ASSET PURCHASE AGREEMENT between PHOTOMEDEX, INC. and PRI MEDICAL TECHNOLOGIES, INC. dated August 1, 2008
EXHIBIT
10.1
between
PHOTOMEDEX,
INC.
and
PRI
MEDICAL TECHNOLOGIES, INC.
dated
August
1, 2008
1
This ASSET PURCHASE AGREEMENT (the
“Agreement”)
is made this 1st
day of August, 2008 by and between PRI Medical Technologies,
Inc., a Nevada corporation (“PRI”),
having a business address at 00000 Xxxxxxxxx Xxxxxx, Xxx Xxxxxx, XX 00000,
and PhotoMedex,
Inc., a Delaware corporation (“PHMD”),
having a business address at 000 Xxxxxxxx Xxxxx, Xxxxxxxxxxxxxxx, XX
00000.
W I T N E S S E T H :
WHEREAS, PHMD desires to sell,
assign and transfer to PRI, and PRI desires to purchase and acquire from PHMD,
certain assets and properties of the Surgical Services Segment of
its business (the “Division”)
of PHMD as hereinafter described, upon the terms and
conditions set forth in this Agreement; and
NOW, THEREFORE, in
consideration of the premises and covenants herein contained and intending
to be legally bound hereby, the parties hereto agree as follows:
1. Sale of
Assets.
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(a)
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Acquired
Assets. PHMD hereby sells, assigns and transfers to
PRI, and PRI
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hereby
purchases from PHMD, the following assets, rights and properties
relating to the Division free and clear of any encumbrances other than as
specified herein. On the Closing Date, the following assets will be
sold:
(i)The accounts receivable relating to
the Division, as listed and subject to the terms on Schedule
1(a)(i), which list contains a complete list of all accounts receivable
as of July 30, 2008 that is accurate in material respects, and that will be
updated, within 5 business days of the execution of the Agreement, to be
accurate in material respects as of the Closing Date, and subject to closing and
post-closing adjustment as described in Schedule
1(a)(i);
(ii) The
inventories used by the Division in the provision of the surgical services, as
listed and subject to the terms on Schedule
1(a)(ii), which list contains a complete list of all inventories as of
July 30, 2008 that is accurate in material respects, and that will be updated
through a physical count to be conducted on August 8, 2008, and reconciled
within 5 business days of the count, to be accurate in material respects as of
the Closing Date, and subject to closing and post-closing adjustment as
described in Schedule
1(a)(ii);
(iii) The
equipment, accessories and other fixed, physical assets used by the Division, as
listed and subject to the terms on Schedule
1(a)(iii), which list contains a complete list of all equipment,
accessories and physical assets as of July 30, 2008 that is accurate in material
respects, and that will be updated by a physical count on August 8, 2008, as
described in Schedule 1(a)iii), and reconciled within 5 business days of the
count, and subject to post-closing adjustment as described in Schedule
1(a)(iii); and
(iv) The
intangible property rights relating to the
Division,
as listed and subject to the terms on Schedule
1(a)(iv) as of the execution of this Agreement and that will be updated
as of the Closing Date.
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All of
the above described assets are hereinafter sometimes collectively referred to as
the “Acquired
Assets.” The foregoing Schedules, and all subsequent Schedules, shall be
treated by the parties as confidential.
(b) Delivery of Certain Rights,
Properties and Information to PRI. In connection
with the transfer of the Acquired Assets, PHMD has heretofore or will
promptly deliver to PRI all of the other rights, properties and
information in its possession which are listed on confidential Schedule
1(b) hereto. The information shall be shipped, if not already
shipped, to PRI collect by motor freight no later than 30 days after the Closing
Date. PHMD shall be entitled to retain a copy of such information for archival
purposes.
2. Purchase
Price; the Closing. The purchase
price for the Acquired Assets and related rights, properties and
information transferred under Section 1(b) shall be as set forth on confidential
Schedule
2 (the “Purchase
Price”). PRI will be using the Acquired Assets (e.g. lasers) for rental
to customers and, therefore, will present to PHMD suitable exemption
certificates, in form satisfactory to PHMD, in order to exempt from sales tax
the sale and purchase of the Acquired Assets under Section 1(a) and for the
transfer and/or assignment of rights, properties and information under Section
1(b).
(a) Payment. Payment
of 90% of the Purchase Price, plus or minus closing adjustments, shall be made
to PHMD by wire transfer on the Closing Date, in accordance with the wire
transfer instructions set forth on confidential Schedule
2(a). The remaining balance of the Purchase Price shall be made as a
post-closing adjustment upon receipt by PRI of the physical count of the
inventory and of the lasers, lithotripters and vehicles, per Schedules
1(a)(ii) and
1(a)(iii).
(b) Allocation of
Consideration. Two (2) days prior to Closing, the parties will
agree to an allocation of the Purchase Price among the Acquired Assets and the
rights assigned to PRI under Section 1(b). The allocation will be attached to
this Agreement prior to Closing as confidential Schedule
2(b). The parties hereto will adhere to such allocation for all purposes,
including without limitation federal and state income tax purposes. PRI and PHMD
agree to cooperate in preparing and filing IRS Form 8594 reflecting that
allocation.
(c) Assumption of
Liabilities. PRI assumes no debts or trade payables of
the Division existing as of, and incurred prior to, the Closing Date. PRI shall
assume only those operating leases under which PHMD rents certain fixed assets
as set forth in Schedule2(c)
and any other liabilities incurred by the Division on or after the
Closing Date, including without limitation all maintenance obligations relating
to the Acquired Assets and all operating expenses of the Division.
(d) The Closing. The
purchase and sale provided for in this Agreement (the “Closing”)
will take place at a location agreed in writing by the parties, commencing at
10:00 a.m. (local time) on the date that is five (5) business days following the
satisfaction or waiver of the conditions set forth in Section 3, unless the
parties otherwise agree, but in no case will the Closing take place later than
August 15, 2008. The parties contemplate that the date of execution
of this Agreement will be August 1, 2008, that the execution of this Agreement
will be announced in press releases on August 4, 2008, and that the Closing will
be on August 8, 2008. PRI and PHMD contemplate that a joint call will be made,
no sooner than the close of the Nasdaq market on the evening of Monday, August
4, 2008, to the Division employees announcing the execution of this Agreement.
The date on which the Closing occurs shall be deemed to be the “Closing
Date.” All income and expenses from the Division business arising after
the Closing Date shall belong to PRI; all income and expenses from the Division
business arising on or before the Closing Date shall belong to
PHMD.
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3. Conditions Precedent to
Closing; Deliveries at Closing.
(a) Conditions
Precedent to Closing. The
Closing of the proposed transaction will be subject to the following
conditions:
(i) At Closing, there will have been
no material adverse changes in the business, operations, properties, prospects
or condition (financial or otherwise) of the Division;
(ii) The proposed transaction will
have been approved by (1) the Board of Directors of PHMD and (2) the Board
of Directors of PRI;
(iii) Receipt of all necessary
consents and approvals of governmental bodies, lenders, lessors and other third
parties;
(iv) Absence of pending or threatened
litigation regarding this Agreement or the transactions to be contemplated
thereby;
(v) Employment agreements conforming
to the standard form set forth in Schedule
7(g), prepared and procured by PRI and signed by Xxxxxxx Xxxxx, Xxxxx
Xxxx, Xxxxxx Xxxxxxx, Xxxx Xxxxxxx and Xxxxxxx Xxxxxxxxxxx;
(vi)
Receipt of evidence of recorded UCC3’s; and
(vii) Receipt of evidence that the
physical counts described in Schedules
1(a)(ii) and 1(a)(iii) have timely occurred.
(b) PHMD’s
Deliveries. At the Closing, PHMD will deliver:
(i) a xxxx of sale and assignment in
substantially the form attached hereto as Schedule
3(b)(i), executed by PHMD, conveying in the
aggregate all property included in the Acquired Assets on confidential
Schedules
1(a)(i), (ii), (iii) and (iv);
(ii) an assignment and assumption
agreement, executed by PHMD, in substantially the form attached hereto as
Schedule
3(b)(ii) assigning to
PRI all of PHMD’s respective right, title and interest in and to each of the
rights, properties and
information assumed by
PRI under Section 1(b), including without limitation the titles and
registrations of the vehicles of the Division;
(iii) such other deeds, bills of sale,
assignments, certificates of title, documents and other instruments of transfer
and conveyance, executed by PHMD, as may reasonably be requested by PRI, each in
form and substance satisfactory to PRI;
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(iv) evidence that the Acquired Assets
are free of liens and encumbrances, except as set forth in Schedule
3(b)(iv);
(v) landlord’s consents to PHMD’s
assignment of the Division’s Real Property Leases (as defined in Section 5.6),
or failing any such consent, PHMD’s sublease of such lease to PRI in lieu of
assignment, if permitted under the terms of such Real Property
Leases;
(vi) a Supply Agreement in accordance
with Section 4 hereof;
(vii) the agreement of Xxxxxxx X.
