance with its terms.
(c) Title to Purchased Assets. Except as set forth in Schedule 5.01(c)
or elsewhere in this Agreement, Imagyn has or will have at the Closing title to
the Purchased Assets, free and clear of all mortgages, liens, security
interests, claims, tax liabilities, charges and encumbrances.
(d) Contracts. The attached Schedule 5.01(d) lists, as of the date of
this Agreement, all leases, contracts, agreements and commitments related to the
Imagyn Products other than these IP agreements listed on Schedule 1.06, the
Purchased Assets or the Business to which Imagyn is a party or by which Imagyn
is bound and which involve payments of more than $10,000 per annum, excluding
purchase orders issued by or to Imagyn in the ordinary course of business.
11
(e) Brokers. With respect to the transactions contemplated by this
Agreement, Imagyn has not dealt with or been contacted by any finder or broker
and is not in any way obligated to compensate any such persons. To the extent
that any broker or similar entity asserts any claim for fees, Imagyn agrees that
it alone is liable for any commissions or other amounts that may be due as a
result of this Agreement being consummated.
(f) Intellectual Property. Imagyn has title to the patents, patent
applications and utility model registrations listed in Schedule 1.05, and, to
its knowledge, such patents are valid. In addition, such title is subject to or
encumbered by the agreements listed in Schedule 5.01(c). To its knowledge,
neither the Imagyn Products nor Imagyn's operations of the Business infringe,
misuse or misappropriate any intellectual property rights not owned by or
licensed to Imagyn, no third party has accused or otherwise suggested that the
Imagyn Products or Imagyn's operations of the Business infringe, misuse or
misappropriate any intellectual property rights not owned by or licensed to
Imagyn, and no third party is infringing any intellectual property rights of
Imagyn used in connection with the Business.
(g) Compliance with Law. The Business is not in violation of any law,
ordinance or regulation of any governmental entity, including, without
limitation, environmental, occupational, employment, medical device, property or
other laws and/or regulations, which violations reasonably could have a Material
Adverse Effect. Moreover, Seller represents, warrants and agrees that this
transaction has been negotiated at arms' length for fair market value. All
governmental approvals, permits, licenses and other authorizations required in
connection with the manufacture or sale of the Imagyn Products or in the conduct
of any material aspect of the Business (collectively, "Authorizations") have
been obtained and are in full force and effect and are being complied with in
all material respects. Seller has not received any written notification of any
asserted past or present violation, nor is it otherwise aware of violations, in
connection with the conduct of the Business of any law, ordinance or regulation,
which violation could have a Material Adverse Effect, or any written complaint,
inquiry or request for information from any governmental entity relating
thereto. Seller represents that none of the Products are currently subject to
recall, none have been voluntarily recalled or removed, nor is Imagyn
12
aware of any facts that would require a recall or that could support a
finding that the products do not comply with the requirements for medical
devices.
(h) FDA and Foreign Regulatory Approval Status. Seller warrants that
all Imagyn Products, including any accessories to be sold, are marketable, and
currently are being marketed, in compliance with all material Food and Drug Act,
Medical Device Directive and other legal requirements.
(i) Completeness of Purchased Assets; Condition of Purchase Assets. The
Purchased Assets constitute all assets that were used in the conduct of, or
necessary to, the Business, particularly the manufacture and sale of the Imagyn
Products, except those assets identified on Schedule 2.01(a)(ii) as the Excluded
Assets. The Purchased Assets are, in all material respects, suitable for the
uses for which they are presently used by the Business, in normal operating
condition and free from any known significant defects, excepting ordinary wear
and tear. With respect to the manufacturing equipment and tooling, on the
Closing, Seller will provide to Buyer its most current maintenance schedule.
(j) Financials. The financial statements provided by Seller and those
attached hereto as schedule 5.01(j) are true and accurate in all material
respects, have been derived from the books and records of Imagyn and have been
prepared and maintained in accordance with Generally Accepted Accounting
Principles ("GAAP")
(k) Claims Status. Seller is unaware of any pending or threatened
material claims that are being asserted other than those already disclosed, with
respect to product liability, intellectual property, regulatory or other claims
related to the Business.
(l) Lender and Other Approval. Seller and each of the parties to this
Agreement have consulted all of their lenders and shareholders whose consent is
required, or any other persons, entity or constituency whose consent is
required, and said lenders, shareholders, persons, entities and/or
constituencies have indicated that they consent to this transaction.
(m) Execution, Delivery; Valid and Binding Agreement. The execution,
delivery and performance of this Agreement by Imagyn and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Imagyn, and no other proceedings on the part of Imagyn
(including, without
13
limitation, approval of the shareholders of Imagyn) are necessary to
authorize the execution, delivery and performance of this Agreement.
(n) Authority; No Breach. The execution, delivery and performance of
this Agreement by Imagyn and the consummation of the transactions contemplated
hereby do not conflict with or result in any material breach of any of the
provisions of, or constitute a default under, result in a violation of, result
in the creation of a right of termination or acceleration or any lien, security
interest, charge or authorization, consent, approval, exemption or other action
by or notice to any court or other governmental body, under the provisions of
the Certificate or Articles of Incorporation or by-laws of Imagyn or any
indenture, mortgage, lease, loan agreement or other agreement or instrument by
which Imagyn or the Purchased Assets are bound or affected , , or any law,
statute, rule or regulation or order, judgment or decree to which Imagyn, or the
Assets, are subject.
(o) Governmental Authorities; Consents. Except as expressly
contemplated by this Agreement, Imagyn is not required to submit any notice,
report or other filing with any governmental authority in connection with the
execution or delivery by it of this Agreement or the consummation of the
transactions contemplated hereby. No consent, approval or authorization of any
governmental or regulatory authority is required to be obtained by Imagyn in
connection with its execution, delivery or performance of this Agreement or the
transactions contemplated thereby.
(p) Absence of Certain Developments. Since the date of the financial
statement attached as Schedule 5.01(j), Imagyn has not, in each case, with
respect to the Assets or the Business: (a) borrowed any amount or incurred or
become subject to any liability except (i) current liabilities incurred in the
ordinary course of business of the Business and (ii) liabilities under contracts
entered into in the ordinary course of business of the Business; (b) mortgaged,
pledged or subjected to any lien, charge or any other encumbrance ("Liens"), any
of the Purchased Assets; (c) discharged or satisfied any Liens or paid any
liability, other than current liabilities paid in the ordinary course of
business of the Business; (d) sold, assigned or transferred (including, without
limitation, transfers to any employees, affiliates or shareholders) any tangible
assets of the Business or canceled any debts or claims, other than in the
ordinary course of business of the Business; (e) sold, assigned or transferred
(including, without limitation, transfers to any employees, affiliates or
shareholders) any patents, trademarks, trade names, copyrights, CE marks, trade
14
secrets or other intangible assets used in or held for use in the
Business; (f) disclosed, to any person other than Buyer and authorized
representatives of Buyer, any proprietary confidential information of the
Business or otherwise related to the Purchased Assets, other than pursuant to a
confidentiality agreement or other obligation to maintain confidentiality
prohibiting the use or further disclosure of such information, which agreement
or other obligation either has been identified to Buyer and is in full force and
effect on the date or will be enforced by Imagyn (at Buyer's cost) for up to two
years following the Closing upon the reasonable request for such enforcement by
Buyer notwithstanding any other time requirements imposed by this Agreement; (g)
waived any rights of material value or suffered any extraordinary losses or
adverse changes in collection loss experience, whether or not in the ordinary
course of business or consistent with past practice; (h) taken any other action
or entered into any other transaction other than in the ordinary course of
business and in accordance with past custom and practice; (i) suffered any
material theft, damage, destruction or loss of or to the Assets or any property
or properties owned or used by it in connection with the Business, whether or
not covered by insurance; (j) made any single capital expenditure or commitment
therefor in excess of $10,000; (k) made any loans or advances to, or guarantees
for the benefit of, any persons such that the aggregate amount of such loans,
advances or guarantees at any time outstanding is in excess of $10,000; or (l)
agreed or committed to any of the actions referred to in clauses (a) through (k)
above.
(q) Inventory. All Inventory, other than inventory to be conveyed to
Buyer that is subject to reserves or inventory subject to material review board
review in amounts which are consistent with past practices and the ordinary
course of business, consists of items of a quality and quantity usable and, with
respect to finished goods only, salable at Imagyn's normal profit levels, in
each case, in the ordinary course of the business. Imagyn has on hand such
quantities of finished goods sufficient to meet the normal demand and
operational requirements for each of the Imagyn Products and in an amount not
less than the amount reflected in the Imagyn Surgical Condensed Balance Sheet as
of April 30, 2001, as adjusted to reflect assets not being transferred. Imagyn
has on hand, or has ordered, and expects timely delivery prior to Closing of
such quantities of Raw Materials as are reasonably required timely to fill
current orders on hand with respect to each product sold by the Business that
require delivery within 60 days and to
15
maintain the manufacture and shipment of products at its normal level
of operations. As of the date of the Imagyn Surgical Condensed Balance Sheet as
of April 30, 2001, as adjusted to reflect assets not being transferred, attached
hereto as Schedule5.01(j), the values at which such inventory is carried on the
Latest Balance Sheet have been determined in accordance with GAAP consistently
applied.
(r) Contracts and Commitments. (a) Schedule 5.01(r) lists the following
contracts, commitments or binding understandings, whether oral or written, to
which Imagyn is a party, which are currently in effect and which relate to the
operation of the Business or the Assets: (i) Each confidentiality agreement,
non-compete agreement or any contract that would prohibit Imagyn or Buyer from
freely engaging in Business or in the manufacture, sale or distribution of the
Imagyn Products anywhere in the world; (ii) Each agreement not made in the
ordinary course of the conduct of the Business; (iii) Each agreement not
otherwise discussed to which Imagyn or any affiliate is a party or which has, or
may have, a material effect on the Business; and (iv) Each agreement relating to
the sale, license or development of any Purchased Asset, except for purchase
orders, but including any and all EndoCap Agreements (b) Imagyn has performed
all material obligations required to be performed by it in connection with the
contracts or commitments listed on any of the Schedules to this Agreement or
otherwise required to be disclosed and are not in receipt of any claim of
default under any contract or commitment required to be disclosed under such
caption; Imagyn has no present expectation or intention of not fully performing
any material obligation pursuant to any such contract or commitment, and Imagyn
has no knowledge of any breach or anticipated breach by any other party to any
such contract or commitment. (c) Ten (10) days prior to the Closing of this
Agreement, Buyer will have been supplied with a true and correct copy of each
written contract or commitment, and a written description of each oral contract
or commitment, listed on any of the Schedules to this Agreement, together with
all amendments, waivers or other changes thereto.
(s) Litigation. Except as set forth in Schedule 5.01(s), there are no
actions, suits, proceedings, orders or investigations pending or, to the best
knowledge of Imagyn, threatened against Imagyn, at law or in equity, or before
or by any federal, state, municipal or other governmental department,
commission, board, bureau, court, agency or instrumentality, domestic or
foreign, which (i) relate to the Business or the Assets
16
(including but not limited to bankruptcy filings by or against Imagyn),
or (ii) seek to enjoin or otherwise prevent the consummation of the transactions
contemplated by this Agreement, and there is no reasonable basis known to Imagyn
for any of the foregoing. Nor is Imagyn aware of any facts that could result in
a finding that Imagyn Products are subject to regulatory action or patent
infringement or invalidity claims.
(t) Customers and Suppliers. Schedule 5.01(t) lists the twenty-five
(25) largest domestic and international customers, and twenty-five (25) largest
suppliers of Imagyn relating to the Business for the most-recent fiscal year and
for the six-month period ended March 31, 2001, and sets forth opposite the name
of each such customer or supplier the approximate percentage of net sales or
purchases attributable to such customer or supplier for each such period. Since
January 1, 2001, no customer or supplier of the Business listed on Schedule
5.01(t) has indicated that it will stop or materially decrease the rate of
business done with Imagyn, nor is Imagyn aware of any collection matters
relating to such customers except as disclosed on such Schedules. Schedule
5.01(t) also lists any customers which regularly receive scheduled shipments of
any of the Imagyn Products.
(u) ISO 9001 Certification. Imagyn represents and warrants that
Imagyn's facilities used in connection with the Business are ISO 9001 certified
and comply with all requirements for such ISO 9001 certification.
(v) Due Diligence Responses. Imagyn represents and warrants that its
responses to due diligence requests have been true, accurate and complete in all
material respects.
(w) Utility Accounts Current. Imagyn is current with payments due any
and all companies supplying utilities (electricity, gas, water, etc.) to the
facility in Richland, Michigan, and will remain so through Closing and
throughout the term of the Supply Agreement (as hereinafter defined).
(x) Vendor Accounts Current. Imagyn's accounts with vendors to the
Business are current, and will remain so during through Closing and throughout
the term of the Supply Agreement.
(y) Securities Related Representations.
----------------------------------
(i) Imagyn: (A) understands that the Shares have not been registered
under the Securities Act or under any state securities law or blue sky law of
any
17
jurisdiction ("Blue Sky Law") and that the Shares are being offered and
sold in reliance upon federal and State exemptions for transactions not
involving a public offering; (B) is an "accredited investor" as that term is
defined under Rule 501 promulgated under the Securities Act; (C) has received
the Conmed SEC Documents (as hereinafter defined) and has had the opportunity to
obtain additional public information as desired in order to evaluate the merits
and risks inherent in holding the Shares; (D) is able to bear the economic risk
in holding the Shares; and (E) is acquiring the Shares solely for investment and
not with a view to the distribution or resale thereof; (F) has conducted its own
due diligence investigation of the shares and Conmed Corporation, and
acknowledges that it has been provided with no non-public information concerning
Conmed Corporation's financial condition or performance. The term "solely for
investment" used in this Section has the meaning given to that term for purposes
of determining the availability of an exemption from registration under Section
4(2) of the Securities Act.
