EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
by and among
THE XXXXXXXX AND XXXXXXXX COMPANY
and
INFOCURE CORPORATION
and
THOROUGHBRED ACQUISITION, INC.
dated as of September 28, 1998
LIST OF SCHEDULES
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A Definitions
B Acquired Assets
C Excluded Assets
D Assumed Liabilities
E Excluded Liabilities
F Disclosure Schedule
G Financial Statements
H Permitted Encumbrances
I Addresses
J Intentionally Omitted
K Accounts Payable Aging as of August 31, 1998
L Accounts Receivable Aging as of August 31, 1998
M Shared Real Property
N Shared Services
O Certain Shared Intellectual Property
P Acquired Business Employees as of August 27, 1998
Q Parent Financial Statements
R Engagement Letter
S Certain Customers
T Certain Suppliers
U Certain Seller Distributed Software, Third Party Distributed
Software and Third Party Internal Use Software
V Certain Agreements
W Certain Millennium Compliance Correspondence
X Certain Personal Property
Y Acquired Business Owned Real Property and Acquired Business Leased
Real Property
Z Seller Plans and Seller Other Benefit Obligations as of August 31,
1998
AA Certain Contracts
BB Intentionally Omitted
CC Certain Matters Regarding Seller Distributed Software and Third
Party Distributed Software
DD Medicare/HCFA Claims Mandate
EE Parent Disclosure Schedule
LIST OF EXHIBITS
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1 Adjusted 6/30/98 Balance Sheet; Adjusted 6/30/98 Working Capital
Statement
2 Form of Assignment Agreement
3 Opinion of Seller's Counsel
4 Opinion of Purchaser's and Parent's Counsel
5 Form of Allocation Agreement
6 Form of Parent Note
7 Form of Xxxxxxxx Holdings Transfer Agreement
8 Form of Lessor Documents
9 Form of Seller's Consent
10 Intentionally Omitted
11 Form of Subordination Agreement
12 Form of Parent Guaranty
13 Form of Transition Agreement
14 Form of Closing Escrow Agreement
15 Form of Commitment Letter
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ASSET PURCHASE AGREEMENT
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The Parties agree as follows:
RECITALS:
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Capitalized terms used in this Agreement have the meanings set forth in the
attached Schedule A.
Purchaser and Parent desire that Purchaser purchase from Seller, and Seller
desires to sell to Purchaser, substantially all of the assets used by Seller
exclusively in the Acquired Business, and Purchaser agrees to assume certain
identified liabilities of Seller in connection with the Acquired Business, in
each case on the terms and subject to the conditions set forth in this
Agreement.
As an inducement to Seller to enter into this Agreement, Parent has agreed
to guarantee all obligations of Purchaser under this Agreement, whether
currently existing or hereafter arising, pursuant to the Parent Guaranty.
1. ACQUIRED ASSETS. Subject to the terms and conditions of this Agreement,
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Purchaser shall purchase from Seller, and Seller shall sell, assign and
deliver to Purchaser, in each case effective as of the Effective Time, all
right, title and interest in, to and under the Acquired Assets, free and
clear of any Lien except the Permitted Encumbrances.
2. EXCLUDED ASSETS. Purchaser will not acquire any of Seller's right, title or
---------------
interest in, to or under any of the Excluded Assets.
3. ASSUMED LIABILITIES. Subject to the terms and conditions of this Agreement,
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Purchaser shall assume the Assumed Liabilities effective as of the Effective
Time, and Purchaser shall thereafter perform and discharge the Assumed
Liabilities.
4. EXCLUDED LIABILITIES. Purchaser will not assume or become liable for all or
--------------------
any portion of any of the Excluded Liabilities.
5. CONSIDERATION AND DELIVERY. The consideration for the Acquired Assets will be
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(a) assumption of the Assumed Liabilities by Purchaser, plus (b) payment by
Purchaser of the Purchase Price.
5.1 Purchase Price.
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1 Closing Payments.
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(a) At Closing, Purchaser will pay the Purchase Price to Seller by
payment of the Cash Payment by wire transfer of immediately
available funds.
(b) The Purchase Price will be subject to adjustment as described on
this Section 5.1(b).
(i) Within ninety (90) days after the Effective Time, Seller will
deliver to Purchaser the Closing Working Capital Statement.
Purchaser will have forty-five (45) days from receipt of the
Closing Working Capital Statement to object to the Closing
Working Capital Statement by written notice to Seller. If Seller
does not receive notice of an objection within such time, the
Closing Working Capital Statement prepared by Seller will be
final and binding on the parties. If Purchaser timely notifies
Seller of an objection, the Parties will have thirty (30) days
from the date of Purchaser's notice to resolve the objection. If
the Parties do not resolve the objection within such time,
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either Seller or Purchaser may submit the dispute to the
Independent Auditors for resolution, and such resolution will be
final and binding on the Parties. The fees and expenses of the
Independent Auditors will be borne by Seller and Purchaser in
proportion to the respective differences between their positions
submitted to the Independent Auditors and the final
determination of the Independent Auditors.
(ii) The Purchase Price will be reduced if the Net Working Capital on
the Closing Working Capital Statement is less than the Net
Working Capital on the Adjusted 6/30/98 Working Capital
Statement (as shown in Exhibit 1). If the deficiency is less
than the Collar Amount, there shall be no reduction. If the
deficiency is greater than the Collar Amount, the actual amount
of the reduction shall be the amount of the deficiency less the
Collar Amount.
(iii) The Purchase Price will be increased if the Net Working Capital
on the Closing Working Capital Statement is greater than the Net
Working Capital on the Adjusted 6/30/98 Working Capital
Statement (as shown in Exhibit 1). If the excess is less than
the Collar Amount, there shall be no increase. If the excess is
greater than the Collar Amount, the actual amount of the
increase shall be the amount of the excess less the Collar
Amount.
(iv) If there is a Purchase Price Adjustment, within ten (10) days
after final determination of the adjustment (whether by
Purchaser's failure to object, agreement of the Parties or
determination by the Independent Auditors), Seller or Purchaser,
as applicable, will pay the applicable amount by wire transfer
of immediately available funds to the account(s) designated by
Seller or Purchaser, as applicable.
5.2 Sales or Transfer Taxes[; PERSONAL PROPERTY TAXES; REAL PROPERTY TAXES].
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Purchaser will pay all sales or transfer taxes, recording fees and
similar fees, charges or assessments arising out of the transfer of the
Acquired Assets pursuant to this Agreement (Seller shall remain liable
for any income or franchise taxes payable by Seller as a result of such
transfer). Seller will timely file all returns for Taxes described in
this Section 5.2.
5.3 Allocation. Within a reasonable time after the Closing Working Capital
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Statement has been finally determined pursuant to Section 5.1(b), the
Parties shall execute the Allocation Agreement (including appropriate
adjustments to Exhibit A thereto; the Parties acknowledge that the form
of Exhibit A to the Allocation Agreement attached at Closing is based
on the Adjusted 6/30/98 Balance Sheet). The obligations of the Parties
under that agreement are incorporated in this Agreement as if written
in this Agreement.
6. REPRESENTATIONS AND WARRANTIES OF SELLER Except as set forth in the
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Disclosure Schedule, Seller represents and warrants to Purchaser and Parent
as follows:
6.1 Corporate Action; Power and Authority. Seller has taken all action
-------------------------------------
required by its Articles of Incorporation and Code of Regulations or
otherwise to authorize the execution and consummation of the Seller
Agreements. When executed by Seller, the Seller Agreements will
constitute the valid and legally binding obligations of Seller,
enforceable in accordance with their terms, except that enforceability
may be limited by applicable equitable principles or bankruptcy,
insolvency, or similar laws affecting the enforcement of creditors
rights generally. Seller has full power and authority to execute and
consummate the Seller Agreements. Xxxxxxxx Holdings has taken all action
required by its Articles of Incorporation and Code of Regulations or
otherwise to authorize the execution and consummation of the Xxxxxxxx
Holdings Transfer Agreement. When executed by Xxxxxxxx Holdings, the
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Xxxxxxxx Holdings Transfer Agreement will constitute the valid and
legally binding obligation of Xxxxxxxx Holdings, enforceable in
accordance with its terms, except that enforceability may be limited by
applicable equitable principles or bankruptcy, insolvency, or similar
laws affecting the enforcement of creditors rights generally. Xxxxxxxx
Holdings has full power and authority to execute and consummate the
Xxxxxxxx Holdings Transfer Agreement.
6.2 No Conflict With Other Agreements or Laws. The execution and
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consummation by Seller of the Seller Agreements will not: (a) violate
the terms of Seller's Articles of Incorporation or Code of Regulations
or any Order, instrument, agreement, mortgage, commitment or
understanding, written or oral, to which Seller is a party, or by which
Seller or any of the Acquired Assets is bound; (b) conflict with, result
in a breach of, constitute (with or without notice or lapse of time or
both) a default under or give any person any right to terminate, modify,
accelerate or otherwise change the existing obligations of Seller under
any such Order, instrument, agreement, mortgage, commitment or
understanding; (c) result in the creation or imposition of any Lien upon
Seller or any of the Acquired Assets; (d) violate any Applicable Law;
(e) give any Governmental Body or other person the right to challenge
any of the transactions contemplated by the Seller Agreements under any
Applicable Law; or (f) violate, contravene or conflict with or give any
Governmental Body the right to revoke, withdraw, suspend, cancel,
terminate or modify any Governmental Authorization, where the
consequences of any of the events in clauses (a) (f), inclusive are
likely to have a Seller Material Adverse Effect. The execution and
consummation by Xxxxxxxx Holdings of the Xxxxxxxx Holdings Transfer
Agreement will not: (a) violate the terms of Xxxxxxxx Holdings' Articles
of Incorporation or Code of Regulations or any Order, instrument,
agreement, mortgage, commitment or understanding, written or oral, to
which Xxxxxxxx Holdings is a party, or by which Xxxxxxxx Holdings or any
of the assets acquired under the Xxxxxxxx Holdings Transfer Agreement is
bound; (b) conflict with, result in a breach of, constitute (with or
without notice or lapse of time or both) a default under or give any
person any right to terminate, modify, accelerate or otherwise change
the existing obligations of Xxxxxxxx Holdings under any such Order,
instrument, agreement, mortgage, commitment or understanding; (c) result
in the creation or imposition of any Lien upon Xxxxxxxx Holdings or any
of the assets acquired under the Xxxxxxxx Holdings Transfer Agreement;
(d) violate any Applicable Law; (e) give any Governmental Body or other
person the right to challenge any of the transactions contemplated by
the Xxxxxxxx Holdings Transfer Agreement under any Applicable Law; or
(f) violate, contravene or conflict with or give any Governmental Body
the right to revoke, withdraw, suspend, cancel, terminate or modify any
Governmental Authorization, where the consequences of any of the events
in clauses (a) (f), inclusive are likely to have a Xxxxxxxx Holdings
Material Adverse Effect.
6.3 Organization and Qualification. Seller is a corporation duly organized,
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validly existing and in good standing under the laws of the State of
Ohio. Seller has full power and authority to carry on the Acquired
Business as it is now being conducted and to own and lease the Acquired
Assets. Seller is qualified to transact business as a foreign
corporation in all jurisdictions where the conduct of the Acquired
Business or ownership of the Acquired Assets require Seller to be so
qualified and where the failure to be so qualified could have a Seller
Material Adverse Effect. Xxxxxxxx Holdings is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Ohio. Xxxxxxxx Holdings has full power and authority to carry
on its business as it is now being conducted and to own and lease the
assets acquired under the Xxxxxxxx Holdings Transfer Agreement. Xxxxxxxx
Holdings is qualified to transact business as a foreign corporation in
all jurisdictions where the conduct of its business or ownership of the
assets acquired under the Xxxxxxxx Holdings Transfer Agreement require
Xxxxxxxx Holdings to be so qualified and where the failure to be so
qualified could have a Xxxxxxxx Holdings Material Adverse Effect.
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6.4 Financial Statements. Attached as Schedule G are copies of the Financial
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Statements. The Financial Statements: (i) were prepared in accordance
with GAAP, consistently applied; and (ii) present, in all material
respects, the financial condition of the Acquired Business as of the
respective dates thereof and the results of operations of the Acquired
Business for the applicable periods; provided, however, that the Most
Recent Financial Statements are subject to normal year-end adjustments
and each of the Financial Statements are without footnotes and other
presentation items.
