ASSET PURCHASE AGREEMENT
This asset purchase agreement ("Agreement") is effective as of October
31, 1996, by and among HealthCare Capital Corp., a corporation organized under
the laws of the Province of Alberta, Canada ("HealthCare"), and HealthCare
Hearing Clinics, Inc., a Washington corporation ("Buyer"), and Hearing Health
Services, Inc., a Delaware corporation ("Hearing Health"), and Audio-Vestibular
Testing Center, Inc., a Michigan corporation ("AVTC"). Hearing Health and AVTC
are collectively referred to herein as "Seller."
RECITALS:
WHEREAS, Seller operates audiology and hearing aid clinics in the
greater Chicago, Illinois, metropolitan area, the greater Lansing, Michigan,
metropolitan area and Highland, Indiana, which perform testing and evaluation of
patients' hearing, prescribe and fit hearing aids, and provide related services
and products; and
WHEREAS, Buyer and Seller desire that Buyer purchase from Seller, and
that Seller sell to Buyer, substantially all of the operating and intangible
assets used in the business of Seller within the states of Illinois, Michigan
and Indiana (the "Midwest Division") on the terms and conditions set forth
herein.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual covenants, representations, warranties and agreements contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties, intending to be legally bound, agree as
follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS AND ASSUMPTION OF LIABILITIES
1.1 PURCHASE AND SALE OF ASSETS. Upon the terms and subject to the
conditions of this Agreement, Seller hereby agrees to sell, transfer, convey,
assign and deliver to Buyer, and Buyer hereby agrees to purchase, acquire and
accept from Seller, free and clear of all liens, charges and encumbrances other
than the Permitted Liens (as hereinafter defined), all of Seller's right, title
and interest in and to the business, assets, tangible and intangible, of Seller
located at the business premises of Seller in the states of Illinois, Michigan
and Indiana, held, owned, or leased by, or used or acquired for use in
connection with, Seller's Midwest Division (collectively, the "Transferred
Assets").
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The Transferred Assets shall include, without limitation,
Seller's right, title, and interest in and to the following to the extent
assignable and to the extent located on the Business Premises (as defined below)
and except as set forth on Schedule 1.2:
(a) all accounts receivable of Midwest Division of Seller;
(b) all of Seller's right, title and interest under, in, and
to, the real estate leases listed on Schedule 1.1(b) (collectively, the "Leased
Premises"), which shall be transferred to Buyer in each case by an assignment
and assumption of lease agreement substantially in the form of Schedule
1.1(b)(i) hereto (the "Assignment and Assumption of Lease Agreement");
(c) all other tangible assets (including, but not limited to,
machinery and equipment, motor vehicles, furniture, office supplies, and
furnishings and fixtures) owned by Midwest Division of Seller, located at or on
the Leased Premises and the real estate covered by the Excluded Leases
(collectively, the "Business Premises"), and including, without limitation, the
assets listed on Schedule 1.1(c);
(d) all of Seller's right, title and interest in and to all,
contracts (including, without limitation, contracts with Seller's customers),
arrangements, obligations, leases with respect to personal property (including,
without limitation, computer leases), franchises, guarantees, commitments,
orders, and other agreements whether written or oral, between Midwest Division
of Seller and any other party, including without limitation, the agreements
listed on Schedule 1.1(d) hereto (collectively, "Contracts") to the extent such
Contracts are assignable and are not fully performed as of the Closing;
(e) all prepaid expenses and cash of Midwest Division of
Seller existing at Closing, except such amounts of cash as are excluded pursuant
to Section 1.2 hereof and are set forth in Schedule 1.2;
(f) all goodwill; customer lists; patient files; all patents,
trade names, trademarks, service marks and copyrights (including all
registrations and applications); slogans; computer programs (and all versions
thereof), compilations and data bases; all inventions, formulae, processes
(secret or otherwise), techniques, technical data and information; any service
records and information; any procedures and software utilized by Seller in the
operation of Seller's Midwest Division; the names "Sonus," "Advanced Hearing Aid
Services," and "Advanced Marketing Resources" (collectively, the "Trade Names");
trade secrets and know-how and all permits, grants, franchises and licenses or
other rights relating to any of the foregoing that are attributable to the
conduct of, used in or related to, the Midwest Division of Seller and, subject
to Section 1.1(h), all books and records located at the Business Premises
relating thereto and any other item of intangible property referred to in this
clause (f) (collectively, "Intangible Property"); and other intangible property
rights of Seller relating to the Midwest Division;
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(g) all claims against third parties (including insurers)
arising out of or in connection with the operation of the Midwest Division
including but not limited to claims against third parties for infringement of
Seller's rights to the Intangible Property;
(h) all books and records of Seller located at the Business
Premises relating to the operations of the Midwest Division;
(i) all rights of Seller under express or implied warranties
from its suppliers to the Midwest Division or with respect to the Transferred
Assets;
(j) all original mechanicals and inventories of advertising,
promotional and point-of-sale materials used in connection with the sale of
Midwest Division of Seller's products;
(k) all licenses, permits, orders or approvals of any
governmental or regulatory body or other applicable authority required or used
in the operations of the Midwest Division (collectively, the "Permits") to the
extent assignable; and
(l) all other assets and properties of any nature whatsoever
held by Seller, either directly or indirectly, located at the Business Premises
and used in, allocated to, or required for the operation of the Midwest
Division, including, without limitation, product development and market research
studies, surveys, reports, analyses and similar information, all stationery,
invoice and other forms, all supplies and all other records of every kind or
type.
1.2 EXCLUDED ASSETS. Notwithstanding Section 1.1, Seller shall
not sell, and Buyer shall not purchase, any assets, property or rights of Seller
listed on Schedule 1.2 (the "Excluded Assets").
1.3 ASSUMPTION OF LIABILITIES. Upon the terms and subject to the
conditions of this Agreement, Seller agrees to transfer to Buyer and Buyer
agrees to assume and undertake to pay, perform and discharge only those
liabilities of Seller (the "Assumed Liabilities") specifically set forth below:
(a) All liabilities of the Midwest Division of Seller as of
the Closing for inventory, office supplies, ordinary compensation payables,
employee benefits and taxes (including, but not limited to, accrued paid time
off), bonuses (including all related payroll taxes and employee benefits),
including amounts owed to employees for achieving revenue targets in September
and October of 1996 as set forth in Schedule 1.3(a), the accrued interest due
and payable as of October 31, 1996, from Hearing Health to Xxxxx Xxxxxxx
pursuant to that certain promissory note dated July 1, 1994, in the original
principal amount of $600,000 issued by Hearing Health to Xxxxx Xxxxxxx, personal
and real property taxes, water, gas, electric and other utility charges,
business or other license fees and taxes, merchants' association dues, rental
payments under any assumed leases, an acquisition bonus payable to Xxxxx Xxxxxxx
as set forth in Schedule 1.3(a)(i) (including all related payroll taxes and
employee benefits), any customer refunds for hearing aids delivered prior to
Closing, and all other operating liabilities (including legal, accounting, and
other professional fees and expenses incurred in the ordinary course of
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business), vendor accounts payable, and similar liabilities (collectively
referred to as "Trade Payables");
(b) All supplier loans set forth in Schedule 1.3(b) and the
Software License, Processing and Support Agreement between Seller and Act Now
Inc. dated January 12, 1995, as amended February 2, 1995;
(c) The obligations of Hearing Health to Xxxxx Xxxxxxx for
"Cash Earn-Out Payments" as such term is defined in Section I.B. of the
Agreement of Purchase and Sale dated June 28, 1994, among AVTC, Xxxxx Xxxxxxx,
and Hearing Health, as amended by Amendment No. 1 thereto dated December 23,
1994 (together, the "Foltner Agreement"); provided, however, that Buyer shall
not assume any liability under Section I.C. in excess of one hundred fifty
thousand dollars ($150,000) in the aggregate, plus interest on payments to be
made by Buyer pursuant to this Section 1.3(c) that are late, if any;
(d) All employment contracts in force at Closing to which
Seller is a party relating to employees of the Midwest Division;
(e) All lease agreements of Midwest Division of Seller in
force at Closing, but excluding the lease agreements set forth on Schedule
1.3(e) (the "Excluded Leases"); and
(f) All obligations with respect to contracts and other
agreements entered into in the ordinary course of business of the Midwest
Division.
All liabilities of Seller not expressly assumed by Buyer under this Section 1.3,
including but not limited to bank obligations, bonuses to employees not within
the definition of Trade Payables or set forth in schedules hereto, loans from
employees, and fees and expenses relating to the transactions contemplated by
this Agreement (but not including any such fees and expenses incurred in the
ordinary course of business owed to accounting, consulting, legal, brokerage,
and investment banking firms) are excluded and are referred to herein as
"Excluded Liabilities".
1.4 PURCHASE PRICE. The purchase price of the Transferred
Assets being sold hereunder (the "Purchase Price") shall be paid simultaneously
at Closing as follows:
(a) Issuance of one (1) year convertible subordinated notes
(collectively, the "Convertible Note") from Buyer and HealthCare in the
aggregate principal amount of two million six hundred thousand dollars
($2,600,000) in the form of Schedule 1.4(a), which Convertible Note shall be
made payable to such payees as Seller shall designate in writing to HealthCare,
together with a security agreement (the "Security Agreement") relating thereto
in the form of Schedule 1.4(a)(i);
(b) Assumption of liabilities pursuant to Section 1.3 above;
(c) Issuance of a promissory note payable to Xxxxx Xxxxxxx in
the principal amount of $360,000 in the form of Schedule 1.4(c) (the "Foltner
Note");
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(d) The Purchase Price shall include an adjustment based on
Net Working Capital as of Closing. For purposes of this Agreement, "Net Working
Capital" shall mean cash, accounts receivable (with adequate reserves for
uncollectible accounts), inventory, and all other current assets and prepaid
expenses less Trade Payables.
(i) As promptly as practicable following the Closing, but in
no event later than 45 days thereafter (the "45-Day Period"), Buyer and Seller
shall cooperate to prepare a mutually agreeable computation of the Net Working
Capital as of the Closing computed in accordance with the terms of this
Agreement, and setting forth the computation and components thereof in
reasonable detail (the "Statement of Net Working Capital").
(ii) During the 45-Day Period, Buyer shall, at the request of
Seller, afford Seller access to the books and records of the Midwest Division
and, upon reasonable prior notice and without unreasonable disruption, to the
employees of Buyer, and afford Seller with the reasonable opportunity to
participate in and consult with Buyer, in connection with the preparation by
Buyer of the Statement of Net Working Capital.
(e) On the fifteenth day after the date on which the Statement
of Closing Working Capital shall have been completed (or such earlier date as
such statement is mutually agreed upon by Seller and Buyer in writing), if the
Net Working Capital shown on the Statement of Net Working Capital is not
disputed by Seller pursuant to section 1.4(f) hereof, (i) in the event that the
Net Working Capital exceeds $50,000, then Buyer shall pay to Seller the amount
by which the Net Working Capital exceeds $50,000, or (ii) in the event that the
Net Working Capital is less than $50,000 (the amount by which the Net Working
Capital is less than $50,000, the "Negative Amount"), then Seller shall promptly
remit to Buyer an amount equal to the Negative Amount;
(f) If Buyer and Seller are unable to mutually agree upon the
Statement of Net Working Capital within the 45-Day Period, all disputed matters
not so resolved shall be submitted to arbitration. One-half of all fees and
disbursements of the arbitration shall be paid by Seller and one-half of such
fees and disbursements shall be paid by Buyer. Any payment to be made as a
consequence of the decision of the arbitrator shall be made not later than three
business days after the receipt of the arbitrator's decision.
1.5 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be allocated
among the Transferred Assets being sold hereunder in the manner required by
Treasury Regulation ss. 1.1060-1T and shall be mutually agreed among Buyer and
Seller. Buyer will submit to Seller a proposed allocation within ninety (90)
days from the date hereof. Buyer and Seller shall thereafter agree upon an
allocation (the "Proposed Allocation"). Buyer and Seller agree that: except as
otherwise required by law, (a) the Proposed Allocation shall be binding on Buyer
and Seller for all federal, state and local tax purposes, and (b) Buyer and
Seller shall file with their respective federal income tax returns consistent
IRS Form 8594-Asset Acquisition Statements under Section 1060, including any
required amendments thereto which shall reflect the allocations set forth in the
Proposed Allocation. Seller agrees to assist Buyer in obtaining accounting
treatment to facilitate a step-up in basis on the Transferred Assets. The
parties
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acknowledge that the allocation of the Purchase Price provided for in the
Proposed Allocation will be reasonable.
1.6 TRANSFER TAXES. Buyer and Seller shall each pay one-half of all
local, city, municipal, county, state and federal sales and transfer taxes
incurred, if any, in connection with the transactions contemplated by this
Agreement. Each party shall in a timely manner sign and swear to any return,
certificate, questionnaire or affidavit as to matters within its knowledge
required in connection with the payment of any such tax.
1.7 EMPLOYEES. In addition to the Excluded Liabilities, Seller shall
retain all liabilities and claims for salary, bonuses, back-pay, commissions,
benefits or other compensation based claims of employees or former employees of
Seller arising prior to the Closing, which are not specifically assumed by Buyer
hereunder. Buyer shall offer employment to all employees of Seller employed
exclusively in connection with the Midwest Division, on such terms and
conditions as determined by Buyer in its sole discretion.
1.8 ASSETS AFTER THE CLOSING. If Seller shall, at any time after the
Closing, receive any Transferred Assets (including any returned products or any
payments) related to the Midwest Division, it shall promptly deliver such assets
to Buyer.
1.9 BULK TRANSFER LAWS. Buyer hereby waives compliance by Seller with
any applicable bulk sale or bulk transfer laws of any jurisdiction in connection
with the sale of the Transferred Assets to Buyer; PROVIDED, HOWEVER, that
nothing in this Section 1.9 shall be construed (a) as an indication that Buyer
or Seller has determined that any bulk sale or transfer law is applicable to the
sale of the Transferred Assets or (b) to undermine Seller's absolute obligation
to pay any liabilities retained by it hereunder.