(ii) Imagyn will not sell, assign, transfer or otherwise dispose of the
Shares without registration under the Securities Act and under applicable Blue
Sky Law unless an exemption from registration thereunder is available, and
provided further that such transferee has consented in writing to the
restrictions set forth in this Section. Imagyn acknowledges the stock
certificates evidencing such Shares will bear a legend to the effect of the
foregoing.
Imagyn agrees that: (1) it will not sell, transfer, assign, encumber or
enter into any transaction involving the Shares for 90 days following the
Closing (the "Lock-up Period") unless it shall have received the prior written
consent of CONMED, which will not be unreasonably withheld; and (2) following
the Lock-up Period, Imagyn, or any transferee of Imagyn, will not sell or
otherwise transfer more than twenty percent (20%) of the Shares in any 60 day
period (the "Transfer Restriction"), except with respect to block sales in
private transactions where any transferee of Imagyn or financial intermediary
counter-party to such transaction agrees to be bound by the Transfer
Restriction.
5.02 Buyer Representations.
---------------------
The Buyer hereby represents and warrants as follows:
(a) Organization of Buyer. The Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of New York.
18
(b) Authority of Buyer. The Buyer has full corporate power and
authority to execute, deliver and perform this Agreement and each of the
Transaction Documents to be entered into by it at the Closing, and such
execution, delivery and performance have been duly authorized by all necessary
and proper corporate action of the Buyer. This Agreement has been duly executed
and delivered by the Buyer, and (assuming due authorization, execution and
delivery hereof by Imagyn) is the valid and binding obligation of the Buyer
enforceable against the Buyer in accordance with its terms (except as such
enforceability may be limited by bankruptcy, reorganization, insolvency
moratorium and other similar laws affecting creditors' rights generally or by
general principles of equity). Upon execution and delivery thereof by the Buyer
at the Closing (and assuming due authorization, execution and delivery thereof
by Imagyn, to the extent applicable), each of the Transaction Documents to be
entered into by the Buyer at the Closing will be the valid and binding
obligation of the Buyer enforceable against the Buyer in accordance with its
terms (except as such enforceability may be limited by bankruptcy,
reorganization, insolvency, moratorium or other similar laws affecting
creditors' rights generally or by general principles of equity).
(c) Brokers. With respect to the transactions contemplated by this
Agreement, the Buyer has not dealt with or been contacted by any finder or
broker and is not in any way obligated to compensate such persons.
(d) Conmed Shares. The Shares have been authorized and, when issued and
delivered in accordance with the terms of this Agreement, will have been validly
issued and be fully paid and non-assessable and the issuance thereof is subject
to any preemptive or other similar right.
(e) Securities and Exchange Commission Filings. Conmed has made
available to Imagyn (i) Conmed's annual report on Form 10-K for its fiscal years
ended December 31, 1999 and December 31, 2000; and (ii) all of its other
reports, statements, schedules and registration statements filed with the SEC
pursuant the Exchange Act since December 31, 1999 (the documents, as, referred
to in this Section collectively, the "Conmed SEC Documents"). As of its filing
date, each Conmed SEC document filed pursuant to the Exchange Act did not
contain any untrue statement of a material fact or
19
omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading, except as the same may have been corrected, updated or
superceded by means of a subsequent filing with the SEC.
(f) Private Offering. Based on the representations set forth Section
5.01(z), the offer, and delivery to Imagyn pursuant to the terms of this
Agreement of the Common Stock Consideration is exempt from under the Securities
Act.
Article 6
Conditions to Closing
---------------------
6.01 Conditions to the Buyer's Obligations.
-------------------------------------
The obligations of the Buyer to be performed at the Closing shall be
subject to the satisfaction or the waiver in writing by the Buyer at or
prior to
the Closing of the following conditions:
(a) Each of the representations and warranties of Imagyn contained in
this Agreement shall be true in all material respects as of the Closing with the
same effect as though such representations and warranties have been made as of
the Closing, except for any variations therein resulting from actions
contemplated or permitted by this Agreement, and each of the covenants to be
performed by Imagyn at or before the Closing pursuant to the terms hereof shall
have been duly performed in all material respects. The Buyer shall have been
furnished with a certificate of Imagyn, executed on its behalf by an appropriate
officer of Imagyn and dated the Closing Date, certifying to the foregoing
effects.
(b) No action, suit or proceeding by any governmental authority shall
be pending against the Buyer or Imagyn which seeks to prevent the consummation
of the transactions contemplated by this Agreement, and no injunction or order
for any court or administrative agency of competent jurisdiction shall be in
effect which restricts or prohibits the consummation by the Buyer or Imagyn of
the transactions contemplated by this Agreement.
(c) Imagyn and Buyer shall have executed a Registration Rights
Agreement in the form of Schedule 6.01(c) (the "Registration Rights Agreement").
20
(d) Imagyn and Buyer shall have executed a Supply Agreement in the form
of Schedule 6.01(d);
(e) Buyer shall have received from Imagyn:
(i) A Bill of Sale in the form of Schedule 6.01(e)(i);
(ii) Certificates of Good Standing, as to each corporate entity
involved in the transaction contemplated by this Agreement;
(iii) Certified copies of Imagyn's corporate resolutions and those of
each corporate entity involved in the transaction contemplated by this
Agreement authorizing the transactions contemplated hereby;
(iv) UCC-3 lien releases and any other documents reasonably requested
by Buyer to reflect that the Purchased Assets are free of liens, claims
or security interests, as well as such other documents as Buyer may
reasonably require for precautionary filings to provide notice of
Buyer's ownership of the Purchased Assets, or as Buyer's lenders may
reasonably require to establish their security interests in such
Purchased Assets;
(v) An opinion from Imagyn's counsel, in a form reasonably acceptable
to Conmed, as to the authority of Imagyn to enter into this Agreement;
(vi) Access to and/or an assignment of the right to market, sell and
distribute the Imagyn Products under the CE certification issued to
Imagyn, and access to the sterilization provider used by Imagyn for the
Imagyn Products, on at least as favorable terms, during the Transfer
Period or as CONMED may reasonably require;
(vii) An assignment of the release and covenant not to sue referred to
in Section 2.01(l), together with proof that any required notice to
United States Surgical Corporation has been provided; and
(viii) Signed customer notification letters in the form referred to in
Section 7.14.
(f) CONMED shall have received an executed written agreement, in form
and substance reasonably acceptable to CONMED, from the Inventors to the effect
that any licensed Intellectual Property included in the Intellectual Property or
covered by the Intellectual Property Agreement(s) may be and is/are assigned to
CONMED.
21
(g) CONMED shall be satisfied, which shall be determined in its sole
discretion, with further due diligence review concerning, among other things,
the patents relating to the Imagyn Products and inventory levels.
(h) With respect to the Business and the Purchased Assets, no event
which would encompass a Material Adverse Effect shall have occurred, since
January 1, 2001.
(i) Imagyn shall have delivered to CONMED Inventory, as set forth in
Section 7.09, which CONMED shall verify on the day prior to the Closing, which
Inventory shall not be less than the value set forth in Section 2.01(b), such
value being measured according to the cost of manufacture.
(j) All of Imagyn's accounts with CONMED and any of its Affiliates (as
hereinafter defined) shall have been said in full on or before the Closing.
(k) The parties shall have reached a mutually acceptable agreement with
respect to the Klieman License.
6.02 Conditions to Obligations of Imagyn.
-----------------------------------
The obligations of Imagyn to be performed at the Closing shall be
subject to the satisfaction or the waiver in writing by Imagyn at or prior to
the Closing of the following conditions:
(a) Each of the representations and warranties of the Buyer contained
in this Agreement shall be true in all material respects as of the Closing with
the same effect as though such representations and warranties had been made as
of the Closing, except for any variations therein resulting from actions
contemplated or permitted by this Agreement, and each of the covenants to be
performed by the Buyer at or before the Closing pursuant to the terms hereof
shall have been duly performed in all material respects. Imagyn shall have been
furnished with a certificate of the Buyer, executed on its behalf by an
appropriate officer of the Buyer and dated the Closing Date, certifying to the
foregoing effects.
(b) No action, suit or proceeding by any governmental authority shall
be pending against the Buyer or Imagyn which seeks to prevent the consummation
of the transactions contemplated by this Agreement, and no injunction or order
of any court or administrative agency of competent jurisdiction shall be in
effect which restricts or
22
prohibits the consummation by the Buyer or Imagyn of the transactions
contemplated by this Agreement.
(c) Imagyn shall have received an opinion from CONMED's in-house
counsel as to the authority of CONMED to enter into this Agreement.
(d) Buyer shall have executed all documents required by this Agreement.
Article 7
Certain Agreements
------------------
7.01 Conduct of Business; No Material Adverse Change.
-----------------------------------------------
Except as expressly contemplated by this Agreement, from the date
hereof until the Closing, Imagyn will conduct the Business in the usual and
ordinary course. Imagyn specifically agrees that it will not (i) enter into any
agreements with respect to the Business that are less favorable than contracts
currently in place, (ii) enter into new contracts without the prior written
consent of Buyer, (iii) give away or commit to give away any products or
services associated with the Business without the prior written consent of Buyer
(iv) offer or provide its products to customers, distributors or others in any
special incentive pricing packages, including any bundled sales of the Products
with other medical or other products, except as may be necessary to meet
competitive pricing in the markets for the Product being sold as part of the
Business and only then after receiving proof of approval from Buyer; (v) offer
discounted pricing or free products in connection with any effort to sell other
Imagyn products; (vi) cancel, terminate, rescind or allow to lapse any insurance
policy relating to the Business, unless it is simultaneously replaced with a
policy with equal or more coverage for the same or less premium; (vii) ship or
deliver any products to customers or distributors any sooner or in amounts that
are greater than would be the case in the ordinary course. Imagyn agrees that it
will make all commercially reasonable efforts to maintain the Business at its
current levels up to and through Closing, and that there will be no Material
Adverse Change in the Business prior to and up to the Closing.
7.02 Unassignable Contracts.
----------------------
Notwithstanding anything to the contrary stated in this Agreement, if
any Contract cannot be assigned to or assumed by the Buyer without the approval,
consent or waiver of another party thereto, and such approval, consent or waiver
has not been obtained at or
23
prior to the Closing, then (i) such Contract shall not be assigned to
or assumed by the Buyer at the Closing, (ii) Imagyn and the Buyer shall, if such
approval, consent or waiver is obtained following the Closing, promptly
thereafter execute all documents necessary to complete the assignment and
assumption of such Contract (at Buyer's expense), and (iii) unless and until
such approval, consent or waiver is obtained and such assignment and assumption
occurs, Imagyn shall hold the benefits and privileges of such Contract arising
after the Closing Date in trust for the Buyer and the Buyer will indemnify and
hold harmless Imagyn against and with respect to all obligations of Imagyn
payable or performable after the Closing Date under such Contract. Each of
Imagyn and the Buyer agrees to use reasonable efforts to promptly obtain all
approvals, consents and waivers from third parties to the Contracts which are
necessary to permit the Contracts to be assigned to and assumed by the Buyer,
provided that neither Imagyn nor the Buyer shall be obligated to make any
payment or offer or grant any accommodation (financial or otherwise) in exchange
for any such approval, consent or waiver.
7.03 Removal of Imagyn Trade Names.
-----------------------------
Within a reasonable period of time but no later than one (1) year after
the end of the Transfer Period, the Buyer shall remove all trade names and
trademarks of Imagyn not included in the Purchased Assets from all assets
transferred to the Buyer hereunder; provided, however, that it is understood and
agreed the Buyer need not remove the Imagyn mark from Inventory transferred as
part of this Agreement.
7.04 Record Retention.
-----------------
The Buyer shall retain all business files and documents included in the
Purchased Assets for a period of five (5) years after the Closing Date, and the
Buyer shall make available to Imagyn any such records for inspection and
copying, upon reasonable notice from Imagyn.
7.05 [Intentionally Blank]
7.06 Further Assurances.
------------------
For a period of five (5) years following the Closing Date, Imagyn shall
promptly execute, acknowledge and deliver any further assignments, conveyances
and other instruments of transfer reasonably requested by Buyer and necessary to
effectuate the
24
transfer of title to the Purchased Assets to Buyer and, at Buyer's
expense, will take any other action consistent with the terms of this Agreement
that may be reasonably be requested by Buyer for the purpose of assigning,
transferring, granting, and confirming ownership in or to buyer, or reducing to
Buyer's possession, any or all of the Purchased Assets.
7.07 Product Liability Claims.
------------------------
Imagyn will assist Buyer with the defense of any and all future product
liability actions, and will make reasonably available any retained employees to
assist in the defense of any such actions, with Buyer being responsible only for
out-of-pocket travel expenses, if any, incurred by such Imagyn employees
therewith.