6.5 Receivables and Payables.
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(a) Attached as Schedule L to this Agreement is an aging, as of August
31, 1998, of all receivables generated exclusively by the Acquired
Business that are trade accounts receivable. Schedule L is true and
correct in all material respects. Schedule L identifies the
applicable account debtors.
(b) Solely for the purposes of this Section 6.5(b), a "material
receivable" means a trade account receivable generated exclusively
by the Acquired Business with an aggregate outstanding balance of at
least $25,000 as of August 31, 1998. To Seller's Knowledge, as of
the date of this Agreement: (i) each of the material receivables has
been generated in the Ordinary Course of Business and represents a
valid debt due and owing to Seller; (ii) no account debtor with
respect to any of the material receivables has raised an objection
in writing or made a claim in writing that the account debtor is not
obligated to pay or is entitled to a credit or adjustment with
respect to all of the applicable material receivable or a portion
thereof equal to or greater than $5,000, (iii) no account debtor
with respect to any of the material receivables has asserted in
writing any actual or purported right of set-off or otherwise
threatened in writing to withhold all of the applicable material
receivable or a portion thereof equal to or greater than $5,000, and
(iv) no account debtor with respect to any of the material
receivables is currently involved in any bankruptcy or similar
proceedings.
(c) Attached as Schedule K to this Agreement is an aging, as of August
31, 1998, of all accounts payable generated exclusively by the
Acquired Business that are trade accounts payable. Schedule K is
true and correct in all material respects. Schedule K identifies the
applicable payees.
(d) Solely for the purposes of this Section 6.5(d), a "material payable"
means a trade account payable generated exclusively by the Acquired
Business with an aggregate outstanding balance of at least $10,000
as of August 31, 1998. To Seller's Knowledge, as of the date of this
Agreement, each of the material payables has been generated in the
Ordinary Course of Business and represents a valid debt due and
owing to the identified payee.
6.6 Absence of Certain Changes. Since June 30, 1998 and except for execution
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of the Seller Agreements and consummation of the transactions
contemplated by the Seller Agreements, (a) no event has occurred which
has resulted in a Seller Material Adverse Effect, and (b) Seller has
operated the Acquired Business in the Ordinary Course of Business.
6.7 Personal Property.
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(a) Schedule X sets forth a complete and correct list as of May 31, 1998
of all items of inventory, furniture, fixtures, machinery,
equipment, vehicles and other personal property owned by Seller or
leased by Seller pursuant to a capitalized lease and in either case
used exclusively in the Acquired Business and with a net book value
as of June 30, 1998 of at least $10,000.
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(b) The inventory included in the Acquired Assets has been acquired only
in bona fide transactions entered into in the Ordinary Course of
Business.
6.8 Real Property.
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(a) Schedule Y sets forth a complete and correct list as of August 31,
1998 of all Acquired Business Owned Real Property and all Acquired
Business Leased Real Property. Schedule M sets forth a complete and
correct list as of August 31, 1998 of all Shared Real Property.
Except for the Acquired Business Owned Real Property, the Acquired
Business Leased Real Property and the Shared Real Property, Seller
does not use any other owned or leased real property in any material
respect in the conduct of the Acquired Business in the Ordinary
Course of Business (the Parties agree and acknowledge that for
purposes of this Section 6.8(a), the Shared Services shall not be
deemed to be material to the conduct of the Acquired Business).
(b) With respect to the Acquired Business Leased Real Property: (i)
Seller has delivered to Purchaser or Parent correct and complete
copies of the applicable leases; (ii) there are no Proceedings
pending or, to Seller's Knowledge, threatened against Seller that, if
resolved adversely to Seller, are likely to result in a material
disruption to the operation of the Acquired Business in the Ordinary
Course of Business; and (iii) to Seller's Knowledge, there are no
Proceedings pending or threatened that, if resolved adversely to the
applicable lessor, are likely to result in a material disruption to
the operation of the Acquired Business in the Ordinary Course of
Business.
6.9 Litigation; Compliance with Laws, Etc. There is no Proceeding pending,
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or, to Seller's Knowledge, threatened, against (a) Seller with respect to
the Acquired Business, the ownership or operation of the Acquired Assets,
or the transactions contemplated by this Agreement, or (b) Xxxxxxxx
Holdings with respect to its business, the assets acquired under the
Xxxxxxxx Holdings Transfer Agreement, or the transactions contemplated by
the Xxxxxxxx Holdings Transfer Agreement. There is no Order outstanding
against (a) Seller with respect to the Acquired Business or the ownership
or operation of the Acquired Assets, or (b) Xxxxxxxx Holdings with
respect to its business or the assets acquired under the Xxxxxxxx
Holdings Transfer Agreement. Seller has not received any notice of any
actual or alleged violation of any Applicable Law. Seller has complied at
all times with all Applicable Laws with respect to the Acquired Business
or the ownership or operation of the Acquired Assets where the
consequences of failure to comply in any instance would likely have a
Seller Material Adverse Effect. Seller has not received any notice of any
actual or alleged violation of any Applicable Law. Xxxxxxxx Holdings has
complied at all times with all applicable laws, rules, regulations or
orders with respect to its business or the ownership or operation of the
assets acquired under the Xxxxxxxx Holdings Transfer Agreement where the
consequences of failure to comply in any instance would likely have a
Seller Material Adverse Effect.
6.10 Labor Relations.
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(a) Except for payments of wages, commissions, benefits and employment-
related Taxes (including withholding) in the Ordinary Course of
Business, Seller is not liable for any arrears of wages, commissions
or benefits or employment-related Taxes (including withholding) or
any penalties for failure to timely pay any of the foregoing with
respect to any current or former employees of the Acquired Business.
(b) Seller is not a party to and Seller does not have any obligations
under any valid and binding agreement with any person or party
regarding the salary, commissions, rates of pay, benefits, or working
conditions of any Acquired Business Employees, including any
collective bargaining agreement.
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(c) Seller does not have any policy regarding, and Seller is not a party
to any agreement regarding, the payment of any severance or similar
benefit upon termination of employment of the Acquired Business
Employees, and no Acquired Business Employees will be entitled to any
severance or similar benefit upon termination of employment as
contemplated by this Agreement.
6.11 Governmental Authorizations. Seller has obtained all Governmental
---------------------------
Authorizations from all applicable Governmental Bodies required in
connection with the conduct of the Acquired Business or the ownership or
operation of any of the Acquired Assets where the consequences of failure
to have any such Governmental Authorization is likely to have a Seller
Material Adverse Effect. Seller has not received any notice of any actual
or alleged violation of or any actual or possible revocation,
modification, suspension or termination of any such Governmental
Authorization. RH has obtained all Governmental Authorizations from all
applicable Governmental Bodies required in connection with the conduct of
RH's business or the ownership or operation of any of the assets acquired
under the Xxxxxxxx Holdings Transfer Agreement where the consequences of
failure to have any such Governmental Authorization is likely to have a
RH Material Adverse Effect. RH has not received any notice of any actual
or alleged violation of or any actual or possible revocation,
modification, suspension or termination of any such Governmental
Authorization.
6.12 Contracts.
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(a) Schedule AA contains a true and correct list as of August 31, 1998 of
all material Contracts as of the date of this Agreement (solely for
purposes of this Section 6.12, a Contract shall be "material" if the
Contract is not cancelable on 30 days or less notice without payment
of a penalty in excess of $1,000 and includes the committed future
expenditure by Seller in any 12-month period of at least $10,000;
provided that under no circumstances shall a purchase order entered
into in the Ordinary Course of Business or a Contract with a customer
to provide products and/or services be deemed a "material" Contract).
Correct and complete copies, in all material respects, of the
material Contracts have been provided by Seller to Purchaser or
Parent.
(b) Seller is not in default under any Contract where the consequences of
the default would likely have a Seller Material Adverse Effect.
(c) To Seller's Knowledge, no Acquired Business Employee or any Affiliate
of any Acquired Business Employee owns any material equity interest
in any person that has or had within the last three (3) years prior
to the date of this Agreement any material business dealings with the
Acquired Business.
(d) To Seller's Knowledge, no event has occurred which, with the giving
of notice or the passage of time, or both, would constitute a default
by Seller or the other party under a material Contract (assuming the
discharge by Purchaser after the Effective Time of all executory
obligations under the material Contracts).
(e) To Seller's Knowledge, as of the date of this Agreement, Seller has
not received any written notice that the other party to any material
Contract intends to cancel, terminate or materially modify the
applicable Contract.
(f) To Seller's Knowledge, Seller has not received, as of the date of
this Agreement, any written notice from a customer or supplier of the
Acquired Business threatening to commence litigation which, if
decided adversely to Seller, would result in damages payable by
Seller in an amount equal to or greater than $25,000.
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(g) Attached as Schedule S is a list of all customers of the Acquired
Business who paid at least $25,000 in the aggregate to the Acquired
Business during the period from October 1, 1997 through August 31,
1998. Schedule S is true and correct in all material respects.
Attached as Schedule T is a list of all persons to whom the Acquired
Business paid at least $25,000 in the aggregate in connection with
the Acquired Business during the period from October 1, 1997 through
August 31, 1998 (except employees). Schedule T is true and correct in
all material respects.
(h) To Seller's Knowledge, all of the Contracts with customers of the
Acquired Business are assignable to Purchaser as contemplated by this
Agreement. Purchaser and Parent agree and acknowledge that (i) Seller
shall not be deemed to have breached the representation in the
preceding sentence unless the consequences of the breach, in the
aggregate, are likely to have a Seller Material Adverse Effect, and
(ii) Seller has not, and Seller is not obligated to, perform any
research or analysis of the assignability of the Contracts describe
in the first sentence of this Section 6.12(h).
6.13 Title to Properties; Encumbrances. Seller has good and assignable title
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to all of the Acquired Assets, free and clear of any Liens except the
Permitted Encumbrances. Except for those systems and related equipment
located at customer locations, the Acquired Assets are located only at
the Acquired Business Owned Real Property, the Acquired Business Leased
Real Property and the Shared Real Property. Xxxxxxxx Holdings has good
and assignable title to all of the RH Intellectual Property Intangibles,
free and clear of any Liens, except the RH Permitted Encumbrances.
6.14 Intellectual Property Intangibles.
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(a) Except for the applicable Shared Intellectual Property and the RH
Intellectual Property Intangibles, the Intellectual Property
Intangibles are all fictional business names, trading names,
registered and unregistered trademarks, service marks, patents,
patent applications, inventions and discoveries that may be
patentable, copyrights in both published works and unpublished works,
rights in mask works, know-how, trade secrets, confidential
information, customer lists, software, data, process technology,
plans and drawings used by Seller in the operation of the Acquired
Business. The RH Intellectual Property Intangibles are all fictional
business names, trading names, registered and unregistered
trademarks, service marks, patents, patent applications, inventions
and discoveries that may be patentable, copyrights in both published
works and unpublished works, rights in mask works, know-how, trade
secrets, confidential information, customer lists, software, data,
process technology, plans and drawings owned by Xxxxxxxx Holdings
that are used by Seller exclusively in the operation of the Acquired
Business.
(b) Seller has not taken any action (or failed to take any action) in
connection with the operation of the Acquired Business that
constitutes infringement or misappropriation of the Proprietary
Rights of any other Person where the consequences of any such
infringement or misappropriation are likely to have a Seller Material
Adverse Effect. Xxxxxxxx Holdings has not taken any action (or failed
to take any action) in connection with the operation of its business
that constitutes infringement or misappropriation of the Proprietary
Rights of any other Person where the consequences of any such
infringement or misappropriation are likely to have a Xxxxxxxx
Holdings Material Adverse Effect. To Seller's Knowledge, neither
Seller nor Xxxxxxxx Holdings has received any written notice
asserting any claim or otherwise alleging that Seller or Xxxxxxxx
Holdings has infringed or misappropriated the Proprietary Rights of
any other Person where the consequences of any such infringement or
misappropriation are likely to have a Seller Material Adverse Effect
or a Xxxxxxxx Holdings Material Adverse Effect.
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(c) Schedule U contains a complete list of (i) the Seller Distributed
Software currently being distributed by Seller, and (ii) a complete
list of all the Third Party Distributed Software and the Third Party
Internal Use Software which (A) is material to the current operation
of the Acquired Business in the Ordinary Course of Business, and (B)
is not either implied by the sale of a product or the subject of a
fully-paid-up license of a commercially available software program or
database.