1.10 CLOSING. The closing of the transaction provided for herein (the
"Closing") shall be deemed to have occurred as of the close of business on
October 31, 1996. Notwithstanding the foregoing, HealthCare shall have the right
to extend the Closing for up to ninety (90) days if, in its judgment, it becomes
necessary to do so as a result of requirements of the Province of Alberta, the
Alberta Stock Exchange (the "ASE"), United States, state of Washington or state
of Delaware securities laws, regulations or rules. The Closing shall take place
at the offices of HealthCare at 000 X.X. Xxxxx Xxxxxx, Xxxxx 0000, Xxxxxxxx,
Xxxxxx 00000, at such time as the parties shall mutually agree.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows:
2.1 ORGANIZATION AND QUALIFICATION.
(a) Hearing Health is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the requisite corporate power to carry on its business as it is now being
conducted and to own, lease and operate the properties and assets used in
connection therewith;
(b) AVTC is a corporation duly organized, validly existing,
and in good standing under the laws of the state of Michigan and has the
requisite corporate power to carry on its business as it is now being conducted
and to own, lease, and operate the properties and assets used in connection
therewith.
2.2 SELLER'S CERTIFICATE OF INCORPORATION AND BYLAWS.
(a) Hearing Health has heretofore delivered to Buyer true and
complete copies of its respective Certificate of Incorporation and Bylaws as in
effect on the date hereof;
(b) AVTC has heretofore delivered to Buyer true and complete
copies of its respective Articles of Incorporation and Bylaws as in effect on
the date hereof.
2.3 AUTHORITY. The execution and delivery of this Agreement and the
other documents and instruments to be executed and delivered by Seller pursuant
hereto and the consummation of the transactions contemplated hereby and thereby
have been duly authorized by the respective boards of directors and stockholders
of Seller. This Agreement constitutes, and when executed and delivered, the
other documents and instruments to be executed and delivered by Seller pursuant
hereto will each constitute, a valid and binding agreement of Seller,
enforceable in accordance with its respective terms.
2.4 SUBSIDIARIES. Except as set forth on Schedule 2.4, Seller does not
own an interest in any corporation, partnership or other entity.
2.5 NO CONFLICT. Neither the execution nor delivery of this Agreement,
nor the consummation by Seller of any of the transactions contemplated hereby or
thereby, will (a) conflict with or violate the Certificate of Incorporation,
Articles of Incorporation, or By-laws of Seller or any law, rule, regulation,
order, writ, judgment, injunction, decree, determination or award applicable to
it, or the Transferred Assets, or (b) except as set forth on Schedule 2.5,
constitute a breach of, or default (whether with notice or lapse of time, or
both) under or, result in the termination or cancellation of or acceleration of
the performance required by, or require any consent, authorization or approval
under, or result in the imposition or creation of any lien upon any of the
Transferred Assets under, any note, bond, mortgage, indenture, contract,
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agreement, lease, license, permit, franchise or other instrument to which Seller
is a party or by which Seller or any of the Transferred Assets are bound or
affected.
2.6 FINANCIAL STATEMENTS AND BOOKS AND RECORDS. Seller has heretofore
delivered to Buyer the following financial statements of Hearing Health or the
Midwest Division including balance sheets and related statements of income (the
"Financial Statements"):
(a) Financial Statements for Hearing Health's 1994 fiscal year
and the Midwest Division's 1995 and 1996 fiscal years (except that the
1995 and 1996 Financial Statements do not contain statements of cash
flow); and
(b) Financial statements for the Midwest Division's interim
period ended September 30, 1996 (excluding statements of cash flow).
The Financial Statements are correct and complete in all material respects and
fairly present the financial condition of the Midwest Division at the dates
indicated and results of its operations and changes in its financial position
for the periods then ended in accordance with generally accepted accounting
principles. The books and records of the Midwest Division accurately reflect in
all material respects the transactions to which the Midwest Division is, or was,
a party or by which properties or assets relating to the Midwest Division of
Seller are, or were, subject or bound. The books and records have been kept in
accordance with the normal business practices of the Midwest Division.
2.7 NO MATERIAL ADVERSE CHANGE. Since September 30, 1996, there has
been no material adverse change in the business, operations or condition
(financial or otherwise) of the Midwest Division of Seller excluding those
changes that result from factors affecting the industry generally or that are
caused by general economic conditions and Seller does not know of any such
change, excluding such changes that result from factors affecting the industry
generally or that are caused by general economic conditions, that is threatened
or pending, nor has there been any damage, destruction or loss, whether or not
covered by insurance, which could have a Material Adverse Effect. For purposes
of this Agreement, "Material Adverse Effect" means an adverse effect in excess
of $50,000 on the business, operations or condition (financial or otherwise) of
the Midwest Division, the Transferred Assets, or the Assumed Liabilities, or on
the ability of Seller to consummate the transactions contemplated hereunder
(henceforth, a "Material Adverse Effect").
2.8 NO UNDISCLOSED LIABILITY. Except (a) as described to Buyer on the
schedules hereto as an item which can be reasonably construed as a liability or
obligation or (b) items not required to be disclosed on the schedules hereto by
reason of exceptions, exclusions, or other qualifications contained in the
representations and warranties of this Agreement, the Midwest Division has no
material liabilities or obligations of any nature (absolute, accrued, contingent
or otherwise) which are not properly reflected or reserved against in the
Financial Statements (except for liabilities or obligations which have been
incurred in the ordinary course of business since the date of the most recent
Financial Statement) in a manner consistent with past practice; and the reserves
reflected in the Financial Statements are adequate, appropriate and reasonable.
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2.9 LITIGATION. Except as set forth on Schedule 2.9, there are no
outstanding orders, judgments, injunctions, awards or decrees of any court,
governmental or regulatory body or arbitration tribunal by which the Midwest
Division or its assets is bound, except for such items which do not and will not
materially adversely affect the business or operations of Midwest Division of
Seller, the Transferred Assets, or the Assumed Liabilities. Except as set forth
on Schedule 2.9, there are no actions, suits, legal, administrative or arbitral
proceedings or inquiries relating to the Midwest Division, the Transferred
Assets or the Assumed Liabilities pending or, to the knowledge of Seller,
threatened (whether or not the defense thereof or liabilities in respect thereof
are covered by insurance) against Seller relating to the Midwest Division, or
any officer, director or employee of Seller other than any such items which do
not and will not materially adversely affect the business or operations of
Midwest Division of Seller, the Transferred Assets or the Assumed Liabilities.
2.10 COMPLIANCE WITH LAWS.
(a) COMPLIANCE. Seller in connection with the Midwest Division
(including each and all of the Midwest Division's operations, practices,
properties and assets) is in material compliance with all applicable federal,
state, local and foreign laws, ordinances, orders, rules and regulations
(collectively, "Laws"), including, without limitation, those applicable to
discrimination in employment, occupational safety and health, trade practices,
environmental protection, competition and pricing, product warranties, zoning,
building and sanitation, employment, retirement and labor relations, and product
advertising except to the extent any noncompliance would not have a material
adverse effect upon the assets or the businesses of Seller taken as a whole. To
the knowledge of Seller, Seller has not received notice of any violation or
alleged violation of, and is not subject to any material liability for past or
continuing violation of, any Laws. All reports and returns required to be filed
by Seller with any governmental authority have been filed, and were accurate and
complete when filed except to the extent failure to file or any deficiency in
accuracy or completeness would not have a material adverse effect upon the
assets or the business of Seller taken as whole.
(b) LICENSES AND PERMITS. Seller has obtained all licenses,
permits, approvals, authorizations and consents of all governmental and
regulatory authorities and all certification organizations required for the
conduct of its Midwest Division (as presently conducted) except to the extent
failure to do so would not have a material adverse effect upon the assets or the
businesses of Midwest Division of Seller taken as a whole. Seller (including its
operations, properties and assets) is and has been in compliance with all such
permits and licenses, approvals, authorizations and consents, except to the
extent any noncompliance would not have a material adverse effect upon the
assets or the businesses of Seller taken as a whole.
2.11 ENVIRONMENTAL COMPLIANCE. Seller has not received any written
communication from any environmental agency with respect to the Transferred
Assets or with respect to the Business Premises and Seller has since June 28,
1994, and has at all times thereafter, operated the Midwest Division, in
material compliance with, or otherwise ceased any material non-compliance with,
all applicable federal, state and local laws and regulations relating to
pollution control and environmental contamination including, without limitation,
all laws and
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regulations governing the generation, use, collection, treatment, storage,
transportation, recovery, removal, discharge or disposal of hazardous materials
(as defined below) and all laws and regulations with regard to record keeping,
notification and reporting requirements respecting Hazardous Materials (as
defined below), except for such noncompliance as would not cause a Material
Adverse Effect. Seller has not received written notice of any administrative or
judicial proceeding pursuant to such laws or regulations. To the knowledge of
Seller, there is no basis for the assertion of a valid material claim against
Seller relating to environmental matters including, without limitation, any
claim arising from past or present environmental practices, asserted under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended from time to time ("CERCLA", the Resource Conservation and Recovery Act,
as amended form time to time ("RCRA") or any other federal, state, or local
statute, code, rule, regulation, ordinance, order, decree, or other governmental
authority as now in effect. For purposes of this Section 2.11, the term
"Hazardous Materials" means materials defined as "hazardous wastes" or "solid
wastes" in CERCLA, RCRA or in any similar federal, state, or local statute,
code, rule, regulation, ordinance, order, decree, or other governmental
authority as now in effect.
2.12 TAX MATTERS.
(a) Except with respect to Taxes (as defined below) for which
adequate reserves are included in the Financial Statements, Seller has timely
paid all federal, state, county, local and foreign taxes, including, without
limitation, income taxes, excise taxes, sales taxes, use taxes, gross receipts
taxes, franchise taxes, employment and payroll taxes, withholding taxes,
property taxes, import duties, and all other taxes of any nature whatsoever and
however denominated together with all penalties, additions to tax, interest,
assessment or other damages imposed thereon with respect to its Midwest Division
(collectively, "Tax" or "Taxes") required to be paid or deposited by Seller
through the Closing. For purposes of this Section 2.12(a), timely payment shall
include payment in accordance with any available extensions and recording of
balances due as a Trade Payable.
(b) Seller has filed on or before the applicable due date
(including extensions) all tax returns which it is required to have filed
through the date hereof and has timely paid all amounts shown as payable
thereon, as well as any deficiencies or other additional amounts subsequently
assessed by any taxing authority with respect to each such tax return. All such
returns are true, correct and complete in all material respects.
(c) Seller has not waived any statute of limitations in
respect of Taxes of Seller or agreed to any extension of time with respect to a
Tax assessment or deficiency of Seller, and the assessment of any additional
Taxes of Seller with respect to periods for which returns have been filed is not
expected.
(d) There are no proposed deficiencies or unresolved claims
concerning Seller's liability for Taxes.
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(e) All federal and state income tax returns (including all
attachments and amendments thereto) of Seller relating to fiscal years 1994 and
1995 (including any extensions or waivers thereof) have been made available to
Buyer.
2.13 INSURANCE. Seller has received no notification of cancellation,
modification or denial of renewal of any material policies of fire, product
liability, malpractice or other forms of insurance.
2.14 SUPPLIERS. Seller has received no notice of termination or an
intention to terminate the relationship with Midwest Division of Seller, from
any material supplier.
2.15 PATENTS, TRADEMARKS, ETC. Set forth in Schedule 2.15 attached
hereto is a list of United States and foreign trademarks, service marks, trade
names, brand names, copyrights, including registrations and applications, patent
and patent applications, and employee covenants and agreements respecting
intellectual property ("Trade Rights") in which Seller, in connection with the
Midwest Division, now has any interest, specifying the basis on which such Trade
Rights are owned, controlled, used or held (under license or otherwise) by
Seller, and also indicating which of such Trade Rights are registered. All Trade
Rights shown as registered in Schedule 2.15 have been properly registered, all
pending registrations and applications have been properly made and filed and all
annuity, maintenance, renewal and other fees relating to registrations or
applications are current. To the knowledge of Seller, Seller is not infringing
and has not infringed on any Trade Rights of another in the operation of the
Midwest Division of Seller, nor to the knowledge of Seller is any other person
infringing on the Trade Rights of Seller relating to the Midwest Division.
Seller has not granted any license or made any assignment of any Trade Right,
and to the knowledge of Seller, no other person has any right to use any Trade
Right owned or held by Seller relating to the Midwest Division. Seller does not
pay any royalties or other consideration for the right to use any Trade Rights
of others. Except as set forth in Schedule 2.15, there are no inquiries,
investigations or claims or litigation challenging or threatening to challenge
Seller's right, title and interest with respect to its continued use and right
to preclude others from using any Trade Rights of Seller. To the knowledge of
Seller, all Trade Rights of Seller relating to the Midwest Division are valid,
enforceable and in good standing and, to the knowledge of Seller, there are no
equitable defenses to enforcement based on any act or omission of Seller.
2.16 PRODUCT WARRANTY. Set forth in Schedule 2.16 is a true, correct
and complete copy of Seller's standard warranty or warranties for sales of its
products.
2.17 PRODUCT LIABILITY. No action is pending or, to the knowledge of
Seller, threatened against or involving Seller relating to any product alleged
to have been manufactured or sold by Seller in connection with Midwest Division
of Seller and alleged to have been defective, or improperly designed or
manufactured.
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2.18 CONTRACTS AND COMMITMENTS.
(a) PERSONAL PROPERTY LEASES. Set forth on Schedule 2.18(a) is
a list of all personal property leases to which the Midwest Division of Seller
is a party.
(b) PURCHASE COMMITMENTS. Set forth in Schedule 2.18(b) is a
list of all agreements (written or oral) between Midwest Division of Seller and
third parties for the purchase of goods and supplies by Seller which
individually call for the payment by Seller after the date hereof of more than
five thousand dollars ($5,000) or which obligate Seller for a period extending
beyond December 31, 1996. Complete and correct copies of all such written
agreements have heretofore been made available to Buyer and HealthCare.