Xxxxxxx referenced in Section 7(e)(ii);
(viii) authorization under Section
7(a) to PRI to negotiate checks made payable to PHMD for accounts receivable
listed in Schedule
1(a)(i) or for accounts receivable arising on or after the Closing Date
which were earned by PRI;
(ix) evidence that the physical counts
described in Schedules
1(a)(ii) and 1(a)(iii) have taken place; and
(ix) Certificate of PHMD’s Secretary or
Assistant Secretary evidencing the resolutions of the Board of Directors of PHMD
authorizing the transactions contemplated by this Agreement.
After the
Closing, PHMD will deliver:
(x) the Financial Statements described
in Section 5.3 will be delivered by PHMD within 60 days after the Closing Date,
to allow PRI time to file the same with the Securities and Exchange
Commission;
(xi) evidence that vacation pay accrued
to the Closing Date has been paid out to Division employees in the final payroll
of PHMD for Division employees following Closing; and
(xii) payment of any post-closing
adjustment that may be necessary, the first such payment to be made no later
than August 15, 2008.
(c) PRI’s
Deliveries. At the Closing, PRI will deliver:
(i) the
payment of the Purchase Price to PHMD, net of any closing
adjustments;
(ii) reimbursement to PHMD of security
deposits, as set forth in Schedule
7(h), reimbursement
of any extant amounts prepaid by PHMD for third-party maintenance
contracts for the Division, as set forth in Schedule1(a)(iii) at para.
(ix);
(iii) suitable sales tax exemption
certificates as described in Section 2, in form satisfactory to
PHMD;
(iv) copies of the five employment
agreements described in Section 3(a)(v); and
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(v) Certificate of PRI’s Secretary or
Assistant Secretary evidencing the resolutions of the Board of Directors of PRI
authorizing the transactions contemplated by this Agreement.
After the
Closing, PRI will deliver:
(vi) payment of any post-closing
adjustments that may be necessary, the first such payment to be made no later
than August 15, 2008.
4. Agreement
to Supply. (a) PHMD
agrees, in accordance with a separate Supply Agreement in the form set forth in
confidential Schedule
4(a), to continue to supply PRI with LaserPro® diode laser systems,
LaserPro® CTH holmium laser systems and UniMax® micromanipulators and fiber
delivery systems of PHMD’s own manufacture. PHMD further agrees, in accordance
with the same Supply Agreement, to continue to provide field and depot
maintenance services for the lasers of its own manufacture and those
manufactured by Trimedyne in the Division. (b) Where PHMD has not provided such
services, PHMD shall inform PRI of its third-party vendors set forth in Schedule
4(b) and, at PRI’s request, endorse to such vendors that they continue to
supply such services to PRI.
5. Representations
and Warranties of PHMD. PHMD represents
and warrants to PRI as follows, with respect to, and solely with respect to, the
Acquired Assets and the Division:
5.1 Organization and
Qualification of PHMD. PHMD is a corporation duly organized,
validly existing and in good standing under the laws of Delaware. PHMD has full
corporate power and authority to conduct the Division’s business as it is
presently being conducted by the Division. PHMD does not do business in any
jurisdiction where the failure to be qualified to do business has had a material
adverse effect on the Division’s business or the Acquired Assets, it being
understood that PRI must secure its own permits, licenses, qualifications and
the like to conduct the business of the Division.
5.2 Authorization. PHMD
has all requisite corporate power and authority to execute and deliver this
Agreement and any ancillary agreements, and all other instruments and
certificates to be delivered at the Closing, and to consummate the transactions
contemplated by such agreements and to perform its respective obligations under
such agreements. The execution and delivery of this Agreement and any
ancillary agreements by PHMD and the other agreements, instruments and
certificates to be delivered at the Closing, and the consummation by PHMD of the
transactions contemplated by such agreements have been duly approved by the
Board of Directors of PHMD. No other actions on the part of PHMD are
necessary to authorize this Agreement, any ancillary agreements or the other
agreements, instruments and certificates to be delivered by PHMD under this
Agreement or the ancillary agreements, or the transactions contemplated by such
agreements. This Agreement and the other agreements, instruments,
certificates and documents to be delivered by PHMD, including any ancillary
agreement, have been (or, if to be executed or delivered after the date of this
Agreement, will be) duly executed and delivered by PHMD, and are (or, when
executed, will be) legal, valid and binding obligations of PHMD, enforceable
against PHMD in accordance with their terms, except as such enforcement may be
limited by bankruptcy, insolvency, reorganization, and other similar laws
affecting creditors’ rights generally and by equitable principles.
5.3 Financial
Statements. (a) The financial statements
of the Division for the period ended December 31, 2007 that are to be provided
by PHMD to PRI and which are to be delivered after Closing (the “Financial
Statements”) (i) will have been prepared, based on management reports,
substantially in accordance with GAAP that was consistently
applied as of the date or for the period covered thereby, but without
accompanying footnotes, and (ii) will fairly and adequately represent the
assets, liabilities, and the financial position and financial results (P&L)
of the Division as of the date, or for the period, set forth on the Financial
Statements. PRI further requires that it receive the Financial Statements in
full accordance with GAAP and that the Financial Statements should be audited by
an independent auditing firm and further requires unaudited quarterly statements
of the Division for 2007, and for such quarters in 2008 (e.g. first and second
quarters) as may be required by the Securities and Exchange Commission, all to
be compiled and reviewed, in order to fulfill SEC reporting obligations, then at
PRI’s request and on PRI’s behalf, PHMD shall engage its independent auditors to
perform such audit, compilation and review, and the expense of such work shall
be borne by the parties as follows: the first $10,000 by PHMD, then the next
$27,000 by PRI, and any additional costs by PHMD. PHMD shall provide
to PRI the unaudited results of operations of the Division from July 1, 2008 to
the Closing Date, and the unaudited balance sheet of the Division as of the
Closing Date, but prior to the Closing itself. (b) PHMD represents to
PRI that the accounting reports (i.e. profit and loss statement and balance
sheet) which PHMD provided to PRI for the Division as of, and for the periods
ended, December 31, 2007 and May 31, 2008, are management reports that PHMD
generated for managing the business of the Division under the rules of segment
reporting. PHMD further represents that, except as set forth in Schedule
5.3, such reports were materially accurate for purposes of management
reporting and, with adjustments disclosed and discussed with PRI and set forth
in Schedule
5.3, were materially accurate for use in segment reporting in PHMD’s
financial statements.
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5.4 Scope of Rights in Acquired
Assets. The rights, properties, and assets included in the
Acquired Assets include substantially all of the rights, properties, and assets,
of every kind, nature and description, wherever located that are presently used
and have been generally used by PHMD in connection with the Division’s business
or that PHMD believes are necessary to own, use or operate the Division as the
same is presently conducted.
5.5 Ownership and Condition of
Acquired Assets . PHMD has, and at
the Closing will have, good and marketable ownership or title (or in the case of
leased personal property, a good and valid leasehold interest) to all of the
Acquired Assets, including its intellectual property rights in and to the use of
the common law trademark “SIS™” and of “PhotoMedex® Surgical Services™”, and all
the properties and assets reflected in the Financial Statements, subject to no
liens, claims, security interests or encumbrance except for permitted liens,
claims, security interests or encumbrances. PHMD owns exclusively, or
validly leases or licenses, all Acquired Assets (including at least
non-exclusive rights to all material intellectual property, tradenames,
trademarks and service marks used in the Division) and all names and images that
are or have been used in connection with the Division’s business. PHMD shall
convey to PRI at Closing good and marketable title to the Acquired Assets,
except as otherwise specified. The Acquired Assets include all the
assets, properties and rights used by PHMD to operate the Division’s business as
currently conducted. Substantially all of the lasers, lithotripters and vehicles
included in the Acquired Assets are in working condition and reasonable repair.
