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Title: |
Asset Purchase Agreement |
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Date: |
2000 |
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$43 |
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#933005 |
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ASSET PURCHASE AGREEMENT
BY AND BETWEEN
HORIZON MEDICAL PRODUCTS, INC.
AND
IDEAS FOR MEDICINE, INC.
OCTOBER 9, 2000
================================================================================
<PAGE> 2
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made as of October
9, 2000 by and between HORIZON MEDICAL PRODUCTS, INC., a Georgia corporation
("Horizon"), and IDEAS FOR MEDICINE, INC., a Florida corporation ("IFM").
WITNESSETH:
WHEREAS, IFM is a wholly-owned subsidiary of CryoLife, Inc., a Florida
corporation ("CryoLife"), and is in the medical device manufacturing business
(the "Business");
WHEREAS, Horizon and IFM previously entered into that certain purchase
agreement, dated as of May 19, 1998 (the "First Purchase Agreement"), pursuant
to which Horizon purchased certain assets of IFM;
WHEREAS, Horizon and IFM previously entered into that certain purchase
agreement, dated as of September 30, 1998 (the "Second Purchase Agreement"),
pursuant to which Horizon purchased certain additional assets of IFM; and
WHEREAS, Horizon wishes to acquire substantially all of the remaining
assets of IFM, and IFM wishes to sell such assets, all on the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained and for other good and valuable consideration, the
receipt, adequacy and sufficiency of which are hereby acknowledged, Horizon and
IFM agree as follows:
1. Purchase and Sale of Assets; Assumed Liabilities.
1.1. Purchase and Sale of Assets. On the Closing Date (as
hereinafter defined), upon and subject to the terms and conditions of this
Agreement, IFM shall sell, transfer, assign, convey, and deliver to Horizon,
and Horizon shall purchase and acquire from IFM all right, title and interest
of IFM in and to all of the assets, properties and rights of IFM, of every kind
and description, personal and mixed, tangible and intangible, wherever
situated, except for the Excluded Assets (as defined in Section 1.4)
(collectively, the "Purchased Assets"), free and clear of all mortgages, liens,
pledges, security interests, charges, claims, restrictions and encumbrances of
any nature whatsoever, except for the Assumed Liabilities (as defined in
Section 1.7). The Purchased Assets shall not include any assets previously
purchased by Horizon pursuant to the First Purchase Agreement or the Second
Purchase Agreement.
1.2. Purchased Assets. Except as otherwise expressly set
forth in Section 1.4 hereof, the Purchased Assets shall include, without
limitation, the following assets, properties and rights of IFM:
(a) All of IFM's right, title and interest in
and to its fixed assets, as further described in Schedule 1.2(a)
hereto, including, without limitation, all production equipment,
office equipment, dies, drawings and other equipment used in the
production, manufacture, sale, marketing or distribution of products
(the "Fixed Assets");
<PAGE> 3
(b) All of IFM's right, title and interest in
and to (1) all finished goods inventory as of the close of business on
the Closing Date, including, without limitation, the items set forth
on Schedule 1.2(b)(1) hereto, and all containers and other packaging
materials associated with such finished goods inventory (the "Finished
Goods Inventory"); and (2) all other inventory, as further described
in Schedule 1.2(b)(2) hereto, including, without limitation, raw
materials and work in process, whether located at IFM's or CryoLife's
facilities, in route to the sterilizer or other outside vendors, or
elsewhere (the "Other Inventory," and together with the Finished Goods
Inventory, collectively, the "Inventory").