(c) SALES COMMITMENTS. Set forth in Schedule 2.18(c) is a list
and description of all presently effective agreements (written or oral) between
Midwest Division of Seller and third parties for the distribution and sale of
its products. Complete and correct copies of all such written contracts have
heretofore been made available to Buyer and HealthCare.
(d) CONTRACTS WITH SHAREHOLDERS AND CERTAIN OTHERS. Except as
set forth on Schedule 2.18(d), Seller has no agreement, understanding, contract
or commitment (written or oral) with any of its shareholders, or any affiliate
of a shareholder.
(e) COLLECTIVE BARGAINING AGREEMENTS. Midwest Division of
Seller is not party to any collective bargaining agreements with any union.
(f) LOAN AGREEMENTS. Except as set forth in the Agreement and
on Schedule 2.18(f) hereto, Midwest Division of Seller is not obligated under
any loan agreement, promissory note, letter of credit, or other evidence of
indebtedness as signatories, guarantors or otherwise.
(g) GUARANTEES. Except as set forth in Schedule 2.18(g),
Seller is not a party to any instrument under which Seller guaranteed the
payment or performance of any person, firm or corporation, agreed to indemnify
any person or act as a surety, or otherwise agreed to be contingently or
secondarily liable for the obligations of any person.
(h) RESTRICTIVE AGREEMENTS. Except as set forth in Schedule
2.18(h), Midwest Division of Seller is not party to nor is it bound by any
agreement requiring it to assign any interest in any trade secret or proprietary
information, or prohibiting or restricting it from competing in any business or
geographical area or soliciting customers or otherwise restricting it from
carrying on its business anywhere in the world.
(i) OTHER MATERIAL CONTRACTS. Midwest Division of Seller is
not party to any lease, license, contract (including without limitation
contracts with health maintenance organizations) or commitment of any nature
involving consideration or other expenditure in excess of ten thousand dollars
($10,000), or involving performance over a period of more than
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ninety (90) days, or which is otherwise individually material to the operations
of Seller, except as set forth in Schedule 2.18(i).
(j) NO DEFAULT. Midwest Division of Seller is not in default
under any lease, agreement, contract or commitment where such default would have
a Material Adverse Effect, nor has any event or omission occurred which through
the passage of time or the giving of notice, or both, would constitute a default
thereunder or cause the acceleration of any of Seller's obligations or result in
the creation of any lien on any of the assets owned, used or occupied by Midwest
Division of Seller where such default, acceleration or creation of lien would
have a Material Adverse Effect. To the knowledge of Seller, no third party is in
default under any lease, agreement, contract or commitment to which Midwest
Division of Seller is a party where such default would have a Material Adverse
Effect, nor, to the knowledge of Seller, has any event or omission occurred
which, through the passage of time or the giving of notice, or both, would
constitute a default thereunder or give rise to an automatic termination, or the
right of discretionary termination thereof.
2.19 LEASES.
(a) Seller does not own any real property. Seller has
heretofore delivered to Buyer true and complete copies of all leases of real
property to which they are a party, which leases are listed on Schedule 1.1(b)
and 1.3(f) (the "Leases"). Except as set forth on Schedule 2.19, no consent of
any third party is required in order to effectuate the assignment of the leases
described in Schedule 1.1(b) to Buyer. The Leases are currently in full force
and effect. No notices of default of Seller under any of the Leases have been
received by Seller and no condition exists which, with the passage of time or
giving of notice or both, would constitute a material default thereunder.
(b) To the knowledge of Seller, there are no defaults by the
landlord under any of the Leases except as set forth on Schedule 2.19(b). Seller
has not waived any rights under any of the Leases.
(c) There is no pending or, to the knowledge of Seller,
threatened action or proceeding which could materially adversely affect Buyer's
use of the Business Premises after the consummation of the transaction
contemplated by this Agreement. Except as set forth on Schedule 2.19(b), there
are no violations by Seller or, to the knowledge of Seller, by Seller's
landlords of laws, ordinances, regulations or codes materially adversely
affecting Seller's use of the Business Premises.
2.20 TANGIBLE PROPERTY. The equipment, computers and related
peripherals, furniture, leasehold improvements, fixtures, vehicles, structures,
any related capitalized items and other similar tangible property constituting
part of the Transferred Assets (the "Tangible Property"), are in operating
condition and repair, subject to normal wear and tear, and Seller has not
received notice that any of the Tangible Property is in material violation of
any existing law of any building, zoning, health, safety or other ordinance,
code or regulation and, to the knowledge of Seller, no such material violation
exists. During the past three years there has not been any
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significant interruption of the operations of Seller due to inadequate
maintenance of the Tangible Property.
2.21 INTANGIBLE PROPERTY. Seller has taken all necessary action to
maintain the continued validity of the Intangible Property except where failure
to do so has not and will not have a Material Adverse Effect. Seller possesses
and hereby conveys to Buyer all rights, licenses or other authority necessary to
enable Buyer to have and enjoy the full, free and unencumbered use of all of
Seller's rights in the Intangible Property without conflict or infringement of
the rights of others relating directly or indirectly to the Intangible Property
and without payment of any royalties or other consideration to any party to this
Agreement or to any other person. Seller has not granted any outstanding
licenses in any of the Intangible Property, nor is Seller under any obligation
to grant the same.
2.22 LIENS. Except as set forth on Schedule 2.22, (a) Seller owns
outright and has good and marketable title to all of the Transferred Assets
(tangible and intangible), and (b) Seller will convey to Buyer at the
consummation of the transactions contemplated by this Agreement good and
marketable title to the Transferred Assets, in the case of each of clauses (a)
and (b) above, free and clear of any lien, charge or other encumbrance, except
for leasehold interests, security interests and liens or other encumbrances
specifically set forth in Schedule 2.22 or liens or other encumbrances securing
Taxes not yet due or payable (collectively, "Permitted Liens").
2.23 EMPLOYEE BENEFIT PLANS. Set forth in Schedule 2.23, is a list of
all pension, profit sharing, retirement, bonus, executive or deferred
compensation, hospitalization and other similar fringe or employee benefit
plans, programs and arrangements, and any employment or consulting contracts,
"golden parachutes", severance agreements or plans, vacation and sick leave
plans including, without limitation, all "employee benefit plans" (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), all employee manuals, and all written or binding oral statements of
policies, practices or understandings relating to employment, which are provided
to, for the benefit of, or relate to, any persons employed by the Midwest
Division of Seller. The items described in the foregoing sentence are
hereinafter sometimes referred to collectively as "Employee Plans/Agreements."
True and correct copies of all written Employee Plans/Agreements, including all
amendments thereto, have heretofore been provided to Buyer. Seller is in
material compliance with and has made all payments due under all Employee
Plans/Agreements and with respect thereto Seller is in material compliance with
all applicable federal and state laws and regulations. Seller is not
contributors to any multi-employer pension plan which has an unfunded liability
with respect to benefits due its participants.
2.24 EMPLOYMENT COMPENSATION. Set forth in Schedule 2.24 is a true and
correct list of:
(a) All employees of Midwest Division to whom Seller is paying
compensation; and in the case of salaried employees such list identifies the
current annual rate of compensation for each employee and in the case of hourly
or commission employees identifies
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certain reasonable ranges of rates and the number of employees falling within
each such range; and
(b) All amounts owed to employees of Midwest Division of
Seller for accrued sick pay, vacation pay, and bonus pay.
2.25 BANK ACCOUNTS. Schedule 2.25 sets forth the names and locations of
all banks, trust companies, savings and loan associations and other financial
institutions at which Midwest Division of Seller maintains safe deposit boxes or
accounts of any nature and names of all persons authorized to draw thereon, make
withdrawals therefrom or have access thereto.
2.26 ACCOUNTS RECEIVABLE. Each of the accounts receivable of Seller (a)
arose from bona fide sales in the ordinary course of business, (b) was entered
into under circumstances and by methods usual and customary in Seller's business
in the applicable state and the collection practices used with respect thereto
have been in all respects legal and proper and (c) was entered into, and credit
granted pursuant thereto, consistent with Seller's historical credit policies
and practices. The books of Seller correctly record the principal balance of all
accounts receivable and each of the security instruments securing any account
receivable, if any, constitutes a valid lien in favor of Seller upon the
property which it describes, and is enforceable (subject to the qualifications
that enforcement of the rights and remedies created thereby is subject to (a)
bankruptcy, insolvency, reorganization, moratorium, and other laws of general
application affecting the rights and remedies of creditors, and (b) general
principles of equity (regardless of whether such enforcement is considered in a
proceeding in equity or at law)) by Seller and its transferees. The reserves for
doubtful accounts shown or reflected on the Financial Statements are adequate
and were calculated consistent with past practice.
2.27 INVENTORY. The inventories of the Midwest Division of Seller have
a commercial value (lower of cost or market value) at least equal to the value
shown on Seller's Financial Statements.
2.28 BROKERS AND FINDERS. Neither Seller nor any of its respective
officers, directors, employees or shareholder has employed any broker or finder
or incurred any liability for any brokerage fees, commissions or finders fees in
connection with the transactions contemplated by this Agreement.
2.29 DISCLOSURE. No representations or warranties of Seller contained
in this Agreement and no statement contained in any document (including, without
limitation, the Financial Statements and the schedules to this Agreement),
certificate, or other writing furnished or to be furnished by Seller to Buyer,
HealthCare or any of its representatives pursuant to the provisions hereof or in
connection with the transactions contemplated hereby, contains or will contain
any untrue statement of a material fact or omits or will omit to state any
material fact required to be stated therein or necessary, in the context in
which made, to make the statements herein or therein not false or misleading.
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2.30 MINUTES. Nothing within Seller's minute book, as it pertains to
operation of the Midwest Division, would be deemed material to Buyer or would be
deemed to have a Material Adverse Effect.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER AND HEALTHCARE
Buyer and HealthCare hereby represent and warrant to Seller as follows:
3.1 ORGANIZATION.
(a) Buyer is a corporation duly organized, validly existing
and in good standing under the laws of Washington and has the requisite
corporate power to carry on its business and to own, lease and operate the
properties and assets used in connection therewith; and
(b) HealthCare is a corporation duly organized, validly
existing and in good standing under the laws of the Province of Alberta, Canada,
and has the requisite corporate power to carry on its business and to own, lease
and operate the properties and assets used in connection therewith.
3.2 CAPITALIZATION. The authorized and issued capital stock of
HealthCare is set forth in the Prospectus referred to in Section 3.11 as of the
date thereof. All of the issued and outstanding shares have been validly issued
and are fully paid and nonassessable. The common stock of HealthCare to be
issued to Seller pursuant to the Convertible Note described in Section 1.4(a)
(the "HealthCare Shares") will, upon issuance, be validly issued, fully paid,
and nonassessable and free and clear of any lien.
3.3 AUTHORITY. The execution and delivery of this Agreement and the
other documents and instruments to be executed and delivered by Buyer and
HealthCare pursuant hereto and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by the respective boards of
directors of Buyer and HealthCare. This Agreement constitutes, and when executed
and delivered, the other documents and instruments to be executed and delivered
by Buyer and HealthCare pursuant hereto will each constitute, a valid and
binding agreement of Buyer and HealthCare, enforceable in accordance with their
respective terms.
3.4 NO CONFLICT. Neither the execution nor delivery of this Agreement,
nor the consummation by Buyer or HealthCare of any of the transactions
contemplated hereby, will (a) conflict with or violate the Articles of
Incorporation or Bylaws of Buyer or HealthCare or any law, rule, regulation,
order, writ, judgment, injunction, decree, determination or award applicable to
them, or the Transferred Assets, or (b) constitute a breach of, or default
(whether with notice or lapse of time, or both) under or, result in the
termination or cancellation of or acceleration of the performance required by,
or require any consent, authorization or approval under, or result in the
imposition or creation of any lien upon any of the Transferred Assets under, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
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franchise or other instrument to which Buyer or HealthCare are a party or by
which Buyer or HealthCare are bound or affected.
3.5 BROKERS AND FINDERS. Neither Buyer, HealthCare nor any of its
officers, directors, employees or shareholders has employed any broker or finder
or incurred any liability for any brokerage fees, commissions or finders' fees
in connection with the transactions contemplated by this Agreement.
3.6 DISCLOSURE. No representations or warranties of Buyer or HealthCare
contained in this Agreement and no statement contained in any document,
certificate or other writing furnished or to be furnished by Buyer or HealthCare
to Seller or any of its representatives pursuant to the provisions hereof or in
connection with the transactions contemplated hereby, contains or will contain
any untrue statement of a material fact or omits or will omit to state any
material fact required to be stated therein or necessary, in the context in
which made, to make the statements herein or therein not false or misleading.
3.7 [Not used]
3.8 COMPLIANCE WITH LAW. Buyer and HealthCare are in material
compliance with all applicable laws, including, without limitation, those
applicable to discrimination in employment, occupational safety and health,
trade practices, environmental protection, competition and pricing, product
warranties, zoning, building and sanitation, employment, retirement and labor
relations, and product advertising except to the extent any noncompliance would
not have a material adverse effect upon the assets or the businesses of Buyer
and HealthCare taken as a whole. Neither Buyer nor HealthCare have received
notice of any violation or alleged violation of, and are not subject to any
material liability for past or continuing violation of, any Laws. All reports
and returns required to be filed by Buyer and HealthCare with any governmental
authority have been filed, and were accurate and complete when filed except to
the extent failure to file or any deficiency in accuracy or completeness would
not have a material adverse effect upon the assets or the business of Buyer and
HealthCare taken as whole.
3.9 NO MATERIAL ADVERSE CHANGE. Since July 31, 1996, there has been no
material adverse change in the business, operations or condition (financial or
otherwise) of Buyer and HealthCare excluding those changes that result from
factors affecting the industry generally or that are caused by general economic
conditions and neither Buyer nor HealthCare know of any such change, excluding
such changes that result from factors affecting the industry generally or that
are caused by general economic conditions, that is threatened or pending, nor
has there been any damage, destruction or loss, whether or not covered by
insurance, which could have a an adverse effect in excess of $50,000 on the
business, operations or condition (financial or otherwise) of Buyer and
HealthCare, on the ability of Buyer and HealthCare to consummate the
transactions contemplated hereunder.