(d) Schedule V identifies: (i) all material agreements pursuant to which
Seller or RH has granted any person a license to use any of the
Intellectual Property Intangibles or the RH Intellectual Property
Intangibles except for customer Contracts, and (ii) all source code
escrow agreements regarding the Intellectual Property Intangibles or
the RH Intellectual Property Intangibles.
(e) Schedule W contains copies of all letters or other written
communications provided to multiple users of the same product
distributed by the Acquired Business with respect to whether such
product is "millennium compliant", "Y2K qualified" or "Y2K
compliant".
(f) Schedules CC and DD are true and correct in all material respects.
6.15 Employee Benefit Plans. Schedule Z contains a complete and correct list,
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in all material respects, of all Seller Plans and Seller Other Benefit
Obligations as of August 31, 1998.
6.16 Consents and Approvals. No Governmental Authorization, filing with any
----------------------
Governmental Body or waiver, consent or approval from or filing with any
other person is required for Seller to consummate the Seller Agreements
without creating a default (or event which with notice, lapse of time or
both would constitute a default) or liability. No Governmental
Authorization, filing with any Governmental Body or waiver, consent or
approval from or filing with any other person is required for RH to
consummate the Xxxxxxxx Holdings Transfer Agreement without creating a
default (or event which with notice, lapse of time or both would
constitute a default) or liability.
6.17 Brokers. Except for BT Alex. Xxxxx Incorporated, no broker or finder has
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acted for Seller or RH in connection with this Agreement.
6.18 Shared Assets and Shared Services. Except for the Shared Assets, there
---------------------------------
are no Excluded Assets that are used by Seller in the operation of the
Acquired Business in the Ordinary Course of Business and that are, in the
aggregate, material to the operation of the Acquired Business in the
Ordinary Course of Business. Except for the Shared Services, there are no
services that are routinely provided by Seller's corporate or other
divisions to the Acquired Business that are material to the operation of
the Acquired Business in the Ordinary Course of Business.
6.19 Investment Representations. Xxxxxxxx Holdings is the sole party in
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interest as to the Parent Note and any Converted Securities and is
acquiring the Parent Note and any Converted Securities for it's own
account, for investment only and not with a view toward the resale or
distribution thereof. Seller and Xxxxxxxx Holdings acknowledge that
neither the Parent Note nor the Converted Securities are registered under
the Securities Act or the securities laws of any state or other
jurisdiction. Xxxxxxxx Holdings is an "accredited investor" as defined in
Regulation D promulgated under the Securities Act. Seller agrees that
Xxxxxxxx Holdings will not attempt to pledge, transfer, convey or
otherwise dispose of any of the Parent Note or the Converted Securities
or any interest therein except in a transaction that is the subject of
either (a) an effective registration statement under the Securities Act
and any applicable state securities laws or (b) an opinion of counsel,
which counsel and which opinion of counsel shall be reasonably
satisfactory to Parent, to the effect that such registration is not
required.
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7. SELLER'S REPRESENTATION AND WARRANTY DISCLAIMERS; PURCHASER'S AND PARENT'S
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ACKNOWLEDGEMENT.
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7.1 General Disclaimer. THE EXPRESS WARRANTIES AND REPRESENTATIONS SET FORTH
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IN SECTION 6 (AS SUCH REPRESENTATIONS AND WARRANTIES HAVE BEEN QUALIFIED
BY THE DISCLOSURE SCHEDULE) ARE IN LIEU OF ALL OTHER WARRANTIES,
CONDITIONS OR REPRESENTATIONS OF SELLER (EXPRESS OR IMPLIED, ORAL OR
WRITTEN), WITH RESPECT TO THE ACQUIRED ASSETS, THE ASSUMED LIABILITIES OR
THE ACQUIRED BUSINESS, INCLUDING WITHOUT LIMITATION ALL IMPLIED
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE,
WHETHER ALLEGED TO ARISE BY LAW, BY REASON OF CUSTOM OR USAGE IN THE
TRADE, OR BY COURSE OF DEALING.
7.2 Specific Disclaimer. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THE
SELLER AGREEMENTS, SELLER SHALL NOT BE DEEMED TO HAVE MADE TO PURCHASER
OR PARENT ANY REPRESENTATION OR WARRANTY OTHER THAN IS EXPRESSLY MADE BY
SELLER IN SECTION 6 OF THIS AGREEMENT (AS SUCH REPRESENTATIONS AND
WARRANTIES HAVE BEEN QUALIFIED BY THE DISCLOSURE SCHEDULE). WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING, AND NOTWITHSTANDING ANY
OTHERWISE EXPRESS REPRESENTATIONS AND WARRANTIES MADE BY SELLER IN
SECTION 6 OF THIS AGREEMENT (AS SUCH REPRESENTATIONS AND WARRANTIES HAVE
BEEN QUALIFIED BY THE DISCLOSURE SCHEDULE) OR OTHERWISE IN THE SELLER
AGREEMENTS, SELLER DOES NOT MAKE AND HEREBY EXPRESSLY DISCLAIMS ANY
REPRESENTATION OR WARRANTY TO PURCHASER OR PARENT WITH RESPECT TO:
(a) ANY PROJECTIONS, ESTIMATES OR BUDGETS HERETOFORE DELIVERED OR MADE
AVAILABLE TO PURCHASER OR PARENT REGARDING FUTURE REVENUES, EXPENSES
OR EXPENDITURES OR RESULTS OF FUTURE OPERATIONS OF THE ACQUIRED
BUSINESS;
(b) ANY OTHER INFORMATION OR DOCUMENTS MADE AVAILABLE TO PURCHASER OR
PARENT OR THEIR COUNSEL, ADVISORS OR ACCOUNTANTS WITH RESPECT TO
SELLER OR THE ACQUIRED BUSINESS, EXCEPT AS EXPRESSLY COVERED BY A
REPRESENTATION IN SECTION 6 OF THIS AGREEMENT (AS SUCH
REPRESENTATIONS AND WARRANTIES HAVE BEEN QUALIFIED BY THE DISCLOSURE
SCHEDULE);
(c) ANY PROPOSED PRODUCTS OF THE ACQUIRED BUSINESS (PROVIDED THIS SECTION
7.2(c) SHALL NOT IN ANY RESPECT LIMIT OR MODIFY THE EXPRESS
REPRESENTATIONS AND WARRANTIES IN SECTION 6.14(f));
(d) THE CONDITION OF ANY PERSONAL PROPERTY (INCLUDING ANY INVENTORY);
(e) THE COLLECTABILITY OF ANY RECEIVABLES;
(f) THE ASSIGNABILITY OF EITHER (i) ANY CONTRACTS WITH CUSTOMERS OF THE
ACQUIRED BUSINESS (PROVIDED THAT THIS SECTION 7.2(f) SHALL NOT IN ANY
RESPECT LIMIT OR MODIFY THE EXPRESS REPRESENTATIONS AND WARRANTIES IN
SECTION 6.12(h)), OR (ii) ANY CONTRACTS WHICH CONTAIN COVENANTS OR
AGREEMENTS NOT TO COMPETE OR COVENANTS OR AGREEMENTS NOT TO DISCLOSE
INFORMATION; OR
(g) WHETHER ANY SELLER DISTRIBUTED SOFTWARE, SELLER INTERNAL USE
SOFTWARE,
9
THIRD PARTY DISTRIBUTED SOFTWARE, THIRD PARTY INTERNAL USE SOFTWARE,
OR ANY HARDWARE, SOFTWARE, OR DATA OWNED, LEASED, LICENSED,
DISTRIBUTED OR USED BY OR IN CONNECTION WITH THE ACQUIRED BUSINESS:
(i) IS OR WILL BE "MILLENNIUM COMPLIANT", "YEAR 2000 COMPLIANT", OR
"YEAR 2000 QUALIFIED" OR OTHERWISE WILL PROCESS, FUNCTION, ACCEPT,
STORE, DISPLAY OR OPERATE WITHOUT ERROR OR INTERRUPTION IN RESPECT OF
DATES BEFORE OR AFTER JANUARY 1, 2000 (PROVIDED THAT THIS SECTION
7.2(g) SHALL NOT IN ANY RESPECT LIMIT OR MODIFY THE EXPRESS
REPRESENTATIONS AND WARRANTIES IN SECTION 6.14(f)); OR (ii) OPERATES
OR WILL OPERATE CONTINUOUSLY AND/OR WITHOUT ERROR (INCLUDING WHEN
INCORPORATED WITH ANY OTHER PRODUCTS PROVIDED BY SELLER OR ANY OTHER
PERSON AS PART OF AN INTEGRATED SYSTEM).
7.3 Purchaser's and Parent's Acknowledgement. Purchaser and Parent
----------------------------------------
acknowledge that they have conducted an independent investigation of the
Acquired Business, the Acquired Assets and the Assumed Liabilities and
Purchaser and Parent are entering into this Agreement solely on the basis
of such investigation and the express representations and warranties of
Seller in Section 6 (as such representations and warranties have been
qualified by the Disclosure Schedule). Purchaser and Parent acknowledge
that (a) neither the representations and warranties in Section 6.14(f),
nor any other representations or warranties in Section 6 which may at any
time be breached if the matter giving rise to the breach constitutes a
Customer Claim, will survive the Closing, (b) the breach of the
representations and warranties described in the foregoing clause (a) is
not grounds for indemnification by Seller under Section 16.2, and (c)
that the sole and exclusive remedy of Purchaser and Parent with respect
to a breach of the representations and warranties described in the
foregoing clause (a) shall be under Section 10.1(c) (provided that this
Section 7.3 shall not limit Purchaser's and Parent's remedies under
Section 17).
8. REPRESENTATIONS AND WARRANTIES OF PURCHASER AND PARENT. Except as set forth
------------------------------------------------------
in the Parent Disclosure Schedule, Purchaser and Parent jointly and severally
represent and warrant to Seller as follows:
8.1 Corporate Action. Purchaser has taken all action required by its Articles
----------------
of Incorporation and Bylaws or otherwise to authorize the execution and
consummation of the Purchaser Agreements. When executed by Purchaser, the
Purchaser Agreements will constitute the valid and legally binding
obligations of Purchaser enforceable in accordance with their terms,
except that enforceability may be limited by applicable equitable
principles or bankruptcy, insolvency, or similar laws affecting the
enforcement of creditors rights generally. Parent has taken all action
required by its Articles of Incorporation and Bylaws or otherwise to
authorize the execution and consummation of the Parent Agreements. When
executed by Parent, the Parent Agreements will constitute the valid and
legally binding obligations of Parent enforceable in accordance with
their terms, except that enforceability may be limited by applicable
equitable principles or bankruptcy, insolvency, or similar laws affecting
the enforcement of creditors rights generally.
8.2 No Conflict With Other Agreements or Laws. The execution and consummation
-----------------------------------------
by Purchaser of the Purchaser Agreements will not (a) violate the terms
of Purchaser's Articles of Incorporation or Bylaws or any instrument,
agreement, judgment or decree to which Purchaser is a party, or by which
Purchaser or any of its properties is bound, (b) be in conflict with,
result in a breach of or constitute (with giving of notice or lapse of
time or both) a default under any such instrument, agreement, judgment or
decree, (c) result in the creation or imposition of any Lien upon
Purchaser or its properties or assets, (d) violate any applicable
federal, state, local or foreign law, regulation or order, or (e) give
any governmental authority or other person the right to challenge any of
the transactions contemplated by the
10
Purchaser Agreements under any applicable laws, rules, regulations,
Orders, decrees, judgments, awards, covenants, restrictions and
ordinances applicable to Purchaser, where the consequences of any of the
events in clauses (a)-(e), inclusive are likely to result in a Parent
Material Adverse Change. The execution and consummation by Parent of the
Parent Agreements will not (a) violate the terms of Parent's Articles of
Incorporation or Bylaws or any instrument, agreement, judgment or decree
to which Parent is a party, or by which Parent or any of its properties
is bound, (b) be in conflict with, result in a breach of or constitute
(with giving of notice or lapse of time or both) a default under any such
instrument, agreement, judgment or decree, (c) result in the creation or
imposition of any Lien upon Parent or its properties or assets, (d)
violate any applicable federal, state, local or foreign law, regulation
or order, or (e) give any governmental authority or other person the
right to challenge any of the transactions contemplated by the Parent
Agreements under any applicable laws, rules, regulations, Orders,
decrees, judgments, awards, covenants, restrictions and ordinances
applicable to Parent, where the consequences of any of the events in
clauses (a)-(e), inclusive are likely to result in a Parent Material
Adverse Change.