(c) All leasehold improvements, as further
described in Schedule 1.2(c) hereto, including, without limitation,
clean rooms and air handling equipment;
(d) All of IFM's right, title and interest in
and to all United States and foreign patents, patent applications,
tradenames, trademarks, copyrights, trade dress, logos, business and
product names, slogans, inventions, trade secrets, industrial models,
formulas, processes, designs, confidential and technical information,
manufacturing, engineering and technical drawings, product
specifications, know-how and all other material intangible property
and intellectual property rights to or similar to and registrations
and applications for registration relating to any of the foregoing or
licenses owned by IFM (collectively, "Intellectual Property")
including, without limitation, the items set forth on Schedule 1.2(d)
hereto;
(e) All of IFM's and/or CryoLife's rights and
benefits pursuant to those certain third-party contracts and
agreements set forth on Schedule 1.2(e) hereto and incorporated herein
by reference (the "Assigned Contracts");
(f) All of IFM's right, title and interest in
and to the "Ideas for Medicine" and "IFM" names and any trademarks and
tradenames, designs and logos associated therewith; and
(g) All records and documents related to the
Business or the Purchased Assets, whether in paper, electronic or
other media, including, without limitation, all FDA 510(k) filings and
other FDA filings, all drawings and designs, all test protocols and
results, all biocompatibility data, all customer lists, sales
brochures, medical records, all production records and all other
business records. IFM shall be entitled to keep a copy of all such
records and documents. IFM shall protect such records and documents
under the confidentiality provisions of Section 11.1 through the sixth
(6th) anniversary of the Closing Date and shall then promptly destroy
all of such records and documents with written notice to Horizon
confirming such destruction. After the destruction of such records and
documents, IFM will have access to such records and documents in
Horizon's possession in accordance with Section 6.8(b). Such records
and documents will be used by IFM solely for the preparation of the
prosecution or the defense of any suit, action, litigation or
administrative, arbitration or other proceeding or investigation by or
against IFM or CryoLife or for any third party claim for which
indemnification is claimed pursuant to the terms of Section 9 below,
or for the preparation for the filing of
- 2 -
<PAGE> 4
any document required by any federal, state or local governmental
department, regulatory agency, authority, commission, board or court.
1.3. Technical Files. At the Closing, IFM shall deliver
to Horizon copies of the technical file or dossier on the CE mark for each
Product, which copies shall include, without limitation, all paper and
electronic files related to IFM's products. IFM may redact from such copies any
information pertaining to the Excluded Products.
1.4. Excluded Assets. IFM shall retain and shall not sell
or deliver to Horizon, and Horizon shall not purchase from IFM, the following
assets, all of which shall be excluded from the Purchased Assets (collectively,
the "Excluded Assets"):
(a) All cash;
(b) All accounts receivable relating to or
arising out of sales on or before the Effective Date;
(c) Any rights including without limitation,
all trade secrets, know how and other intellectual property to the
following products and their related inventory and packaging
(collectively, the "Excluded Products"):
(i) BioGlue applicator tip connector;
(ii) heart valve holder;
(iii) BioGlue Aortic dissection
catheters;
(iv) CryoValve tags; and
(v) Cardiac Manipulator for Minimally
Invasive Surgical Procedures;
(d) Any raw materials supplied by third
parties, including, without limitation, work in progress and finished
goods inventory resulting from such raw materials, to which title
shall remain with such third party supplier pursuant to an Assigned
Contract;
(e) Accounts receivable resulting from work
performed under the Assigned Contracts prior to the Effective Date, as
set forth in Schedule 1.4(e) hereto;
(f) Any packaging or other items bearing the
"CryoLife" name;
(g) Any materials, equipment, fixtures, dies
and tooling listed on Schedule 1.4(g) which are utilized in connection
with the packaging and manufacture of the Excluded Products;
(h) All packaging for and work in process and
inventory of the Excluded Products, including, without limitation, all
BioGlue dispensers, mixing tips and
- 3 -
<PAGE> 5
twist rings and connectors, all CryoPacks, and all CryoLife
Intermediates (also known as allograft packaging); and
(i) All equipment owned by third parties and
listed on Schedule 1.4(i) hereto, which shall continue to be owned by
such third parties.