7.08 Imagyn's Non-Competition Agreement.
----------------------------------
For a period of five (5) years following the Closing Date, neither
Seller, nor any of the Affiliates of the Seller shall sell directly or
indirectly anywhere within the United States or U.S. territory and any foreign
country any products that compete with any of the Imagyn Products being sold in
this Agreement. If at the time of enforcement of this Section, the court shall
hold that the duration, scope or area restrictions stated herein are
unreasonable under circumstances then existing, the parties agree that the
maximum duration, scope or area reasonable under such circumstances shall be
substituted for the stated duration, scope or area, but in no event in excess of
the stated duration, scope or area. In an action in law or in equity for breach
or enforcement of this Section brought in any court having competent
jurisdiction over the parties to such an action, the prevailing party shall be
entitled to recover from the other party or parties its reasonable attorneys
fees, costs and expenses associated with prosecuting or defending such an action
to its final disposition (including final dispositions by summary adjudication,
judge or jury verdict or final appeal).
7.09 Delivery of Inventory.
---------------------
Imagyn agrees to deliver to Buyer upon Closing, Inventory of Imagyn
Products in an amount equal to or greater than the amounts referred to in
Section 2.01(b)as provided in the April 30, 2001 Condensed Balance Sheet as
adjusted to reflect assets not being purchased, attached hereto as Schedule
5.01(j) which Imagyn represents and warrants to
25
be a true and accurate statement of finished goods inventory relating
to the Imagyn Products as of that date compiled in accordance with GAAP.
7.10 Misdirected Payments.
--------------------
The parties anticipate that certain third parties, including customers
and vendors, may misdirect payments or goods to Seller rather than to Buyer.
Seller agrees to notify and to forward to Buyer promptly any such misdirected
payments or goods. Likewise, Buyer agrees to forward to Seller any payments
misdirected to Buyer.
7.11 Vendor Assignments or Assistance.
--------------------------------
Seller shall assist Buyer in transferring or assigning, or entering
into supply agreements with vendors or with Imagyn or its affiliates, as Buyer
may reasonably require.
7.12 Agreement Not To Solicit Offers.
-------------------------------
Imagyn agrees that it will not solicit any offers from other companies
for the Business, and further agrees that it shall not enter into or conduct any
discussions with any other prospective purchaser of the Business, and that it
will deal exclusively with Buyer for the purchase of the Business, for so long
as this Agreement remains in effect.
7.13 Transition Assistance.
---------------------
Imagyn will provide CONMED with reasonable assistance, at Buyer's cost,
with the manufacture of the Imagyn Products, and the relocation of manufacturing
to Buyer's facilities, for up to nine (9) months following the Closing,
including making available to CONMED the Key Employees, to the extent still
employed by Imagyn, with Buyer responsible for reasonable travel expense and any
applicable overtime pay (only) for such Imagyn employees. Imagyn shall provide
transition assistance, including such assistance as is set forth on Schedule
7.13, during the Transition Period or as CONMED may reasonably request. In
addition, and without limiting the foregoing, Imagyn shall permit CONMED, or
cause CONMED to be permitted, to use Imagyn's CE mark for the Imagyn Products
pending CONMED's receipt of permission to apply the CE mark to the Imagyn
Products as manufactured by CONMED, and shall permit CONMED, or cause CONMED to
be permitted, to contract with Imagyn's third party sterilizer on terms at least
as favorable as those provided to Imagyn until CONMED shall have validated its
own sterilization process. Moreover, Imagyn shall provide assistance by
providing access to buildings on
26
weekends if requested by Buyer, and shall be responsible to the extent
required, for moving its own equipment or scheduling production so as to permit
Buyer to remove the Purchased Assets upon Buyer's request, provided that Buyer
shall have provided reasonable notice, it being understood that Imagyn shall not
be required to maintain the Michigan building for more than two weeks following
the termination of the Supply Agreement for warehousing or other purposes for
Buyer.
7.14 Customer Notification Letter.
-----------------------------
Promptly following the Closing, Imagyn and/or CONMED shall send a
letter to customers of the Business informing customers that Buyer has purchased
the Business of Seller. Said letter shall be substantially in the form of the
letters attached hereto at Schedule 7.14.
7.15 Post-Closing Customer Referrals.
-------------------------------
The parties anticipate that after the Closing, customers may
communicate with Seller seeking to purchase products of the Business. For a
period of twenty-four (24) months following the Closing Date, Seller shall use
reasonable efforts to notify those customers that said products are available
from Buyer.
7.16 Due Diligence and Other Cooperation.
-----------------------------------
Imagyn shall cooperate with, and respond fully to, CONMED's reasonable
due diligence requests from the date of the execution of this Agreement through
Closing, and will also cooperate with other requests for reasonable assistance
with the transfer during the period between the execution of this Agreement and
Closing by, among other things, assisting with training for marketing and sales
personnel, with CONMED being responsible for reasonable travel expense, if any,
incurred by personnel of Imagyn who may conduct such training.
Article 8
EMPLOYEES
---------
8.01 Employment Offers.
-----------------
(A) Buyer shall be under no obligation to offer employment to any of
Imagyn's manufacturing or Michigan employees, although Buyer shall have the
option to offer
27
employment to those employees whom Buyer shall identify within twenty
(20) days of the execution of this Agreement, in Schedule 8.01(a). In addition,
Buyer agrees to offer employment or to cause an affiliated entity to offer, as
of the Closing Date, to those persons employed by Imagyn in connection with the
Business purchased and whose names are listed on Schedule 8.01(b) (such persons
listed on Schedule 8.01(b) to be referred to hereinafter as the "Business
Employees"). Imagyn agrees to exercise reasonable efforts to encourage all
Business Employees who are offered employment by Buyer, or Buyer's affiliate, to
accept such offers of employment. Those Business Employees who accept employment
with Buyer or Buyer's affiliate, pursuant to this Agreement shall be referred to
as "Transferred Employees". Business Employees of Imagyn who are on long-term
disability as of the Closing Date will remain employees of Imagyn. Should any
Transferred Employee who is absent from work on the Closing Date due to a
short-term disability remain absent long enough to qualify for benefits under
the long-term disability plan of Buyer or Buyer's affiliate, Imagyn shall
reimburse Buyer for its cost of providing benefit coverages to such Transferred
Employee for as long as such Employee continues to receive long-term disability
benefits under the long-term disability plan of Buyer or Buyer's affiliate
(B) Imagyn shall remain responsible for the employment of all Imagyn
employees who are employed by Imagyn at its Richland, Michigan facility, subject
to Buyer's indemnification obligation in Section 10.03 (c).
8.02 Benefits.
--------
From and after the Closing Date, Buyer, or an affiliate of Buyer, will
provide coverage and benefits to the Transferred Employees under the pension and
welfare benefit plans covering its employees, and Imagyn shall have no
responsibility therefor on and after such date (except for payment of any
amounts incurred or accrued but not yet due, such as workmen's compensation and
other employment-related claims to the extent related to pre-Closing matters, or
commission except to the extent that accrued commissions are paid as part of
Article 2 to Buyer,). Except as provided in Section 8.04, Imagyn shall remain
responsible to the Transferred Employees for all benefits accrued pursuant to
Imagyn compensation and benefit plans prior to the Closing Date and commissions,
expenses and bonuses payable under the provisions of such plans (except to the
extent
28
transferred to Buyer under Article 2), and Buyer assumes no liability
or obligation to provide coverage for any pre-Closing benefits or liabilities.
8.03 Group Health Plans.
------------------
Buyer will cause the group health benefit plans for the Transferred
Employee, to (i) waive any exclusions for pre-existing conditions affecting
Transferred Employees and their eligible family members, and (ii) recognize any
out-of-pocket medical and dental expenses incurred by Transferred Employees and
their eligible family members during 2001, but prior to the Closing Date, for
purposes of determining their deductibles and out-of-pocket maximums under the
plans of Buyer or its affiliate.
8.04 Vacation Benefits.
-----------------
From and after the Closing Date, the Transferred Employees will be
covered by and begin accruing benefits under the vacation plan of Buyer or its
affiliate. Buyer's vacation plan shall recognize all of the Transferred
Employees' years of service with Imagyn for the purpose of determining their
future vacation benefits. On or immediately following the Closing Date, Imagyn
will (i) pay in cash to the Buyer, the amount of their accrued and unused
vacation benefits under Imagyn's vacation plan through the Closing Date, and
(ii) provide Buyer with a list of Transferred Employees and the days of unused
vacation benefits for which Buyer shall receive payment from Imagyn. During the
remainder of 2001, Buyer, or it affiliate, will cause its vacation plan to
permit the Transferred Employees to take paid absences equal in time to the
number of days of unused vacation benefits for which Buyer shall have received
payment from Imagyn.
8.05 Service Credit.
--------------
Buyer shall cause the pension and welfare benefit plans to be provided
for the Transferred Employees to recognize all of the service that the
Transferred Employees completed with Imagyn for purposes of determining their
eligibility to participate in, eligibility for benefits under, and vesting in
accrued benefits. Accrual of benefits under such plans shall commence on the
date of Closing.
8.06 Non-Solicitation.
----------------
Imagyn agrees not to seek to hire, or to hire, any Transferred
Employee, except as may be permitted with Buyer's prior written consent or in
the event Buyer terminates the
29
employment of such Transferred Employee, for a period of two (2) years following
the Closing Date.
Article 9
Closing
-------
9.01 Closing Date.
------------
The closing of the purchase and sale of the Business and the Purchased
Assets and the assumption of the Assumed Liabilities pursuant to this Agreement
(the "Closing") shall take place on July 2,2001, at the offices of Sullivan &
Cromwell in New York City, at 10:00 a.m., or, if the conditions to Closing set
forth in Article VI shall not have been satisfied or waived by the appropriate
party by such time of day on such date, at the same time of day on the first
business day to occur following the date on which all of the conditions to
Closing set forth in Article VI shall have been satisfied or waived as provided
therein (subject to the provisions of Section 11.01), or at such other date,
place or time as the Buyer and Imagyn may agree upon in writing. The date on
which the Closing shall be required to occur, as determined in accordance with
this Section 9.01, is herein referred to as the "Closing Date". The Closing
shall be deemed to have become effective as of the start of business on the
Closing Date.
9.02 Closing Deliveries.
------------------
(a) Imagyn agrees to deliver to the Buyer at the Closing such bills of
sale, assignments and other instruments of transfer (excluding transfer of
Intellectual Property or IP Agreements), in form and substance reasonably
satisfactory to the Buyer, as shall be necessary or appropriate to effect the
conveyance to the Buyer of the Purchased Assets, duly executed by Imagyn, as
well as a certificates of good standing and certified corporate resolutions.
(b) The Buyer agrees to pay or deliver, as the case may be, to Imagyn
at the Closing the following:
(i) the Purchase Price and appropriate stock certificate paid in the
manner provided in Section 3.01;
(ii) Certificate of Good Standing; and
(iii) Certified Corporate Resolutions.
30
(c) The certificates, instruments and documents executed and delivered
by the parties at the Closing pursuant to this Agreement are herein collectively
referred to as the "Transaction Documents".
9.03 Post-Closing Deliveries.
-----------------------
Each of the Buyer and Imagyn will, at the request and sole cost and
expense of the other such party, do, make, execute, acknowledge and deliver
after the Closing all such other and further acts and instruments of conveyance,
assignment, transfer, consent and assumption as the Buyer may reasonably require
to confirm conveyance and transfer to the Buyer of any of the Purchased Assets
or as Imagyn may reasonably required to confirm assumption by the Buyer of any
of the Assumed Liabilities. Nothing contained herein shall be construed to
require Imagyn to acquire any intellectual property license from any third
party.
Article 10
Indemnity
---------
10.01 Survival.
--------
The representations and warranties of the Buyer and Imagyn herein or in
any of the Transaction Documents shall survive the Closing, but, as to any
claim, only for so long as the indemnification obligations under this Agreement
with respect to such claim remain in force as provided in Sections 10.02 and
10.03, as the case may be.
10.02 Indemnity by Imagyn.
-------------------
(a) Imagyn hereby agrees to indemnify and hold harmless the Buyer
against and with respect to any and all claims, losses, injuries, damages,
deficiencies, liabilities, obligations, assessments, judgments, costs and
expenses, including (except as otherwise expressly provided in this Agreement)
costs and expenses of litigation and reasonable attorneys' fees ("Losses"),
suffered or incurred by the Buyer to the extent caused proximately by:
(i) any material breach of any representation or warranty of Imagyn
contained in this Agreement;
(ii) any material non-fulfillment of any covenant or agreement of
Imagyn contained in this Agreement;
31
(iii) any failure by Imagyn to pay taxes when due only to the extent
that any such unpaid taxes may serve as the basis for a lien upon any
of the Purchased Assets;
(iv) (a) any product liability claim for death, personal injury, other
injury to persons, property damage, loss or deprivation of rights, or
other product liability claim (whether based on statute, negligence,
breach of warranty, strict liability or any other theory) caused by or
resulting from Imagyn Products sold by Imagyn prior to the Closing and
(b) any recall of Imagyn Products sold by Imagyn prior to the Closing.
(v) Any claim by United States Surgical Corporation, or its successors
or assigns, that the U.S. Surgical Settlement was not assigned to Buyer
or that the Imagyn Products infringe the patents referred to in Section
1.14. Imagyn's indemnification obligation hereunder will also include,
at CONMED's option, the obligation for Imagyn to defend Buyer and to
seek to intervene in any suit involving claims by U.S. Surgical or its
successors or assigns, to assert that the U.S. Surgical Settlement was
assigned to Buyer as to the Imagyn Products, except to the extent that
any such claim arises in a counterclaim in a suit brought by CONMED.