8.3 Organization and Qualification. Purchaser is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the
State of Georgia. Purchaser has full power and authority to execute and
consummate the Purchaser Agreements. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware. Parent has full power and authority to execute and
consummate the Purchaser Agreements.
8.4 Financing. Attached as Exhibit 15 is a true and correct copy of the
---------
Commitment Letter (Purchaser and Parent acknowledge that their obligation
to close this Agreement is not subject to any condition relative to the
financing contemplated by the Commitment Letter or any other financing).
Purchaser and Parent have received all written consents and approvals
required of Purchaser's or Parent's lenders as a condition to execution
or performance of the Purchaser Agreements or the Parent Agreements
(including a commitment by all parties to the Subordination Agreement
other than Seller to execute and deliver the Subordination Agreement at
Closing) and Purchaser has delivered a correct and complete copy of all
such consents and approval to Seller.
8.5 No Breach by Seller. To Purchaser's Knowledge, as of the date of this
-------------------
Agreement, Seller has not breached any of its representations,
warranties, covenants or agreements set forth in this Agreement. Seller
acknowledges that any breach of the representation in the preceding
sentence must be proved by clear and convincing evidence.
8.6 Brokers. Except for X.X.Xxxxx Securities Corporation, no broker or finder
-------
has acted for Purchaser or Parent in connection with this Agreement.
8.7 Parent Financial Statements; Absence of Certain Changes and Events. The
------------------------------------------------------------------
Parent Financial Statements: (i) were prepared in accordance with GAAP,
consistently applied; and (ii) present, in all material respects, the
financial condition of Parent as of the respective dates thereof and the
results of operations of Parent's business for the applicable periods;
provided, however, that interim financial statements are subject to
normal year-end adjustments and do not contain footnotes and other
presentation items. Since January 1, 1998 and except for (a) execution of
the Purchaser Agreements and the Parent Agreements and consummation of
the transactions contemplated by the Purchaser Agreements and the Parent
Agreements and (b) matters that have been disclosed in a filing with the
Securities and Exchange Commission on Form 10-K, Form 10-Q or Form 8-K,
no Parent Material Adverse Change has occurred. Neither Purchaser nor
Parent is currently in default under, nor has an event occurred which
with notice, passage of time or both would constitute a default under,
any material liability of Purchaser or Parent. No event has occurred
which, with the passage of time, would constitute an Acceleration Event
(as that term is defined in the Parent Note). Except for those
liabilities of Parent identified in the Parent Financial Statements or
otherwise disclosed in a filing with the Securities and Exchange
Commission on Form 10-K, Form 10-Q or Form 8-K, and those liabilities
incurred by Parent in the
11
Ordinary Course of Business since January 1, 1998, Parent does not have
any material liabilities, whether accrued, absolute, contingent or
otherwise. None of Parent's Form 10-KSB dated April 1, 1998 (including
the Annual Report to Shareholders for the year ended December 31, 1997
incorporated by reference therein), Forms 10-QSB dated May 15, 1998 and
August 14, 1998, Forms 8-K and 8-K/A dated April 8, 1998, April 24, 1998
and May 11, 1998 contains any untrue statement of material fact or omits
to state a material fact necessary in order to make the statements
contained in any such document not misleading.
8.8 Purchaser's Capital Structure; Absence of Other Obligations. Purchaser is
-----------------------------------------------------------
a wholly owned subsidiary of Parent. Except for the Purchaser Agreements,
Purchaser is not a party to nor are any of Purchaser's assets bound by
any agreement, Order, instrument, judgment or decree. Except for the
liabilities and obligations of Purchaser under the Purchaser Agreements,
Purchaser does not have any liability or obligation.
9. COVENANTS. The Parties covenant and agree as follows:
---------
9.1 Conduct of Business Prior to Closing. Until the Closing, and unless
------------------------------------
Purchaser otherwise consents in writing, Seller will operate the Acquired
Business substantially as previously operated and only in the Ordinary
Course of Business.
9.2 Seller Material Adverse Changes. Seller will not without the prior
-------------------------------
consent of Purchaser take any affirmative action, or fail to take any
reasonable action within its control, the consequences of which are
likely to have a Seller Material Adverse Effect.
9.3 Other Transactions. Until the Closing or earlier termination of this
------------------
Agreement, Seller will deal exclusively and in good faith with Purchaser
and Parent regarding a Sale Transaction, and Seller will not (and Seller
will direct Seller's officers, directors, financial advisors,
accountants, agents and counsel not to): (a) solicit submission of offers
from any person relating to a Sale Transaction; (b) participate in any
discussions or negotiations regarding, or furnish any nonpublic
information to any person regarding any Sale Transaction by any person
other than Purchaser and Parent; or (c) enter into any agreement or
understanding, whether oral or written, that would have the effect of
preventing consummation of this Agreement. If Seller or its
representatives or agents should receive any proposal for a Sale
Transaction or any inquiry regarding such proposal from a third party,
Seller will promptly so inform Purchaser.
9.4 Consents, Waivers and Approvals. Seller, Purchaser and Parent will each
-------------------------------
use best efforts to obtain prior to the Closing (a) the Lessor Documents
from each lessor of any Acquired Business Leased Real Property and (b)
all other material consents, waivers, approvals, and releases, and to
make prior to the Closing all material filings (including Governmental
Authorizations and filings with Governmental Bodies), in each case as
necessary to effect the transactions contemplated hereby (provided, that
Seller shall not be obligated to obtain any consents, waiver, approvals
or releases from Customers). Seller, Purchaser and Parent will each use
best efforts to cause NEC to enter into an agreement with Purchaser and
Parent to continue Purchaser's right to use certain equipment at Seller's
San Diego facility on substantially the same terms ad conditions as
currently in effect. All such consents, waivers, releases, approvals and
filings will be in writing and in form and substance reasonably
satisfactory to the other Party.
9.5 Supplemental Disclosure.
-----------------------
(a) Seller will have the continuing obligation up to and including the
Closing Date to supplement or amend the Disclosure Schedule with
respect to any material matter subsequently arising or discovered
which, if existing or known at the date of this Agreement, would have
been required to be set forth or listed in the Disclosure Schedule.
Any such supplemental disclosure will be deemed to have been
disclosed as of the date
12
of this Agreement if Purchaser and Parent proceed with and ultimately
consummate the Closing following receipt of such supplemental
disclosure.
(b) Prior to Closing, Seller shall confirm the accuracy of its
representation and warranties under Section 6.12(f) by interviewing
the operations centers general managers in Birmingham, Daytona Beach,
San Diego and Portland. In the event such interviews reveal any
matter which, if existing or known at the date of this Agreement,
would have been required to be set forth or listed in the Disclosure
Schedule in response to Section 6.12(f), Seller will notify Purchaser
of the same. Purchaser and Parent acknowledge and agree that no
information contained in any such supplemental disclosure shall be
deemed to constitute a breach of Section 6.12(f) unless, in the
aggregate, the matters listed in such supplemental disclosure are
likely to result in Seller Material Adverse Effect.
(c) Purchaser and Parent will have the continuing obligation up to and
including the Closing Date to disclose to Seller in writing any
matter coming to Purchaser's Knowledge after the date of this
Agreement that constitutes a breach by Seller of any of its
representations, warranties, covenants or agreements set forth in
this Agreement (any such matter will be deemed to have been within
Purchaser's Knowledge as of the date of this Agreement if Purchaser
and Parent proceed with and ultimately consummate the Closing after
such matter comes to Purchaser's Knowledge).
(d) Purchaser and Parent will have the continuing obligation up to and
including the Closing Date to supplement or amend the Parent
Disclosure Schedule with respect to any material matter subsequently
arising or discovered which, if existing or known at the date of this
Agreement, would have been required to be set forth or listed in the
Parent Disclosure Schedule. Any such supplemental disclosure will be
deemed to have been disclosed as of the date of this Agreement if
Seller proceeds with and ultimately consummates the Closing following
receipt of such supplemental disclosure.
9.6 Conditions Precedent. Seller will use its reasonable efforts in good
--------------------
faith to satisfy the conditions set forth in Section 10 hereof. Purchaser
and Parent will use reasonable efforts in good faith to satisfy the
conditions set forth in Section 11 hereof.
9.7 Access. Seller will give Purchaser and Parent and their counsel,
------
accountants and other representatives reasonable access during normal
business hours to all of the books, records, assets and personnel of the
Acquired Business. Seller will furnish Purchaser and Parent with such
information concerning the affairs of the Acquired Business as Purchaser
and Parent may reasonably request to verify that the representations and
warranties contained in this Agreement are true and correct in all
material respects. Notwithstanding the foregoing, Purchaser and Parent
acknowledge and agree (a) that their examinations of the materials and
information made available to Purchaser and Parent under this Section (or
otherwise in connection with Purchaser's and Parent's due diligence
investigation) will be conducted in such a manner so as not to
unreasonably disrupt the normal business operations of Seller; (b) that
such examinations will take place in a manner reasonably acceptable to
Seller and its counsel; (c) that neither Purchaser nor Parent shall
contact any customers or suppliers of the Acquired Business in connection
with Purchaser's and Parent's due diligence investigation unless and
approved in advance by Seller (such approval will not be unreasonably
withheld); and (d) that all information supplied to Purchaser and Parent
or their representatives in the course of such investigations will be
subject to the Non-disclosure Agreement between Parent and Seller dated
July 21, 1998.
9.8 Certain Actions. Each of the Parties will refrain from taking any action
---------------
which would render any representation or warranty contained in Sections 6
or 8 of this Agreement inaccurate as of the Closing Date. Each Party will
promptly notify the other of any action or proceeding that is instituted
or threatened against such Party to restrain, prohibit or otherwise
challenge the legality of any transaction contemplated by this Agreement.
13
9.9 Payment of Personal Property Tax Reimbursement. The Parties shall follow
----------------------------------------------
the same procedures to determine the amount of the Personal Property Tax
Reimbursement Amount as required for the Purchase Price Adjustment
Amount. Within ten (10) days after final determination of the Personal
Property Tax Reimbursement Amount (whether by Purchaser's failure to
object, agreement of the Parties or determination by the Independent
Auditors), Purchaser will pay the Personal Property Tax Reimbursement
Amount by wire transfer of immediately available funds to the account(s)
designated by Seller.
9.10 Payment of Agreement-related Expenses. Except as provided in the
-------------------------------------
following sentence, all expenses incurred by a Party in connection with
or related to the authorization, preparation, negotiation and
consummation of this Agreement and the agreements, documents or
instruments contemplated hereby will be borne solely by that Party. The
Auditors' Report Expenses shall be borne by Purchaser and Parent and
paid to D&T by wire transfer of immediately available funds on the
earlier of the Closing Date or the effective date of termination of this
Agreement; provided, however, that if this Agreement is rightfully
terminated by Purchaser pursuant to Section 15.1(a) due to a material
breach by Seller or pursuant to Section 15.1(b), then Seller shall bear
the Auditors' Report Expenses. Notwithstanding anything to the contrary
in this Agreement, Purchaser and Parent shall bear all amounts payable
to X.X. Xxxxx Securities Corporation and FINOVA Capital Corporation in
connection with the transactions contemplated by this Agreement.
9.11 Certain Consents. In the event any of the Contracts (except for the
----------------
leases for the Acquired Business Leased Real Property) requires consent
to assignment and such consent is not obtained prior to the Closing,
then until such consent has been obtained or the applicable Contract
terminates, the Contract shall not be deemed assigned to Purchaser but
instead Purchaser shall be deemed to be Seller's subcontractor or the
Parties shall make such other arrangements as necessary to assure
Purchaser the benefits of the underlying Contract. In that event,
Purchaser shall perform all obligations of Seller under the applicable
Contract and shall be entitled to all benefits from such Contract. The
obligations to be performed by Purchaser shall be Assumed Executory
Obligations for purposes of this Agreement and the benefits to inure to
Purchaser shall be Acquired Assets for purposes of this Agreement.