1.5. Liabilities Not Assumed. Except as expressly set
forth in Section 1.7, Horizon shall not and will not accept or assume any
liability or obligation of any nature whatsoever (whether express or implied,
fixed or contingent, liquidated or unliquidated, known or unknown, accrued or
to become due) of IFM or CryoLife. Without limiting the generality of the
foregoing, Horizon shall not and will not accept nor assume any liability or
obligation of IFM:
(a) arising from or related to any federal,
state, or local income, sales, use, excise, or other tax of IFM
(including without limitation any such taxes incurred by IFM as a
result of the transactions contemplated hereby), except as set forth
in Section 1.7(c);
(b) relating to any employees or former
employees of IFM arising by reason of any such other person's
employment or termination of employment by IFM, except as expressly
set forth in Section 6.5;
(c) resulting from the conduct of the Business
on or prior to the Closing Date, provided the foregoing shall not be
deemed to limit IFM's right to seek indemnification from Horizon under
the Manufacturing Agreement (as defined in Section 2.7);
(d) resulting from any product manufactured by
IFM for Horizon pursuant to the Manufacturing Agreement (the "HMP/IFM
Products") which is returned to Horizon or IFM prior to, on, or after
the Closing Date if such product (i) is defective as a result of a
defect in the manufacture or assembly thereof (and not as a result of
any defect in the design or specifications), and (ii) was sold by IFM,
or is a part of the Finished Goods Inventory (a "Defective HMP/IFM
Product"), provided such defect is not caused by the action or
inaction of Horizon;
(e) resulting from IFM's production,
manufacture and assembly of any of IFM's products other than the
HMP/IFM Products (the "Non-HMP Products") on or prior to the Closing
Date, including, without limitation, any personal injury or product
damage whether occurring prior to, on, or after the Closing Date,
caused by or through or arising as a result of the marketing, sale,
delivery, production, manufacture or assembly by IFM of the Non-HMP
Products;
(f) resulting from any defective or damaged
Non-HMP Product returned to Horizon or IFM prior to, on, or after the
Closing Date if such product (i) was sold by IFM, or (ii) is a part of
the Finished Goods Inventory (a "Defective Non-HMP Product," and
together with the Defective HMP/IFM Products, collectively, the
"Defective Products"), provided such defect or damage is not caused by
the action or inaction of Horizon; or
- 4 -
<PAGE> 6
(g) resulting from IFM's lack of compliance
with any applicable federal, state, or local laws, rules, regulations,
ordinances, or orders.
1.6. Valuation For Tax Reporting Purposes. IFM and
Horizon agree that Schedule 1.6, in which the parties have allocated the
Purchase Price (as defined below) among the Purchased Assets, has been jointly
prepared by the parties hereto. The parties agree to use Schedule 1.6 in
preparing and filing their respective Forms 8594 with the Internal Revenue
Service and for all other relevant federal and state income tax purposes. Each
party will provide a copy of the Form 8594 to the other party prior to filing.
In the event the parties are unable to agree on Schedule 1.6 as of the Closing,
the parties shall agree on such Schedule 1.6 within ninety (90) days of the
Closing Date.
1.7. Assumption of Liabilities. On the Closing Date,
Horizon shall assume from IFM the following liabilities and obligations of IFM
(the "Assumed Liabilities"):
(a) the trade payables of IFM with respect to
Inventory received after the Effective Date and the trade payables of
IFM arising in respect of the provision of goods (excluding Inventory)
or services on or after the Effective Date;
(b) all ad valorem taxes on the Purchased
Assets accruing on or after the Effective Date; and
(c) the monetary obligations of IFM accruing on
or after the Effective Date under the Assigned Contracts and all other
obligations or liabilities under the Assigned Contracts accruing after
the Closing Date.
2. Purchase Price; Refund of Purchase Price.
2.1. Purchase Price. In consideration for IFM's sale,
transfer and delivery of the Purchased Assets (as defined above) to Horizon,
Horizon shall deliver to IFM at Closing a promissory note in the form of
Exhibit A hereto (the "Note") in favor of IFM with a principal amount equal to
Five Million Nine Hundred Forty-Five Thousand Two Hundred Sixteen Dollars
($5,945,216) (the "Purchase Price"). The terms of the Note shall be as follows:
(a) Three Million Eight Hundred Thousand
Dollars ($3,800,000) of the Note shall bear interest at the rate of
nine percent (9%) per annum and shall be payable in monthly
installments of principal and interest of One Hundred Forty Thousand
Dollars ($140,000) per month until all principal and interest due
under the Note is paid in full.
(b) Two Million One Hundred Forty-Five Thousand
Two Hundred Sixteen Dollars ($2,145,216) of the Note shall bear no
interest so long as Horizon makes all payments under the Note on a
timely basis.
(c) If Horizon fails to make any payment under
the Note on time, the remaining principal balance of the Note shall
bear interest at eighteen percent (18%). If Horizon makes all payments
on a timely basis without any late or deficient payments until such
time as the principal balance on the Note is reduced (by payment,
set-off,
- 5 -
<PAGE> 7
adjustment or otherwise) to Two Million One Hundred Forty-Five
Thousand Two Hundred Sixteen Dollars ($2,145,216), IFM shall forgive
the remaining Two Million One Hundred Forty-Five Thousand Two Hundred
Sixteen Dollar ($2,145,216) principal balance of the Note (the
"Discount").