All of the lasers encompassed within the Acquired Assets have been maintained in
accordance with the Division’s standard maintenance schedules. As to
all other Acquired Assets, PHMD is selling same “as is, where is”.
5.6 Real Property
Leases. PHMD is not
conveying any real property to PRI. Schedule 5.6
contains a complete and correct list of all written leases and subleases
pursuant to which PHMD leases real property to or from any person (the “Real Property
Leases”) and from which the Division conducts its
business. With respect to each Real Property Lease, PHMD represents
to its knowledge that there are no liens or encumbrances in the leasehold
interest that PHMD has by virtue of the Real Property Leases, except insofar as
PHMD’s leasehold interest may have been subordinated to the interests of
mortgagees on the real property in question. PHMD enjoys, without
material exceptions, peaceful and undisturbed possession of all the
leased real property covered by the Real Property Leases. To the
knowledge of PHMD, no portion of the security deposit under any Real Property
Lease has been applied that has not been re-deposited in full. Except
as set forth in Schedule
5.6, PHMD has not received notice (and has no knowledge) of any special
assessment proceedings affecting the leased real property that have not been
resolved. There is no pending or, to the knowledge of PHMD,
threatened condemnation affecting any real property that is leased or used by
the Division. Except as set forth in Schedule
5.6, PHMD has not caused any work or improvements to be performed upon or
made to any of the leased real property for which there remains outstanding any
material payment obligation that could result in the imposition of any material
encumbrance on the leased real property. To the knowledge of PHMD,
the current use and occupancy by PHMD of the real property and operation of the
Division’s business at the locations of the real property does not violate in
any material respect any applicable law, rule or regulation. PHMD has
not received any notice (and has no knowledge) of violation of any easement,
covenant, condition, restriction or similar provision in any instrument of
record or other unrecorded agreement affecting the real property occupied or
used by the Division.
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5.7 Contracts and
Commitments.
(a) Except
for the contracts listed on Schedule 5.7
(the “Specified
Contracts”), the Division is not a party to, nor is the Division or any
of its Acquired Assets bound by, any:
(i) contract
for the employment of any person on a full-time, part-time, consulting or other
basis or contract relating to loans to officers, directors or affiliates, except
oral or written contracts for employment at-will or contracts that will be
terminated at or prior to Closing;
(ii) contract
relating to any severance, golden parachute, stay bonus or similar contract with
or for the benefit of any person engaged on a full-time, part-time, consulting
or other basis requiring payments by PHMD upon the sale of the Division or
otherwise;
(iii) contract
relating to borrowed money or other indebtedness (including any capital lease
agreements) or the mortgaging, pledging or otherwise placing an encumbrance on
any Acquired Asset;
(iv) contract
under which PHMD is lessor of, or permits any third person to hold or operate,
any Acquired Asset;
(v) assignment,
license, indemnification, joint development agreement or other contract with
respect to any tradenames, trademarks, and service marks or designs used by the
Division;
(vi) sales,
distribution, dealer or manufacturer’s representative or franchise
contract;
(vii) contract
prohibiting or restricting the Division from freely engaging in any business or
competing anywhere in the world, or subject to a change of control
provision;
(viii) contract
with any Division supplier containing any provision permitting any party other
than PHMD to renegotiate the price or other terms, or containing any pay-back,
retroactive adjustment or other similar provision, upon the occurrence of a
failure by PHMD to meet its obligations under contract when due or the
occurrence of any other event if such Division contract involves annual
consideration in excess of $5,000 or aggregate consideration in excess of
$10,000, except where such failure gives the other party to the contract the
right to terminate the contract and as a result of such right, the other party
may seek to renegotiate any of such terms;
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(ix) contract
for the Division’s committed future purchase of fixed assets or the maintenance
of such fixed assets subject to future purchase or for the committed future
purchase of materials, supplies or equipment involving annual consideration of
$5,000 or aggregate consideration in excess of $10,000;
(x) Division
contract relating to joint ventures or other agreements involving a sharing of
Division profits;
(xi) Division
contract relating to cleanup, abatement or other actions in connection with
environmental liabilities;
(xii) Division
contract relating to any “lock-box” with any financial institution;
(xiii) Division
guaranty, bond or similar contract;
(xiv) Division
contracts that require the payment of royalties, commissions, finder’s fees or
similar payments which involves in the aggregate annual consideration in excess
of $25,000;
(xv) contract
limiting or restricting the disclosure of confidential information by PHMD;
or
(xvi) material
oral contracts not in the ordinary course of business that are binding on the
Division.
(b) Materially
complete and correct copies of each of the written Specified Contracts,
including all amendments, waivers and modifications have been delivered, or will
be delivered under Section 1(b), to PRI by PHMD. Except as set forth on Schedule 5.7,
PHMD has not received notice of any breach or default under any of the contracts
from any other party to the contracts, or sent notice of any breach or default
under any of the contracts to any other party to the contracts. To
the knowledge of PHMD, no event has occurred that, with the giving of notice or
the lapse of time, or both, would constitute a breach or default on the part of
PHMD under any of the contracts; nor to PHMD’s knowledge, has any event occurred
which with the giving of notice or the lapse of time, or both, would constitute
a breach or default on the part of any other party to any of the contracts. Each
contract that contains a change in control clause or otherwise requires the
consent or approval of any person in connection with the transactions
contemplated by this Agreement is appropriately identified as such on Schedule
5.7.
5.8 Permits. To
the knowledge of PHMD, PHMD has all material permits necessary for the conduct
of, or relating to the operation of, the Division as now being conducted, except
as set forth on Schedule
5.8. To the knowledge of PHMD, except as set forth on Schedule
5.8, all permits of PHMD are valid and in full force and
effect. There is not now pending nor, to the knowledge of PHMD,
threatened any action by or before any governmental authority to revoke, cancel,
rescind, modify, or refuse to renew in the ordinary course of business any of
such permits. Except as set forth on Schedule 5.8,
to the knowledge of PHMD, no notice to, declaration, filing or registration
with, or permit from, any governmental authority, or any other person, is
required to be made or obtained by PHMD in connection with the execution,
delivery or performance of this Agreement or any ancillary agreements by PHMD
and the consummation of the transactions contemplated by this
Agreement.
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5.9 No Conflict or
Violation. Except as set forth on Schedule 5.9,
none of the execution, delivery or performance of this Agreement or any
ancillary agreements, the consummation of the transactions contemplated by this
Agreement or any ancillary agreements, or compliance by PHMD with any of the
provisions of this Agreement or any ancillary agreements, will (a) violate or
conflict with any provision of the Articles of Incorporation or Bylaws of PHMD,
(b) violate, conflict with, or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration under, any of the terms, conditions or provisions of any written
contract or, to the knowledge of PHMD, any permit or other instrument or
obligation (i) to which PHMD is a party or (ii) by which the Acquired Assets are
bound, (c) to the knowledge of PHMD violate, in any respect material to the
business of the Division, any statute, rule, regulation, ordinance, code, order,
judgment, ruling, writ, injunction, decree or award, or (d) impose any
encumbrance on the Acquired Assets or the Division’s business.
5.10 Absence of Certain
Changes. Except as disclosed in Schedule 5.10,
since January 1, 2008, PHMD has conducted the Division’s business only in the
ordinary course consistent with past practice and there has not occurred: (a)
any material adverse change with respect to the Acquired Assets or the
Division’s business; (b) any damage to, destruction or loss of any Acquired
Asset that is not covered by insurance and is not in the ordinary course of
business and that would require expenditures in excess of $5,000 in the
aggregate to repair or replace; (c) any change by PHMD in its accounting
methods, principles or practices with respect to the Division except as required
by any change in, or as appropriate to, GAAP; (d) any revaluation by PHMD of any
of its Acquired Assets, including any writing down the value of inventory or
writing off accounts receivable, except as such revaluation may happen in the
ordinary course of business and consistent with past accounting practices; (e)
any sale or disposition of, or encumbrance or security interest placed on, any
Acquired Asset, except (1) sales or uses of inventory in the ordinary
course of business and in a manner consistent with past practice and
(2) dispositions of obsolete or worthless assets; (f) any execution or
implementation of any employment, bonus, deferred compensation, severance or
similar arrangement or agreement (or amendment of any such agreement) covering
employees of the Division, or any increase in employee welfare or retirement
benefits covering such employees of the Division, except as such may happen in
the ordinary course of business and consistent with past practice, (g) any
increase in the salary of any employee in the Division not in the ordinary
course of business; (h) any labor dispute or any activity or proceeding by a
labor union or labor representative to organize any employees of PHMD, or any
lockouts, strikes, slowdowns, picketing, work stoppages or, to the knowledge of
PHMD, threats thereof by or with respect to such employees; (i) any termination,
or notice of termination, of any material written contract or, to the knowledge
of PHMD, material permit, except as happens in the ordinary course of business;
(j) any material failure that is inconsistent with past practice to pay the
Division’s creditors or to collect debt or obligations owed to the Division or
any material change in the Division’s selling, pricing or advertising practices;
(k) any commitment to a third party for capital expenditures in excess of $5,000
that is not in the ordinary course of business; (l) any resignation,
termination, death or material disability involving any of the Division’s
employees, except as happen in the ordinary course of business; (m) any material
adverse change in the amount, aging or collectibility of the Division’s accounts
receivable or other debts due it or the allowances with respect thereto or in
the Division’s accounts payable from those which are to be reflected on the
Financial Statements.