9.12 Auditors' Report. Seller shall provide to D&T reasonable access to all
----------------
necessary books, records and personnel of Seller to permit D&T to
deliver the Auditors' Report to the Parties no later than September 30,
1998. The Parties shall take all actions reasonably requested by D&T in
connection with the Auditors' Report, including the delivery of the
representation letters contemplated by the Engagement Letter. The
Parties acknowledge and agree that, except as set forth in the following
sentence, the Auditors' Report is to be used solely for the purpose of
inclusion in a filing on Form 8-K required to be filed by Parent as a
result of this Agreement and a Form S-1 registration statement planned
to be filed by Parent prior to the Effective Time, and neither the
Auditors' Report nor any information contained therein shall be used for
any purpose in connection with this Agreement or the representations,
warranties, covenants or agreements of either Party under this
Agreement, including the preparation of the Closing Net Working Capital
Statement and the determination of any Purchase Price Adjustment
pursuant to Section 5.1(b). Seller acknowledges that delivery of the
Auditors' Report shall be a condition to Purchaser's and Parent's
obligations to close as described in Section 10.9.
9.13 Unemployment Tax Ratings. Seller will cooperate with Purchaser to
------------------------
effectuate the assignment to Purchaser (to the extent permitted under
Applicable Law) of the benefits of any unemployment tax ratings or
similar ratings in any jurisdiction in which any of the Acquired Assets
and Acquired Business Employees are located; provided, however, that
Seller shall not be required to effectuate any such assignment where
such assignment would adversely impact Seller with respect to any such
ratings in those jurisdictions where any Excluded Assets or employees of
Seller other than Acquired Business Employees are located.
14
9.14 Closing Escrow Agreement. If required under Section 12.1, the Parties
------------------------
shall execute, deliver and perform their respective obligations under,
and shall cause their respective outside counsel to execute and deliver,
the Closing Escrow Agreement.
9.15 HSD Transition Employees. Purchaser shall in good faith identify the
------------------------
applicable Acquired Business Effective Time Employees and take such
other actions as may be required to complete Schedule 3 to the
Transition Agreement.
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER AND PARENT. The
-----------------------------------------------------------
obligations of Purchaser and Parent to consummate this Agreement will be
subject to the satisfaction, on or before the Closing Date, of the
following conditions, any of which may be waived by Purchaser and Parent
in writing.
10.1 Representations.
---------------
(a) The representations and warranties made by Seller in Section 6 hereof
other than the Materiality-qualified Representations and the
representations and warranties in Section 6.14(f) will be true and
correct in all material respects on the Closing Date as though such
representations and warranties had been made on such date (without
giving any effect to any subsequent disclosure pursuant to Section
9.5) and Seller will deliver to Purchaser and Parent a certificate
dated as of the Closing Date to the foregoing effect.
(b) The Materiality-qualified Representations will be true and correct in
all respects on the Closing Date as though such representations and
warranties had been made on such date (without giving any effect to
any subsequent disclosure pursuant to Section 9.5) and Seller will
deliver to Purchaser and Parent a certificate dated as of the Closing
Date to the foregoing effect.
(c) There shall not exist such breaches of the representations and
warranties of Seller described in clause (a) of Section 7.3 that the
consequences of such breaches, either individually or in the
aggregate, are likely to have a Seller Material Adverse Effect.
10.2 Covenants. Seller will have performed in all material respects all of
---------
the covenants, acts and undertakings to be performed by Seller on or
prior to the Closing Date, and Seller will deliver to Purchaser and
Parent a certificate dated as of the Closing Date to the foregoing
effect.
10.3 No Injunction, Etc. No Proceeding or legislation will have been
------------------
instituted, threatened or proposed to enjoin, prohibit, or obtain
substantial damages in respect of the Seller Agreements or any of the
transactions contemplated by the Seller Agreements.
10.4 Opinion of Counsel. An opinion of in-house counsel for Seller will have
------------------
been delivered to Purchaser and Parent, dated as of the Closing Date, in
the form of the attached Exhibit 3.
10.5 Incumbency. Seller will have delivered a certificate of incumbency
----------
executed by the president and secretary of Seller listing the persons
authorized to execute the Seller Agreements.
10.6 Certified Resolutions. Seller will have delivered to Purchaser and
---------------------
Parent a certificate executed by a duly authorized officer of Seller
containing copies of the resolutions duly adopted by the board of
directors of Seller approving and authorizing the Seller Agreements and
their consummation. Such officer will also certify that such resolutions
have not been revoked or modified and remain in full force and effect.
15
10.7 Assignment Agreement; Xxxxxxxx Holdings Transfer Agreement; Transition
----------------------------------------------------------------------
Agreement. Seller and Xxxxxxxx Holdings, as applicable, shall have
---------
executed the Assignment Agreement, the Transition Agreement and the
Xxxxxxxx Holdings Transfer Agreement and performed all acts required to
be performed by each of them under those agreements on or prior to the
Closing Date, including the execution and delivery of such assignment
documentation as may be required by such agreements.
10.8 HSR Act. All applicable waiting periods (and any extensions thereof)
-------
under the HSR Act shall have expired or otherwise been terminated.
10.9 Auditors' Report. Purchaser and Parent shall have received the Auditors'
----------------
Report, and the Auditors' Report shall not reflect differences from the
Draft Auditors' Report that, taken as a whole, have a Seller Material
Adverse Effect.
10.10 Lessor Documents. Purchaser and Parent shall have received the Lessor
----------------
Documents for each Acquired Business Leased Real Property as executed by
each of the applicable lessors.
10.11 Seller's Consent; Subordination Agreement. Purchaser and Parent shall
-----------------------------------------
have received the Seller's Consent and the Subordination Agreement, each
as fully executed by Seller.
10.12 Closing Escrow Agreement. If required under Section 12.1, Seller and
------------------------
its outside counsel shall have executed the Closing Escrow Agreement.
11. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER. The obligation of Seller
---------------------------------------------
to consummate this Agreement will be subject to the satisfaction, on or
before the Closing Date, of the following conditions, any of which may be
waived by Seller in writing.
11.1 Representations. The representations and warranties made by Purchaser
---------------
and Parent in Section 8 hereof will be true and correct in all material
respects on the Closing Date with the same force and effect as though
such representations and warranties had been made on and as of such date
and Purchaser and Parent will deliver to Seller a certificate dated as of
the Closing Date to the foregoing effect.
11.2 Covenants. Purchaser and Parent will have performed in all material
---------
respects all of the covenants, acts or undertakings to be performed by it
on or before the Closing Date, and Purchaser and Parent will deliver to
Seller a certificate dated as of the Closing Date to the foregoing
effect.
11.3 Certified Resolutions. Purchaser will have delivered to Seller a
---------------------
certificate executed by duly authorized officers and containing true and
correct copy of resolutions duly adopted by the Purchaser's Board of
Directors approving and authorizing the Purchaser Agreements and their
consummation. Such officers will also certify that such resolutions have
not been revoked or modified and remain in full force and effect. Parent
will have delivered to Seller a certificate executed by duly authorized
officers and containing true and correct copy of resolutions duly adopted
by the Parent's Board of Directors approving and authorizing the Parent
Agreements and their consummation. Such officers will also certify that
such resolutions have not been revoked or modified and remain in full
force and effect.
11.4 Opinion of Counsel. An opinion of counsel for Purchaser and Parent will
------------------
have been delivered to Seller, dated as of the Closing Date, in the form
of the attached Exhibit 4.
16
11.5 No Injunction, Etc. No Proceeding or legislation will have been
------------------
instituted, threatened or proposed to enjoin, or prohibit, or to obtain
substantial damages in respect of the Purchaser Agreements or the Parent
Agreements or the transactions contemplated by any of the Purchaser
Agreements or the Parent Agreements.
11.6 Incumbency. Purchaser will have delivered a certificate of incumbency
----------
executed by its president and secretary identifying the persons
authorized to execute the Purchaser Agreements. Parent will have
delivered a certificate of incumbency executed by its president and
secretary identifying the persons authorized to execute the Parent
Agreements.
11.7 HSR Act. All applicable waiting periods (and any extensions thereof)
-------
under the HSR Act shall have expired or otherwise been terminated.
11.8 Assignment Agreement, Transition Agreement and Xxxxxxxx Holdings
----------------------------------------------------------------
Transfer Agreement. Purchaser shall have executed the Assignment
------------------
Agreement, the Transition Agreement and the Xxxxxxxx Holdings Transfer
Agreement and performed all acts required to be performed by Purchaser on
or prior to the Closing Date under such agreements, including the payment
of all consideration payable to Xxxxxxxx Holdings, including the Parent
Note.
11.9 Subordination Agreement. Seller and Xxxxxxxx Holdings shall have
-----------------------
received the Subordination Agreement, each as fully executed by all
parties thereto other than Seller.
11.10 Parent Guaranty. Seller shall have received the Parent Guaranty as
---------------
executed by Parent.
11.11 Closing Escrow Agreement. If required under Section 12.1, Purchaser,
------------------------
Parent and their outside counsel shall have executed the Closing Escrow
Agreement.
17
12. CLOSING.
-------
12.1 Time and Place. The Closing will be held at the offices of Xxxxxxxx,
--------------
Wall, Womsley & Lombard, Dayton Ohio, commencing at 9:00 a.m. on the
second business day following satisfaction or waiver of all of the
conditions set forth in Sections 10 and 11, or at such other place or
time or on such other date as the Parties may agree; provided that (a)
the Closing shall not occur prior to September 30, 1998; and (b) if (i)
all of the conditions in Section 10 of this Agreement have been satisfied
or waived by Purchaser as Parent except the condition in Section 10.8,
and (ii) all of the conditions in Section 11 of this Agreement have been
satisfied or waived by Seller except the condition in Section 11.7, then
the Closing will be held at the offices of Coolidge, Wall, Womsley &
Lombard, Dayton Ohio, commencing at 9:00 a.m. on September 30, 1998 and
the Parties will execute, deliver and perform their respective
obligations under, and cause their respective outside counsel to execute
and deliver, the Closing Escrow Agreement. The Parties agree and
acknowledge in the event of an Escrowed Closing: (i) the Effective Time
shall be deemed to have occurred as of the close of business on September
30, 1998; (ii) Seller will operate the Acquired Business in the Ordinary
Course of Business during the Interim Period (with all receipts generated
in connection therewith promptly paid over to Purchaser); (iii) the
Acquired Business shall be operated for the sole benefit of and at the
sole risk of Purchaser during the Interim Period, and Purchaser shall
bear all risk of loss with respect to any of the Acquired Assets or
Assumed Liabilities from and after the deemed Effective Time pursuant to
such clause (b) (including that Purchaser and Parent shall reimburse
Seller within 60 days after the Closing Escrow Termination Date for costs
and expenses incurred by Seller in operating the Acquired Business during
the Interim Period; such costs and expenses will include all wages,
salaries, commissions, benefits and related Taxes payable to or in
respect of the Acquired Business Employees); and (iv) prior to September
30, 1998, the Parties will cooperate to establish reasonable and mutually
satisfactory procedures for operation of the Acquired Business during the
Interim Period.
12.2 Transactions at the Closing. At the Closing, each of the following
---------------------------
transactions will occur:
(a) Seller will deliver to Purchaser and Parent the following:
(i) copies of the Seller's Articles of Incorporation, certified as of
a date within 30 days prior thereto by the Secretary of State of
Ohio, Seller's Code of Regulations, certified as of such a date
by Seller's Secretary, and a certificate of good standing for
Seller from the Secretary of State of Ohio;
(ii) such bills of sale and other instruments of transfer as are
necessary to vest in Purchaser all of Seller's right, title and
interest in, to and under the Acquired Assets, free and clear of
all Liens (except the Permitted Encumbrances); and
(iii) the certificates, opinion, agreements, instruments, documents,
consents, waivers, releases, approvals and other documents
required as a condition to the obligations of Purchaser and
Parent to close under Section 10.
(b) Purchaser and Parent will deliver to Seller the following:
(i) the Cash Payment (payable by wire transfer of immediately
available funds to the account(s) designated by Seller);
18
(ii) a certificate of good standing of Purchaser from the Secretary of
State of Georgia as of the most recent practicable date and a
certificate of goodstanding of Parent from the Secretary of State
of Delaware as of the most recent practicable date; and
(iii) the Parent Guaranty and the certificates, opinion, agreements,
instruments, documents, consents, waivers, releases, approvals
and other documents required as a condition to the obligation of
Seller to close under Section 11.