2.2. Scheduled Payment of Note. Horizon agrees to pay
under the Note the sum of One Million Dollars ($1,000,000) in cash (the
"Scheduled Payment") upon the earlier of (i) the closing of one or more equity
financings which result in consideration to Horizon of at least Fifteen Million
Dollars ($15,000,000) in exchange for Horizon common and/or preferred stock
(the "Equity Financing") or (ii) April 3, 2001. In the event Horizon's pays the
Scheduled Payment prior to April 3, 2001, IFM shall forgive One Million Dollars
($1,000,000) of the principal amount of the Note in accordance with the terms
of the Note.
2.3. Physical Inventory.
(a) Horizon and IFM have taken a physical
inventory of the Inventory and Fixed Assets (the "Physical Inventory")
prior to Closing. Based on the Physical Inventory, the Purchase Price
shall be adjusted as follows to reflect the difference, if any,
between (1) the estimated value of the Inventory and the Fixed Assets
totalling Three Million Three Hundred Eighteen Thousand Three Hundred
Twenty ($3,318,320) (the "Estimated Asset Value"), and (2) the value
of the Inventory and Fixed Assets reflected in the Physical Inventory
(the "Actual Asset Value").
(i) In the event that the Estimated
Asset Value is greater than the Actual Asset Value, the
principal amount of the Note shall be reduced to reflect the
difference between the Estimated Asset Value and the Actual
Asset Value.
(ii) In the event that the Actual Asset
Value is greater than the Estimated Asset Value, the
principal amount of the Note shall be increased to reflect
the difference between the Actual Asset Value and the
Estimated Asset Value.
(b) For purposes of determining the Actual
Asset Value pursuant to this Section 2.3, (i) the value of all raw
materials, work in process and finished goods inventory shall reflect
IFM's fully absorbed cost which shall be equal to the original cost of
such Inventory, excluding any write-off or discount subsequently taken
by IFM with respect thereto, and (ii) the value of the Fixed Assets
shall be the book value for such Fixed Assets, calculated in
accordance with generally accepted accounting principles.
(c) In connection with the Purchase Price
adjustment pursuant to this Section 2.3, the Parties shall take into
account the appropriate prorations for the following items: utilities,
phone service, deposits, rent, prepaid items and employee
compensation. IFM shall be responsible for all such expenses incurred
or accruing prior to October 1, 2000, and Horizon shall be responsible
for all such expenses incurred or accruing on or after October 1,
2000.
- 6 -
<PAGE> 8
(d) In the event that the parties are unable to
agree on the amount of the Purchase Price adjustment required pursuant
to this Section 2.3, if any, within twenty (20) days after the Closing
Date, Horizon and IFM shall engage an independent accounting firm
("IA") at such time, to determine the amount of the Purchase Price
adjustment. The cost of the IA shall be paid equally by both parties
The decision of the IA shall be made within thirty (30) days after
being engaged and shall be final and binding on the parties. In the
event that Horizon and IFM are unable to agree on the IA by the
twentieth (20th) day after the Closing Date, any dispute under this
Section 2.3 shall be settled in accordance with the provisions of
Section 2.4(b).
(e) Any adjustment to the Purchase Price
required pursuant to this Section 2.3 will be made against the
principal balance of the Note. In the event of such adjustment, IFM
shall surrender the Note, and Horizon shall execute and deliver to IFM
an amended and restated Note that reflects such adjustment. In such
case, the original Note shall be canceled regardless of any failure of
IFM to deliver said Note, which failure shall not affect the amendment
and restatement of the Note. Any failure of Horizon to deliver an
amended and restated Note if required hereunder shall not affect the
obligation to make payments as required hereunder.
2.4. Refund for Damaged Finished Goods Inventory.
(a) IFM and CryoLife agree to reduce the
principal amount of the Note by the price paid by Horizon for any
Defective Product in accordance with this Section 2.4. On or before
the ninetieth (90th) day after delivery of the Inventory pursuant to
Section 2.5, Horizon shall return all products which are alleged to be
Defective Products to IFM or CryoLife for inspection with a
description of the alleged defect or damage. If IFM determines in good
faith that a product is a Defective Product, IFM or CryoLife shall
agree to reduce the principal amount of the Note by the price paid by
Horizon for each such Defective Product. In the event of such a
reduction, IFM shall surrender the Note, and Horizon shall execute and
deliver to IFM or CryoLife an amended and restated note that reflects
such adjustment.