5.11 Books and
Records. PHMD has made and kept (and
given PRI reasonable access to) its books and records.
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5.12 Litigation. Except as set forth in
Section
5.12, there is no action, order, writ, injunction, judgment or decree
outstanding or any claim, complaint, inquiry, suit, litigation, proceeding,
hearing, dispute, arbitration, action, audit or investigation (whether by third
parties or governmental agencies) (collectively, “Actions”)
pending, or to PHMD’s knowledge, threatened (a) involving, against, related
to or affecting PHMD with respect to the Division’s business or the
Acquired Assets, or (b) seeking to delay, limit or enjoin the transactions
contemplated by this Agreement or any ancillary agreements. To the
knowledge of PHMD, PHMD is not in breach or default with respect to, or subject
to, any judgment, order, writ, injunction or decree of any court or other
governmental authority that reasonably pertains to the Division, and there are
no unsatisfied judgments not otherwise discharged by court order or an
applicable statute of limitations, against PHMD, the Division’s business or the
Acquired Assets. Schedule 5.12
contains a brief summary of all material Actions involving, or related to, the
Acquired Assets, or the Division’s business that are open as of the date of this
Agreement, including, worker’s compensation claims, wage and hour claims or
discrimination claims (including sex, age, race, national origin, handicap or
veteran status discrimination claims).
5.13 Undisclosed
Liabilities. Except as is disclosed in Schedule 5.13,
PHMD and the Division’s business have no material liabilities (absolute,
accrued, contingent or otherwise), except those liabilities (a) to be
reflected on the face or in the notes of the Financial Statements,
(b) incurred since the date of the Financial Statements, in the ordinary
course of business consistent with past practice, which are of the same general
nature as those set forth on the face of the Financial Statements, or
(c) incurred in connection with this Agreement.
5.14 Compliance with
Law. To the knowledge of PHMD except as shown in Schedule
5.14, during the 18 months preceding the date of this Agreement, PHMD, in
the conduct of the Division’s business, has not violated in any material
respect, and is in material compliance with, all applicable and material laws,
statutes, ordinances, regulations, rules, orders, judgments, decisions and
decrees of governmental authorities, relating to the Acquired Assets and the
Division’s business. Except as shown in Schedule
5.14, during the last 18 months, PHMD has not received any notice to the
effect that, or otherwise been advised that, PHMD is not in material compliance
with any such statutes, regulations, rules, judgments, decrees, orders,
ordinances or other laws.
5.15 Intellectual
Property. Except as set forth in Schedule
5.15, PHMD has the right to assign to PRI its rights to the common law
trade name “Surgical Innovations & Services” and the common law trademark
“SIS™” and has the right to license PRI to use the trademark “PhotoMedex®
Surgical Services™” (the, “Intellectual
Property”), which are material to, and for use in, the
Division. The trademark “PhotoMedex” is registered with the United
Sates Patent and Trademark Office under Registration number 2575254. Except as
set forth in Schedule 5.15:
(i) PHMD possesses all right, title, and interest in and to, or a valid and
enforceable license to use, as the case may be, the Intellectual Property, free
and clear of any encumbrance; (ii) to the knowledge of PHMD, the legality,
validity, enforceability, ownership, or use of the Intellectual Property by PHMD
has not been, nor is currently being challenged, interfered with, or infringed
upon, and to PHMD’s knowledge, it is not subject to any such challenge; (iii) to
the knowledge of PHMD, PHMD’s ownership and/or use of the Intellectual Property
has not, interfered with, infringed upon, misappropriated or otherwise violated
any intellectual property rights of any third party; and (iv) except as set
forth otherwise in this Agreement, the Intellectual Property will continue to be
available for use by PRI from and after the Closing at no additional cost to
PRI.
5.16 Employees. There
are no employment or severance or termination agreements, whether written or
oral, accruing to the benefit of any person, except for agreements disclosed on
Schedule
5.7 or those
entered into pursuant to the terms of this Agreement. Set forth on Schedule
5.16 is a list of all persons currently employed by the Division, and
that list states, with respect to such persons who are so employed, their
current hourly rates of compensation, base salaries or other basis for and
amount of compensation, their total 2007 Form W-2 compensation, their accrued
and unpaid vacation and sick days and the commencement date of their
employment. Vacation pay (but not sick pay) accrued as of the Closing
Date shall be paid out by PHMD in its next payroll period following the Closing
Date.
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5.17 [intentionally
blank]
5.18 Labor Relations. Except as set
forth on Schedule
5.18, to the knowledge of PHMD, PHMD has complied in all material
respects with all applicable requirements of governmental authorities pertaining
to the employment of labor, including those relating to wages, hours, collective
bargaining, employment discrimination, sexual harassment, worker’s compensation,
and the payment of or withholding of taxes and there are no actions, suits,
charges, complaints, proceedings, investigations or audits pending or threatened
against PHMD in connection therewith. There are no collective
bargaining agreements relating to PHMD’s relationship with any
employee. PHMD has not recognized any labor organization, nor has any
such organization been certified, as the exclusive bargaining agent of any
employees of PHMD. Except as set forth on Schedule
5.18, there has been no demand on behalf of any labor organization to
represent any employees of PHMD, PHMD has no knowledge of any present efforts of
any labor organization for authorization to represent any employees of PHMD,
PHMD believes it currently has good relations with its employees, and there are
no strikes, work stoppages or labor disputes pending or, to the knowledge of
PHMD, threatened against the Division.
5.19 Environmental, Health, and
Safety.
(a) To
the knowledge of PHMD, except as set forth in Schedule
5.19(b), at all
times prior to the Closing, PHMD has complied in all material respects, and at
Closing will be in compliance, in all material respects, with all Environmental
and Safety Requirements applicable to the Division’s business, PHMD’s use and
occupancy of any real property and/or PHMD’s ownership and use of the Acquired
Assets, and PHMD has not received any notice, report, or information (including
information that litigation, investigation or administrative action of any kind
are pending or threatened) regarding any liabilities (whether accrued, absolute,
contingent, unliquidated, or otherwise), or any corrective, investigatory, or
remedial obligations, arising under Environmental and Safety Requirements
relating to the Division’s business or PHMD’s ownership and/or use of any of the
Acquired Assets. For the purposes of this Agreement, “Environmental and
Safety Requirements” means all present requirements of any applicable
governmental authority relating to the discharge of air pollutants, water
pollutants, or process waste water or petroleum products or otherwise relating
to health, safety, the environment or Hazardous Substances (as defined below),
including, but not limited to, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, the Occupational Safety and
Health Act of 1970, as amended, the Federal Water Pollution Control Act, as
amended, the Federal Resource Conservation and Recovery Act, as amended, the
Federal Clean Water Act, as amended, the Toxic Substances Control Act, as
amended, the Federal Clean Air Act, as amended, the Superfund Amendments and
Reauthorization Act, as amended, and any and all other comparable state or local
laws relating to public health and safety or work health and
safety.
(b) To
the knowledge of PHMD, except as set forth on Schedule
5.19 (b), no Hazardous Substances have been or are currently located at,
in, or under or about the real property or the leased premises in a manner
which: (i) violates in any material respect any applicable
Environmental and Safety Requirements, or (ii) requires response, remedial,
corrective action or cleanup of any kind under any applicable Environmental and
Safety Requirements. For purposes of this Agreement, “Hazardous
Substances” has the meaning set forth in Section 101(14) of the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, and will also expressly include petroleum, crude oil and any fraction
thereof.