3.10 LITIGATION. There are no outstanding orders, judgments,
injunctions, awards or decrees of any court, governmental or regulatory body or
arbitration tribunal by which Buyer
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or Healthcare, or their assets are bound, except for such items which do not and
will not materially adversely affect the business or operations of Buyer or
HealthCare. There are no actions, suits, legal, administrative or arbitral
proceedings or inquiries relating to Buyer or HealthCare pending or, to the
knowledge of Buyer or Healthcare, threatened (whether or not the defense thereof
or liabilities in respect thereof are covered by insurance) against Buyer or
HealthCare or any officer, director or employee of Buyer or HealthCare other
than any such items which do not and will not materially or adversely affect the
business or operations of Buyer or HealthCare.
3.11 SECURITIES FILINGS. The documents filed by HealthCare with the ASE
and the HealthCare Capital Corp. United States Confidential Offering Memorandum
dated October 16, 1996 (the "Prospectus"), do not contain any untrue statements
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading.
3.12 TRANSFERABILITY OF HEALTHCARE SHARES. Based upon the knowledge of
HealthCare and Buyer regarding the practice, interpretation, and use of Alberta
Securities Commission Notice 7 entitled "Distribution of Securities Outside
Alberta" by the staff of the ASE and Alberta, Canada securities practitioners,
the HealthCare Shares may be sold, transferred, or otherwise disposed of in the
Province of Alberta, Canada, and traded through the facilities of the ASE,
beginning on the 91st day following the Closing.
ARTICLE IV
COVENANTS OF SELLER
Seller hereby covenants and agrees as follows:
4.1 NONCOMPETITION; CONFIDENTIALITY. As an inducement to Buyer to
execute this Agreement and complete the transactions contemplated hereby, and in
order to preserve the goodwill associated with the Midwest Division of Seller
being acquired pursuant to this Agreement, Seller hereby covenants and agrees to
deliver to Buyer at the Closing Noncompetition and Confidentiality Agreements in
the form attached hereto as Schedule 7.6(a)(i).
4.2 ACCESS TO INFORMATION AND RECORDS. Seller agrees that during the
period prior to the Closing, Buyer, its counsel, accountants and other
representatives shall be provided (i) reasonable access during normal business
hours to all of the properties, books, records, contracts and documents of
Seller relating to the Midwest Division for the purpose of such inspection,
investigation and testing as Buyer deems appropriate (and Seller shall furnish
or cause to be furnished to Buyer and its representatives all information with
respect to the business and affairs of Midwest Division of Seller as Buyer may
reasonably request); (ii) reasonable access to employees and agents of Seller
for such meetings and communications as Buyer reasonably desires; and (iii) with
the prior consent of Seller in each instance (which consent shall not be
unreasonably withheld), access to vendors, customers, and others having business
dealings with Seller.
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4.3 CONDUCT OF BUSINESS PENDING THE CLOSING. Seller agrees that from
the date hereof until the Closing, except as provided herein or otherwise
approved in writing by Buyer:
(a) NO CHANGES. Midwest Division of Seller will carry on its businesses
diligently and in the same manner as heretofore and will not make or institute
any material changes in its methods of purchase, sale, management, accounting or
operation.
(b) MAINTAIN ORGANIZATION. Seller will use its best efforts to
maintain, preserve, renew and keep in force and effect the existence, rights and
franchises of the Midwest Division and to preserve the business organization of
the Midwest Division intact, to keep available to Buyer the present officers and
employees of the Midwest Division, and to preserve for Buyer the Midwest
Division's present relationships with suppliers and customers and others having
business relationships with the Midwest Division.
(c) NO BREACH. Seller will use its best efforts to avoid any
act, or any failure to act, which may cause a breach of any material contract,
commitment or obligation by which the Midwest Division is bound, or any breach
of any representation, warranty, covenant or agreement made by Seller in this
Agreement.
(d) NO MATERIAL CONTRACTS. Midwest Division of Seller will not
enter into any contract or commitment or purchase any assets (tangible or
intangible) other than in the ordinary course of business and consistent with
past practice, except where the value of any such contract, commitment or asset
is less than five thousand dollars ($5,000).
(e) MAINTENANCE OF INSURANCE. Midwest Division of Seller shall
maintain all of the insurance on the Transferred Assets in effect as of the date
hereof or replace such insurance with comparable coverage and shall procure such
additional insurance as shall be reasonably requested by Buyer at Buyer's
expense.
(f) MAINTENANCE OF PROPERTY. Midwest Division of Seller shall
use, operate, maintain and repair all its assets and properties in a normal
business manner consistent with Seller's past practices.
(g) INTERIM FINANCIALS. Seller will provide Buyer with interim
monthly financial statements and other management reports as and when they are
available.
(h) NO DIVIDENDS. Seller shall not declare or pay any property
dividend of assets of the Midwest Division.
(i) COMPENSATION. Except in the usual course of business
consistent with the past practices, Midwest Division of Seller shall not
increase the compensation or benefits of any of its employees nor make any other
change in the terms of their employment.
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ARTICLE V
SECURITIES LAWS AND UNDERTAKINGS
5.1 SECURITIES LAWS.
(a) INVESTMENT REPRESENTATIONS. Seller represents to
HealthCare as follows:
(i) The Convertible Note and the HealthCare Shares
are being acquired for its own account and for investment only, and not with a
view to the distribution of all or any part of the Convertible Note or the
HealthCare Shares, except pursuant to (i) an effective registration statement
covering such Convertible Note or such shares as contemplated in Section 5.2 or
(ii) an available exemption from registration, and the acquisition of the
Convertible Note and the HealthCare Shares by Seller and their continued holding
thereof as may be required by law and the terms hereof are consistent with its
financial position.
(ii) Seller has had such access to information
regarding the business and finances of HealthCare, and has met and discussed the
business and finances of HealthCare with its management employees to the extent
it deems necessary, and has received and read, and understands the contents of
the Prospectus.
(b) LIMITATIONS ON TRANSFER.
(i) Except as expressly provided in this Agreement,
Seller shall not, directly or indirectly, offer or sell, pledge, transfer, or
otherwise dispose of all or any portion of the Convertible Note or the
HealthCare Shares, or solicit any offer to buy, purchase, or otherwise acquire
or take a pledge of all or any portion of the Convertible Note or the HealthCare
Shares, as the case may be, except (A) in the manner and to the extent described
in (i) a registration statement in effect under the Securities Act of 1933 (the
"Act") covering the Convertible Note or the HealthCare Shares and as to which a
prospectus meeting the requirements of the Act is duly delivered and filed as
necessary to qualify the shares under applicable state securities laws or (ii)
an opinion of counsel for Seller, which opinion is in form and substance
reasonably satisfactory to counsel for HealthCare, to the effect that such
proposed offer, sale, pledge, transfer, or other disposition of the Convertible
Note or the HealthCare Shares may lawfully be made without such registration,
delivery, and qualification or (B) pursuant to trades made on the ASE after 90
days following the Closing pursuant to Rule 904 of Regulation S under the Act,
provided such resale on the ASE complies with applicable state securities laws.
Seller acknowledges that it has consulted with counsel concerning the limited
availability of exemptions from registration under the Act and it understands
that it (i) may bear the economic risk of investment in the Convertible Note and
the HealthCare Shares for an indefinite period of time because neither the
Convertible Note nor the HealthCare Shares have been registered under the Act
and, therefore, cannot be sold unless they are subsequently registered under the
Act or qualified as necessary under applicable state securities laws or an
exemption from registration under the Act, such as that contained in Rule 904,
or from qualification under state securities laws, is available, (ii) except as
provided in this Agreement,
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HealthCare is not obligated to register the Convertible Note or the HealthCare
Shares under the Act or qualify them under applicable state securities laws,
(iii) that absent registration under the Act, neither the Convertible Note nor
the HealthCare Shares may ordinarily be sold in the United States for at least
two years after the Closing and then only in accordance with Rule 144 under the
Act or in a bona fide transaction not involving a public offering to a purchaser
who shall be subject to the same restrictions on any resale, (iv) that absent
qualification under applicable state securities laws, the sale of the
Convertible Note and the HealthCare Shares may be restricted by such laws; and
(v) the HealthCare Shares may not be sold, transferred or otherwise disposed of
in the province of Alberta, Canada, or traded through the facilities of the ASE
for a period of 90 days following the Closing.
(ii) Notwithstanding any other provisions of this
Agreement, Seller shall not, directly or indirectly, sell, transfer, or
otherwise dispose of all or any portion of the Convertible Note or the
HealthCare Shares within 12 months after the date of purchase of the Convertible
Note or the HealthCare Shares, as the case may be, except in accordance with
Regulation 204.011 of the Pennsylvania Code.
(c) LEGENDS ON CERTIFICATES. Certificates representing the
HealthCare Shares shall be endorsed with legends, (i) substantially in the form
set forth in Schedule 5.1(c)(i) hereto, and (ii) to the effect that the
HealthCare Shares may not be traded in Canada for 90 days following the Closing.
HealthCare need not recognize any person other than Seller as having any
interest in or to the HealthCare Shares unless the acquisition thereof shall
have been made in compliance with Subsection 5.1(b) above. HealthCare may issue
appropriate stop transfer instructions to the transfer agent for the HealthCare
Shares to prevent transfers in violation of Subsection 5.1(b) hereof.
(d) REMOVAL OF LEGENDS.
(i) At any time while the HealthCare Shares are
registered under the Act and qualified as necessary under applicable state
securities laws, HealthCare shall, upon written request, cause the certificates
representing the HealthCare Shares to be reissued free of all legends and
withdraw all stop transfer instructions. Upon the termination of any such
registration, Seller and any transferee who owns HealthCare Shares represented
by a certificate without such legends, shall, upon written request, promptly
return such certificate to HealthCare for reissue for a certificate endorsed
with the legends specified in, and otherwise subject to, the provisions of
Subsection 5.1(c). Three years after the Closing, HealthCare's right to request
the return of unlegended certificates for previously registered HealthCare
Shares shall terminate and HealthCare shall, upon written request of Seller,
cause any certificates bearing one or more legends to be reissued free of such
legends and withdraw all stop transfer instructions, provided that Rule 144(k)
under the Act, or a comparable rule, is in effect in substantially its present
form and Seller furnishes to HealthCare evidence satisfactory to HealthCare and
its counsel that they meet the requirements of such rule.
(ii) HealthCare shall, upon written request, cause a
certificate representing all or a portion of the HealthCare Shares to be
reissued free of all legends
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and shall withdraw all stop transfer instructions upon the provision by Seller
of a declaration to The R-M Trust Company as transfer agent in substantially the
form set forth in Schedule 5.1(d)(ii) hereto.
5.2 REGISTRATION UNDERTAKING.
(a) DEMAND REGISTRATION.
(i) REQUEST FOR REGISTRATION. The holders of
HealthCare Shares may request registration under the Act of such HealthCare
Shares as are described in the notice to HealthCare requesting such registration
as provided in Section 5.2(b)(ii). Within ten days after receipt of any such
request, HealthCare will give written notice of such request to all other
holders of HealthCare Shares and will include in such registration all
HealthCare Shares with respect to which the holder has given notice to
HealthCare of such holder<018>s request for inclusion therein within 30 days
after the receipt by such holder of HealthCare<018>s notice.
(ii) DEMAND REGISTRATION. The holders of HealthCare
Shares will collectively be entitled to two requests for demand registration as
provided in subsection (i) above (the "Demand Registrations") and those requests
may be made at any time specified by the holders of at least 25% of all the
outstanding HealthCare Shares. The Demand Registrations will be short-form
registrations on Form S-3 or any successor form thereof if HealthCare is
permitted to use such short form. Except for (i) shares of HealthCare common
stock owned by Xxxxxxx X. Xxxxxx, Xxxxxxx Xxxxxxx or Xxxx Xxxxxxxx for which
registration rights have been granted prior to the date of this Agreement, (ii)
all shares of HealthCare common stock or warrants to purchase such shares issued
or issuable in connection with the offer of the February Special Warrants
described in the HealthCare Capital Corp. Preliminary Prospectus dated July ___,
1996, draft dated July 12, 1996, (iii) all shares of HealthCare common stock or
warrants to purchase such shares issued or issuable in connection with the offer
of the September Special Warrants described in the Prospectus, no securities
other than the HealthCare Shares shall be included in the Demand Registrations
without the consent of the holders of at least 50 percent of all then
outstanding HealthCare Shares that have not been previously registered pursuant
to this Article V, which consent shall not be unreasonably withheld.
(b) PIGGYBACK REGISTRATION. HealthCare agrees that, if at any
time from and after the Closing HealthCare proposes to register any of its
securities under the Act, HealthCare will (i) promptly notify the holders of
HealthCare Shares that such Registration Statement (as hereinafter defined) will
be filed and that the HealthCare Shares which are then held by such holders will
be included in such Registration Statement at their request and (ii) subject to
the next sentence of this subsection (b), cause such Registration Statement to
cover all HealthCare Shares which it has been so requested to include by the
Participating Holders (as hereinafter defined), provided such request is
delivered to HealthCare not later than 20 days after such notice is given to the
holders of HealthCare Shares and specifies the number of HealthCare Shares to be
included in the proposed registration. Notwithstanding the foregoing provisions,
if the registration statement relates to an underwritten offering of HealthCare
Shares and the managing underwriter shall inform in writing HealthCare and the
Participating Holders that the
- 22 -
managing underwriter believes that the number of shares requested to be included
in such registration would materially, adversely affect its ability to effect
such offering, then HealthCare will include in such registration the number of
HealthCare Shares which HealthCare is so advised can be sold in (or during the
time of) such offering as follows: first, all shares proposed by HealthCare to
be sold for its own account, and, second, such HealthCare Shares requested to be
included in such registration, pro rata by the Participating Holders on the
basis of the number of HealthCare Shares so proposed to be sold and so requested
to be included; PROVIDED, HOWEVER, that HealthCare shall be obligated to
register any HealthCare Shares so excluded from the registration statement
pursuant to a registration statement filed 90 days after the effectiveness of
such initial registration statement or such greater number of days as may be
specified in "lock-up" agreements entered into with the managing underwriter.