(vi) Any claim by any employee, agent or other person that such
employee, agent or other person is entitled to be employed by CONMED
following the Closing as a result of foreign employment laws or
regulations, including, without limitation, the Transfer of
Undertakings (Protection of Employment) Regulations 1981, as amended.
(b) The obligations of Imagyn under this Agreement to indemnify the
Buyer with respect to any claim pursuant to clause (i) of Section 10.02(a) shall
be of no force unless the Buyer has given Imagyn written notice of such claim
prior to the eighteen (18) months after the Closing Date, except for certain
claims listed in Section 10.02(d).
(c) Notwithstanding anything to the contrary provided elsewhere in this
Agreement, in no event shall Imagyn be liable to the Buyer for amounts payable
under clause (i) of Section 10.02(a) unless and to the extent that until such
amounts exceed in the aggregate $150,000.
32
(d) Notwithstanding any language in this Agreement to the contrary,
Imagyn shall have certain continuing obligations that will continue beyond the
eighteen (18) month period including without limitation with respect to the
representation that the Business is not in any violation of any law or
regulation, as set forth in Section 5.01(j). This continuing duty shall include
the obligation on the part of Imagyn to indemnify Buyer for all of Buyer's costs
included with any recall of the Products that Buyer may be required, or
requested to make, or that Buyer may deem appropriate because of the risk of
non-marketability of the Products under the Food and Drug Act or other
applicable laws.
(e) Imagyn agrees on its own behalf, and on behalf of any successor,
assign, or trustee appointed in respect of Imagyn, to indemnify and hold Buyer
harmless from any claims that this transaction should be rescinded or otherwise
the subject of any claim relating to the validity or finality of this Agreement.
(f) In no event shall Imagyn's liabilities to Buyer under Section 10.02 exceed
the Purchase Price, which shall be calculated for these purposes as if the Stock
were valued as being equal to the closing price of Conmed stock on NASDAQ on the
execution date of this Agreement.
10.03 Indemnity by the Buyer.
----------------------
(a) The Buyer hereby agrees to indemnify and hold harmless Imagyn
against and with respect to any and all Losses suffered or incurred by Imagyn to
the extent caused proximately by:
(i) any material breach of any representation or warranty of the Buyer
contained in this Agreement or in any of the Transaction Documents.
(ii) any material non-fulfillment of any covenant or agreement of the
Buyer contained in this Agreement or in any of the Transaction
Documents.
(iii) any claims which are brought against Imagyn as a result of the
retention by the Buyer after the Closing of any assets transferred to
the Buyer hereunder or Buyer's use of any trade names or trademarks of
Imagyn not included in the Purchased Assets after the Closing as
provided for in Section 2.04.
(iv) fifty percent (50%) of the severance costs incurred by Seller in
connection with the termination of the Imagyn employees within the
33
Business pursuant to the previously disclosed severance policy of
Imagyn, which is listed on Schedule 10.03.
(b) Notwithstanding anything to the contrary provided elsewhere in this
Agreement the obligation of Buyer under this Agreement to indemnify Seller with
respect to any claim pursuant to Section 10.03(a) shall be of no force unless
Seller has given Buyer written notice of such claim within eighteen (18) months
after the Closing Date.
(c) Notwithstanding anything to the contrary provided elsewhere in this
Agreement, in no event shall Buyer be liable for amounts payable under the first
clause of Section 10.03(a) until such amounts exceed $150,000.
10.04 Third Party Claims.
------------------
In order for a party (the "indemnified party") to be entitled to any
indemnification provided for under this Agreement in respect of, arising out of
or involving a claim or demand made by any third party against the indemnified
party (a "Third Party Claim"), such indemnified party shall notify the other
party (the "indemnifying party") in writing of the Third Party Claim, and
deliver to the indemnifying party copies of all notices and documents
accompanying or constituting the Third Party Claim, within ten business days
after obtaining notice thereof; provided, however, that failure to give such
notification shall not affect the indemnification provided hereunder, except to
the extent the indemnifying party shall have been actually prejudiced as a
result of such failure and except that the indemnifying party shall have been
actually prejudiced as a result of such failure and except that the indemnifying
party shall not be liable for any expenses incurred during the period in which
the indemnified party failed to give such notice. Thereafter, the indemnified
party shall deliver to the indemnifying party, within five business days after
the indemnified party's receipt thereof, copies of all notices and documents
(including court papers) received by the indemnified party relating to the Third
Party Claim; provided, however that failure to deliver such copies shall not
affect the indemnification provided hereunder except to the extent the
indemnifying party shall have been actually prejudiced as a result of such
failure. If a Third Party Claim is made against an indemnified party, the
indemnifying party will be entitled to participate in the defense thereof and,
if it so chooses, to assume the defense thereof with counsel selected by the
indemnifying party and reasonably satisfactory to the indemnified party. Should
the indemnifying party so elect to assume the defense of a Third Party Claim,
which election must be made within 30 days after the
34
indemnifying party receives notice of the Third Party Claim from the
indemnified party, the indemnifying party will not be liable to the indemnified
party for legal expenses incurred by the indemnified party in connection with
the defense thereof. If the indemnifying party assumes such defense, the
indemnified party shall have the right, but not the obligation, to participate
in the defense thereof and to employ counsel, at its own expense, separate from
the counsel employed by the indemnifying party, it being understood that the
indemnifying party shall control such defense. If the indemnifying party has not
assumed the defense of a Third Party Claim, the indemnifying party shall be
liable for the fees and expenses of counsel employed by the indemnified party.
If the indemnifying party chooses to defend or prosecute any Third Party Claim,
the indemnified party shall cooperate in the defense or prosecution thereof with
reimbursement by the indemnifying party only of reasonable out-of-pocket
expenses of the indemnified party incurred in connection therewith. Such
cooperation shall include the retention and (upon the indemnifying party's
request) the provision to the indemnifying party of records and information
which are reasonably relevant to such Third Party Claim, and making employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. Whether or not the indemnifying
party shall have assumed the defense of a Third Party Claim, the indemnified
party shall not admit any liability with respect to, or settle, compromise or
discharge, such Third Party Claim without the indemnifying party's prior written
consent, which consent shall not be unreasonably withheld.
Article 11
Miscellaneous
-------------
11.01 Termination.
-----------
This Agreement may be terminated and the transactions contemplated
hereby abandoned prior to the Closing:
(a) by the Buyer giving written notice to Imagyn, if Imagyn shall be in
breach in any material respect of any representation, warranty or covenant
contained in this Agreement (provided that no such termination shall occur
unless the Buyer shall have given notice to Imagyn of such breach, specifying in
reasonable detail the nature of such breach, and such breach shall not have been
cured in all material respects within 30 days after such notice is given), or if
the conditions set forth in Section 6.01 shall become
35
impossible to fulfill other than for reasons totally within the control
the Buyer and shall not have been waived in writing by the Buyer;
(b) by Imagyn giving written notice to the Buyer, if the Buyer shall be
in breach in any material respect of any representation, warranty or covenant
contained in this Agreement (provided that no such termination shall occur
unless Imagyn shall have given notice to the Buyer of such breach, specifying in
reasonable detail the nature of such breach, and such breach shall not have been
cured in all material respects within 30 days after such notice is given);
(c) by mutual agreement of Imagyn and the Buyer;
(d) by Imagyn or the Buyer giving written notice to the other such
party, if the purchase and sale of the Purchased Assets and the assumption of
the Assumed Liabilities contemplated hereby shall not have been consummated by
July 30, 2001, unless such failure shall be due to the failure of the party
seeking to terminate this Agreement to perform or observe any covenants
contained in this Agreement required to be performed or observed by such party
at or before the Closing; and
(e) by the Buyer, if there is any Material Adverse Effect on the
Business. 11.02 Effects of Termination.
If this Agreement is terminated pursuant to any of the provisions
hereof, each of the parties hereto shall thereupon be released from all
liabilities hereunder, except (i) liabilities for any default under this
Agreement which shall have occurred prior to the effective date of such
termination, (ii) all confidentiality obligations pursuant to the Agreement
dated March 15, 2001, and (iii) obligations set forth in Sections 11.03 and
11.13.
11.03 [ Intentionally Blank ]
11.04 Dispute Resolution.
------------------
(a) Any disagreement or dispute between the parties arising out of or
related to this Agreement or the breach or making hereof (a "Dispute") shall be
resolved in the manner provided in this Section 11.04. Should there develop any
Dispute, either party may, by written notice to the other party, request that
such Dispute be referred to the General Counsel of Imagyn and the General
Counsel of the Buyer (the "Principals"), who shall negotiate in good faith to
attempt to resolve the Dispute. No settlement reached
36
under this Section 11.02(a) shall be binding on the parties until reduced to a
writing signed on behalf of the parties by the Principals.
(b) Should the procedure outlined in Section 11.04(a) fail to bring
about a resolution of each outstanding Dispute within 30 days following the
giving of the notice referred to therein, then the parties shall promptly
initiate a voluntary, non-binding mediation conducted by a mutually-agreed
mediator. Should the parties for any reason be unable to agree upon a mediator,
they shall request the American Arbitration Association ("AAA") to appoint a
capable mediator for them. The Buyer and Imagyn shall each bear one-half of the
costs and expenses of the mediation and shall endeavor in good faith to resolve
therein each outstanding Dispute. No settlement reached under this Section
11.04(b) shall be binding on the parties until reduced to a writing signed on
behalf of the parties by the Principals.
(c) Notwithstanding anything to the contrary provided in this Section
11.04, and without prejudice to the above procedures, either party may at any
time, in connection with any Dispute, apply to a for temporary injunctive or
other provisional judicial relief if in such party's sole judgment such action
is necessary to avoid irreparable damage or to preserve the status quo until
such time as the Dispute is otherwise resolved in accordance with this Section
11.04.
11.05 Expenses.
--------
Except as otherwise expressly provided herein, each party hereto shall
pay its own legal, accounting and other expenses incident to the preparation of,
and consummation of the transactions contemplated by, this Agreement
11.06 Titles.
------
The titles of the Articles and Sections of this Agreement are for
convenience of reference only and are not to be considered in construing this
Agreement.
11.07 Entire Agreement.
----------------
This Agreement constitutes the entire understanding between the parties
with respect to the subject matter hereof, superseding all negotiations, prior
discussions and preliminary agreements.
37
11.08 Counterparts.
------------
This Agreement may be executed in any number of counterparts, each of
which shall be considered an original and all of which shall constitute one and
the same instrument.
11.09 Waivers, Consents and Amendments.
--------------------------------
Any failure of either of the parties to comply with any obligation,
covenant, agreement or condition herein may be waived by the other party only by
a written instrument signed by such other party, but such waiver or failure to
insist upon strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure. Whenever this Agreement requires or permits consent
by or on behalf of either party hereto, such consent shall be given in writing
in a manner consistent with the requirements for a waiver of compliance as set
forth herein. This Agreement may be amended only by an agreement, in writing,
signed by the parties hereto.
11.10 Governing Law.
-------------
This Agreement shall be governed in all respects by, and construed
under, the internal laws of the State of New York, without regard to any
conflicts of laws principles
11.11 Waiver of Jury Trial.
---------------------
Each of Imagyn and the Buyer acknowledges that the time and expense
required for trial by jury exceed the time and expense required for a bench
trial and hereby waive, to the extent permitted by law, trial by jury.
11.12 Resolution of Inventory Counting and Valuation Disputes.
-------------------------------------------------------
Any disputes regarding the counting of the Inventory will be resolved
in good faith by the Buyer and Seller during such count or immediately following
the completion of such count or following such adjustments as the case may be.
Any dispute relating to the Inventory Balance or Purchase Price Adjustment not
resolved by Buyer and Seller and their respective accountants within sixty (60)
days after the Closing shall, upon written request by either Buyer or Seller, be
referred to a nationally recognized accounting firm which shall be selected by
and from a list of such firms which neither Buyer or Seller have had any
business dealings during the three (3) year period preceding selection, or such
other independent public accounting firms selected jointly by Buyer and Seller,
for final
38
resolution. Each party shall, within twenty (20) business days after submission
of such dispute, deliver to such firm the information such party wishes to have
considered by such firm in making its determination. Such firm shall present its
determination and resolution of any such disputes within thirty (30) business
days after the submission of such dispute to the firm. Buyer and Seller agree
that the resolution reached by such firm shall be binding and conclusive between
the parties. The fees of the accounting firm selected to resolve any such
dispute shall be borne one-half by Seller and one-half by Buyer.
11.13 Special Damages.
---------------
Buyer and Imagyn have each agreed to waive any right to receive
punitive, consequential, special or indirect damages relating in any way to this
Agreement or the purchase/sale of the Business and/or the Purchased Assets,
irrespective of the legal theory asserted.
11.14 Severability of this Agreement.
------------------------------
In case any provision of this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
11.15 Assignment.
----------
This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of the parties hereto, provided that this Agreement may
not be assigned by either party without the prior written consent of the other
party. Except as expressly provided herein, this Agreement is for the sole
benefit of the parties hereto and nothing herein shall give or be construed to
give to any person other than the parties any legal or equitable rights under
this Agreement.