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5.20 Tax Matters.
Except as set forth on Schedule
5.20:
(a) Taxes. PHMD has, to
its knowledge, paid, and up to the Closing Date will have either paid or will
have accrued for, all real property, personal property, sales, employment,
franchise, state, federal, and local taxes of whatsoever kind or nature to the
appropriate state, local and/or federal agencies and governmental entities,
which have arisen or accrued in connection with the ownership and/or occupancy
and/or use of the Acquired Assets, the real property, the leased premises and/or
the Division’s business that are due prior to the Closing Date or that relate to
periods prior to the Closing Date.
(b) Filing of Tax
Returns. PHMD has timely filed, or caused to be filed, with
the appropriate taxing authorities substantially all material returns (including
information returns and other material information) in respect of taxes relating
to the Division and required to be filed through or as of the Closing Date
(except for any W-2, W-3, 940 that PHMD will file on a timely basis when
due). The returns and other information filed are complete and
accurate in all material respects, including the characterization of
compensation and the amount of deductions reflected thereon. To the
knowledge of PHMD, all of these tax returns are correct and
complete.
(c) Audits, Investigations or
Claims. There are no pending or, to PHMD’s knowledge,
threatened audits, investigations, claims or other actions for or relating to
any additional liability of PHMD in respect of taxes relating to the Division,
and there are no matters under discussion between PHMD and any governmental
authority with respect to taxes relating to the Division. To the
knowledge of PHMD, there are no tax liens on any of the Acquired Assets, except
for liens for current taxes not yet due and payable or liens not known to PHMD
which may have arisen due to administrative errors.
5.21 Insurance. PHMD
will maintain from the date of execution of this Agreement until the Closing
Date the policies of fire, liability, worker’s compensation, product liability
and other forms of insurance that it has maintained from January 1, 2008. To the
knowledge of PHMD, PHMD is not in material breach or default under any of such
policies.
5.22 Governmental and Other
Third-Party Consents. Except as set forth on Schedule 5.22,
to the knowledge of PHMD, no consent or approval of, notice to, or filing with
any governmental authority or third person is required to be made by PHMD in
order to consummate the transactions contemplated by this
Agreement.
5.23 Brokers. Except
as described in Section 12, no person will be entitled to any brokerage
commissions, finder’s fees or similar compensation arising out of or due to any
act of PHMD in connection with the transactions contemplated by this
Agreement.
5.24 Affiliate
Transactions. Except as set forth on Schedule
5.24, there are no contracts, agreements, arrangements or transactions
between the Division and any affiliates, stockholders or employee of
PHMD.
5.25 Possession of Assets Owned
by Third Parties. Except as set forth on Schedule
5.25, PHMD is not in possession or control of any proprietary information
or other personal property that is owned by any other person or its vendors for
use in connection with the Division’s business.
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5.26 Customers and
Suppliers. Except as set forth on Schedule
5.26, to the knowledge of PHMD, no customer, supplier or other person
with a material business relationship with the Division has any intention to
cease or substantially reduce the use or supply of products, goods or services
of or to the Division’s business or return any products or goods of the
Division’s business, whether as a result of the Closing or otherwise. Except as
set forth on Schedule
5.26, PHMD is not aware of any material customer issues or problems with
respect to their relationship or business dealings with the Division. Attached
as Schedule
5.26 is a list of all of the Division’s customers during 2007 and 2008
along with their respective gross sales volumes and the Division’s vendors
during 2007 and 2008 to which the Division incurred $10,000 or more in
expenditure.
5.27 Reports. Except
as set forth on Schedule
5.27, PHMD, to its knowledge, has timely filed all material reports,
registrations and statements relating to the Division and required to be filed
by it with any governmental authority and has paid all related fees and
assessments due and payable.
5.28 Accounts
Receivable. The accounts receivable which are being
sold to PRI under Section 1(a)(i) and which are associated with the Division’s
business as of the Closing Date, except as set forth on Schedule
5.28, (i) are valid and genuine; (ii) have arisen solely out of
bona fide sales and performance of services and other business transactions in
the ordinary course of business consistent with past practice; (iii) are,
to the knowledge of PHMD, not subject to any material, valid defenses, set-offs
or counterclaims; and (iv) are, subject to recorded bad debt allowances, fully
collectible and payable at their face amounts.
5.29 Transfer of Ownership of
Computer Databases and Customer Information. On the Closing
Date, PHMD shall sell, transfer and deliver copies, or otherwise make available,
to PRI of all customer records, customer lists, contact information, billing
records and computer data bases that are used in connection with and/or relate
to the operation of the Division’s business, including any information stored on
any media containing the names, addresses and other information relating to
present and potential future customers of the Division, and where such
information, including patient health information, is to be maintained, or has
been maintained, by the Division as confidential, PRI will also maintain the
confidentiality of such information.
5.30 Accuracy of
Information. No statement made by PHMD in this Agreement or in
any document to be provided by PHMD to PRI hereunder contains or will contain
any untrue statement of a material fact or omits or will omit to state a
material fact necessary to make the statements contained therein not misleading
to PRI. PHMD is not aware of any occurrence or event or circumstance that would
cause any of the representations and warranties contained herein not to be true
and complete in all material respects on the Closing Date.
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6. Representations and
Warranties of PRI. PRI represents and
warrants to PHMD as follows:
(a) Organization and Good
Standing. PRI is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Nevada.
(b) Binding
Effect. This Agreement and each instrument executed by
PRI in connection herewith are the legal, valid and binding obligations of
PRI, enforceable against it in accordance with its terms.
(c) Authorization. The
execution, delivery and performance by PRI of this Agreement, the grant of
the license hereunder and consummation of the transactions provided for
herein, are within the corporate powers of PRI; have been duly authorized
by all necessary corporate action, on the part of PRI; and do not
contravene any law, regulation, judgment, decree, order or award
relating to PRI or conflict with or result in a breach of any of the terms
or provisions of, or constitute a default under, any indenture, mortgage,
lease, security agreement, or other agreement or instrument to which PRI is
a party or by which PRI is bound.
(d) Consents and
Approvals. No consent of any other party and no approval or
authorization of, or declaration or filing with, any governmental or regulatory
authority is required for the valid authorization, execution and delivery by PRI
of this Agreement.
7. Agreements of
PHMD. PHMD
covenants and agrees with PRI as follows:
(a) Accounts Receivable.
PHMD agrees that should any customers of the Division remit to PHMD payment of
accounts receivable sold to PRI under Section 1(a)(i), PHMD shall, immediately
upon knowledge of such receipt, inform PRI of the receipt and remit the payment
to PRI within five (5) business days from the date on which such
remittance was made to PHMD by the customer. PHMD will provide
written authorization to PRI to use the trade names of PHMD in order to
negotiate checks sent by customers in payment of an account receivable sold to
PRI hereunder. Given that some customer checks may include payment for other
services of PHMD which were not provided by the Division, PRI will report to
PHMD instances of such checks and remit to PHMD the portion of such checks not
applicable to the Division and do so within five (5) business days from the date
on which such remittance was made to PRI by the customer.
(b) Discharge of Certain
Liabilities. PHMD will discharge or otherwise be responsible
for any claims (including without limitation employee and other workplace
claims, environmental claims, vendor claims, customer claims or patient claims)
arising out of and accruing to the Division’s business before the Closing
Date.
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(c) Release and Termination of
Liens. On or before the Closing Date, PHMD shall cause (i) the
release and termination of all liens in force of any person on any of the
Acquired Assets, except for those obligations or contracts which PRI assumes
under Section 2(c) or those liens in force which PRI specifically agrees may be
released by some different date, and (ii) the execution and delivery to PRI of
all UCC-3 financing statements or the equivalent under the legal requirement of
the jurisdiction, state or country in which the Acquired Assets are located, and
such other documentation, in form and substance satisfactory to
PRI.
(d) Insurance. PHMD shall obtain and maintain at
least $2 million of liability insurance covering the trailing liabilities
of the Division.
(e)
Noncompetition
and Confidential Information.