For the purposes of this Agreement, "Registration Statement" shall mean any
registration statement of HealthCare that covers any of its securities under the
Act, including the prospectus, amendments and supplements to such Registration
Statement, including post-effective amendments, all exhibits and all material
incorporated by reference in such Registration Statement.
(c) Whenever the holders of HealthCare Shares have requested
that any HealthCare Shares be registered pursuant to this Agreement, HealthCare
will use its best efforts to effect the registration and the sale of such
HealthCare Shares in accordance with the intended method of disposition thereof,
and pursuant thereto HealthCare will as expeditiously as possible:
(i) prepare and file with the United States
Securities and Exchange Commission (the "SEC") a Registration Statement with
respect to such HealthCare Shares and use its reasonable best efforts to cause
such Registration Statement to become effective and to remain continuously
effective for a period which will terminate when all HealthCare Shares covered
by such Registration Statement, as amended from time to time, have been sold or
a period of one year, whichever is shorter;
(ii) prepare and file with the SEC such amendments
and post- effective amendments to the Registration Statement and the prospectus
as may be necessary to keep the Registration Statement effective for the period
specified in Section 5.2(c)(i) and to comply with the provisions of the Act and
the Securities Exchange Act of 1934 (the "1934 Act") with respect to the
distribution of all HealthCare Shares covered by such Registration Statement;
PROVIDED that, at a time reasonably prior to the filing of a Registration
Statement or prospectus, or any amendments or supplements thereto, HealthCare
will furnish to the Participating Holders copies of all documents proposed to be
filed, in order to allow the Participating Holders and their counsel to comment
on such documents;
(iii) notify the Participating Holders promptly, and
confirm such advice in writing, (a) when the prospectus or any supplement or
post-effective amendment has been filed, and with respect to the Registration
Statement or any post-effective amendment, when the same has become effective,
(b) of any request by the SEC for amendments or supplements to the Registration
Statement or the prospectus or
- 23 -
for additional information, (c) of the issuance by the SEC of any stop order
suspending the effectiveness of the Registration Statement or the initiation of
any proceedings for that purpose, and (d) of the receipt by HealthCare of any
notification with respect to the suspension of the qualification of such
HealthCare Shares for which registration has been requested for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose;
(iv) make reasonable effort to obtain the withdrawal
of any order suspending the effectiveness of the Registration Statement;
(v) furnish to the Participating Holders at least
five copies of the Registration Statement and any post-effective amendment
thereto, including financial statements and schedules, all documents
incorporated therein by reference and all exhibits (including those incorporated
by reference);
(vi) deliver to each Participating Holder as many
copies of the prospectus (including each preliminary prospectus) and any
amendment or supplement thereto as such holder may reasonably request in order
to facilitate the disposition of the HealthCare Shares covered by such
Registration Statement;
(vii) prior to any public offering of HealthCare
Shares, use its reasonable best efforts to register or qualify or cooperate with
the Participating Holders and the underwriters, if any, and their respective
counsel in connection with the registration or qualification of such HealthCare
Shares for offer and sale under the securities or blue sky laws of such
jurisdictions as the Participating Holders or any underwriter reasonably
requests in writing and do any and all other reasonable acts or things necessary
or advisable to enable the distribution in such jurisdictions of the HealthCare
Shares covered by such Registration Statement; PROVIDED that HealthCare will not
be required to qualify generally to do business in any jurisdiction where it is
not then so qualified or to take any action which would subject it to general
service of process in any such jurisdiction where it is not then so subject;
(viii) [Not used];
(ix) in the event of any underwritten public
offering, enter into and perform its obligations under an underwriting
agreement, usual and customary in form, with the managing underwriter of such
offering; the Participating Holders shall also enter into and perform their
obligations under such agreement, usual and customary in form; HealthCare shall
take such other actions as the underwriters reasonably request in order to
expedite or facilitate a disposition of the HealthCare Shares covered by such
Registration Statement;
(x) upon request, furnish to each Participating
Holder a signed counterpart, addressed to such holder, of (a) an opinion of
counsel for HealthCare, dated the effective date of such registration statement
(or, if such registration includes an
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underwritten public offering, dated the date of the closing under the
underwriting agreement), and (b) a "comfort" letter, dated the effective date of
such registration statement (and, if such registration includes an underwritten
public offering, dated the date of the closing under the underwriting
agreement), signed by the independent public accountants who have certified
HealthCare's financial statements included in such registration statement,
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of such
accountants' letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer's counsel
and in accountants' letters delivered to underwriters in underwritten public
offerings of securities and, in the case of the accountants' letter, such other
financial matters, as the principal underwriter with respect to such
registration may reasonably request (or, if such registration does not involve
an underwritten offering, as may reasonably (i.e., in conformity with Statement
on Auditing Standards No. 72, as amended, or any successor statement thereto) be
requested by holders of a majority of the HealthCare Shares included in such
registration);
(xi) immediately notify each Participating Holder at
any time when a prospectus relating thereto is required to be delivered under
the Act, upon discovery that, or upon the happening of any event as a result of
which, the prospectus included in such Registration Statement, as then in
effect, includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing, and at
the request of any such holder, promptly prepare and furnish to such holder a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such HealthCare Shares, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading in
the light of the circumstances then existing;
(xii) Otherwise use its reasonable efforts to comply
with all applicable rules and regulations of the SEC under the Act and the 1934
Act, take such other actions as may be reasonably necessary to facilitate the
registration or the disposition of the HealthCare Shares hereunder; and make
available to its security holders, as soon as reasonably practicable, but not
later than the Availability Date (as defined below), an earnings statement
covering a period of at least twelve months, beginning after the effective date
of the applicable Registration Statement, which earnings statement shall satisfy
the provisions of subsection 11(a) of the Act. For the purpose of this
subsection 5.2(c)(xii), "Availability Date" means the 45th day following the end
of the fourth fiscal quarter that includes the effective date of such
Registration Statement, except that, if such fourth fiscal quarter is the last
quarter of the HealthCare's fiscal year, "Availability Date" means the 90th day
after the end of such fourth fiscal quarter).
- 25 -
(xiii) For purposes of this Article V "Participating
Holder" shall mean any holder of the HealthCare Shares whose shares are being
registered pursuant to this Article V.
(d) HealthCare shall pay all expenses incurred in connection
with any registration or other action pursuant to the provisions of this Section
5.2, other than underwriting discounts and applicable transfer taxes relating to
the HealthCare Shares sold by Seller and attorney fees and expenses of Seller in
excess of $10,000.
(e) HealthCare agrees to indemnify and hold harmless Seller
from and against any and all losses, claims, damages, liabilities or actions,
joint or several, to which Seller may become subject under the Act for any legal
or other expenses (including the cost of any investigation and preparation)
incurred by them in connection with any litigation or threatened litigation,
whether or not resulting in any liability, but only insofar as such losses,
claims, damages, liabilities or actions arise out of, or are based upon, (i) any
untrue statement or alleged untrue statement of a material fact contained in any
registration statement pursuant to which HealthCare Shares were registered under
the Act (hereinafter called a "Registration Statement"), any preliminary
prospectus, the final prospectus or any amendment or supplement thereto (or in
any application or document filed in connection therewith) or any document filed
by HealthCare in any jurisdiction in order to register or qualify the HealthCare
Shares under the securities laws thereof or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, or (ii) the employment by HealthCare of any device, scheme
or artifice to defraud, or the engaging by HealthCare in any act, practice or
course of business which operates or would operate as a fraud or deceit, or any
conspiracy with respect thereto, in which HealthCare shall participate, in
connection with the issuance and sale of any of the HealthCare Shares; PROVIDED,
HOWEVER that (i) the indemnity agreement contained in this Subsection (e) shall
not extend to Seller in respect of any such losses, claims, damages, liabilities
or actions arising out of, or based upon any such untrue statement or alleged
untrue statement, or any such omission or alleged omission, if such statement or
omission was based upon and made in conformity with information furnished in
writing to HealthCare by Seller specifically for use in connection with the
preparation of such Registration Statement, any final prospectus, any
preliminary prospectus or any such amendment or supplement thereto (or in any
application or document filed in connection therewith) or document filed in any
jurisdiction in order to register or qualify the HealthCare Shares under the
securities laws thereof. HealthCare agrees to pay any legal and other expenses
for which it is liable under this Subsection (e) from time to time (but not more
frequently than monthly) within 30 days after its receipt of a xxxx therefor.
(f) Seller will indemnify and hold harmless HealthCare, its
directors, its officers who shall have signed the Registration Statement and
each person, if any, who controls HealthCare within the meaning of Section 15 of
the Act to the same extent as the foregoing indemnity from HealthCare, but in
each case to the extent, and only to
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the extent, that any statement in or omission from or alleged omission from such
Registration Statement, any final prospectus, any preliminary prospectus or any
amendment or supplement thereto (or in any application or document filed in
connection therewith) or document filed in any jurisdiction in order to register
or qualify the HealthCare Shares under the securities laws thereof was made in
reliance upon information furnished in writing to HealthCare by such Seller
specifically for use in connection with the preparation of the Registration
Statement, any final prospectus or the preliminary prospectus or any such
amendment or supplement thereto (or in any application or document filed in
connection therewith) or document filed in any jurisdiction in order to register
or qualify the HealthCare Shares under the securities laws thereof; PROVIDED,
HOWEVER, that the obligation of Seller to indemnify HealthCare under the
provisions of this Subsection (f) shall be limited to the product of the number
of HealthCare Shares being sold by Seller and the market price of HealthCare
Shares on the date of the sale to the public of such HealthCare Shares. Seller
agrees to pay any legal and other expenses for which it is liable under this
Subsection (f) from time to time (but not more frequently than monthly) within
30 days after receipt of a xxxx therefor.
(g) If any action is brought against a person entitled to
indemnification pursuant to the foregoing Subsections (e) and (f) (an
"indemnified party") in respect of which indemnity may be sought against a
person granting indemnification (an "indemnifying party") pursuant to such
Subsections (e) and (f), such indemnified party shall promptly notify such
indemnifying party in writing of the commencement thereof; but the omission so
to notify the indemnifying party of any such action shall not release the
indemnifying party from any liability it may have to such indemnified party
otherwise than on account of the indemnity agreement contained in Subsections
(e) and (f) of this Section 5.2. In case any such action is brought against an
indemnified party and it notifies an indemnifying party of the commencement
thereof, the indemnifying party against which a claim is to be made will be
entitled to participate therein at its own expense and, to the extent that it
may wish, to assume at its own expense the defense thereof, with counsel
reasonably satisfactory to such indemnified party; PROVIDED, HOWEVER, that (i)
if the defendants in any such action include both the indemnified party and the
indemnifying party and the indemnifying party shall have reasonably concluded
based upon advice of counsel that there may be legal defenses available to it
and/or other indemnified parties which are different from or additional to those
available to the indemnified party, the indemnified party shall have the right
to select separate counsel to assume such legal defenses and otherwise to
participate in the defense of such action on behalf of such indemnified party or
parties and (ii) in any event, the indemnified party shall be entitled to have
counsel chosen by such indemnified party participate in, but not conduct, the
defense at the expense of the indemnifying party. Upon receipt of notice from
the indemnifying party to such indemnified party of its election so to assume
the defense of such action and approval by the indemnified party of counsel, the
indemnifying party will not be liable to such indemnified party under this
Section 5.2 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed such counsel in connection with the
assumption of legal defenses in accordance with
- 27 -
proviso (i) to the next preceding sentence (it being understood, however, that
the indemnifying party shall not be liable for the expenses of more than one
separate counsel), (ii) the indemnifying party shall not have employed counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after notice of commencement of the action or
(iii) the indemnifying party has authorized the employment of counsel for the
indemnified party at the expense of the indemnifying party. An indemnifying
party shall not be liable for any settlement of any action or proceeding
effected without its written consent.
(h) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in Subsections (e)
and (f) of this Section 5.2 is unavailable to an indemnified party in accordance
with its terms, HealthCare and Seller shall contribute to the aggregate losses,
claims, damages and liabilities, of the nature contemplated by said indemnity
agreement, incurred by HealthCare and Seller, in such proportions as are
appropriate to reflect the relative benefits received by HealthCare and Seller
from any offering of the HealthCare Shares; PROVIDED, HOWEVER, that if such
allocation is not permitted by applicable law or if the indemnified party failed
to give the notice required under Subsection (g) of this Section 5.2, then the
relative fault of HealthCare and Seller in connection with the statements or
omissions which resulted in such losses, claims, damages and liabilities and
other relevant equitable considerations will be considered together with such
relative benefits.
(i) The respective indemnity and contribution agreements by
HealthCare and Seller in Subsections (e), (f), (g), and (h) of this Section 5.2
shall remain operative and in full force and effect regardless of (i) any
investigation made by Seller or by HealthCare or any controlling person of
HealthCare or any director or any officer of HealthCare, (ii) payment for any of
the HealthCare Shares or (iii) any termination of this Agreement, and shall
survive the delivery of the HealthCare Shares, and any successor of HealthCare,
or of Seller, or of any person who controls HealthCare, as the case may be,
shall be entitled to the benefit of such respective indemnity and contribution
agreements. The respective indemnity and contribution agreements by HealthCare
and Seller contained in Subsections (e), (f), (g), and (h) of this Section 5.2
shall be in addition to any liability which HealthCare and Seller may otherwise
have.