11.16 Notices.
-------
All notices, requests, demands and other communications hereunder shall
be in writing and shall be deemed to have been duly given upon delivery in
person, or one day after the same shall have been sent by overnight messenger
service, or three days after the same shall have been mailed by registered or
certified mail, postage prepaid, return receipt requested, to the respective
parties at the following addresses:
39
If to the Buyer: CONMED Corporation
310 Broad St.
Utica, New York 13501
Attention: President
with copies to: CONMED Corporation
310 Broad Street
Utica, New York 13501
Attention: General Counsel
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: Robert W. Downes, Esq.
If to Imagyn: Imagyn Medical Technologies, Inc.
1 Park Plaza
Suite 1100
Irvine, California 92614-5925
Attention: President
and copy to: Imagyn Medical Technologies, Inc.
1 Park Plaza
Suite 1100
Irvine, California 92614-5925
Attention: General Counsel
Morrison & Foerster
19900 MacArthur Boulevard
12th Floor
Irvine, CA 92612
Attention: Tamara P. Tate, Esq.
11.17 Public Announcements.
--------------------
No press releases or public announcements regarding the terms of this
Agreement shall be made by either party without the prior written approval of
the other party (which approval shall not be unreasonably withheld), except as
may be necessary, in the opinion of counsel for such party, to meet the
requirements of any law or governmental regulation or any applicable exchange
regulation (in which event the other party will be notified before, if practical
under the circumstances, and after any action is taken thereon), or as may be
necessary or appropriate in connection with a party's communications with its
independent auditors and lenders.
40
11.18 Tax Treatment.
-------------
It is expressly understood and agreed that none of Imagyn, the Buyer or
any of their respective officers or agents have made any warranty or agreement,
express or implied, as to the tax consequences of the transactions contemplated
hereby.
11.19 Specific Performance.
--------------------
Each of the parties hereto acknowledges and agrees that the other party
would be damaged irreparably in the event any of the covenants contained in this
Agreement are not performed in accordance with their specific terms or otherwise
are breached. Accordingly, each of the parties hereto agrees that the other
party shall be entitled to an injunction or injunctions to prevent breaches of
the covenants contained in this Agreement and to enforce specifically this
Agreement and the covenants contained herein in any action properly instituted,
in addition to any other remedy to which such other party may be entitled under
this Agreement or at law or in equity.
11.20 Disclosures.
-----------
(a) Matters disclosed by Imagyn to the Buyer in this Agreement or the
Schedules hereto are not necessarily limited to matters required to be disclosed
by this Agreement. Any such additional matters are set forth for informational
purposes and do not necessarily include other matters of a similar nature.
Matters disclosed by Imagyn to the Buyer in any provision of this Agreement or
any Exhibit hereto shall be deemed to be disclosed with respect to each
provision of this Agreement to the extent such provision requires such
disclosure.
(b) From time to time prior to the Closing, Imagyn will promptly
supplement or amend the Schedules hereto with respect to any matter hereafter
arising which would make any representation or warranty inaccurate if updated as
of the Closing, or as is otherwise necessary to correct any information in such
Exhibits or Schedules or in any representation or warranty of Imagyn. For
purposes of determining the satisfaction of the condition set forth in Section
6.01(a) at or prior to the Closing and the accuracy of the representations and
warranties contained in Section 5.01 if the Closing does not occur, the Exhibits
hereto shall be deemed not to include any information contained in any
subsequent supplement or amendment thereto. In addition, for purposes of
determining whether the
41
condition of 6.01(h) has been triggered, the Exhibits hereto shall be deemed not
to include information contained in any subsequent supplement or amendment
thereto.
11.21 Interpretation.
---------------
In this Agreement:
(a) words denoting the singular include the plural and vice versa and
words denoting any gender include all genders;
(b) the word "including" shall mean "including without limitation";
(c) the word "Affiliate" shall have the meaning set forth in Rule 12b-2
of the General Rules and Regulations under the Securities Exchange Act of 1934,
as amended;
(d) the word "person" shall mean and include an individual, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization and a government or any department or agency thereof;
(e) the word "business day" shall mean any day other than a Saturday,
Sunday or a day which is a statutory holiday under the laws of the United States
or the State of New York;
(f) when calculating the period of time within which or following which
any act is to be done or step taken, the date which is the reference day in
calculating such period shall be excluded and, if the last day of such period is
not a business day, the period shall end on the next day which is a business
day; and
(g) all dollar amounts are expressed in United States funds.
42
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed of the day and year first above written.
ATTEST: IMAGYN MEDICAL, INC.
__________________ By: ___________________________________
Its: ___________________________________
ATTEST: IMAGYN MEDICAL TECHNOLOGIES, INC.
___________________ By:
--------------------------------------
Its:
---------------------------------------
ATTEST: IMAGYN MEDICAL TECHNOLOGIES CALIFORNIA, INC.
___________________ By:
----------------------------------------
Its:
---------------------------------------
ATTEST: MICROSURGE, INC.
____________________ By: ___________________________________
Its: ___________________________________
ATTEST: DACOMED CORPORATION
_____________________ By ___________________________________
Its: ___________________________________
43
ATTEST: CONMED CORPORATION
___________________ By:
-------------------------------------------------
Its:
---------------------------------------
44
Schedules and Exhibits
- --------------------------------------------------------------------------------
1.03 Imagyn Products
1.05 Intellectual Property Patents Trademarks
1.06 Intellectual Property Agreements
2.01(a)(i) Included Assets
2.01(a)(ii) Excluded Assets
2.01(g) Non-Assignable Contracts
2.01(h) Non-Transferred Trademarks
3.02 Purchase Price Allocation
Registration Rights Agreement
4.01(a) Assumed Liabilities
5.01(c) Clouded Title
5.01(d) Contracts Involving More Than $10,000 A Year
5.01(j) Financials
5.01(r) Contracts and Commitments
5.01(s) Litigation
5.01(t) 25 Largest Customers and Suppliers; Scheduled
Shipments
6.01(c) Registration Rights Agreement
6.01(d) Supply Agreement
6.01(e)(l) Bill of Sale
7.13 Transition Assistance
45
7.14 Customer Notification Letters
8.01(a) Post-Closing Selected Employees
8.01(b) Business Employees
10.03 Imagyn Severance Costs
46
Schedule 1.03
Imagyn Products: Laparoscopic Devices
Product Order No.
- ------- ---------
DetachaPort Cannula 1-7001
1-7002
1-7003
1-7005
1-7006
Threaded Cannula 1-7007
1-7008
1-7009
1-7011
1-7012
DetachaPort Seal 1-7013
1-7044
DetachaPort UCSII (Universal Converter) 1-7045
DetachaPort Obturator & Seal Sets 1-7016
1-7017
1-7018
1-7019
1-7020
1-7021
1-7024
1-7025
1-7026
1-7028
DetachaPort Open Entry Obturator 1-7055
1-7056
DetachaPort Open Entry Trocar Wedge 1-7057
1-7052
PortSaver Ghost Stick 1-7042
PermaClip Endoscopic Clip Applier 1-1082
PermaClip Cartridge 1-1081
47
DetachaTip Scissors 1-1003
1-1004
1-1013
8-1001
1-4301
DetachaTip Scissors(w/Tip Tracker) 1-1021
1-1022
1-4306
DetachaTip Grasper 1-1008
1-1019
1-1028
1-4307
1-1014
DetachaTip Dissector 1-1009
1-1018
1-4308
DetachaTip Handle 1-1010
1-1015
1-1024
DetachaTip/DetachaPort (Instrument Tray) 1-1027
Excel Insufflation Needle RPN120
RPN150
DPN120
DPN150
Expose Retractor MK0005
MC0005
KM0005
MK0010
MC0010
48
Accessories/Replacement Parts RS05
RS10
M0005A
MK0005B
MC0005B
KM0005B
M0010A
MK0010B
MC0010B
Director Thoracoscopic Clamp 8-1011
8-1012
8-1013
8-1014
Knot Pusher 1-7041
Articulator 35(Endoscopic Stapler) 4325
4335
TU4325
TU4335
Articulator 35 Cartridge 4025
4035
Open Clip Applier 3522
Expose Inflatable Retractor IT0010
IU0010
Puncture Closure Device PCD10
Excel Insufflation Needle 392
395
Exhale Lung Plication Clamp 8-1009
Extract Specimen Bag SB31110
SB51112
SB71112
Examine Cholangiography Catheter ECC01
PCC01
49
Bipolar Cable 5-1004
5-1005
Bipoligator (Bipolar Irrigating Grasper) 5-1002
MicroLap Gold Laparoscope ML-GOLD
VS-5000
VS-2280
VS-2350
VS-2240
MicroLap Access 3 Introducer MK-3500
MicroLap Access 3 Instruments MI-3120
MI-3140
MI-3300
IA-3000
MI-3000
MicroLap Access 2 Introducer LI-1500
MK-1500
VN-1500
VN-1510
MicroLap Access 2 Instruments MI-2100
MI-2120
MI-1800
MI-2200
MI-2300
MI-2400
MI-2000
IA-1000
MicroLap Bipolar Instruments BP-1000
BP-3000
BP-1500
BP-3500
MicroLap Monopolar Instruments MP-1010
MP-1020
MP-1030
MB-1000
MB-1001
50
Reposable Kits: 1-7040
Cholecystectomy 1-7101
LAVH/Lap Chole 1-7102
LAVH/Lap Appy 1-7103
Nissen 1-7104
LAVH 37041
LAVH 37040
Laparoscopic Appendectomy 8535
8035
Reflex One Skin Stapler
8735
8635
Refllex TL Skin Stapler(w/tissue lift)
3031
Reflex Extractor
All Imagyn Products included in Schedule 1 to Supply Agreement
All Imagyn Products included in the Inventory as valued on the Balance Sheet and
included in the Sales in Financials in Schedule 5.01(j)
51
Schedule 2.01(a)(ii)
Excluded Assets
52
Exhibit 10.2
AGREEMENT OF PURCHASE AND SALE
This Agreement ("Agreement") made this 5th day of February, 2001, by
and between LARGO LAKES I, II, and IV, INC., a Delaware corporation with a place
of business in c/o Harrod Properties, Inc., ("Largo, Inc."), HARROD PROPERTIES,
INC., a Florida corporation ("Harrod, Inc."), and GARY W. HARROD, an individual,
("Harrod"), all with places of business at 777 S. Harbour Island Blvd., Suite
877, Tampa, Florida 33602, (Largo, Inc., Harrod, Inc. and Harrod sometimes
referred to herein collectively as "Sellers"), and LINVATEC CORPORATION, a
Florida corporation with a place of business at 310 Broad Street, Utica, New
York 13501 ("Purchaser").
RECITALS
A. Largo, Inc. is the sole general partner of Largo Lakes - I Limited
Partnership, a Delaware limited partnership ("Lakes").
B. Harrod, Inc. is the sole general partner of GWH, Ltd., a Florida
limited partnership ("GWH").
C. Harrod is the sole limited partner of both Lakes and GWH. Lakes and
GWH sometimes being referred to herein as "The Partnerships".
D. Lakes is the owner of approximately 3.362 acres of land known as
Tract 4, Largo Lakes Park, as recorded in Plat Book 111, Pages 23-26 in the
public records of Pinellas County, Florida, said land being improved by a
building ("Building One"), together with certain easements, the land and
easements being more fully described on Exhibit "A-1" attached hereto ("Building
One Property").
E. Lakes is the owner of approximately 2.437 acres of land being a
portion of Tract 3, Largo Lakes Park, as recorded on Plat Book 111, Pages 23-26
of Pinellas County, Florida, said land being improved by a building ("Building
Two"), together with certain easements, the land and easements being more fully
described on Exhibit "A-2" attached hereto ("Building Two Property").
1
F. Lakes is the owner of approximately 8.466 acres of land known as
Tract 2, Largo Lakes, as recorded in Plat Book 111, Pages 23-26 of the public
records of Pinellas County, Florida, said land being improved by a building
("Building Four"), together with certain easements, the land and easements being
more fully described on Exhibit "A-3" attached hereto ("Building Four Property")
(the Building One Property, Building Two Property, and Building Four Property
are sometimes referred to herein collectively as the "Lake Property").
G. GWH is the owner of approximately 2.670 acres of land being a
portion of Tract 3, Largo Lakes Park, as recorded in Plat Book 111, Pages 23-26
of the public records of Pinellas County, Florida, said land being improved by a
building ("Building Three"), together with certain easements, the land and
easements being more fully described on Exhibit "A-4" attached hereto ("GWH
Property").
H. Harrod is the owner of a certain parking area as reflected on the
map attached hereto as Exhibit "B" ("Parking Area") (the Lakes Property and GWH
Property and Parking Area are sometimes herein collectively referred to as
"Property").
I. Purchaser wishes to purchase and Sellers are willing to sell all of
the right, title and interest in Lakes and GWH upon the terms and conditions set
forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and other good
and valuable consideration, the receipt of which is hereby acknowledged,
Sellers, jointly and severally, and Purchaser hereby agree as follows:
1. Sale and Purchase of Partnerships. On the Closing Date set forth in
paragraph 3, Sellers shall transfer and convey to Purchaser all of Sellers'
right, title and interest in the Partnerships free and clear of all liens,
claims or encumbrances of any sort.