(i) Business of
Division. Prior to the execution of this Agreement, (1) PHMD
was engaged in the Division’s business utilizing various marketing techniques to
sell its products and services to customers, (2) PHMD maintained a database with
the names, addresses, and other information relating to such customers and
potential customers who are or may be customers of the Division’s products and
services, (3) the scope of PHMD’s business encompassed the United States, but
the scope of the Division’s business was in certain regions and areas of the
United States, and (4) PHMD is among a limited number of persons and/or entities
that have developed specialized expertise in, and have been engaged in, the
business carried on by the Division which has brought them into close
contact with trade secrets and proprietary information concerning the Division’s
business which are confidential in nature, not readily ascertainable, and which
could not, without expense and difficulty, be obtained or duplicated by others
who have not been able to acquire such information by virtue of employment by or
close association with PHMD.
(ii) Noncompete. PHMD
acknowledges and agrees that during the six-year period following the execution
of this Agreement, PHMD shall not, and will not permit its employees or agents
to, directly or indirectly compete or interfere with PRI with respect to, and
only with respect to, the customers or business of the Division as existing on
the Closing Date and sold to PRI. Neither will PHMD engage an investee, agent or
independent contractor to directly or indirectly compete or interfere with PRI
with respect to, and only with respect to, the customers or business of the
Division as existing on the Closing Date and sold to PRI. Further, PHMD shall
not solicit business for its Surgical Products Segment from those customers of
the Division, as existing on the Closing Date, when the business of the Division
was sold to PRI, in an attempt to dissuade those customers from continuing to
receive those surgical services from PRI that they formerly received from the
Division, it being understood, however, that PHMD may, through its Surgical
Products Segment or its business Segments, continue to supply the existing
customers of those other Segments. PHMD’s Chief Operating Officer, Xxxxxxx X.
Xxxxxxx, will also undertake over the same period of time those promises to PRI
set forth in Section 7(e) that relate to direct competition, interference or
solicitation but not to indirect competition, interference or solicitation. It
is understood direct competition by Xx. Xxxxxxx includes his becoming an
employee of a mobile competitor of the business of the Division as sold to PRI,
subject to the limitations stated in this Section 7(e). Xx. Xxxxxxx’x promises
shall be evidenced by his individual concurrence herein on the signature page of
this Agreement, whether or not he remains employed by PHMD. The foregoing
restrictions do not apply to technologies not existing in the business of the
Division as of the Closing Date, nor to States in which the Division has not
done business in the 12 months before the Closing Date. In the twelve months
prior to the Closing Date, the Division has done business in Pennsylvania, New
Jersey, Maryland, the District of Columbia, Virginia, Florida, Georgia, Alabama,
Arkansas, Tennessee, Wisconsin and Illinois.
16
(iii) Injunctive
Relief. PHMD further acknowledges and agrees that: (1) the
restraints imposed on PHMD pursuant to this Agreement are no greater than is
reasonably necessary to preserve and protect PRI’s legitimate business interests
in the ongoing business operations which PRI has acquired from PHMD for good and
valuable consideration pursuant to this Agreement, (2) PRI is undertaking
substantial obligations and paying substantial monetary consideration to PHMD
for their covenants and agreements not to compete with PRI, (3) the restraints
against competition outlined herein will not impose an undue hardship upon PHMD,
and (4) that any violations of said restraints will be unfair to, and will
irreparably injure PRI. Accordingly, PRI may, in addition to pursing its other
remedies, obtain such equitable and injunctive relief (including, but not
limited to, preliminary and permanent injunctions) from any court or competent
jurisdiction, as may be necessary to enjoin any such violation of the foregoing
restraints.
(iv) Confidential
Information. PHMD covenants and agrees that it shall not, at
any time, disclose or use, directly or indirectly, on its own behalf or on
behalf of any other person or entity, any confidential information or trade
secrets of the Division or any of its clients or suppliers (or confidential
information or trade secrets of PHMD which have been acquired by PRI pursuant to
this Agreement) which it became aware of arising out of and relating to the
Division’s business and/or the property or business of the Division, including,
but not limited to, confidential information concerning and relating to
marketing, distribution and sales methods, prices, customers (or
potential customers), suppliers, know-how, intellectual property rights,
copyrights, trademarks or trade names; nor shall PHMD disclose or use any
written, visual, graphic, electronic, magnetic, or computer media, or other
materials containing such confidential information. PHMD acknowledges and agrees
that such confidential information is valuable enough to give PRI and/or any of
its affiliated entities, clients or suppliers a competitive advantage over those
who do not use the information or know of it, that such information is to be
maintained as secret and confidential, and that such information is not readily
ascertainable. Excluded from confidential information and trade secrets are any
instances of such information or secrets which have become known or knowable in
the public domain through no breach or default hereof by PHMD. Accordingly, PHMD
agrees that it shall take all reasonable steps necessary, and all steps
reasonably requested by PRI, to ensure that all such confidential information is
kept secret and confidential for the sole use and benefit of PRI. The
obligations of this Section 7(e)(iv) shall continue for six (6) years after the
Closing Date.
17
(v) Reliance. The
parties hereto acknowledge and agree that: (1) PRI has undertaken substantial
obligations and has entered into valuable contracts and agreements and paid
good, valuable, and substantial consideration to PHMD for and in consideration
of PHMD’s compliance with the terms, conditions, and restrictions set forth in
this noncompetition provision, (2) PRI has relied on the representations and
agreements of PHMD (i.e., that it would enter into and abide by the terms of
this noncompetition provision) in connection with PRI’s execution and
performance of this Agreement, and (3) PRI would not have entered into this
Agreement or paid consideration under this Agreement to and for the benefit of
PHMD but for the agreement of PHMD to enter into this noncompetition provision
and abide by its terms and conditions.
(vi) Equitable
Relief. It is expressly agreed by and between the parties to
this Agreement that the subject matter of this Agreement is unique and that the
failure of PHMD to comply with the obligations and/or covenants contained in
this noncompetition provision constitutes irreparable injury if not fully and
completely performed; accordingly, any party seeking to enforce the terms and
covenants contained herein shall be entitled to the equitable relief of specific
performance and/or such other equitable relief as decreed and/or ordered by a
court of competent jurisdiction.
(f) Letter
to Customers. At
the request of PRI, PHMD agrees to send, within two (2) days after the Closing
Date hereof, a first-class letter to its Division customers announcing the
transfer of the surgical services business to PRI. Such letter shall
be in the form set forth in Schedule 7(f), drafted by PRI
and attached hereto.
(g) Recommendation
to Employees. (i) PHMD shall
recommend to the employees of the Division that they accept employment from PRI,
and enter into PRI’s standard non-compete agreement. PHMD will endorse
to its employees working in the Division that they remain
in the employ of PRI. It is PRI’s intention that such employees should enter
into new at-will employment agreements (including non-competition provisions)
conforming to the standard that PRI uses and substantially equivalent to the
standard PHMD uses, as set forth in Schedule 7(g). (ii)
PHMD will further settle on Xxxxxxx Xxxxx, its manager of the Division, a
termination package as described in confidential Schedule 1(b), in settlement
and cancellation of all obligations owing by PHMD to Xx. Xxxxx. No
severance or other separation payment will be made to any Division employee by
PHMD.
(h) Assignment
of Leases. PHMD will
assign to PRI, and PRI will accept, the Real Property Leases for locations at
which PHMD maintains offices for the Division and which are set forth in
Schedule
5.6,
and will assign therewith its rights in any security deposits, for which
deposits PRI will reimburse PHMD at Closing.
(i) Conduct in Ordinary
Course. With reference to the Division, PHMD shall not enter
into any transaction other than in the normal, regular and customary course of
business pending the Closing.
(j) Maintain Relations; Customer
Inquiries. PHMD shall use its best efforts to keep available
to PHMD the employees of PHMD with knowledge of the Acquired Assets and to
preserve the current relationships of PHMD with vendors, suppliers, customers,
landlords and other persons having business relationships with it. PHMD will
forward to PRI all service inquiries received after Closing and until December
31, 2008.
(k) Maintenance
of Property. PHMD
has maintained the properties in the Division in working order and reasonable
repair, according to the Division’s standard maintenance schedules, and has
performed in an up to date manner all necessary preventive maintenance on such
property. PHMD shall transfer to PRI all manufacturer’s warranties on the
equipment in its possession and in force, as set forth on Schedule 7(k).
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(l) Transition. In the 30 days following Closing,
PHMD will, at PRI’s request, act as PRI’s agent for such designated items as
billing, collection, payroll and the like, to the end that the transition over
to PRI of day-to-day operations of the Division may be smooth. In addition, PHMD
agrees to continue the medical coverages for the employees of the Division who
become employees of PRI, for 60 days after Closing, at the expense of PRI, for
which PRI will reimburse PHMD within 5 days of invoice from PHMD of such
expense. After the thirty-day transition period, PRI will be responsible for all
such day-to-day operations.