12.3 Default at Closing. If either Party fails or refuses to consummate the
------------------
transactions set forth in this Agreement on or prior to the Closing
Date, all conditions to that Party's obligation to close under Section
10 or Section 11, as applicable, have been satisfied, and if the other
Party is not then in material breach under terms of this Agreement and
such other Party stands ready, willing and able to make tender of its
deliveries required under Section 12.2, then, in addition to any other
remedies available to such other Party, the other Party may invoke any
equitable remedies to cause the consummation of the transactions set
forth in this Agreement, including, without limitation, an action or
suit for specific performance.
13. ACQUIRED BUSINESS EMPLOYEES
---------------------------
13.1 Terminations. No later than October 12, 1998, Purchaser shall identify in
------------
writing to Seller those Acquired Business Employees to whom Purchaser
intends to offer employment (as determined by Purchaser in its sole
discretion). At the Effective Time (or, in the event of an Escrowed
Closing, at the Closing Escrow Termination Date), Seller will terminate
all of the Acquired Business Effective Time Employees and Purchaser will
offer employment (and will hire all persons who accept such offer of
employment) to the Acquired Business Effective Time Employees identified
in Purchaser's notice contemplated by the preceding sentence (on such
terms and conditions as Purchaser may determine in its sole discretion).
Seller makes no representation or warranty and provides no assurance that
any Acquired Business Employee will remain employed by Seller until the
Effective Time (or, in the event of an Escrowed Closing, the Closing
Escrow Termination Date) or that any such person will accept an offer of
employment from Purchaser.
13.2 Reimbursement of Excess Termination-related Amounts. Seller shall pay to
---------------------------------------------------
applicable Acquired Business Employees all Termination-related Amounts.
In the event that the number of Acquired Business Effective Time
Employees to whom (a) Purchaser does not extend an offer of employment
effective as of the Effective Time, or (b) Purchaser does extend an offer
of employment effective as of the Effective Time but the terms and
conditions of employment (including duties, responsibilities and
location) are such that even if the Acquired Business Effective Time
Employee accepts the offer, the Acquired Business Effective Time Employee
will be entitled to severance under Seller's standard severance policy or
any compensation or benefits under the WARN Act, exceeds 225, Purchaser
shall reimburse Seller for all Termination-related Amounts paid by Seller
to the excess Acquired Business Effective Time Employees and the
applicable Taxes payable by Seller with respect to such Termination-
related Amounts. The Parties agree that for purposes of determining the
amount of any reimbursement to Seller under this Section 13.2, the
Parties shall determine an average amount payable to or in respect of
each applicable employee and Purchaser shall be responsible for an amount
equal to the per employee average, multiplied by the number of employees
in excess of 225. Amounts payable by Purchaser under this Section 13.2
shall be paid to Seller within thirty (30) days after receipt of each
19
request therefor accompanied by reasonably sufficient supporting material
to verify the amount.
13.3 Withholding. Purchaser and Seller agree to adopt the alternative
-----------
procedure described in Section 5 of Revenue Procedure 96-60 as
promulgated by the Internal Revenue Service with respect to wage
reporting, F.I.C.A., withholding and similar Taxes applicable to the
Acquired Business Employees who become employees of Purchaser.
14. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
------------------------------------------
warranties made by Seller or Purchaser and Parent in this Agreement will
survive until the 18-month anniversary of the Effective Time, except that
(a) to the extent any representations or warranties relate to Taxes, such
representations and warranties shall be deemed to survive for the period of
the applicable statute of limitations, (b) the representations and
warranties described in clause (a) of Section 7.3 shall not survive the
Closing, (c) the representations and warranties in Section 6.14 (other than
Section 6.14 (f)) and the representations and warranties under Section 8.5
shall survive until the third (3rd) anniversary of the Effective Time, and
(d) the representations and warranties in Sections 6.1, 6.13, and 8.1 shall
survive indefinitely. No claim for breach of a representation or warranty
(including an Indemnification Claim) may be brought by any person unless
written notice of such claim is given on or prior to the last day of the
applicable survival period in this Section 14 (in which event each
representation and warranty with respect to any asserted claim will survive
until such claim is finally resolved and all obligations with respect
thereto are fully satisfied).
15. TERMINATION.
-----------
15.1 Grounds. This Agreement may, by notice given on or prior to the earlier
-------
of the Termination Date or the Closing Date, be terminated: (a) by either
Seller or Purchaser if a material breach of any provision of this
Agreement has been committed by the other Party and such breach has not
been cured by the earlier of the Termination Date or ten (10) days after
receipt by the breaching Party of written notice from the non-breaching
Party describing the breach and such breach has not been waived by the
non-breaching Party; (b) by Purchaser if any of the conditions in Section
10 has not been satisfied as of the Termination Date or if satisfaction
of such a condition is or becomes impossible (other than through the
failure of Purchaser to comply with its obligations under this Agreement)
and Purchaser has not waived such condition on or before the Termination
Date; (c) by Seller, if any of the conditions in Section 11 has not been
satisfied of the Termination Date or if satisfaction of such a condition
is or becomes impossible (other than through the failure of Seller to
comply with its obligations under this Agreement) and Seller has not
waived such condition on or before the Termination Date; (d) by mutual
consent of Purchaser and Seller; or (e) by either Purchaser or Seller if
the Closing has not occurred (other than through the failure of any Party
seeking to terminate this Agreement to comply fully with its obligations
under this Agreement) on or before the Termination Date or such later
date as the Parties may agree upon.
15.2 Effect of Termination. Each Party's right of termination under Section
---------------------
15.1 is in addition to any other rights it may have under this Agreement
or otherwise, and the exercise of a right of termination will not be an
election of remedies. If this Agreement is terminated pursuant to Section
15.1, all further obligations of the Parties under this Agreement will
terminate, except that the obligations in Section 9.10 will survive;
provided, however, that if this Agreement is terminated by a Party
because of the breach of the Agreement by the other Party or because one
or more of the conditions to the terminating Party's obligations under
this Agreement is not satisfied as a result of the other Party's failure
to comply with its obligations under this Agreement, the terminating
Party's right to pursue all legal remedies will survive such termination
unimpaired.
20
16. INDEMNIFICATION.
---------------
16.1 Losses. For purposes of Sections 16 and 17 of this Agreement, "LOSSES"
------
will mean all damages, losses, costs, expenses (including legal,
accounting, investigation and other fees and expenses), interest,
penalties, charges and liabilities.
16.2 Indemnification by Seller Shareholders. Seller shall indemnify, defend
--------------------------------------
and hold harmless the Purchaser Indemnified Persons from and against any
Loss incurred by the Purchaser Indemnified Persons related to or arising
out of (a) the breach of any of the warranties, representations,
covenants or agreements of Seller in this Agreement, (b) any Excluded
Liability or Excluded Asset, (c) Seller's use of the R/2000 and ProMed
Marks prior to the Effective Time, or (d) any claim by Synergex with
regard to Seller's use or distribution of Synergex' products on or
before the Effective Time.
16.3 Indemnification by Purchaser. Purchaser and Parent jointly and severally
----------------------------
agree to indemnify, defend and hold harmless the Seller Indemnified
Persons from and against any Loss incurred by the Seller Indemnified
Persons related to or arising out of (a) the breach of any of the
warranties, representations, covenants or agreements of Purchaser and/or
Parent in this Agreement, or (b) any Acquired Asset or Assumed Liability
(except to the extent that Seller is obligated to indemnify the
Purchaser Indemnified Persons under Section 16.2 with respect to the
applicable event, circumstance, action or omission that generates the
Loss).
16.4 Procedures for Indemnification.
------------------------------
(a) An Indemnification Claim will be made by Indemnitee by delivery of a
written declaration to Indemnitor requesting indemnification and
specifying the basis on which indemnification is sought and the
amount of asserted Losses and, in the case of a Third Party Claim,
containing such other information as Indemnitee will have concerning
such Third Party Claim.
(b) If the Indemnification Claim involves a Third Party Claim the
procedures set forth in Section 16.5 hereof will be observed by
Indemnitee and Indemnitor.
(c) If the Indemnification Claim involves a matter other than a Third
Party Claim, the Indemnitor will have ten (10) days to object to
such Indemnification Claim by delivery of a written notice of such
objection to Indemnitee specifying in reasonable detail the basis
for such objection. Failure to timely so object will constitute
acceptance of the Indemnification Claim by the Indemnitor and the
Indemnification Claim will be paid in accordance with Section
16.4(d). If any objection is timely interposed by the Indemnitor and
the dispute is not resolved within fifteen (15) days from the date
Indemnitee receives such objection, such dispute will be resolved as
provided in Section 18.12 of this Agreement.
(d) Upon determination of the amount of an Indemnification Claim
(including a Third Party Claim), whether by agreement between
Indemnitor and Indemnitee, by an arbitration award or otherwise,
Indemnitor will pay the amount of such Indemnification Claim within
ten (10) days of the date such amount is determined.
16.5 Defense of Third Party Claims.
-----------------------------
21
(a) Should any Third Party Claim be made the obligations and liabilities
of the parties with respect to such Third Party Claim will be
subject to this Section 16.5.
(b) Within a reasonable time (i.e., such time as will not prejudice the
contest, defense, litigation, or settlement of a Third Party Claim)
following the receipt of notice of a Third Party Claim, the party
receiving the notice of the Third Party Claim will (i) notify the
other party of its existence setting forth in writing and with
reasonable specificity the facts and circumstances of which such
party has received notice, and (ii) if the party giving such
notice is an Indemnitee, specify in writing the basis hereunder upon
which the Indemnitee's claim for indemnification is asserted and
tendering defense of the Third Party Claim to Indemnitor.
(c) If the defense of a Third Party Claim is so tendered and within ten
(10) days thereafter such tender is accepted without qualification
by the Indemnitor as evidenced by written notice to Indemnitee,
then, except as provided below, the Indemnitee will not, and the
Indemnitor will, have the right to contest, defend, litigate and
settle such Third Party Claim. The Indemnitee will have the right to
be represented by counsel of its own choice and at Indemnitee's
expense to participate in any contest, defense, litigation or
settlement conducted by the Indemnitor; provided that the Indemnitee
will be entitled to reimbursement therefor if the Indemnitor loses
its right to contest, defend, litigate and settle the Third Party
Claim as provided below. Notwithstanding the preceding provisions of
this Section 16.5, if the Third Party Claim is asserted against both
a Purchaser Indemnified Person and a Seller Indemnified Person, and
representation of both of them by the same counsel would be
inappropriate due to actual or potentially differing interests
between them, Indemnitee shall be entitled to retain the right to
contest, defend or litigate such Third Party Claim as it relates to
Indemnitee and will have the exclusive right, in its discretion
exercised in good faith, and with the advice of counsel, to settle
any such matter, either before or after the initiation of
litigation, at such time and upon such terms as it deems fair and
reasonable, provided that at least ten (10) days prior to any such
settlement, written notice of its intention to settle will be given
to the Indemnitor. If, pursuant to the preceding sentence, the
Indemnitee so contests, defends, litigates or settles a Third Party
Claim, the Indemnitee will be reimbursed by the Indemnitor for the
reasonable attorneys' fees and other expenses of defending,
contesting, litigating and/or settling the Third Party Claim which
are incurred from time to time, promptly following the presentation
to the Indemnitor of itemized bills for such attorneys' fees and
other expenses.
(d) The Indemnitor will lose its right to contest, defend, litigate and
settle the Third Party Claim if it fails to diligently contest the
Third Party Claim (except in connection with a settlement thereof in
accordance with the terms hereof). So long as the Indemnitor has not
lost its right to defend, contest, litigate and settle as herein
provided, the Indemnitor will have the exclusive right to contest,
defend and litigate the Third Party Claim and will have the
exclusive right, in its discretion exercised in good faith, and with
the advice of counsel, to settle any such matter, either before or
after the initiation of litigation, at such time and upon such terms
as it deems fair and reasonable, provided that at least ten (10)
days prior to any such settlement, written notice of its intention
to settle will be given to the Indemnitee and the settlement
includes an unconditional release of the Indemnitee.
(e) All expenses (including without limitation attorneys' fees and
expenses) incurred by the Indemnitor in connection with the
foregoing will be paid by the Indemnitor.