(b) Any dispute between the parties under this
Section 2.4 shall be settled by arbitration conducted in Atlanta,
Georgia before and in accordance with the then-existing Rules for
Commercial Arbitration of the American Arbitration Association,
provided that only one arbitrator as selected by the American
Arbitration Association shall conduct any arbitration proceeding. Any
arbitration shall be final and binding. Any judgment upon any interim
or final award or order rendered by the arbitrator may be entered by
any federal or state court having jurisdiction thereof. Each party in
the arbitration proceeding shall bear its own costs and expenses of
investigating, preparing, and pursuing such arbitration claim. The
cost of the arbitration shall be borne by the non-prevailing party
which the arbitration will determine in such arbitration proceeding.
In the event that the arbitrator is unable to determine a prevailing
and non-prevailing party, the cost of arbitration will be shared
equally.
2.5. Shipment of Finished Goods Inventory to Horizon. On
or before the sixtieth (60th) business day after the Closing Date, IFM will
deliver the Finished Goods
- 7 -
<PAGE> 9
Inventory which is located at any location (a "Storage Location") other than
the Premises (as defined in Section 4.7) to Horizon or its carrier F.O.B. such
Storage Location. IFM shall deliver such Finished Goods Inventory at such times
and in such number of shipments as instructed by Horizon; provided, however,
that the number of shipments requested by Horizon shall not exceed four (4)
shipments.
2.6. Manufacturing Agreement. Horizon and IFM hereby
agree to terminate that certain Manufacturing Agreement, dated as of September
30, 1998, by and between Horizon and IFM (the "Manufacturing Agreement"), as of
the Closing Date and agree that the Manufacturing Agreement shall have no
further force or effect after the Closing Date; provided, however, that the
provisions of Sections 6, 8, 9, 12, 14, 17, 18 and 19 of the Manufacturing
Agreement shall survive such termination. The parties acknowledge and agree
that upon termination of the Manufacturing Agreement as provided herein, (i)
Horizon shall not owe any further payment to IFM under the Manufacturing
Agreement, (ii) Horizon shall not be subject to any claims, liabilities,
obligations, losses, costs, expenses, penalties, fines or other judgments (at
equity or at law) or damages (collectively, "Damages"), whenever arising or
incurred, arising out of or relating to Horizon's default under the
Manufacturing Agreement prior to the date hereof, excluding Damages for which
the other party is entitled to indemnification pursuant to Section 6 thereof,
and (iii) IFM shall not be subject to any Damages, whenever arising or
incurred, arising out of or relating to default by IFM, if any, under the
Manufacturing Agreement prior to the date hereof, excluding Damages for which
the other party is entitled to indemnification pursuant to Section 6 thereof.
3. Closing.
3.1. Date and Place of Closing. The purchase and sale of
the Purchased Assets contemplated by this Agreement (the "Closing") shall occur
at the offices of King & Spalding at 191 Peachtree Street, Atlanta, Georgia on
October 9, 2000 (the "Closing Date"). The term "Effective Date" as used in this
Agreement shall mean the opening of business on October 1, 2000.
3.2. Deliveries by IFM. At the Closing, IFM shall deliver
or cause to be delivered to Horizon the following:
(a) An executed copy of the Guaranty of
CryoLife in the form of Exhibit B hereto (the "CryoLife Guaranty");
(b) An executed copy of the Bill of Sale and
General Assignment from IFM in the form of Exhibit C hereto (the "Bill
of Sale") conveying good and marketable title to the Purchased Assets
free and clear of all liens, mortgages, pledges, security interests,
restrictions, prior assignments, charges, encumbrances, equities, and
other claims of any kind or nature whatsoever (collectively,
"Encumbrances");
(c) An executed copy of the Assignment and
Assumption Agreement in the form of Exhibit D hereto (the "Assignment
and Assumption Agreement") assigning the Assigned Contracts to
Horizon;
- 8 -
<PAGE> 10
(d) A legal opinion of Arnall, Golden &
Gregory, counsel to IFM, in the form of Exhibit E hereto;
(e) An executed copy of the Sublease Agreement
in the form of Exhibit F hereto (the "Sublease Agreement");
(f) An executed copy of the Manufacturing,
Assembly and Packaging Agreement in the form of Exhibit G hereto (the
"Manufacturing, Assembly and Packaging Agreement"), pursuant to which
Horizon shall provide certain manufacturing, assembly and packaging
services to CryoLife;
(g) An executed copy of the Transition Services
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