2. Purchase Price and Allocation of Purchase Price.
-----------------------------------------------
(a) The consideration for the Sellers' transfer and conveyance to
Purchaser of all of Sellers' rights, title, and interest in and to the
Partnerships as set forth in paragraphs 1 and 2 of this Agreement, shall be as
follows ("Purchase Price"):
2
(i) a deposit ("Deposit") of Fifty Thousand Dollars
($50,000.00) in the form of a check in escrow with the Sellers' attorney,
Lowndes, Drosdick, Doster, Kantor & Reed, P.A. ("Escrow Agent") to be paid by
Purchaser to Escrow Agent upon the execution and delivery of this Agreement by
Sellers and Purchaser. The Deposit shall be credited toward the cash portion of
the Purchase Price to be paid by Buyer pursuant to subparagraph (ii) hereof. The
Deposit will be invested by Escrow Agent in a separate interest bearing account
and to be disbursed by Escrow Agent in accordance with the provisions of this
Agreement. Interest on the Deposit shall constitute part of the Deposit so that
whoever shall be entitled to receipt of the Deposit pursuant to this Agreement
shall be entitled to accrued interest thereon;
(ii) the sum of Five Hundred Forty Thousand Dollars
($540,000.00) (less the Deposit) shall be paid to Sellers by Purchaser in cash,
wire transfer or bank check at Closing, subject to credits, adjustments and
prorations as provided in Agreement;
(iii) the sum of Four Million Two Hundred Twenty
Eight Thousand Two Hundred Sixty Eight Dollars ($4,228,268.00) by Purchaser
executing and delivering to Sellers, or their designee, a promissory note
("Note"). The Note shall be paid by Purchaser with interest at the rate of six
percent (6%) per annum in one hundred forty-four (144) equal installments of
principal and interest in accordance with the amortization schedule attached
hereto as Exhibit "C" commencing thirty (30) days from the date the Note is
executed. Purchaser shall be entitled to prepay the Note in whole or in part
without penalty. The Note shall be secured by a security interest covering one
hundred percent (100%) of the interests in the Partnerships;
(iv) Purchaser's acceptance of Sellers' interest in
the Partnership subject to the indebtedness evidenced by a promissory note dated
June 28, 1996 in the original principal sum of Fifteen Million Four Hundred
Eighty-One Thousand Dollars ($15,481,000) in favor of MCM Finance Corporation
("MCM") and secured by an unrecorded mortgage of even
3
date and amount executed by Lakes in favor of MCM, which note and mortgage was
assigned and is currently held by the United States Trust Company of New York,
as Trustee ("Trustee"); and
(v) Purchaser's acceptance of Sellers' interest in
the Partnership subject to the indebtedness evidenced by a promissory note dated
June 28, 1996 in the original amount of Four Million One Hundred Two Thousand
Two Hundred Sixty-Two Dollars ($4,102,262) secured by a mortgage executed by
Lakes to MCM Finance Corporation, a Delaware corporation, recorded July 3, 1996
in Official Record Book 9392 Page 1541 of the Public Records of Pinellas County,
Florida, given to secure the original principal sum of Four Million One Hundred
Two Thousand Two Hundred Sixty-Two Dollars ($4,102,262). Said mortgage
thereafter assigned to MCM Deposit Corp. #1, a Delaware corporation, in Official
Record Book 9392, Page 1591 of the Public Records of Pinellas County, Florida
and said mortgage thereafter assigned to United States Trust Company of New
York, as trustee, in Official Record Book 9392, Page 1615 of the Public Records
of Pinellas County, Florida ("Trust Mortgage").
(b) Allocation of Purchase Price. The Purchase Price shall be allocated
by the Sellers and Purchaser among the Sellers' interest in Lakes and GWH in
accordance with Exhibit "D" attached hereto. At the Closing, the parties hereto
shall execute and file Internal Revenue Service Form 8594 reflecting such
allocation, pursuant to Section 1060 of the Internal Revenue Code of 1986, as
amended.
3. Closing. The closing of the transactions contemplated under this
Agreement ("Closing") shall be held within forty (40) days after the
satisfaction of the conditions set forth in paragraph 12(d) hereof provided that
all other conditions have been satisfied or waived by that date, or any other
date mutually agreed upon in writing by the parties ("Closing Date").
4. Closing Documents.
-----------------
(a) At the Closing, Sellers shall deliver to Purchaser in a form
acceptable to Purchaser's attorneys:
4
(i) assignment of all general and limited partnership
interest for Lakes and GWH in a form which, in the reasonable opinion of
Purchaser's counsel is necessary to effectively transfer and convey to Purchaser
good and marketable title to 100% of the general and limited partnership
interest in Lakes and GWH and all property owned by them, free and clear of all
mortgages, pledges, liens, security interests, covenants, restrictions,
easements and other encumbrances except the Trust Mortgage;
(ii) a copy of the deed transferring good and
marketable title free and clear of all liens and encumbrances to the Parking
Area from Harrod to Lakes as shown on Exhibit "E" hereto, which transfer shall
have occurred prior to the Closing;
(iii) all leases for the Property;
(iv) the original or true copy of a valid certificate
of occupancy for Building One, Building Two, Building Three and Building Four;
(v) original copies of all Operating Agreements and
Intangible Rights (as hereinafter defined), certified by Sellers as being true,
accurate, current and complete;
(vi) executed estoppel certificates from all tenants
under the Leases (as hereinafter defined), other than Purchaser, which estoppel
certificates shall be in substantially the form attached hereto as Exhibit "F"
and dated not more the thirty (30) days prior to the Closing;
(vii) a FIRPTA Non-Foreign Transferor Certificate in
accordance with Section 1445 of the Internal Revenue Code;
(viii) those affidavits reasonably required by
Purchaser's title insurance company ("Title Company") to clear title to the
Property;
(ix) resolutions of the directors and the
shareholders of Largo, Inc. and Harrod, Inc., and the certificate of
incorporation and by-laws of Largo, Inc. and Harrod, Inc., authorizing the
general partners for Lakes and GWH to execute this Agreement and the closing
documents on behalf of Lakes and GWH;
(x) copies of the partnership agreements of Lakes and
GWH, as amended, certified by the general partner as being true, accurate,
current and complete, and that
5
the same are in full force and effect, and have not been revoked, rescinded,
modified or amended except as set forth therein; resolutions of the general
partners of Lakes and GWH certifying that the partners of Lakes and GWH approved
the conveyance of the Lakes Property and the GWH Property and Assets (as
hereinafter defined) to the Purchaser;
(xi) the opinion of Sellers' counsel, dated the
Closing Date, in form attached as Exhibit "G";
(xii) all guaranties, warranties and operating
manuals, if any, for the Assets, including, without limitation, all Equipment
(as hereinafter defined);
(xiii) an Assessment Form required by the State of
Florida to accompany the deed; and
(xiv) consent by the Trustee to the transactions
contemplated by this Agreement.
(b) At Closing, Purchaser shall execute and/or deliver to Seller, or
their designee, a Note, Security Agreement, UCC-1 Financing Statements, Opinion
of Counsel, Good Standing Certificate, Resolutions and such other documents
necessary to close the transaction described herein.
5. Adjustments. All rent, real estate taxes and interest on the
Mortgage (including any escrows) shall be adjusted as of Closing.
6. Expenses Incurred by Purchaser. The following shall be paid
exclusively by Purchaser:
(i) all costs and expenses for title insurance.
However, if the costs for Purchaser's title insurance exceeds $10,000.00, then
Purchaser may elect to terminate this Agreement upon notice to Sellers,
whereupon the Escrow Agent shall deliver the Deposit to Purchaser and the
parties shall have no further obligations hereunder;
(ii) Purchaser's attorneys' fees; and
(iii) such other costs and expenses which are
normally and reasonably incu rred by a purchaser in connection with the type of
transaction contemplated by this Agreement.
6
7. Expenses Incurred by Sellers. Sellers shall pay the following items
prior to or at the Closing:
(i) all costs and expenses of title and lien searches
and abstracts of title;
(ii) all income taxes and other similar charges owed
by Seller, including, but not limited to, income taxes resulting in the transfer
of the Partnership interests set forth in Paragraph 1 of this Agreement;
(iii) any transfer tax on the transfer of the
Partnership interests; (iv) such amount necessary to obtain an assumption of the
Trust Mortgage; and (v) such other costs, fees, and expenses which are normally
and reasonably incurred by a seller in connection with the type of transaction
contemplated by this Agreement.
8. Sellers' and Harrod's Representations and Warranties. As a material
inducement to Purchaser's acceptance of this Agreement and its acquisition of
the Property, each Seller and Harrod jointly, severally, and independently make
the following representations to Purchaser, each of which: (i) is true and
correct as of the date of this Agreement; (ii) shall be true and correct as of
the Closing; and (iii) shall be binding upon the respective successors and
assigns of Sellers and Harrod.
(a) Lakes and GWH are limited partnerships, duly organized, validly
existing and in good standing under the laws of the States of Delaware and
Florida, respectively. The recitals to this Agreement accurately state the
Partnership of both Lakes and GWH. Sellers shall provide to Purchaser true,
complete, and correct copies of its organizational documents and partnership
agreement, as currently in effect, to Lakes and GWH. In the event that any such
document or agreement is amended after the date hereof, Sellers will promptly
provide or make available to Purchaser a true, complete and correct copy of such
document or agreement, as so amended.
(b) Sellers have all necessary organizational power and authority to
execute, deliver, and perform this Agreement. The execution, delivery, and
performance of this
7
Agreement by Sellers and the consummation by Sellers of the transactions
contemplated hereby will, as of the Closing, have been duly authorized and
approved by all necessary organizational actions on the part of Sellers. This
Agreement has been duly executed and delivered by Sellers and constitutes a
legal, valid, and binding obligation of Sellers enforceable against Sellers in
accordance with its terms, except that such enforceability may be subject to (i)
bankruptcy, insolvency, reorganization, or other similar laws affecting or
relating to enforcement of creditors' rights generally; and (ii) general
principles of equity relating to enforceability.
(c) Lakes and GWH are not a party to any agreement or instrument
materially and adversely affecting it or their ownership of the Lakes Property
or GWH Property respectively, and Sellers are not in default in the performance,
observance or fulfillment of any of the material obligations, covenants or
conditions set forth in any agreement or instrument to which they are a party.
(d) The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby on the part of Sellers does not and will
not violate any agreement binding upon Sellers and does not and will not
conflict with or result in the breach of any condition or provision of, or
constitute a default under, or result in the creation or imposition of any lien,
charge or encumbrance upon the Lakes Property or the GWH Property, nor will it
violate any law, rule, regulation, restriction, judicial or administrative
order, judgment or decree applicable to Sellers, nor, except as provided herein,
is the consent of any third party required for Sellers' consummation of this
Agreement.
(e) Sellers have not entered into any other contracts for the sale of
their interest in all or any part of Lakes, GWH, the Lakes Property or GWH
Property or any portion thereof, and no other person or entity has any rights of
first refusals, options or other preferential rights to purchase Lakes, GWH, the
Lakes Property or GWH Property or any portion thereof.
(f) Lakes has good and marketable title to the Lakes Property free and
clear of any liens, restrictions, security interests or encumbrances, and other
exceptions other than the Trust Mortgage and such easements and covenants of
record which do not interfere with the use
8
and enjoyment of the Property. GWH has good and marketable title to the GWH
Property, free and clear of any liens, restrictions, covenants, security
interests, easements, encumbrances, and other exceptions or objections to title.
Such title includes:
(i) all building, improvements, and structures
located upon the Lakes Property and GWH Property;
(ii) all furniture, furnishings, and fixtures,
including, but not limited to, lighting, decorative, plumbing and electric
fixtures and appliances, including, but not limited to those items of furniture,
furnishings and fixtures set forth in Exhibit "H" attached hereto ("Equipment");
(iii) All leases, together with any security deposits
and utility deposits, affecting the Property, all of which are set forth in
Exhibit "I" attached hereto and made a part hereof ("Leases");
(iv) all records of Sellers relating to the operation
or management of the Property ("Property Records");
(v) any and all permits, licenses, certificates,
approvals, authorizations, documents and the like which are necessary for the
operation and use of the Property ("Intangible Rights"); and
(vi) to the extent assignable and subject to the
terms thereof, any and all maintenance agreements, operating agreements,
licenses, contracts, and concessions relating to the operation and maintenance
of the Property, all of which are set forth in Exhibit "J" annexed hereto and
made a part hereof ("Operating Agreements").
(vii) Sellers' rights, title and interest, if any, in
any strips or gores of land adjoining the Property, the land lying in the bed of
any street, road or avenue, opened or proposed, adjoining any part of the
Property to the center line thereof, to any unpaid award for damages to the
Property by reason of any change of grade in any street, road or avenue and any
other condemnation awards, together with any easements benefiting the Property.
9
(g) With regard to any leasehold interests in the Lakes Property and
the GWH Property, the same are in full force and effect, there are no defaults
by Sellers, and the Leases are set forth in Exhibit "I" annexed hereto. No rent
under any Lease has been prepaid beyond the month in which Closing takes place.
(h) There is no suit, action, proceeding (legal, administrative, or
otherwise) arbitration or governmental investigation pending or threatened,
against or with respect to Sellers and the Lakes Property and GWH Property, as
the case may be, which suit, action and proceeding, arbitration or investigation
could reasonably be expected to have a material adverse effect on Sellers'
ability to perform their obligations hereunder or on Purchaser's ownership and
use of the Lakes Property and GWH Property after the Closing.
(i) Except as may have been caused or created by Purchaser, the
Property is not in violation of any federal, state, or country or local law,
ordinance, code, rule or regulation, which violation could reasonably be
expected to have a material adverse effect on Purchaser's ownership of the
Property after the Closing, nor has Seller received any notice in writing that
any governmental authority is asserting any such violation.