(m) Taxes. Each party
shall bear and pay in a timely manner all taxes resulting from or payable in
connection with the sale of the Acquired Assets and the assumption of any
assumed liabilities pursuant to this Agreement, in accordance with applicable
legal requirements.
(n) Assistance in
Proceedings. PHMD will, at PRI’s expense, cooperate with PRI and its
counsel in the contest or defense of, and make available its personnel and
provide any testimony and access to its books and records (except for such
records as may enjoy privilege from such disclosure) in connection with, any
proceeding involving or relating to any action, activity, circumstance,
condition, conduct, event, fact, failure to act, incident, occurrence, plan,
practice, situation, status or transaction on or after the Closing Date
involving the Division, and if before the Closing Date, then at PHMD’s own
expense.
(o) Customer and Other Business
Relationships. After the Closing, PHMD will, with reasonable commercial
efforts, cooperate with PRI in its efforts to continue and maintain for the
benefit of PRI those business relationships of PHMD existing prior to the
Closing Date and related to the business of the Division, as to be operated by
PRI after the Closing, including relationships with lessors, employees,
regulatory authorities, licensors, customers, suppliers and others.
(p) SEC Compliance. For the purpose of
complying with SEC Rules and Regulations for Form 8-K and Regulation S-X, PHMD
shall provide PRI with its management reports for the Division for
the year ended December 31, 2007 and unaudited interim management reports for
2008 through the Closing Date. PRI and PHMD shall cooperate, as described in
Section 5.3, to procure audited Financial Statements. PRI shall maintain such
management reports as confidential information.
(q) Payroll
Liability. PHMD is and shall remain
fully responsible for any obligation, responsibility or liability, whether
contractual or statutory, arising out of the termination of its employees, with
regard to their employment with PHMD for the period of time up until the Closing
including without limitation, any liability or obligation with respect to wages,
bonuses, health care plans, employee benefit plans or vacation pay or any other
compensation arrangement whatsoever which are from or relate to any individual’s
employment with PHMD.
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8. Agreements of
PRI. PRI
covenants and agrees with PHMD as follows:
(a) Accounts
Receivable. PRI shall use
its diligent efforts, as described in Schedule 1(a)(i), to collect the
accounts receivable purchased under Section 1(a)(i).
(b) Discharge of
Liabilities. After the Closing Date, PRI hereby agrees to pay,
perform and discharge, as and when due all of liabilities (including
without limitation employee and other workplace claims, environmental claims,
vendor claims, customer claims or patient claims) arising out of or relating to
the Division caused by events occurring on or after the Closing
Date.
(c) Insurance. PRI
shall obtain and maintain at least $3 million of liability insurance covering
its responsibilities with respect to the Acquired Assets after the Closing
Date.
(d) Agreement Not to Compete,
Interfere or Solicit. PRI promises to PHMD that it will not, for three
(3) years from the Closing Date, interfere in the contracts of PHMD’s Surgical
Products Segment, nor solicit vendors, employees, agents or customers
of that Segment to cease to do business with it, except in the normal course of
PRI’s business.
(e) Use of
Labels. PRI agrees that any labels, product brochures, data
sheets and other such materials transferred by PHMD pursuant to
Section 1(b) hereof may be used by PRI only until December 31,
2008.
(f) Use of PHMD
Trademarks. For as long as PRI shall use PHMD’s trademarks
“SIS™” and “PhotoMedex® Surgical Services™”, PRI shall comply with all
requirements of law, use PHMD’s products, and other third-party vendors’
products, if used in the Division, in accordance with the Instructions for Use
of those products, and will train its employees in the use of, and maintain, the
Acquired Assets in a manner consistent with its own existing training and
maintenance standards.
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9. Further
Assurances. If at any time hereafter
any further assignments, conveyances or assurances in law are necessary or
desirable to vest, perfect or confirm of record in PRI the title to any of the
Acquired Assets, or to confirm the assumption by PRI of any liability or
obligation of PHMD assumed hereunder, or otherwise to carry out the
provisions hereof, the proper officers of PHMD or of PRI, as the case
may be, shall execute and deliver any and all proper deeds, assignments,
instruments of assumption, powers of attorney and assurances in law, and do
all things necessary or proper to vest, perfect or confirm title to such
property or rights in PRI or PHMD or to confirm the assumption by PRI of
any such liability or obligation of PHMD, as the case may be, and otherwise
to carry out the provisions hereof.
10. Survival of Representations
and Warranties. The parties hereto agree
that the representations and warranties contained herein shall survive the
execution and delivery of this Agreement for a period of 18 months,
irrespective of any investigation made by or on behalf of either of the parties
hereto. Notwithstanding the foregoing, the representations and warranties made
in Section 7 shall not be limited to such 18-month period.
11. Indemnification
(a) Indemnification by
PRI. PRI agrees to indemnify and hold PHMD and its successors and
assigns harmless from and against:
i) Any
and all claimed liabilities and obligations of PHMD which were assumed by PRI
hereunder and which arose after the Closing;
(ii) Any
and all loss, liability, damage or deficiency resulting from any
misrepresentation, breach of warranty or nonfulfillment of any covenant or
agreement on the part of PRI under the terms of this Agreement or any
document or instrument executed by PRI in connection herewith;
provided however, that PRI shall have been given thirty (30) days written notice
of any breach or non-fulfillment and shall have failed to cure such breach or
non-fulfillment within such thirty-day period; and
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(iii) Any
and all actions, suits, proceedings, claims, demands, assessments, judgments,
costs and expenses incident to the foregoing.
(b) Indemnification by
PHMD. PHMD agrees to indemnify and hold PRI, its
representatives, shareholders, related companies, and its successor and assigns
harmless from and against:
(i) Any
and all liabilities and obligations of PHMD or claimed liabilities and
obligations of PHMD which are not specifically assumed by PRI hereunder and
which arose before the Closing and relate to the Division;
(ii) Any and
all loss, liability, damage or deficiency resulting from any
misrepresentation, breach of warranty or nonfulfillment of any covenant or
agreement on the part of PHMD under the terms of this Agreement or any
document or instrument delivered by PHMD in connection herewith,
including product liability claims arising and accruing from events prior to the
Closing Date; provided however that PHMD shall have been given sixty (60) days
written notice of any breach or non-fulfillment and shall have failed to cure
such breach or non-fulfillment within such sixty-day period; and
(iii) All
actions, suits, proceedings, claims, demands, assessments, judgments,
costs and expenses incident to the foregoing.
(c) Other Limitations on
Indemnification. The right to indemnification, reimbursement or other
remedy based upon such representations, warranties, covenants and obligations
shall not be affected by any investigation conducted at any time before the
Closing Date with respect to the Division, or any knowledge acquired (or capable
of being acquired) from such investigation , except as the same may have been
disclosed in this Agreement or the Schedules thereto or except as the same may
have been waived. The waiver of any condition based upon the accuracy of any
representation or warranty, or on the performance of or compliance with any
covenant or obligation, will not affect the right to indemnification,
reimbursement or other remedy based upon such representations,
warranties, covenants and obligations, provided the retention of any such remedy
is notified to the other party in writing within 60 days of the waiver of such
condition, performance or compliance, during which thirty-day period the waiving
party shall investigate whether such remedy is susceptible to indemnification
hereunder.
(d) Notice of Claim and
Defense.
(i) A
party hereto shall give prompt written notice to the other party of
any claim requiring indemnification by the other party, and in any
case shall give such notice no later than 60 days of first learning of such
claim.
(ii) A
party hereto from which indemnification is sought hereunder shall have the
right, but not the obligation, to control the defense of any such claim
involving the potential for indemnification of the other
party. If a party hereto chooses not to control such
defense, then the other party shall be entitled to ensure the appropriate
defense of such action and may determine whether to enter a settlement
agreement.
(iii) Where
each party claims indemnification from the other party out of the same incident
or occurrence, then PHMD shall have the first right under Section 11(d)(ii) to
control the defense of such action.