5.3 SELL ALONG RIGHT. Except pursuant to a registration
statement filed pursuant to Sections 5.2(a) or 5.2(b) hereof, whenever Xxxxxxx
X. Xxxxxx (the "Selling Stockholder") shall receive a bona fide offer to acquire
all or substantially all of the shares of HealthCare Common Stock held by the
Selling Stockholder from a prospective acquiror which the Selling Stockholder
wishes to accept, the Selling Stockholder shall give a written notice (the
"Notice") to each holder of HealthCare Shares (collectively, the "Offerees") to
such effect, specifying the number of shares of Common Stock of HealthCare which
the Selling Stockholder desires to transfer. Upon receipt of the Notice, each of
the Offerees shall have the right, at such Offeree<018>s option, to require the
Selling Stockholder to arrange for the sale to the prospective acquiror (on
terms and
- 28 -
conditions at least as favorable to such Offeree as the terms and conditions set
out in the offer received by the Selling Stockholder) of the number of such
Offeree<018>s holdings of shares of Common Stock which bears the same proportion
to the number of shares of Common Stock owned by such Offeree as the number of
shares of Common Stock being sold by the Selling Stockholder bears to the total
number of shares of Common Stock owned by the Selling Stockholder. If the
prospective acquiror will not acquire all the shares of Common Stock which the
Selling Stockholder and the Offerees wish to dispose of pursuant to this Section
5.3, the number of shares of Common Stock which the Selling Stockholder and each
of the Offerees exercising its right and option pursuant to this Section 5.3
shall be permitted to transfer to such prospective acquiror shall be a number of
shares equal to the number of shares which the prospective acquiror desires to
acquire multiplied by a fraction, the numerator of which shall be the number of
shares of Common Stock owned by the Selling Stockholder or each such Offeree, as
applicable, and the denominator of which shall be the aggregate number of shares
of Common Stock owned by the Selling Stockholder and all such Offerees. An
Offeree may exercise such person<018>s right under this Section 5.3 by written
notice given within ten days after the date on which such person received the
Notice.
5.4 ASSIGNMENTS AND TRANSFERS.
(a) ASSIGNMENTS AND TRANSFERS BY SELLER. All of the
rights and obligations of Seller under this Article V may be assigned or
transferred by any holder of HealthCare Shares to any transferee or assignee of
any HealthCare Shares, PROVIDED, that such transfer is made expressly subject to
the terms and conditions of this Article V and HealthCare is provided with
written notice of such assignment. HealthCare hereby expressly consents to any
transfers or assignments of the rights and obligations of Seller under this
Article V and all the rights and obligations of a transferee hereunder,
including by such transferee that is a partnership to its partners, pro rata in
accordance with their ownership interests in such transferee, by a transferee
that is a corporation, to its executive officers, directors, or shareholders,
and by a transferee that is an individual to his or her spouse or children,
PROVIDED, HOWEVER, that such transfer is made expressly subject to the terms and
conditions of this Article V and HealthCare is provided with written notice of
any such assignment.
(b) ASSIGNMENTS AND TRANSFERS BY HEALTHCARE. The
rights and obligations of HealthCare under this Article V may not be assigned by
HealthCare without the prior written consent of the holders of a majority of the
HealthCare Shares which have not been previously registered pursuant to this
Article V (the "Majority Holders"), except that without the prior written
consent of the Majority Holders, but after notice duly given, HealthCare shall
assign its rights and delegate its duties hereunder to any successor-in-interest
corporation, and such successor-in-interest shall assume such rights and duties,
in the event of a merger or consolidation of HealthCare with or into another
corporation, or any merger or consolidation of another corporation with or into
HealthCare which results directly or indirectly in an aggregate change in the
- 29 -
ownership or control of more than 50% of the voting rights of the equity
securities of HealthCare, or the sale of all or substantially all of
HealthCare<018>s assets.
(c) ASSIGNMENT OF CONVERTIBLE NOTE. Subject to the
provisions of Section 5.1, the Convertible Note may be assigned or transferred
by Hearing Health to its subsidiaries or any of the investment partnerships that
are shareholders of Hearing Health.
ARTICLE VI
CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
Each and every obligation of Seller to be performed at Closing shall be
subject to the satisfaction prior to or at the Closing (or the waiver by Seller)
of the following conditions:
6.1 REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. Each of the
representations and warranties made by Buyer and HealthCare in this Agreement,
or in any instrument, list, certificate or writing delivered by Buyer or
HealthCare pursuant to this Agreement, shall be true and correct when made and
shall be true and correct at and as of the Closing as though such
representations and warranties were made as of the Closing.
6.2 COMPLIANCE WITH AGREEMENT. Buyer and HealthCare shall have in all
material respects performed and complied with all of Buyer's and HealthCare's
agreements and obligations under this Agreement which are to be performed or
complied with by Buyer and HealthCare prior to or at the Closing, including the
delivery of the closing documents specified in Section 8.5 and 8.6 hereof.
6.3 ABSENCE OF SUIT. No action, suit, investigation, or proceeding
before any court or any governmental authority shall have been commenced or
threatened against Buyer, HealthCare, Seller or any of the affiliates, officers
or directors of any of them, seeking to restrain, prevent or change the
transactions contemplated hereby, or questioning the validity or legality of any
such transactions, or seeking damages in connection with, or imposing any
condition on, any such transactions.
6.4 SUB-LEASE AGREEMENTS. Buyer and Seller shall have executed
sub-lease agreements relating to the Excluded Leases substantially in the form
of Schedule 6.4 hereto.
6.5 ASSUMPTION AGREEMENT. Each of Buyer, HealthCare, and Xxxxx Xxxxxxx
shall have executed an Assumption Agreement in the form of Schedule 6.5 thereof.
6.6 FOLTNER NOTE. Buyer shall have issued to Xxxxx Xxxxxxx the Foltner
Note.
6.7 RELEASE FROM FOLTNER. Buyer and Foltner shall have executed an
Assumption Agreement providing for the release of Seller in the form of Schedule
6.7 attached hereto.
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6.8 CANCELLATION OF NOTE. Seller shall have received that certain
promissory note dated July 1, 1994, in the original principal amount of $600,000
made by Hearing Health to Xxxxx Xxxxxxx.
6.9 ASE LISTING. Seller shall have received evidence reasonably
satisfactory to it that the HealthCare Shares have been conditionally accepted
for listing on the ASE.
ARTICLE VII
CONDITIONS PRECEDENT TO BUYER'S AND HEALTHCARE'S OBLIGATIONS
Each and every obligation of Buyer and HealthCare to be performed at
Closing shall be subject to the satisfaction prior to or at the Closing (or the
waiver by Buyer or HealthCare) of each of the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. Each of the
representations and warranties made by Seller in this Agreement, or in any
instrument, schedule, list, certificate or writing delivered by Seller pursuant
to this Agreement, shall be true and correct when made and shall be true and
correct in all material respects at and as of the Closing as though such
representations and warranties were made as of the Closing.
7.2 COMPLIANCE WITH AGREEMENT. Seller shall have in all material
respects performed and complied with all of its agreements and obligations under
this Agreement which are to be performed or complied with by it prior to or at
the Closing, including the delivery of the closing documents specified in
Section 8.4 hereof.
7.3 ABSENCE OF SUIT. No action, suit, investigation or proceeding
before any court or any governmental authority shall have been commenced or
threatened, against HealthCare, Buyer, Seller or any of the affiliates, officers
or directors of any of them, seeking to restrain, prevent or change the
transactions contemplated hereby, or questioning the validity or legality of any
such transactions, or seeking damages in connection with, or imposing any
condition on, any such transactions; provided that the obligations of HealthCare
and Buyer shall not be affected unless there is a reasonable likelihood that as
a result of such action, suit, investigation, or proceeding HealthCare and Buyer
will be unable to retain substantially all the practical benefits of the
transaction to which they are entitled under this Agreement.
7.4 APPROVALS; CONSENTS. The consents, permits, approvals, licenses or
orders from any governmental or regulatory body or other third party required to
be obtained by Seller for the lawful consummation of the transactions
contemplated by this Agreement and listed in Schedule 2.5 hereto shall have been
obtained except where failure to obtain such consents, permits, approvals,
licenses or orders would not have a Material Adverse Effect (whether or not such
effect is referred to or described in any Schedule) on the business, prospects,
financial conditions, assets, reserves or operations of Seller taken together.
7.5 MATERIAL ADVERSE CHANGE. From the date of the Financial Statements
to the Closing, Seller shall not have suffered any change which has a Material
Adverse Effect (whether
- 31 -
or not such effect is referred to or described in any Schedule) on the business,
prospects, financial condition, assets, reserves or operations of Seller taken
together.
7.6 AGREEMENTS.
(a) NONCOMPETITION AND CONFIDENTIALITY AGREEMENT. Seller, Xxxxxx
Management Company and the Xxxxxx Investment Partnerships shall have executed
and delivered to Buyer and HealthCare Noncompetition and confidentiality
agreements in the forms attached hereto as Schedules 7.6(a)(i), 7.6(a)(ii) and
7.6(a)(iii) respectively.
(b) SUB-LEASE AGREEMENT. Buyer and Seller shall have executed a
sub-lease agreement substantially in the form of Schedule 6.4 hereto.
(c) EMPLOYMENT AGREEMENT. Buyer and Xx. Xxxxx Xxxxxxx shall have
executed an Employment Agreement substantially in the form of Schedule 7.6(c)
hereto.
(d) AGREEMENT OF PARTNERSHIPS. Abbington Venture Partners Limited
Partnership, Abbington Venture Partners Limited Partnership-II, Business
Development Capital Limited Partnership-III, and Brownscreek, Inc., shall each
have executed a letter agreement in the form attached hereto as Schedule 7.6(d).
ARTICLE VIII
ACTIONS TO BE TAKEN AT CLOSING
The following actions shall be taken at Closing, each of which shall be
conditional on completion of all the others and all of which shall be deemed to
have taken place simultaneously:
8.1 TITLE. Seller shall deliver to Buyer all conveyances, assignments,
bills of sale (as set forth in Schedule 8.1), powers of attorney and any and all
further instruments and documents as may be reasonably requested by Buyer in
order to complete any and all conveyances, transfers and assignments herein
provided and any approvals and consents required to be delivered pursuant to the
terms of this Agreement, including, but not limited to, the items referred to in
Section 8.4 hereof.
8.2 PAYMENT OF PURCHASE PRICE. Buyer shall deliver to Seller:
(a) the Convertible Note; and
(b) all instruments of assumption and any and all further
instruments and documents as may be reasonably requested by Seller in order to
complete the assumption by Buyer of the Assumed Liabilities.
8.3 CORPORATE NAME. Seller shall transfer to Buyer Seller's right to
the use of the Trade Names and all variations thereof and combinations embodying
the words included therein.
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Seller shall furnish such written consents as Buyer shall have reasonably
requested (if any) to the use of the Trade Names, and from and after the date
hereof, Seller will cooperate with Buyer to the end that Buyer may use the Trade
Names in any jurisdiction in which Seller is currently doing business.
8.4 ADDITIONAL DELIVERIES BY SELLER. Seller shall also deliver the
following to Buyer at the consummation of the transactions contemplated by this
Agreement:
(a) An opinion of counsel to Seller, dated as of the date
hereof, in form and substance satisfactory to Buyer, substantially in the form
of Schedule 8.4(a);
(b) Certificates dated the date hereof of an officer of Seller
certifying to the fulfillment of the conditions set forth in Sections 7.1 and
7.2;
(c) A copy of the resolutions of Seller's Board of Directors
and shareholders, certified by its corporate secretary, which resolutions shall
be in full force and effect on the date hereof, authorizing the execution,
delivery and performance of this Agreement and the other agreements and
transactions contemplated hereby;
(d) All bills of sale and such other evidences of the transfer
of the Transferred Assets reasonably necessary to complete the transaction;
(e) All consents received in connection with the transactions
contemplated hereunder.
8.5 DELIVERIES BY BUYER. Buyer shall also deliver the following to
Seller at the Closing:
(a) An opinion of counsel to Buyer, dated as of the date
hereof, in form and substance satisfactory to Seller, substantially in the form
of Schedule 8.5(a);
(b) A certificate dated the date hereof of the President of
Buyer certifying to the fulfillment of the conditions set forth in Sections 6.1
and 6.2; and
(c) A copy of the resolutions of Buyer's Board of Directors,
certified by its corporate secretary, which resolutions shall be in full force
and effect on the date hereof, authorizing the execution, delivery and
performance of this Agreement and the other agreements and transactions
contemplated hereby.
8.6 DELIVERIES BY HEALTHCARE. HealthCare shall deliver the following
additional closing documents to Seller at the Closing:
(a) An opinion of counsel to HealthCare, dated as of the date
hereof, in form and substance satisfactory to Seller, substantially in the form
of Schedule 8.6(a);
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(b) A certificate dated the date hereof of the President of
HealthCare certifying to the fulfillment of the conditions set forth in Sections
6.1 and 6.2; and
(c) A copy of the resolutions of HealthCare's Board of
Directors, certified by its corporate secretary, which resolutions shall be in
full force and effect on the date hereof, authorizing the execution, delivery
and performance of this Agreement and the other agreements and transactions
contemplated hereby.
8.7 POSSESSION. Seller shall deliver possession of all tangible
Transferred Assets to Buyer.
ARTICLE IX
INDEMNIFICATION; SURVIVAL
9.1 INDEMNIFICATION.
(a) Seller agrees to indemnify and hold harmless Buyer and
HealthCare (and its directors, officers, shareholders, employees, affiliates,
agents and assigns) from and against any and all losses, liabilities, damages,
deficiencies, assessments, judgments, costs or expenses (including, without
limitation, interest, penalties and reasonable attorneys' fees and
disbursements) (collectively, "Claims") arising out of or based upon the breach
or inaccuracy of any representation or warranty contained herein or in any of
the documents delivered pursuant hereto made by Seller, the non-performance or
breach by Seller of any covenant, term or provision to be performed by it
hereunder or in any of the documents delivered pursuant hereto, or any Excluded
Liability which may be imposed or sought to be imposed on Buyer (including,
without limitation, as a result of noncompliance by any party with any
applicable bulk sales law or any comparable statute relating to notice to and
rights of creditors of Seller in connection with the transactions contemplated
hereunder).
(b) Buyer and HealthCare agree to indemnify and hold harmless
Seller (and its directors, officers, shareholders, employees, affiliates, agents
and assigns) from and against any Claims arising out of or based upon the breach
or inaccuracy of any representation or warranty contained herein or in any of
the documents delivered pursuant hereto made by Buyer or HealthCare, the
non-performance or breach by Buyer or HealthCare of any covenant, term or
provision to be performed by it hereunder or in any of the documents delivered
pursuant hereto, or any Assumed Liability which may be imposed or sought to be
imposed on Seller. The indemnification obligation of Buyer and HealthCare
hereunder is with respect to the full amount of the Claims.