(j) Except as may have been caused or created by Purchaser, with
respect to the Lakes Property and the GWH Property:
(i) the Lakes Property or the GWH Property are not
being, or have been, used for the storage, treatment, generation,
transportation, processing, handling, production or disposal of any Hazardous
Substance.
(ii) Underground storage tanks are not and have not
been located on the Lakes Property or GWH Property.
(iii) There has been no release of any Hazardous
Substances in an amount (A) required to be reported to the appropriate
governmental entity or (B) that would require the incurrence of response cost to
meet an applicable clean up standard ("Release") nor is there the threat of a
Release on, at, or from the Lakes Property or GWH Property, which through soil,
subsoil, bedrock, surface water or groundwater migration could come to be
located on the
10
Lakes Property or GWH Property, and Sellers have not received any form of notice
or inquiry from any federal, state, or local governmental agency or authority,
any operator, tenant, subtenant, licensee or occupant of the Lakes Property or
GWH Property or any property adjacent to or within the immediate vicinity of the
Lakes Property or GWH Property, or any other person with regard to a Release or
the threat of a Release on, at, or from the Lakes Property or GWH Property or
any property adjacent to or within the immediate vicinity of the Lakes Property
and GWH Property.
(iv) There are no agreements, consent orders,
decrees, judgments, license or permit conditions or other orders or directives
of any federal, state or local court, governmental agency, or authority relating
to the past, present, or future ownership, use, operation, sale, transfer, or
conveyance of the Lakes Property or GWH Property which require any change in the
present condition of the Lakes Property or GWH Property, or any work, repairs,
construction, containment, clean up, investigations, studies, removal, or other
remedial action or capital expenditures with respect to the Lakes Property or
GWH Property.
(v) There are no actions, suits, claims, or
proceedings, pending or, to the best of Seller's knowledge, threatened, which
could cause the incurrence of expenses or costs of any nature or description, or
which seek money damages, injunctive relief, remedial action, or any other
remedy that arise out of, relate to, or result from (A) a violation or alleged
violation of any applicable Environmental Law or noncompliance or alleged
noncompliance with any environmental permit, (B) the presence of any Hazardous
Substances or a Release or the threat of a Release on, at or from the Lakes
Property or GWH Property, or (C) human exposure to any Hazardous Substances,
noises, vibrations or nuisances of whatever kind to the extent the same arise
from the condition of the Lakes Property or GWH Property or the ownership, use,
operation, sale, transfer or conveyance thereof.
For the purposes of this Paragraph 8(j), "Hazardous
Substances" means and includes petroleum products, flammable explosives,
radioactive materials, polychlorinated biphenyls, and/or any hazardous, toxic or
dangerous waste, substance, element, compound,
11
mixture, solution, pollutant or material now or hereafter defined as such, or as
a hazardous substance or any similar term, by or in the Environmental Laws. For
purposes of this Paragraph 8(j), "Environmental Law" or "Environmental Laws"
means any law commonly referred to or generally known as "Superfund" or
"Superlien" law, or any other federal, state, or local statute, law, ordinance,
code, rule, regulation, order, decree, or common law theory regulating, relating
to or imposing liability or standards of conduct concerning any Hazardous
Substances as are now in effect, including without limitation, the following as
the same may be amended from time to time, and all regulations promulgated
thereunder or in connection therewith: the Superfund Amendments and
Reauthorization Act of 1986; the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (42 U.S.C. ss. 9601 et seq.); the Clean
Air Act; the Clean Water Act; the Toxic Substances Control Act; the Resource
Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.), as amended by the
Solid Waste Disposal Act; and the Hazardous Materials Transportation Act.
(k) There are no pending, or to the best of Sellers' knowledge, any
threatened condemnation actions or proceedings in eminent domain with respect to
the Lakes Property or GWH Property or any portion thereof, nor have the Sellers
received notice of the commencement of any condemnation, or other action or
proceeding that would change or affect the present zoning classification of the
Lakes Property or GWH Property.
(l) No representation or warranty made by Sellers in this Agreement,
nor any statement, certificate or exhibit furnished by or on behalf of Sellers
pursuant to this Agreement, nor any document or certificate delivered to
Purchaser pursuant to this Agreement, or in connection with the transactions
contemplated hereby, contains or shall contain any untrue statement of a
material fact, or omits or shall omit to state a material fact necessary to make
the statements contained therein not misleading. Sellers have not failed to
disclose to Purchaser any pending developments or circumstances of which they
are aware which are reasonably likely to have a material adverse effect on
Sellers, Lakes Property or GWH Property.
12
(m) There are no unrecorded liens, encumbrances, covenants,
restrictions, agreements, declarations, or easements which materially affect the
Lakes Property or GWH Property. Sellers have no knowledge of any fact or
circumstance which would invalidate any policy of title insurance covering the
Property.
(n) Sellers have complied with all of their obligations under the
Leases and have received no written or oral notice of default from any parties
thereto.
(o) All of the exhibits attached hereto are true, correct, and
complete.
(p) All bills for work done and materials furnished on behalf of
Sellers with respect to the Lakes Property or GWH Property have been or will be
paid in full prior to Closing.
(q) Sellers have received no notice or knowledge of any special
assessments (other than the assessment referred to in paragraph 19 hereof)
having been made or levied against the Lakes Property or GWH Property and, to
the best of Seller's knowledge, there are no public improvements which have been
planned, commenced, or completed which would result in a special assessment
against the Lake Property or GWH Property.
(r) The Partnerships have no liabilities nor are they a party to
contracts which would create future liabilities other than those which have been
disclosed to Purchaser in writing.
(s) All of Sellers' accounts payable and all of Sellers' obligations
and responsibilities arising out of its ownership, maintenance, and operation of
the Lakes Property and GWH Property ("Preclosing Liabilities") have been paid in
full. Preclosing Liabilities shall include, but shall not be limited to (i)
payments due under all Operating Agreements, including employment agreements;
(ii) payments due to all materialmen, contractors and subcontractors which
provided any material or performed any work at the Lakes Property and GWH
Property; (iii) all sales taxes, withholding taxes, all unpaid real estate taxes
assessed against the Property, or other taxes due to the federal, state or local
governments; (iv) all utilities; and (v) payments due under the Trust Mortgage.
13
9. Survival of Representations and Warranties; Indemnification.
------------------------------------------------------------
(a) The representations and warranties made by Sellers under this
Agreement shall survive until the fifth (5th) anniversary of the Closing.
(b) Sellers, and by joining in the execution of this Agreement, Harrod
hereby agree to indemnify and hold Purchaser, its officers, directors,
shareholders, employees and representatives and Purchaser's affiliates, harmless
from and against any and all claims, liabilities, losses, damages or injuries,
together with costs and expenses, including reasonable attorneys' fees, arising
out of or resulting from (i) any breach, misrepresentation, or material omission
of the representations and warranties contained in Paragraph 8(a) through (s) of
this Agreement made by each Seller and/or Harrod in this Agreement or in any
Exhibit hereto, (ii) any breach by any Seller, unless waived in writing by
Purchaser, of any covenant or agreement contained in or arising out of this
Agreement, and (iii) any failure by any Seller to comply with any provision of
this Agreement. This indemnification shall survive until the fifth (5th)
anniversary of Closing.
(c) If Purchaser claims a right to indemnification hereunder
("Indemnified Party") it shall give the other party from whom indemnification is
sought ("Indemnifying Party") prompt notice of any claim, demand, action, suit,
proceeding or discovery of fact upon which the Indemnified Party intends to base
a claim for indemnification under this Paragraph 9, provided, however, that no
failure to give such notice shall excuse any Indemnifying Party from any
obligation hereunder.
10. Purchaser's Diligence Investigation.
-----------------------------------
(a) Due Diligence.
-------------
(i) Purchaser has conducted and will continue to
conduct, in good faith at Purchaser's sole cost and expense, together with its
agents, contractors and representatives, whatever inspections, tests, surveys,
examinations, appraisals and investigations of the Lakes Property or GWH
Property that Purchaser and such agents, contractors or representatives may deem
necessary or desirable to determine the desirability of purchasing the
14
Lakes Property or GWH Property, including, without limitation, the right to make
soil tests and borings, and groundwater sampling, the right to make structural,
architectural, engineering, and asbestos studies.
(ii) Purchaser may also review and Seller shall
cooperate in providing any and all documentation relating to the Property
including but not limited to plans, specifications, environmental reports,
zoning ordinances, governmental approvals, licenses, permits, leases and related
notices. Sellers have allowed and will continue to allow Purchaser and
Purchaser's agents, contractors and representatives reasonable access to the
Lakes Property and GWH Property. Purchaser hereby agrees to indemnify Sellers
against any damages to the Lakes Property and GWH Property incurred by Seller
caused by the inspections, investigations or other activities of Purchaser or
Purchaser's agents after the date of this Agreement. Without limitation on the
foregoing, Purchaser shall promptly repair any damage to the Lakes Property or
GWH Property caused as a result of Purchaser's investigation after the date of
this Agreement.
(iii) If at any time prior to close of business, on
or before March 31, 2001 (the period between the date of this Agreement and
March 31, 2001, the "Inspection Period"), Purchaser in its sole and absolute
discretion determines that it is dissatisfied with the results of its
investigation and/or inspections, or for any reason whatsoever, then Purchaser
may elect to terminate this Agreement by written notice to Seller, in which
event the Escrow Agent shall deliver the Deposit to Purchaser and neither party
shall thereafter have any further rights or obligations under this Agreement. If
Purchaser fails to deliver such notice prior to the expiration of the Inspection
Period, Purchaser shall be deemed to have elected to proceed with the
transactions set forth herein (subject of course to the satisfaction of the
conditions precedent and other conditions to Closing set forth elsewhere in this
Agreement).
11. Title Documents. Within twenty (20) days after the execution and
delivery of this Agreement, Sellers shall deliver to Purchaser, or to
Purchaser's attorney, a copy of Sellers' existing title policy, tax search and
existing survey of the Lakes Property and GWH Property. Purchaser shall satisfy
itself that it is covered by the existing title policy. If Purchaser is not so
15
satisfied, it will obtain from the Title Company a commitment for title
insurance showing that Sellers hold a good and marketable title to the Lakes
Property and GWH Property. Purchaser shall, within thirty (30) days of the
delivery of the existing policy or the title insurance commitment (whichever is
later), deliver to Sellers a written statement of all objections to conditions
disclosed by the survey and to any exceptions set forth in the title insurance
commitment obtained by Purchaser (the foregoing survey and title objections
being collectively referred to herein as "Purchaser's Objections"). Purchaser's
Objections may include an easement, covenant or other restriction whether of
record or not. Sellers shall, within ten (10) days of the delivery of
Purchaser's Objections to Sellers' attorneys, give notice to Purchaser's
attorney as to whether Sellers will cure all Purchaser's Objections on or prior
to the Closing, or which of such objections Sellers will refuse to cure. If
Sellers' notice indicates that Sellers refuse to cure any Purchaser's
Objections, then Purchaser may, within ten (10) days of the giving of such
notice to Purchaser's attorney, elect by notice given to Sellers to terminate
this Agreement, in which event all rights and liabilities of the parties by
reason of this Agreement shall be deemed at an end. If Purchaser shall not so
elect to terminate this Agreement, Purchaser shall be deemed to have waived such
Purchaser's Objections which Sellers shall refuse to cure. Sellers shall, at
Closing, convey marketable title free and clear of all Purchaser's Objections
which Seller agreed in Sellers' notice Sellers would cure. In addition, and
notwithstanding anything to the contrary set forth in this Agreement, Sellers
shall cure, at or prior to Closing, any lien, claim, easement, restriction,
covenant or other encumbrance arising after the date of Purchaser's delivery of
Purchaser's Objections and prior to Closing.
12. Conditions Precedent To Closing. The obligation of Purchaser under
this Agreement to purchase the Partnership interests from Sellers and to assume
the Trust Mortgage is subject to the satisfaction at the time of Closing of each
of the following conditions ("Conditions Precedent"):
16
(a) All of the representations, warranties and covenants by Sellers set
forth in this Agreement shall be true and correct as of Closing in all material
respects, as though such representations and warranties were made at and as of
Closing.
(b) Sellers shall have performed, observed, and complied with all
covenants, agreements, and conditions required by this Agreement to be
performed, observed, and complied with on its part prior to or as of the
Closing.
(c) All instruments and documents required on Sellers' part to
effectuate this Agreement and the transactions contemplated herein, as set forth
in this Agreement, shall have been delivered and shall be in form and substance
reasonably satisfactory to Purchaser, Purchaser's counsel and Title Company.
(d) Seller shall have obtained the approval and consent of the Trustee
for the transactions contemplated by this Agreement.
(e) Approval of this Agreement by Purchaser's Board of Directors.
(f) Approval of Purchaser's lenders upon terms and conditions
acceptable to Purchaser.
(g) Purchaser's receipt of opinions from its special tax counsel and
accountants concerning the various tax consequences of this transaction,
satisfactory to Purchaser.
(h) Purchaser's receipt of any governmental approvals necessary for
Purchaser to use the Property for Purchaser's intended purpose.
17
(i) Seller's completion of the paving of 25-35 parking spaces in the
Parking Area currently being used by Val-Pak employees. As of Closing, Val-Pak
employees will no longer be permitted to park in this area.