12. Brokerage. Each party hereby
represents to the other party that such party has not made any agreement or
taken any other action that might cause anyone to become entitled to a
commission or brokerage fee as a result of the transactions
contemplated hereby, except that PHMD has engaged Fairmount
Partners as its advisor, and PHMD shall be solely responsible for any fees owing
to Fairmount Partners. PRI shall indemnify and hold PHMD harmless
against any and all claims, losses, liabilities or expenses asserted against
PHMD as a result of PRI’s dealings, arrangements or agreements with
any such broker or person; and PHMD shall indemnify and hold PRI harmless
against any and all claims, losses, liabilities or expenses asserted
against PRI as a result of the dealings, arrangements or agreements of
PHMD with any such broker or person.
13. Miscellaneous. The parties further agree as
follows:
(a) Expenses. Each
of the parties hereto shall pay all of its own legal and other fees, costs and
expenses in connection herewith.
22
(b) Parties in
Interest. This Agreement shall inure solely to the benefit of
and shall be binding upon the parties and their successors and
assigns.
(c) Governing Law. The
terms of this Agreement shall be governed by, and interpreted and construed in
accordance with the provisions of, the law of the State of New York, without
giving effect to any choice of law provisions. The parties hereto consent to the
jurisdiction of the courts, State and Federal, situate in the State of New
York.
(d) Captions;
Counterparts. (i) The captions in this Agreement are for
convenience only and shall not be considered a part of or affect the
construction or interpretation of any provision hereof. (ii) This Agreement
may be executed in any number of counterparts, each of which, when so executed,
shall constitute an original copy hereof.
(e) Arbitration. Any
dispute or controversy arising out of or in relation to this Agreement hereof
shall be determined and settled solely and exclusively by arbitration in New
York, New York, and in accordance with the Commercial Rules of the American
Arbitration Association then in effect, by a panel of 3 arbitrators, and
judgment upon the award rendered by the arbitrator(s) may be entered in any
court of competent jurisdiction. Each of the parties hereto hereby
consents to the personal jurisdiction of such forum for the purposes of this
Agreement. The arbitration and the parties’ agreement therefor
shall be deemed to be self-executing, and if either party fails to appear at a
properly noticed arbitration proceeding, an award may be entered against such
party despite such failure to appear.
(f) Public Announcements; Public
Filings. (i) PHMD and PRI shall use their best efforts to
agree upon the form and content of a press release or public announcement of the
execution of this Agreement as promptly as practicable after execution hereof to
the extent the parties have not already reached such agreement by the Closing
Date. Notwithstanding the foregoing, PRI, on behalf of Emergent
Group, Inc, its parent company which is a public company, and PHMD agree not to
make any such announcement without prior consent to the form and content thereof
by the other party; PRI acknowledges that PHMD, as a public company, will be
required to and may make such an announcement without the prior consent of PRI
in the event the parties are unable to reach agreement on the form and content
thereof within a reasonable period of time after the execution hereof, and PHMD
acknowledges the same to PRI with respect to any such obligations that its
parent company may have; (ii) Neither PHMD nor Emergent Group, Inc. shall be
prohibited by this Agreement from fulfilling its duties to make appropriate
public disclosure of the transactions under this Agreement, and of the Agreement
itself, to the Securities and Exchange Commission; (iii) Otherwise, PRI and PHMD
will not, and each will direct that its respective representatives will not,
directly or indirectly, make any public comment, statement or communication with
respect to, or otherwise disclose or permit the disclosure of any of the
confidential terms, conditions or other aspects of the transaction set forth in
this Agreement, unless directed to do so by the Securities and Exchange
Commission or unless advised to do so by the outside securities counsel of such
party. If a party is required by law to make any such disclosure, it
must first provide to the other party the content of the proposed disclosure,
the reasons that such disclosure is required by law, and the time and place that
the disclosure will be made. [DW: see Sec. 2(d) Closing, above, for
announcements to be made on Monday, 8/4/08]
(g) Force
Majeure. In the event that the performance by any party hereto
of its obligations hereunder shall be interrupted or delayed by any occurrence
not occasioned by the conduct of either party hereto, whether such occurrence be
an act of God or the common enemy or the result of war, riot, civil commotion or
sovereign conduct, then the party whose performance is so delayed or interrupted
shall be excused from such performance for such period of time as is reasonably
necessary after the occurrence to remedy the effects thereof, but in no event
shall such excused time exceed 180 days.
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(h) Severability. In
the event that any particular provision or provisions of this Agreement or the
other agreements contained herein shall for any reason hereafter be determined
to be unenforceable, or in violation of any legal requirement, governmental
order or regulation, such unenforceability or violation shall not affect the
remaining provisions of such agreements, which shall continue in full force and
effect and be binding upon the respective parties hereto.
(i) Notices. Any
notice, request, instruction or other document to be given hereunder shall be in
writing and delivered personally or sent by certified mail, postage prepaid,
addressed as follows:
To PRI:
PRI Medical Technologies,
Inc.
00000 Xxxxxxxxx Xxxxxx
Xxx Xxxxxx, XX 00000
Attention: President
with a copies to:
PRI Medical Technologies,
Inc.
000 Xxxxxxxx Xxxxxx, Xxxxx
000
Xxx Xxxxxxxx, XX 00000
Attn: Xxxxx Xxxxx
Levy, Xxxxxxx &
Xxxxxxxxx
00 Xxxx Xxxx, Xxxxx 0000
Xxxxxx, XX 00000
Attn: Xxxx Xxxxxxx
To PHMD:
PhotoMedex, Inc.
000 Xxxxxxxx Xxxxx
Xxxxxxxxxxxxxxx, XX 00000
Attention: President
with a copy to:
Xxxxxx Xxxxx & Xxxxxxx,
LLP
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx,
XX 00000
Attention: Xxxxxxx X.
Xxxxxxx
Any party may from time to time change
its address for purpose of notices to that party by a similar notice specifying
a new address, but no such change shall be deemed to have been given until
it is actually received by the parties to be charged
therewith.
24
(j) Prior Agreements;
Modifications. This Agreement shall supersede all prior
agreements, documents or other instruments with respect to the matters
covered hereby. This Agreement may be amended only by an instrument
in writing, duly signed by or on behalf of the parties hereto.
(k) Enforcement of
Agreement. PHMD acknowledges and agrees that PRI would be irreparably
damaged if any of the provisions of this Agreement are not performed in
accordance with their specific terms and that any breach of this Agreement by
PHMD could not be adequately compensated in all cases by monetary damages alone.
Accordingly, in addition to any other right or remedy to which PRI may be
entitled, at law or in equity, it shall be entitled to enforce any provision of
this Agreement by a decree of specific performance and to temporary, preliminary
and permanent injunctive relief to prevent breaches or threatened breaches of
any of the provisions of this Agreement, without posting any bond or other
undertaking.
(l) Waiver; Remedies
Cumulative. The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither any failure nor any delay by any party
in exercising any right, power or privilege under this Agreement or any of the
documents referred to in this Agreement will operate as a continuing waiver of
such right, power or privilege, and no single or partial exercise of any such
right, power or privilege will preclude any other or further exercise of such
right, power or privilege or the exercise of any other right, power or
privilege. To the maximum extent permitted by applicable law, (a) no claim or
right arising out of this Agreement or any of the documents referred to in this
Agreement can be discharged by one party, in whole or in part, by a waiver or
renunciation of the claim or right unless in writing signed by the other party;
(b) no waiver that may be given by a party will be applicable except in the
specific instance for which it is given; and (c) no notice to or demand on one
party will be deemed to be a waiver of any obligation of that party or of the
right of the party giving such notice or demand to take further action without
notice or demand as provided in this Agreement or the documents referred to in
this Agreement.
25
IN WITNESS WHEREOF, each of
the parties hereto, intending to be legally bound hereby, has caused this
Agreement to be signed in its name by the undersigned thereunto duly authorized,
all as of the date first above written.
| PRI Medical Technologies, Inc. | |||
|
Attest:_________________
|
By:
|
/s/ Xxxxx X. Xxxxx | |
| Title: Chairman | |||
| Title: | |||
| PhotoMedex, Inc. | |||
|
Attest:_Davis
Xxxxxxxx
|
By:
|
/s/ Xxxxxxx X. X’Xxxxxxx | |
| Title: Corporate Counsel | Title: Chief Executive Office | ||
In
concurrence and acceptance of the terms of Section 7(e) in his capacity as a
private individual:
|
/s/
Xxxxxxx X. Xxxxxxx
|
August
1, 2008
|
|||
|
Xxxxxxx
X. Xxxxxxx
|
Date
|
|||
|
|
|
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