(c) Buyer and HealthCare shall be entitled to indemnification
from Seller under the provisions of this Section 9.1 only to the extent that (i)
Buyer and HealthCare have made a claim for indemnification within 180 days after
Closing and (ii) the Claims subject to indemnification (other than Claims for
indemnification based on any Excluded Liabilities) exceed ten thousand dollars
($10,000) in the aggregate. Notwithstanding the foregoing, Seller's liability
for all Claims subject to indemnification under the provisions of this Section
9.1 shall be limited
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to one hundred thousand dollars ($100,000) in the aggregate. The foregoing shall
have no effect on the indemnification obligations of Seller set forth in Section
5.2(f).
(d) Buyer's and HealthCare's right to, indemnification as
provided in this Section 9.1 shall not be eliminated, reduced or modified in any
way as a result of the fact that (i) Buyer or HealthCare had notice of a breach
or inaccuracy of any representation, warranty or covenant contained herein, (ii)
Buyer or HealthCare had been provided with access, as requested by Buyer or
HealthCare, to officers and employees of Seller and such of Seller's books,
documents, contracts and records as has been provided to Buyer or HealthCare in
response to Buyer's or HealthCare's requests.
(e) Buyer's and HealthCare's sole remedy to Claims made
pursuant to this Section 9.1 shall be offset, by notice to Seller, any amount
due from Seller pursuant to the indemnification provisions of this Agreement
against (i) any payment due to Seller under the Convertible Note and (ii) the
HealthCare Shares, valued for the purposes of this section as the greater of the
five (5) day average trading price or one and 30/100 dollars ($1.30) per share.
If Seller disputes the validity of the offset, the amount proposed to be offset
shall be deposited by Seller in a segregated bank account under joint control of
Buyer and Seller and the matter shall be resolved by arbitration under Section
10.12. Any undisputed portion shall be paid to the obligee. The disputed amount
proposed to be offset shall be transferred to the control of the arbitrator(s)
promptly following their appointment.
9.2 CONDITIONS OF INDEMNIFICATION.
(a) A party entitled to indemnification hereunder (the
"Indemnified Party") shall notify the party or parties liable for such
indemnification (the "Indemnifying Party") in writing of any Claim which the
Indemnified Party has determined has given or could give rise to a right of
indemnification under this Agreement. Such notice shall be given within a
reasonable (taking into account the nature of the Claim) period of time after
the Indemnified Party has actual knowledge thereof. The Indemnifying Party shall
satisfy its obligations under this Article IX within ten (10) days after receipt
of subsequent written notice from the Indemnified Party if an amount is
specified therein, or promptly following receipt of subsequent written notice or
notices specifying the amount of such Claim or additions thereto; provided,
however, that for so long as the Indemnifying Party is in good faith defending a
Claim pursuant to Section 9.2(b) hereof, its obligation to indemnify the
Indemnified Party with respect thereto shall be suspended (other than with
respect to any costs, expenses or other liabilities incurred by the Indemnified
Party prior to the assumption of the defense by the Indemnifying Party). Failure
to provide a notice of Claim within the time period referred to above shall not
constitute a defense to a Claim or release the Indemnifying Party from any
obligation hereunder to the extent that such failure does not prejudice the
position of the Indemnifying Party.
(b) If the facts giving rise to any such indemnification
involve any actual, threatened or possible Claim or demand by any person not a
party to this Agreement against the Indemnified Party, the Indemnifying Party
shall be entitled to contest or defend such Claim or demand at its expense and
through counsel of its own choosing, which counsel shall be
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reasonably acceptable to the Indemnified Party, if the Indemnifying Party gives
written notice of its intention to assume the contest and defense of such Claim
or demand to the Indemnified Party as soon as practicable, but in no event more
than ten (10) days after receipt of the notice of Claim, and provides the
Indemnified Party with appropriate assurances as to the creditworthiness of
Indemnifying Party, that the Indemnifying Party will be in a position to pay all
fees, expenses and judgments that might arise out of such Claim or demand. The
Indemnified Party shall have the obligation to cooperate in the defense of any
such Claim or demand and the right, at its own expense, to participate in the
defense of any Claim. So long as the Indemnifying Party is defending in good
faith any such Claim or demand asserted by a third party against the Indemnified
Party, the Indemnified Party shall not settle or compromise such Claim or
demand. The Indemnifying Party shall have the right to settle or compromise any
such Claim or demand without the consent of the Indemnified Party at any time
utilizing its own funds to do so if in connection with such settlement or
compromise the Indemnified Party is fully released by the third party and is
paid in full any indemnification amounts due hereunder. The Indemnified Party
shall make available to the Indemnifying Party or its agents all records and
other materials in the Indemnified Party's possession reasonably required by it
for its use in contesting any third party Claim or demand and shall otherwise
cooperate, at the expense of the Indemnifying Party, in the defense thereof in
such manner as the Indemnifying Party may reasonably request. Whether or not the
Indemnifying Party elects to defend such Claim or demand, the Indemnified Party
shall have no obligation to do so.
(c) The Indemnifying Party shall pay to the Indemnified Party
all reasonable costs and expenses (including, but not limited to, the fees and
disbursements of any Indemnified Party's outside legal counsel and the charges
of any Indemnified Party's in-house legal counsel) incurred by such party in
connection with this indemnity or the enforcement hereof.
(d) This indemnity shall be binding upon the Indemnifying
Party, its heirs, representatives, administrators, executors, successors and
assigns and shall inure to the benefit of and shall be enforceable by each
Indemnified Party, its successors, endorsees and assigns (including, but not
limited to, any entity to which Buyer assigns or sells all or any portion of its
interest). If this indemnity is executed by more than one person or entity, the
liability of the undersigned hereunder shall be joint and several.
(e) No failure or delay on the part of any Indemnified Party
to exercise any power, right or privilege under this indemnity shall impair any
such power, right or privilege or be construed to be a waiver of any default or
any acquiescence therein, nor shall any single or partial exercise of power,
right or privilege preclude other or further exercise thereof or of any other
right, power or privilege. No provision of this indemnity may be changed,
waived, discharged or terminated except by an instrument in writing signed by
the party against whom enforcement of the change, waiver, discharge or
termination is sought.
9.3 SURVIVAL OF REPRESENTATIONS. All representations and warranties
made by the parties in this Agreement set forth in Article II and Article III
hereof shall survive the consummation of the transactions contemplated by this
Agreement for a period ending 180 days after the Closing (except for the
representations and warranties of Seller set forth in Section 2.12
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hereof which shall expire 90 days after the applicable statutes of limitation
shall have run with respect to all tax returns filed by Seller for all periods
ended on or before the Closing) after which all such representations and
warranties shall expire except with respect to claims asserted in writing prior
to such date. Notwithstanding the foregoing, HealthCare's representations and
warranties set forth in Section 3.2 hereof shall survive indefinitely.
9.4 SOLE AND EXCLUSIVE REMEDY. After the Closing, each party hereto
acknowledges and agrees that such party's sole and exclusive remedy with respect
to and any and all Claims relating to a breach of the representations and
warranties contained in Article II and Article III hereof shall be in accordance
with, and limited by, the indemnification provisions set forth in this Article
9.
ARTICLE X
MISCELLANEOUS
10.1 TERMINATION.
(a) RIGHT OF TERMINATION WITHOUT BREACH. This Agreement may be
terminated without further liability of any party at any time prior to the
Closing:
(i) By mutual written agreement of the parties, or
(ii) By either HealthCare, Buyer or Seller if the
Closing shall not have occurred on or before December 31, 1996, provided the
terminating party has not, through breach of a representation, warranty or
covenant, prevented the Closing from occurring on or before such date.
(b) TERMINATION FOR BREACH.
(i) TERMINATION BY BUYER AND HEALTHCARE. If there has
been a material breach by Seller of any of its agreements, representations or
warranties contained in this Agreement which has not been waived in writing by
HealthCare or Buyer, then HealthCare or Buyer may, by written notice to Seller
at any time prior to the Closing that such breach is continuing, terminate this
Agreement with the effect set forth in Section 10.1(b)(iii) hereof.
(ii) TERMINATION BY SELLER. If there has been a
material breach by Buyer or HealthCare of any of its agreements, representations
or warranties contained in this Agreement which has not been waived in writing
by Seller, then Seller may, by written notice to Buyer and HealthCare at any
time prior to the Closing that such breach is continuing, terminate this
Agreement with the effect set forth in Section 10.1(b)(iii).
(iii) EFFECT OF TERMINATION. Termination of this
Agreement pursuant to this Section 10.1 shall not in any way terminate, limit or
restrict the rights and remedies of any party hereto against any other party
which has breached or failed to perform any of the
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representations, warranties, covenants, or agreements of this Agreement prior to
termination hereof.
(c) RETURN OF DOCUMENTATION. Following a termination in
accordance with this Article X, Buyer, HealthCare, or any affiliate thereof
shall return all agreements, documents, contracts, instruments, books, records,
materials and all other information of Seller or any affiliate thereof provided
by Seller or by any representative of or Seller to Buyer, HealthCare, or any
affiliate thereof or any representatives of Buyer, HealthCare, or any affiliate
thereof in connection with the transactions contemplated by this Agreement, and
Seller shall return all agreements, documents, contracts, instruments, books,
records, materials and all other information of Buyer, HealthCare, or any
affiliate thereof provided by Buyer, HealthCare, or any affiliate thereof or any
representative of Buyer, HealthCare, or any affiliate thereof to Seller in
connection with the transactions contemplated by this Agreement.
10.2 WAIVER. Buyer or Seller may (a) extend the time for the
performance of any of the obligations or other acts of the other, (b) waive any
inaccuracies in the representations and warranties of the other contained herein
or in any document delivered pursuant hereto and (c) waive compliance with any
of the agreements of the other or satisfaction of any of the conditions to its
obligations contained herein. Any extension or waiver made pursuant to this
Section 10.2 must be by an instrument in writing signed on behalf of the party
granting the extension or waiver. A waiver by any party of any provision hereof
or breach hereof shall not operate or be construed as the waiver of any other
provision or any subsequent breach.
10.3 BINDING EFFECT; NO ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
legal representatives. Except as specifically set forth herein, this Agreement
is not assignable and any purported assignment shall be null and void. Nothing
contained in this Agreement shall be deemed to confer any right or benefit upon
any person other than the parties hereto to the extent herein provided.
10.4 DOLLARS. "Dollars" and "$" mean lawful money of the United States
of America, which shall be legal tender on the date of payment for all public
and private debts.
10.5 VARIATIONS IN PRONOUNS. All pronouns and any variations thereof
refer to the masculine, feminine or neuter, singular or plural, as the context
may require.
10.6 HEADINGS; SEVERABILITY. The headings in this Agreement are for
reference only, and shall not affect the interpretation of this Agreement. Each
and every provision of this Agreement shall be treated as separate and distinct
and, in the event of any provision hereof being declared invalid, such invalid
provision shall be deemed to be severable and all other provisions hereof shall
remain in full force and effect.
10.7 SCHEDULES. The schedules to this Agreement are a part of this
Agreement as if fully set forth herein.
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10.8 DISCLOSURES AND ANNOUNCEMENTS. Both the timing and the content of
all disclosures to third parties and public announcements concerning the
transactions provided for in this Agreement by Seller, Buyer or HealthCare shall
be subject to the approval of the other parties in all essential respects,
except that Seller's approval shall not be required as to any announcements or
filings Buyer or HealthCare may be required to make under applicable laws or
regulations.
10.9 CONFIDENTIAL INFORMATION. For a period of two (2) years from the
date hereof, Seller shall use its best efforts to cause all of its agents,
officers, directors and employees to treat and safeguard all Confidential
Information concerning the business and, except as necessary to pursue any
claims of Seller, or as required by law or pursuant to a court proceeding or
legal action, agree not to disclose or reveal any Confidential Information to
any third party or otherwise use such Confidential Information. For purposes of
this Agreement, "Confidential Information" shall mean information of a valuable,
proprietary and confidential nature relating directly to the business, asset
lists and valuations of any kind, customer lists, trade secrets, formulae,
methods or processes, channels of distribution, pricing policies and records.
The term "Confidential Information" does not include information that (a) is or
becomes generally available to the public or is a recognized standard industry
practice; or (b) becomes available subsequent to the date hereof to Seller on a
non-confidential basis from a source other than Buyer, HealthCare or from
records of the business.
10.10 EXPENSES. Seller agrees that all fees and expenses incurred by it
in connection with this Agreement shall be borne by Seller including, without
limitation, all fees of counsel and accountants; and Buyer and HealthCare agree
that all fees and expenses incurred by them in connection with this Agreement
shall be borne by them, including, without limitation, all fees of counsel and
accountants.
10.11 NOTICES. All notices, requests, demands and other communications
hereunder shall be given in writing and shall be: (a) personally delivered; (b)
sent by telecopier, facsimile transmission or other electronic means of
transmitting written documents; or (c) sent to the
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parties at their respective addresses indicated herein by private overnight
courier service. The respective addresses and telephone numbers to be used for
all such notices, demands or requests are as follows:
If to Buyer: HealthCare Hearing Clinics Inc.
000 X.X. Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx, Xxxxxx 00000
Attn: President
Personal & Confidential
Facsimile: (000) 000-0000
If to HealthCare: HealthCare Capital Corp.
000 X.X. Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx, Xxxxxx 00000
Attn: President
Personal & Confidential
Facsimile: (000) 000-0000
with a copy to: Miller, Nash, Wiener, Hager & Xxxxxxx
000 X.X. Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx, Xxxxxx 00000
Attn: G. Xxxx Xxxxxxx
Facsimile: (000) 000-0000
If to Seller: Hearing Health Services Inc.