(f) No failure by an Indemnitor to acknowledge in writing its
indemnification obligations under
22
this Section 16 will relieve it of such obligations to the extent
they exist. If an Indemnitee is entitled to indemnification against
a Third Party Claim, and the Indemnitor fails to accept or assume
the defense of a Third Party Claim pursuant to Section 16.5(c), or
if, in accordance with the foregoing, the Indemnitor loses its right
to contest, defend, litigate and settle such a Third Party Claim,
the Indemnitee will have the right, without prejudice to its right
of indemnification hereunder, in its discretion exercised in good
faith, to contest, defend and litigate such Third Party Claim, and
may, in its discretion exercised in good faith, and with the advice
of counsel, settle such Third Party Claim, either before or after
the initiation of litigation, at such time and upon such terms as it
deems fair and reasonable, provided that at least ten (10) days
prior to any such settlement, written notice of its intention to
settle is given to the Indemnitor. If, pursuant to this Section
16.5(f), the Indemnitee so contests, defends, litigates or settles a
Third Party Claim for which it is entitled to indemnification
hereunder, the Indemnitee will be reimbursed by the Indemnitor for
the reasonable attorneys' fees and other expenses of defending,
contesting, litigating and/or settling the Third Party Claim which
are incurred from time to time, promptly following the presentation
to the Indemnitor of itemized bills for such attorneys' fees and
other expenses.
16.6 Limitations.
-----------
(a) All notices of Loss must be delivered to the Indemnitor prior to
expiration of the applicable periods for the warranties and
representations as set forth in Section 16 hereof.
(b) Except as set forth in Section 16.6(c), no Indemnitor will have any
obligation until the aggregate of all Losses payable by the
Indemnitor to the Indemnitee with respect to all Indemnification
Claims under this Section 16 exceeds the Floor. Upon the aggregate
of all Losses (except the Exempt Indemnification Obligations)
payable by an Indemnitor with respect to Indemnification Claims
under this Section 16 exceeding the Floor, the Indemnitor will be
liable to the Indemnitee on a dollar-for-dollar basis, for all
Losses (except the Exempt Indemnification Obligations) above the
Floor.
(c) The Floor shall not apply to the Exempt Indemnification Obligations
and such amounts shall be payable by the Indemnitor from the first
dollar. The Parties acknowledge that obligations to pay any Purchase
Price Adjustment Amount, any Personal Property Tax Reimbursement
Amount, any amount described in Section 5.2 or any reimbursement of
Termination-related Amounts as described in Section 13.2 are not
Indemnification Claims and are not subject to the Floor.
(d) The payment of any Loss hereunder will constitute an additional
adjustment to the Purchase Price under Section 5.
(e) Except for the equitable remedies under the terms of Section 12.3,
indemnification for Customer Claims under Section 17 and matters
that Purchaser or Parent establishes by clear and convincing
evidence amount to fraud under applicable law, the remedies provided
in this Section 16 (as limited by this Section 16.6) are the sole
and exclusive remedies of Purchaser with respect to claims arising
out of: (i) the warranties, representations, covenants and
agreements of Seller in this Agreement; (ii) any Excluded Asset or
Excluded Liability; or (iii) any Acquired Asset or Assumed
Liability. Except for the equitable remedies under the terms of
Section 12.3, indemnification for Customer Claims under Section 17
and matters that Seller establishes by clear and convincing evidence
amount to fraud under applicable law, the remedies provided in this
23
Section 16 (as limited by this Section 16.6) are the sole and
exclusive remedies of Seller with respect to claims arising out of:
(i) the warranties, representations, covenants and agreements of
Purchaser and/or Parent in this Agreement; (ii) any Excluded Asset
or Excluded Liability; (iii) any Acquired Asset or Assumed
Liability; or (iv) the ownership or operation of the Acquired
Business or the Acquired Assets for any period ending after the
Effective Time. Except as permitted under applicable law as a remedy
for fraud proven by clear and convincing evidence, no Party shall
have the right of rescission of the transactions under this
Agreement.
(f) Notwithstanding anything to the contrary contained in this
Agreement, neither Seller nor Xxxxxxxx Holdings shall have any
liability under this Section 16 or otherwise (including under or in
connection with the Xxxxxxxx Holdings Transfer Agreement), and
neither Purchaser nor Parent shall be entitled to recover against
Seller or Xxxxxxxx Holdings, whether under a claim for breach of
contract, breach of warranty, strict liability, tort, contribution
or other theory of recovery with respect to or arising out of
(provided, however, that this Section shall not apply to matters
that Purchaser or Parent establishes by clear and convincing
evidence constitute fraud under applicable law):
(i) any falsity or breach of a representation or the breach of a
warranty or covenant under this Agreement to the extent that
the existence of such falsity or breach upon which liability
would be based (A) is within Purchaser's Knowledge at or prior
to the execution of this Agreement (as proven by clear and
convincing evidence), or (B) comes within Purchaser's
Knowledge prior to the Closing (as proven by clear and
convincing evidence); provided, however, that as to the
foregoing clause (B), any such falsity or breach so disclosed
to Purchaser or Parent after the execution and delivery of
this Agreement but prior to the Closing shall not affect the
right of Purchaser or Parent under the terms of Section 10 to
elect not to close the transactions contemplated by this
Agreement (it being understood that if, despite such right of
Purchaser and Parent to elect not to close Purchaser and
Parent nevertheless elects to close, Purchaser and Parent
shall thereafter have no claim against Seller by reason of, in
connection with or arising from such falsity or breach);
(ii) any projections, estimates or budgets heretofore delivered or
made available to Purchaser regarding future revenues,
expenses or expenditures or results of future operations of
the Acquired Business;
(iii) any other information or documents provided to Purchaser or
Parent or their counsel, advisors or accountants with respect
to Seller or the Acquired Business, except as expressly
covered by a representation in Section 6 of this Agreement (as
such representations and warranties have been qualified by the
Disclosure Schedule);
(iv) any proposed products of the Acquired Business;
(v) the condition of any Personal Property (including any
inventory);
(vi) the collectability of any Receivables;
(vii) the assignability of any Contracts with customers of the
Acquired Business (provided that the foregoing shall not in
any manner limit, modify or otherwise affect Purchaser's and
Parent's rights and remedies under Sections 17 and 22) or any
Contracts which contain covenants or agreements not to compete
or
24
covenants or agreements not to compete or covenants or
agreements not to disclose information;
(viii) the failure to obtain any consents, releases, waivers or
approvals required under any Contracts as a result of
consummation of the transactions contemplated by this
Agreement or as a condition to the valid and effective
assignment of any Contracts pursuant to this Agreement
(provided that the foregoing shall not in any manner limit,
modify or otherwise affect Purchaser's and Parent's rights and
remedies under Sections 17 and 22);
(ix) the Auditors' Report or any information contained therein;
(x) the RH Intellectual Property Intangibles or the Xxxxxxxx
Holdings Transfer Agreement (Purchaser and Parent acknowledge
that the transactions under the Xxxxxxxx Holdings Transfer
Agreement are "AS IS,WHERE IS" and that Xxxxxxxx Holdings has
disclaimed any and all warranties with respect to the RH
Intellectual Property Intangibles; provided that this Section
16.6(f)(x) shall not limit in any respect Seller's liability
and the Purchaser Indemnified Persons' remedies under Section
16.2 for a breach of Section the representations or warranties
in Section 6.13 and Section 6.14 that expressly pertain to
Xxxxxxxx Holdings or the RH Intellectual Property
Intangibles);
(xi) except as provided in Section 17, the failure of any Seller
Distributed Software, Seller Internal Use Software, Third
Party Distributed Software or Third Party Internal Use
Software or any hardware, software, or data owned, leased,
licensed, distributed or used by or in connection with the
Acquired Business: (A) to be "millennium compliant", "year
2000 compliant", or "year 2000 qualified" or otherwise
process, function, accept, store, display or operate without
error or interruption in respect of dates before or after
January 1, 2000, or (B) to operate continuously and without
error (including when incorporated with any other products
provided by Seller or any other person as part of an
integrated system);
(xii) the falsity of or breach by Seller of any representation or
warranty in Section 6.14(f); or
(xiii) any Customer Claims (provided that this Section 16.6(f) shall
not in any manner limit, modify or otherwise affect
Purchaser's and Parent's rights and remedies under Section
17).
(a) Notwithstanding anything to the contrary contained in this
Agreement, neither Purchaser nor Parent shall have any liability
under this Section 16 or otherwise, and neither Seller nor Xxxxxxxx
Holdings shall be entitled to recover against Purchaser or Parent,
whether under a claim for breach of contract, breach of warranty,
strict liability, tort, contribution or other theory of recovery
with respect to or arising out of (provided, however, that this
Section shall not apply to matters that Seller or Xxxxxxxx Holdings
establishes by clear and convincing evidence constitute fraud under
applicable law) any falsity or breach of a representation or the
breach of a warranty or covenant under this Agreement to the extent
that the existence of such falsity or breach upon which liability
would be based (i) is within Seller's Knowledge at or prior to the
Closing, or (ii) is disclosed in a written notice furnished to
Seller prior to the Closing; provided, however, that as to the
foregoing clause ii), any such falsity or breach so disclosed to
Seller after the execution and delivery of this Agreement but prior
to the Closing shall not affect the right of Seller under the terms
of Section 11 to elect not to close the transactions
25
contemplated by this Agreement (it being understood that if, despite
such right of Seller to elect not to close Seller nevertheless
elects to close, Seller shall thereafter have no claim against
Purchaser and Parent by reason of, in connection with or arising
from such falsity or breach).
(b) Notwithstanding anything to the contrary in this Agreement, in
determining the amount of any "Loss" suffered by a Party: (i) no
Party shall be entitled to recover under this Section 16 any
consequential damages, including business interruption or lost
profits, or any punitive damages; and (ii) "Loss" shall not be
calculated using a multiple of earnings, book value or any other
item which may have been used in arriving at the Purchase Price.
(c) In the event that, after taking into account the limitations in this
Section 16.6 or elsewhere in this Agreement, Seller nevertheless
becomes obligated to pay Losses to a Purchaser Indemnified Person,
in no event shall the aggregate amount of such liability of Seller
(including any and all liabilities of Seller for costs, expenses and
attorney's fees paid or incurred in connection therewith or in
connection with curing of any and all breaches of Seller's
representations, warranties, covenants or agreement) exceed the Cap;
provided that the Cap shall not apply to matters that the Purchaser
Indemnified Person establishes by clear and convincing evidence
amount to fraud under applicable law or to Exempt Indemnification
Obligations. In the event that, after taking into account the
limitations in this Section 16.6 or elsewhere in this Agreement,
Purchaser and/or Parent nevertheless becomes obligated to pay Losses
to Seller, in no event shall the aggregate amount of such liability
of Purchaser and Parent (including any and all liabilities of
Purchaser and Parent for costs, expenses and attorney's fees paid or
incurred in connection therewith or in connection with curing of any
and all breaches of Purchaser's representations, warranties,
covenants or agreement) exceed the Cap; provided that the Cap shall
not apply to matters that Seller establishes by clear and convincing
evidence amount to fraud under applicable law.
17. SPECIAL INDEMNIFICATION.
--- -----------------------
17.1 General. TRANSITION SERVICES. Seller agrees to indemnify and hold the
------- -------------------
Purchaser Indemnified Persons harmless from Customer Claims Losses, and
Purchaser and Parent agree to indemnify and hold harmless the Seller
Indemnified Persons from Customer Claims Losses, each as follows: (a)
Seller shall bear the first $500,000 of Customer Claims Losses; (b) each
of (i) Seller and (ii) Purchaser and Parent, shall bear 50% of the next
$4,000,000 of Customer Claims Losses (i.e., up to $4,500,000 in the
aggregate); and (c) Purchaser and Parent shall bear all Customer Claims
Losses in excess of $4,500,000 in the aggregate. Notwithstanding
anything to the contrary in this Agreement, Seller shall not have any
further liability under this Section 17 from and after September 30,
2001.