(j) Purchaser obtaining a title insurance policy acceptable to
Purchaser at a cost not to exceed $10,000.
(k) Appraisal of the Property reasonably acceptable to Purchaser.
(l) No adverse material change to the condition of the Property.
If any one or more of the foregoing Conditions Precedent is not
satisfied by March 31, 2001, Purchaser may terminate this Agreement upon notice
to Sellers. If Purchaser gives a notice of termination under this Paragraph 12,
this Agreement shall terminate, Escrow Agent shall deliver the Deposit to
Purchaser, and neither party shall have any further rights or liabilities under
this Agreement.
13. Default. If Sellers shall tender all documents, instruments, items
and payments required by this Agreement and all Conditions Precedent shall have
been fully satisfied and Sellers have complied fully with all its obligations
hereunder, and all of Sellers' representations and warranties pursuant to this
Agreement shall be true and correct on the date hereof and on the Closing Date
in all material respects, and if Purchaser shall fail or refuse to close title
as required by the terms of this Agreement, Sellers' sole remedy shall be to
retain the Deposit, it being agreed by Sellers that the damages to Sellers in
case of default by Purchaser may be impossible to ascertain and that $50,000.00
constitutes a fair and reasonable amount of damages in the circumstances, and
neither party to this Agreement shall have any further rights or obligations
hereunder. If Purchaser is ready, willing and able to close in the manner
required by this Agreement and Sellers default in its obligations under this
Agreement, Purchaser shall have the remedies at law or in equity based upon
Sellers' breach of this Agreement, it being agreed by the parties that Purchaser
shall be entitled to specific performance of this Agreement. If Purchaser elects
not to seek specific performance, Sellers shall return the Deposit to Purchaser
and shall reimburse Purchaser for all expenses it has incurred in connection
with or arising out of its
18
activities, due diligence and investigations under this Agreement, including
attorneys' fees, not to exceed $50,000.00.
14. Notices. Any notice, demand, or request, required or agreed to be
given by either party, shall be sufficiently given or served if in writing and
signed by the party giving it, and delivered by hand with receipt acknowledged
(including by national overnight courier, such as Federal Express) or mailed by
certified mail, return receipt requested, addressed to the party to be noticed
as follows:
To Seller(s): Largo Lakes, I, II, and IV, Inc.
777 S. Harbour Island Blvd.
Suite 877
Tampa, Florida 33602
Attn: Gary W. Harrod
Harrod Properties, Inc.
777 S. Harbour Island Blvd.
Suite 877
Tampa, Florida 33602
Attn: Gary W. Harrod
With a copy to: Lowndes, Drosdick, Doster
Kantor & Reed, P.A.
215 N. Eola Drive
Orlando, FL 32801
Attn: Jon C. Yergler, Esq.
To Purchaser: Linvatec Corporation
310 Broad Street
Utica, New York 13501
Attn: President and General Counsel
With a copy to: ConMed Corporation
310 Broad Street
Utica, New York 13501
Attn: President and General Counsel
Hancock & Estabrook, LLP
100 Madison Street
MONY Tower I
Syracuse, New York 13202
Attn: Richard W. Cook, Esq.
19
or to such other address as Sellers, Purchaser and Harrod, may from time to time
designate by giving notice thereof in writing. Service shall be complete upon
such delivery or mailing except in the case of a notice to change an address in
which case service shall be complete when the notice is received by the
addressee. Notices may be given by counsel to the respective parties identified
in this Paragraph.
15. Risk of Loss and Eminent Domain.
-------------------------------
(a) The risk of loss or damage to the Lakes Property and GWH Property
or of a taking by eminent domain, until delivery of the deed(s) and bills of
sale to Purchaser, is assumed by Sellers. In the event that the improvements
which are a part of the Lakes Property and GWH Property are destroyed or damaged
by fire or other cause, or the Lakes Property and GWH property or any portion
thereof is taken by eminent domain, (i) Purchaser may elect to terminate this
Agreement, or (ii) Purchaser may elect to close the transaction contemplated
hereby, and accept the insurance proceeds payable by reason of such damage or
destruction, or the condemnation award payable by reason of such taking, and
Sellers shall pay over and assign such proceeds and/or award and all claims
therefor to Purchaser at Closing.
(b) Sellers warrant and represent to Purchaser that Sellers have and
will have through the date of Closing, property insurance on Building Three in
an amount sufficient to replace all improvements on the Lakes Property and GWH
Property and all Equipment.
16. Operation of the Property Until Closing. From the date hereof until
the Closing, Sellers shall operate the Lake Property and GWH Property in the
ordinary course of such business as presently being conducted. Moreover, Sellers
shall:
(a) maintain, through Closing, the current insurance policies with
respect to the Lakes Property and GWH Property;
(b) pay any and all sums due and payable on the Trust Mortgage as the
same become due and payable, and shall not allow a default to occur thereunder,
nor an event, with the passage of time or notice, or both, result in a default
thereunder;
20
(c) refrain from modifying the Trust Mortgage, nor enter into
additional mortgages, or any other financing agreements, or allow the Lakes
Property or the GWH Property to be subject to any lien other than the lien of
the Trust Mortgage;
(d) maintain the Intangible Rights and Operating Agreements in their
current state, and not grant any renewals, extensions, modifications, rights of
purchase, or otherwise modify or terminate the same, without the express prior
written consent of Purchaser;
(e) maintain and repair the Lakes Property and the GWH Property and
Equipment in a good and workmanlike manner, and replace any of the Equipment
with comparable substitutes being at least of equal value and function as the
item which it replaced, all in the ordinary course operation;
(f) comply with all of the Sellers' obligations under the Leases.
17. Broker. Purchaser and Sellers represent and warrant to each other
that neither party has dealt with any broker or finder with respect to the
transactions contemplated under this Agreement. Each party agrees to defend and
indemnify the other against any breach of this representation and warranty.
18. Relocation of Tenants and Building Three Upgrades. Sellers covenant
and agree to obtain the consent and approval of the tenants of Building Three,
namely Sun Pharmacy and South Trust Bank ("Building Three Tenants"), to relocate
them to new facilities as promptly as possible after Closing. Sellers will
assume all responsibilities for relocating the Building Three Tenants, including
all costs and expenses associated with the relocation including the build-out
and refinishing costs of the new facilities, cleaning and repairing the space
currently occupied by the Building Three Tenants. In addition, during the period
of time the Building Three Tenants remain in possession of Building Three
following Closing, Sellers shall indemnify and hold harmless Purchaser from any
costs, expenses, operating deficiencies or damages suffered by Purchaser on
account of such continued occupancy by the Building Three Tenants, including but
not limited to Purchaser's pro rata share of the cost of maintaining the common
areas of Largo Lakes Corporate Center and for all assessments attributable to
the Purchaser on account of its
21
ownership of Building Three. Any base rent paid by the Building Three Tenants
during their occupancy of Building Three following Closing shall be paid to
Purchaser. Upon the relocation of the Building Three Tenants, Sellers shall pay
all of Purchaser's actual costs and expenses of the alterations and improvements
to Building Three to meet Purchaser's needs including labor and materials for
demolition and construction, as well as the costs for preparing plans and
specifications, not to exceed $150,000.00 ("Build-Out Costs"). Sellers shall pay
all or a portion of the Build-Out Costs to Purchaser within ten (10) days of
Purchaser's written notice to Sellers which notice shall include copies of these
invoices, receipts, and other evidence of such costs as Sellers may reasonably
require in support of the amount set forth in Purchaser's notice.
19. Traffic Light. Sellers agree to pay all of the Purchaser's costs
associated with bringing a traffic light to the Largo Lakes Corporate Center as
and when same are due under the assessment dated May 31, 2000.
20. Management. Properties is currently the management company for the
Largo Lakes Corporate Center. Purchaser agrees to support Properties as the
management company of Largo Lakes Corporate Center and vote for Properties in
any property owners association meeting or similar proceeding regarding the
selection of the management company for Largo Lakes Corporate Center so long as:
(a) there is an outstanding balance owed under the Note;
(b) that Harrod is a principal of Properties; and
(c) Properties is not in default of any of its covenants or obligations
under this Agreement or any agreement concerning the management of Largo Lakes
Corporate Center.
21. Miscellaneous Provisions.
------------------------
(a) This Agreement embodies and constitutes the entire understanding
between the parties with respect to the transactions contemplated herein, and
all prior or contemporaneous agreements, understandings, representations and
statements, oral or written, are merged into this Agreement. Neither this
Agreement nor any provisions hereof may be waived, modified, amended, discharged
or terminated except by a written agreement of such
22
waiver, modification, amendment, discharge or termination executed by the
parties and then only to the extent set forth in such instrument.
(b) This Agreement shall be construed and enforced in accordance with,
and governed by, the laws of the State of Florida.
(c) The captions in this Agreement are inserted for convenience of
reference only and in no way define, describe or limit the scope or intent of
this Agreement or any of the provisions hereof.
(d) This Agreement when executed and delivered by both parties shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective heirs, executors, administrators, legal representatives, successors
and assigns.
(e) Whenever in this Agreement a period of time is stated as a number
of days, it shall be construed to mean calendar days; provided, however, that
when any period of time so stated would end on a Saturday, Sunday or legal
holiday, such period shall be deemed to end on the next day following which is
not a Saturday, Sunday or legal holiday.
(f) Purchaser may assign its rights under this Agreement to an entity
owned or controlled by Purchaser. Any assignment by Purchaser of its rights
under this Agreement shall not relieve Purchaser of Purchaser's obligations
under this Agreement.
(g) This Agreement and any document or instrument entered into, given
or made pursuant to this Agreement or authorized hereby, or any amendment or
supplement thereto, may be executed simultaneously in any number of
counterparts. Each counterpart shall be deemed an original agreement, but all
counterparts shall constitute only a single agreement. Any signature page of
this Agreement or of such amendment, supplement document, or instrument may be
detached from any counterpart without impairing the legal effect of any
signatures thereon and may be attached to another counterpart in form thereto
but having attached to it one (1) or more additional signature pages.
(h) If any provisions of this Agreement, or the application thereof,
will for any reason and to any extent by invalid or unenforceable, the remainder
of this Agreement and
23
application of such provision to other persons or circumstances will be
interpreted so as reasonably to effect the intent of the parties hereto. The
parties further agree to replace such void or unenforceable provision of this
Agreement with a valid and enforceable provision that will achieve, to the
greatest extent possible, the economic, business and other purposes of the void
or unenforceable provision.
(i) The parties acknowledge that this is a negotiated agreement, and
that in no event shall the terms hereof by construed against either party on the
basis that such party, or its counsel, drafted this Agreement.
(j) If any civil action, arbitration or other legal proceeding is
brought for the enforcement of this Agreement, or because of an alleged dispute,
breach, default or misrepresentation in connection with any provision of this
Agreement, the successful or prevailing party or parties, by decision or
settlement shall be entitled to recover actual attorneys' fees, costs and
expenses, sales and use taxes, court costs and all expenses even if not taxable
as court costs (including, without limitation, all such fees, taxes, costs and
expenses incident to arbitration, appellate, bankruptcy and post-judgment
proceedings), incurred in that civil action, arbitration or legal proceeding, in
addition to any other relief to which such party or parties may be entitled.
Attorneys' fees shall include, without limitation, paralegal fees, investigative
fees, administrative costs, sales and use taxes and all other charges billed by
the attorney to the prevailing party.
(k) Each party acknowledges that it has been advised by its own counsel
with respect to the transaction governed by this Agreement.
(l) In this Agreement, the use of any gender shall be deemed to include
all genders, and the use of the singular shall include the plural and visa
versa, wherever it appears appropriate from the context. The definitions and
terms contained in the recitals of this Agreement and the documents referenced
in the recitals are all incorporated into this Agreement by reference as if more
fully set forth in the body of this Agreement.
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(m) Each of the Sellers shall be jointly and severally liable for each
and every obligation of Seller or Sellers under this Agreement.
(n) Except as otherwise expressly provided herein, no remedy herein
conferred upon any party is intended to be exclusive of any other remedy, and
each and every such remedy shall be cumulative and shall be in addition to every
other remedy given hereunder or now or hereafter existing at law or in equity or
by statute or otherwise.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
LARGO LAKES I, II AND IV, INC.
By:______________________________________
Gary W. Harrod, President
HARROD PROPERTIES, INC.
By:______________________________________
Gary W. Harrod, President
-----------------------------------------
GARY W. HARROD
LINVATEC CORPORATION
By:______________________________________
Daniel S. Jonas, Assistant Secretary
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State of )
) ss.:
County of )
On the _____ day of February in the year 2001 before me, the
undersigned, a Notary Public in and for said State, personally appeared Gary W.
Harrod, personally known to me or proved to me on the basis of satisfactory
evidence to be the individual whose name is subscribed to the within instrument
and acknowledged to me that he executed the same in his capacity, and that by
his signature on the instrument, the individual, or the person upon behalf of
which the individual acted, executed the instrument.
---------------------------
Notary Public
State of New York )
) ss.:
County of Onondaga )
On the _____ day of February in the year 2001 before me, the
undersigned, a Notary Public in and for said State, personally appeared Daniel
S. Jonas, personally known to me or proved to me on the basis of satisfactory
evidence to be the individual whose name is subscribed to the within instrument
and acknowledged to me that he executed the same in his capacity, and that by
his signature on the instrument, the individual, or the person upon behalf of
which the individual acted, executed the instrument.
---------------------------
Notary Public
26