0000 Xxxx Xxxxx Xxxxxx, Xxxxx 000
Xxxx xx Xxxxxxx, XX 00000
Attn: W. Xxxx Xxxxxxx
Facsimile: (000) 000-0000
with a copy to: Xxxxxx & Xxxxxx
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxxxx
Facsimile: (000) 000-0000
If personally delivered, such communication shall be deemed delivered
upon actual receipt; if electronically transmitted, such communication shall be
deemed delivered the next business day after transmission (and the sender shall
bear the burden of proof of delivery); if sent by overnight courier pursuant to
this paragraph, such communication shall be deemed delivered upon receipt. Any
party to this Agreement may change its address for the purposes of this
Agreement by giving notice thereof in accordance with this section.
- 40 -
10.12 RESOLUTION OF DISPUTES.
(a) ARBITRATION. Any dispute, controversy or claim arising out
of or relating to this Agreement or the performance by the parties of its terms
shall be settled by binding arbitration held in Philadelphia, Pennsylvania, in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association then in effect, except as specifically otherwise provided in this
Section 10.12. Notwithstanding the foregoing, Buyer, in its discretion, may
apply to a court of competent jurisdiction for equitable relief from any
violation or threatened violation of the provisions of Seller under any
noncompetition and confidentiality agreements executed pursuant to this
Agreement.
(b) ARBITRATORS. Following thirty (30) days' written notice by
any party of intention to invoke arbitration, any dispute arising under this
Agreement or other schedules hereto and not mutually resolved within such thirty
(30) day period shall be determined by a single arbitrator upon whom the parties
agree or, if the parties cannot agree on a single arbitrator within five (5)
business days following such thirty (30) day period, then by a board of three
(3) arbitrators, which arbitrator(s) shall be selected for each such controversy
so arising hereunder. If three (3) arbitrators are necessary, each party shall
have the right to pick one arbitrator and the two arbitrators so chosen shall
have the right to select a third arbitrator. Any party who is unable or
unwilling to so select an arbitrator in a timely manner, shall forfeit its right
to participate in the selection process. If a selected arbitrator is unable or
unwilling to act, or if for any other reason an appointment of the requisite
number or arbitrators cannot be made, then any party, on behalf of all the
parties, may request appointment of arbitrator(s) by the presiding judge of the
federal courts located in the Eastern District of Pennsylvania.
(c) PROCEDURES; NO APPEAL. The arbitrator(s) shall allow such
discovery as the arbitrator(s) determine appropriate under the circumstances and
shall resolve the dispute as expeditiously as practicable, and if reasonably
practicable, within 120 days after the selection of the arbitrator(s). The
arbitrator(s) shall give the parties written notice of the decision, with the
reasons therefor set out, and shall have thirty (30) days thereafter to
reconsider and modify such decision if any party so requests within ten (10)
days after the decision. Thereafter, the decision of the arbitrator(s) shall be
final, binding, and nonappealable with respect to all persons, including
(without limitation) persons who have failed or refused to participate in the
arbitration process.
(d) AUTHORITY. The arbitrator(s) shall have authority to award
relief under legal or equitable principles, including interim or preliminary
relief, and to allocate responsibility for the costs of the arbitration and to
award recovery of attorney fees and expenses in such manner as is determined to
be appropriate by the arbitrator(s).
(e) ENTRY OF JUDGMENT. Judgment upon the award rendered by the
arbitrator(s) may be entered in any court having in personam and subject matter
jurisdiction. Seller, Buyer and HealthCare hereby submit to the in personam
jurisdiction of the federal and state courts in the Eastern District of
Pennsylvania for the purpose of confirming any such award and entering judgment
thereon.
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(f) CONFIDENTIALITY. All proceedings under this Section 10.12,
and all evidence given or discovered pursuant hereto, shall be maintained in
confidence by all parties.
(g) CONTINUED PERFORMANCE. The fact that the dispute
resolution procedures specified in this Section 10.12 shall have been or may be
invoked shall not excuse any party from performing its obligations under this
Agreement, and during the pendency of any such procedure all parties shall
continue to perform their respective obligations in good faith, subject to any
rights to terminate this Agreement that may be available to any party.
10.13 GOVERNING LAW. This Agreement may not be modified or terminated
orally, and shall be construed and interpreted according to the internal law of
the Commonwealth of Pennsylvania, excluding any choice of law rules that may
direct the application of the laws of another jurisdiction.
10.14 COUNTERPARTS. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument. Each counterpart may consist of a number of copies
hereof each signed by less than all, but together signed by all, of the parties
hereto.
10.15 ENTIRE AGREEMENT. This Agreement (including the schedules hereto)
and the agreements, certificates and other documents delivered pursuant hereto
contain the entire agreement between the parties hereto. All parties
collaborated in the preparation of this Agreement and it has been reviewed by
attorneys for each party. No one party should be considered the author of any
specific language for purposes of legal presumptions.
10.16 FURTHER ASSURANCES. Both before and after the Closing, each party
will cooperate in good faith with the others and will take all appropriate
action and execute any documents, instruments, or conveyances of any kind that
may be reasonable necessary or desirable to carry out any of the transactions
contemplated hereunder.
10.17 BOOKS AND RECORDS. For a period of five years after the Closing
(a) Seller shall provide reasonable access during normal business hours to the
books and records of the Midwest Division in existence on the date of Closing
that do not constitute a part of the Transferred Assets and (b) HealthCare and
Buyer shall provide reasonable access during normal business hours to the books
and records relating to the Midwest Division in existence on the date of the
Closing that constitute a part of the Transferred Assets.
10.18 RELEASE OF SELLER. All parties to this Agreement shall use their
best efforts to obtain the consent to assignment and release of Seller from
liability with respect to the Business Premises and the contracts listed in
Schedule 2.5, it being understood and agreed that no party to this Agreement
shall be required to obtain the consent to assignment and release of Seller from
liability with respect to the Contracts listed in Schedule 2.18(a).
- 42 -
10.19 TRANSFER OF NAME. At the later of the time Hearing Health
dissolves or otherwise ceases the business use of (which shall not be later than
180 days after such dissolution) the names "Hearing Health Services" and
"Audio-Vestibular Testing Center," Hearing Health shall cause such names to be
transferred and conveyed to Buyer without further consideration.
10.20 PASS THROUGH OF RIGHTS AND OBLIGATIONS. In the event that the
parties hereto are unable to obtain any of the necessary consents set forth in
Schedule 2.5 hereto prior to the Closing, each of the parties hereto agrees to
use its reasonable best efforts subsequent to the Closing to obtain such
consents. Seller agrees that until such time as such consents are obtained or in
the event the parties hereto are unable to obtain such consents, Seller shall
pass through to Buyer or HealthCare (or their respective designees) the benefits
and the obligations arising under the agreements listed in Schedule 2.5 as if
such agreements were assigned to Buyer or HealthCare (or their respective
designees) pursuant to this Agreement. Buyer and HealthCare, jointly and
severally, agree to perform fully the obligations under such agreements. Each of
Buyer and HealthCare hereby release and discharge Seller from all Claims (known
or unknown) arising out of or relating to the failure of the parties hereto to
obtain any of the necessary consents set forth in Schedule 2.5 hereto prior to
the Closing.
10.21 LEASE RENEWALS. Each of Buyer and HealthCare covenants and agrees
not to renew or extend any lease currently in effect covering the Business
Premises unless Hearing Health or AVTC, as the case may be, has been released
from all obligations arising under such lease.
10.22 JOINT AND SEVERAL OBLIGATIONS OF SELLER. All representations,
warranties, covenants, and obligations of Seller under this Agreement are the
joint and several representations, warranties, covenants, and obligations of
Hearing Health and AVTC.
10.23 RESTRICTIONS ON ISSUANCE OF SHARES. Except for the sale and
issuance of (i) any warrants or shares of HealthCare common stock issued or
issuable in connection with the offer of the September Special Warrants
described in the Prospectus and (ii) 420,000 shares of HealthCare common stock
to be issued to Xxxxxxx X. Xxxxx at a price of $1.72 per share, HealthCare shall
not at any time while the Convertible Note is outstanding, (i) issue or sell any
shares of its common stock or any evidences of indebtedness or other securities
convertible into or exchangeable for shares of its common stock at a price per
share of common stock less than the current market price per share of common
stock, (ii) issue any rights or warrants to all holders of shares of
HealthCare's common stock entitling such holders to subscribe for or purchase
shares of common stock at a price per share less than the current market price
per share of common stock, or (iii) distribute to all holders of shares of
common stock evidences of its indebtedness or securities or assets, except for
cash dividends or cash distributions payable out of consolidated net income or
retained earnings, and dividends payable in shares of common stock. For purposes
of this Section 10.23, the current market price per share of common stock on any
particular date shall be the last reported sale price of such common stock on
the ASE (or if not listed on the ASE, then on such other exchange on which such
common stock is listed as HealthCare may designate) on such date or if there
shall not have been a sale on such date, the
- 43 -
current market price shall be the average of the bid and asked quotations for
such common stock on such exchange for such date.
10.24 NOTICE TO SELLER. HealthCare shall give Seller not less than 10
days' written notice prior to the issuance or sale of additional shares of
HealthCare<018>s common stock, or evidences of its indebtedness or securities
convertible or exchangeable into shares of common stock, at a price less than
$1.30 per share of common stock; provided, however no notice shall be required
with respect to up to 750,000 shares or options to purchase up to 750,000 shares
issued to employees, officers, directors, consultants, or other persons
performing services for HealthCare or any subsidiary of HealthCare pursuant to
any stock offering, plan, or arrangement approved by the board of directors of
HealthCare.
10.25 QUALIFICATION OF BUYER. Buyer shall use its best efforts to
become duly qualified to transact business as a foreign corporation in the
States of Illinois, Indiana, and Michigan as promptly as practicable following
the Closing.
10.26 PENNSYLVANIA LEGEND. PURSUANT TO SECTION 207(M) OF THE
PENNSYLVANIA SECURITIES ACT OF 1972 (THE "ACT"), EACH PERSON WHO ACCEPTS AN
OFFER TO PURCHASE SECURITIES EXEMPTED FROM REGISTRATION BY SECTION 203(D) OF THE
ACT, DIRECTLY FROM THE ISSUER OR AFFILIATE OF THE ISSUER, SHALL HAVE THE RIGHT
TO WITHDRAW HIS ACCEPTANCE WITHOUT INCURRING ANY LIABILITY TO THE SELLER,
UNDERWRITER (IF ANY), OR ANY OTHER PERSON WITHIN TWO BUSINESS DAYS FROM THE DATE
OF RECEIPT BY THE ISSUER OF HIS WRITTEN BINDING CONTRACT OF PURCHASE OR, IN THE
CASE OF A TRANSACTION IN WHICH THERE IS NO BINDING CONTRACT OR PURCHASE, WITHIN
TWO BUSINESS DAYS AFTER HE MAKES THE INITIAL PAYMENT FOR THE SECURITIES BEING
OFFERED.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement effective as of the date first above written.
HEARING HEALTH:
HEARING HEALTH SERVICES, INC., a Delaware
corporation, dba SONUS
By: /S/ W. XXXX XXXXXXX
W. Xxxx Xxxxxxx
Vice President of Finance
AVTC:
AUDIO-VESTIBULAR TESTING CENTER, INC.
By: /S/ W. XXXXX XXXXXXX
W. Xxxx Xxxxxxx, Vice President
BUYER: HEALTHCARE HEARING CLINICS, INC., a
Washington corporation
By: /S/ XXXXXXX X. XXXXXX
Xxxxxxx X. Xxxxxx, President
HEALTHCARE: HEALTHCARE CAPITAL CORP., an Alberta,
Canada, corporation
By: /S/ XXXXXXX X. XXXXXX Xxxxxxx X. Xxxxxx,
President
- 45 -
SCHEDULES TO ASSET PURCHASE AGREEMENT
Schedule 1.1(b) Leased Premises
Schedule 1.1(b)(i) Assignment and Assumption of Lease Agreement
Schedule 1.1(c) Fixed Assets
Schedule 1.1(d) Contracts
Schedule 1.2 Excluded Assets
Schedule 1.3(a) Employee Bonuses
Schedule 1.3(a)(i) Foltner's Bonus
Schedule 1.3(b) Supplier Loans
Schedule 1.3(e) Excluded Leases
Schedule 1.4(a) Convertible Subordinated Note
Schedule 1.4(a)(i) Security Agreement
Schedule 1.4(c) Xxxxx Xxxxxxx Note
Schedule 2.4 Subsidiaries
Schedule 2.5 Conflicts
Schedule 2.9 Litigation
Schedule 2.15 Patents, Trademarks, etc.
Schedule 2.16 Product Warranty
Schedule 2.18(a) Leases
Schedule 2.18(b) Purchase Commitments
Schedule 2.18(c) Sales Commitments
Schedule 2.18(d) Contracts with Shareholders
Schedule 2.18(f) Loan Agreements
Schedule 2.18(g) Guarantees
Schedule 2.18(h) Restrictive Agreements
Schedule 2.18(i) Other Material Contracts
Schedule 2.19 Consents
Schedule 2.19(b) Defaults and Violations affecting Business Premises
Schedule 2.22 Liens
Schedule 2.23 Employee Benefit Plans
Schedule 2.24 Employment Compensation
Schedule 2.25 Bank Accounts
Schedule 5.1(c)(i) Legends on Certificates
Schedule 5.1(d)(ii) Declaration for Removal of Legends
Schedule 6.4 Sub-Lease Agreement
Schedule 6.7 Assumption Agreement
Schedule 7.6(a)(i) Noncompetition and Confidentiality Agreements - Seller
Schedule 7.6(a)(ii) Noncompetition and Confidentiality Agreements - Xxxxxx
Management
Schedule 7.6(a)(iii) Noncompetition and Confidentiality Agreements - Xxxxxx
Investment
Schedule 7.6(c) Employment Agreement - Foltner
Schedule 7.6(d) Letter Agreement
Schedule 8.1 Bills of Sale
Schedule 8.4(a) Opinion of Seller's Counsel
Schedule 8.5(a) Opinion of Buyer's Counsel
Schedule 8.6(a) Opinion of HealthCare's Counsel