17.2 Definitions. "Customer Claims Losses" means all Losses arising out of
-----------
or related to Customer Claims. "Customer Claims" means either (a) any
claims, demands, actions, causes of action or Proceedings asserted or
threatened to be asserted by, on behalf of or with respect to any person
that is a customer of the Acquired Business as of the Effective Time (an
"Acquired Business Customer"), regardless of whether such claim is
asserted under any breach of contract, breach of warranty, products
liability, strict liability or other theory, with respect to or arising
out of any agreement, contract, commitment, liability or obligation to
the Acquired Business Customer as of the Effective Time, including
without limitation (i) claims with respect to any hardware, software,
databases or services sold, leased, licensed or otherwise provided to
the Acquired Business Customer prior to the Effective Time, (ii) claims
26
relating to the failure any of Seller Distributed Software or Third
Party Distributed Software or any other hardware, software, databases
sold, leased, licensed or otherwise provided to the Acquired Business
Customer prior to the Effective Time to be "millennium compliant", "year
2000 compliant", or "year 2000 qualified" or otherwise process,
function, accept, store, display or operate without error or
interruption in respect of dates before or after January 1, 2000, or to
operate continuously and without error (including when incorporated with
any other products provided by Seller or any other person as part of an
integrated system), and (iii) claims related to the disputes identified
in Section 6.12(f) of the Disclosure Schedule, or (b) any Losses or
other costs incurred by Purchaser or Parent, which, in their reasonable
judgment, are necessary to minimize, mitigate or avoid potential claims,
demands, actions, causes of action or Proceedings under clause (a)
above, including without limitation the cost to cause any of the
services or software or hardware referenced in clause (a) to become
"millennium compliant", "year 2000 compliant", or "year 2000 qualified".
17.3 Procedures. Purchaser shall assume responsibility for the defense and
----------
settlement of any Customer Claims. Seller's consent (which shall not be
unreasonably withheld) will not be required for settlements of any
Customer Claim of less than $100,000; provided, however that as a
condition to any settlement, regardless of the amount of Customer Claims
described in clause (a) of Section 17.2, Purchaser shall secure from the
Acquired Business Customer a unconditional release of Seller from any
past or future liability. Notwithstanding any provision to the contrary
in this Agreement, the Floor will not apply to the obligations of the
Parties under this Section. Purchaser shall provide Seller a monthly
report of all Customer Claims Losses. All such reports shall become
final and binding on the Parties unless Seller objects in writing within
30 days after receipt of the report. To the extent that Seller becomes
obligated to pay any amounts under this Section, Seller's payment shall
be effected first through a reduction of the Principal Sum (as defined
in the Parent Note) in accordance with the Parent Note, with any
remainder paid by Seller by wire transfer within thirty (30) days after
the applicable report becomes final (whether by agreement, by failure of
Seller to timely object or by resolution under Section 18.12).
18. MISCELLANEOUS.
-------------
18.1 Accounting Records. From and after the Effective Time, Seller and its
------------------
representatives will have reasonable access to all of the Books and
Records for the period prior to the Effective Time, but only to the
extent that such access may reasonably be required by such persons in
connection with matters relating to or affected by the operations of
the Acquired Business prior to the Effective Time. Such access will be
afforded by Purchaser upon receipt of reasonable advance notice and
during normal business hours. From and after the Effective Time,
Purchaser and its representatives will have reasonable access to all of
the books and records of the Acquired Business for the period prior to
the Effective Time which are retained by Seller, but only to the extent
that such access may reasonably be required by such persons in
connection with matters relating to or affected by the operations of
the Acquired Business prior to the Effective Time. Such access will be
afforded by Seller upon receipt of reasonable advance notice and during
normal business hours.
27
18.2 Notice. All notices, requests, demands and other communications
------
hereunder will be in writing and will be deemed given and received (a)
on the date of delivery when delivered by hand or when transmitted by
confirmed simultaneous telecopy, (b) on the following business day when
sent by receipted overnight courier, or (c) five (5) business days after
deposit in the United States Mail when mailed by registered or certified
mail, return receipt requested, first class postage prepaid, when
addressed as set forth in Schedule I. Any party may change the address
to which notices are to be sent to it by giving written notice of such
change of address to the other parties in the manner above provided for
giving notice.
18.3 Assignment; Binding Effect. This Agreement may not be assigned by
--------------------------
either Party without the prior written consent of the other Party. This
Agreement will be binding upon the Parties and their respective
successors and permitted assigns.
18.4 Headings; Exhibits and Schedules. The Section, Subsection and other
--------------------------------
headings in this Agreement are inserted solely as a matter of
convenience and for reference, and are not a part of this Agreement. The
Exhibits and Schedules attached hereto are a material part of this
Agreement and are incorporated herein by this reference.
18.5 Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which will be considered one and the same agreement
and will become effective when one counterpart has been signed by each
party and delivered to the other party hereto.
18.6 Integration of Agreement. This Agreement supersedes all prior
------------------------
agreements, oral and written, between the parties hereto with respect to
the subject matter hereunder, including the Letter of Intent; provided,
however, that if the Closing does not occur for any reason, the Non-
disclosure Agreement between the Parties dated July 21, 1998 shall
survive according to its terms. Neither this Agreement, nor any
provision hereof, may be changed, waived, discharged, supplemented or
terminated orally, but only by an agreement in writing signed by the
party against which the enforcement of such change, waiver, discharge or
termination is sought.
18.7 Time of Essence. Time is of the essence in this Agreement.
---------------
18.8 Governing Law. This Agreement will be governed by and construed and
-------------
enforced in accordance with the laws of the state of Ohio as applied to
contracts between Ohio residents executed and performed wholly within
that state.
18.9 Disclosure. Purchaser, Parent and Seller each agree not to issue any
----------
press release or make any public announcement or other disclosure to
competitors, customers, employees or any other person (except to
employees and agents on a need-to-know basis in order to complete the
transactions contemplated by this Agreement and who agree to maintain
the confidentiality of the disclosed information) concerning this
Agreement except as required by law or with the advance written approval
of the other Parties, which approval will not be unreasonably withheld.
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18.10 Partial Illegality or Unenforceability. Wherever possible, each
--------------------------------------
provision hereof will be interpreted in such manner as to be effective
under applicable law, but in case any one or more of the provisions
contained herein will, for any reason, be held to be illegal or
unenforceable in any respect, such illegality or unenforceability will
not affect any other provisions of this Agreement, and this Agreement
will be construed as if such illegal or unenforceable provision or
provisions had never been contained herein unless the deletion of such
provision or provisions would result in such a material change as to
cause completion of the transactions contemplated hereby to be
unreasonable.
18.11 Singular or Plural. All defined terms used herein will have the same
------------------
meaning, whether used in the singular or plural form, unless the context
clearly requires otherwise.
18.12 Arbitration.
-----------
(a) Any controversy, dispute or claim arising out of or relating to this
Agreement or the Xxxxxxxx Holdings Transfer Agreement (except in
connection with the determination of a Purchase Price Adjustment
Amount or a Personal Property Tax Reimbursement Amount or
enforcement of the Parent Note or a breach of Section 19) will be
submitted to arbitration in accordance with the commercial rules of
the AAA, by which each Party will be bound.
(b) If the Parties have not agreed during their negotiations on a single
arbitrator to whom the controversy, dispute or claim will be
submitted, either Party may select an arbitrator and send written
notice to the other party of the selection. The Party receiving such
notice will have 10 days from the date such Party receives such
notice of such selection to select a second arbitrator and send
notice of such to the party who selected the first arbitrator.
Failure to select the second arbitrator and to send timely notice,
as provided above, empowers the arbitrator first selected to resolve
the controversy. If both arbitrators have been duly named, they will
as soon as is reasonably practicable (but within 30 days from the
date the latter of the two arbitrators is named) name a third
arbitrator who must not be from the Dayton, Ohio or Atlanta, Georgia
metropolitan areas and who will be the sole arbitrator to hear and
rule upon the dispute. The provisions of the Federal Rules of Civil
Procedure which provide for discovery will be applicable to any such
arbitration. The parties agree that such discovery must be completed
within six (6) months after the claim has been filed with the AAA
and service on the other party effected.
(c) Any arbitration proceedings will be conducted in Dayton, Ohio unless
the Parties otherwise agree.
(d) The Parties agree to be bound by the decision of the arbitrator and
the decision thereof to be entered into any appropriate court or
other jurisdiction. The prevailing Party in the arbitration will be
promptly reimbursed for its reasonable costs and fees (including
attorneys' fees) incurred in connection with the arbitration and
will not be responsible for the costs of arbitration.
18.13 Person. The term "person" will be broadly interpreted to include,
------
without limitation, any corporation, partnership, association, limited
liability company, other association, trust or individual.
18.14 BestEfforts. The use of the term "best efforts" herein will in no event
-----------
require
29
any party to (a) expend funds which are not commercially reasonable in
relation to the transactions contemplated hereby or (b) take, or cause
to be taken, any action which would have a material adverse effect with
respect to it.
18.15 Including. Whenever the term "including" is used in this Agreement, it
---------
will mean "including, without limitation," (whether or not such language
is specifically set forth) and will not be deemed to limit the range of
possibilities of those items specifically enumerated.
18.16 No Third Party Beneficiaries. Nothing in this Agreement shall confer
----------------------------
any rights upon any person other than the Parties and their respective
heirs, successors and permitted assigns.
18.17 Further Assurances. From and after the Closing, the Parties shall,
------------------
without further consideration, execute and deliver promptly such further
assignments, endorsements and other documents, and to take all such
further actions, as either may from time to time reasonably request with
respect to the transactions contemplated by this Agreement, and the
fulfillment of any condition precedent to the obligations of either
Party waived by that Party in order to consummate the Agreement. The
Parties also agree to promptly deliver to each other any assets
(including mail) they receive which properly are the property of the
other Party or an Affiliate.
19. CERTAIN COVENANTS OF SELLER.
---------------------------
19.1 Covenant Not to Compete. Subject to the conditions in Section 19.2, and
-----------------------
as further consideration for Purchaser's and Parent's obligations under
this Agreement, Seller covenants and agrees that, prior to the fifth
(5th) anniversary of the Effective Time, Seller will not (a) engage in
the Restricted Business in the United States, or (b) solicit for
employment any Acquired Business Effective Time Employees that were
offered and accepted employment with Purchaser immediately after the
Effective Time (or the Closing Escrow Termination Date, as applicable).
19.2 Exceptions. Notwithstanding anything in this Agreement to the contrary:
----------
(i) Section 19.1 shall not survive any termination of this Agreement
prior to Closing pursuant to Section 15.1; and (ii) it shall not be a
violation of Section 19.1 if either: (A) Seller at any time directly or
indirectly holds less than fifteen percent (15%) of the outstanding
voting power of any person engaged in the Restricted Business, (B) a
person engaged in the Restricted Business acquires any securities of
Seller or any successor in interest to Seller or a person who at any time
holds any securities of Seller engages in the Restricted Business, (C)
Seller sells any significant portion of its assets to any person that is
engaged in the Restricted Business (and Section 19.1 shall not apply to
such asset transferee), or (D) Seller merges with or consolidates into
any person that is engaged in the Restricted Business where either (i)
the total consideration paid in any such transaction exceeds
$250,000,000, or (ii) the percentage of overall revenues of such other
person that are generated by its operations within the Restricted
Business are less than 20% as of the lost recently completed fiscal year
of such person (and Section 19.1 shall not apply to the surviving person
in any such merger or consolidation).
20. XXXXX LEASE PORTFOLIO. Purchaser and Parent acknowledge Seller's desire to
---------------------
transfer the Xxxxx Lease Portfolio to one or more persons that routinely
provides lease financing to Parent's customers. Purchaser and Parent agree
to cooperate with Xxxxx and to provide reasonable assistance to Xxxxx
(including through introductions to appropriate representatives of such
lease financing sources) in connection with any such proposed sale of the
Xxxxx Lease Portfolio. Purchaser and Parent also agree to cooperate with
Xxxxx (including, subject to applicable legal restrictions through the
exchange of information) in the collection of amounts coming due to Xxxxx
30
from the Xxxxx Lease Portfolio.
21. ELECTRONIC MEDICAL RECORDS/CLINICAL PRODUCT LINE. Nothing in this Agreement
------------------------------------------------
shall entitle Purchaser or Parent to any right, title or interest in or
restrict Seller in the use and/or disposal of those rights, properties and
assets of Seller described in Exhibit C under the heading "Electronic
Medical Records/Clinical Product Line".
[SIGNATURES APPEAR ON FOLLOWING PAGE]
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The parties have executed this Agreement as of this ____ day of September,
1998.
INFOCURE CORPORATION
By /s/ Xxxxxxxxx X. Fine
------------------------------------------
Title: President and Chief Executive Officer
--------------------------------------
THOROUGHBRED ACQUISITION, INC.
By /s/ Xxxxxxxxx X. Fine
------------------------------------------
Title: President and Chief Executive Officer
--------------------------------------
THE XXXXXXXX AND XXXXXXXX COMPANY
By /s/ Xxxxxx X. Xxxxxx
------------------------------------------
Title: Chairman, President and
Chief Executive Officer
--------------------------------------
32
