EXHIBIT (2)
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (hereinafter the "Agreement") is made,
executed and entered into on this 9th day of May, 2002 by and between MD
INDUSTRIES ACQUISITION LLC, a Delaware limited liability company (hereinafter
"MD Industries") and MEDICAL ACTION INDUSTRIES INC., a Delaware corporation
(hereinafter "Medical Action" or "Buyer").
W I T N E S S E T H:
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WHEREAS, MD Industries is engaged in the business of marketing a
variety of specialty packaging and sterilization products described in Exhibit
"A" attached hereto (the "Products"); and
WHEREAS, the Buyer wishes to purchase or acquire from MD Industries and
MD Industries wishes to sell, assign and transfer to the Buyer, substantially
all of the assets and properties directly used in connection with the
production, marketing and promotion of the Products and such business being
referred to as the "Business", all for the purchase price and upon the terms and
subject to the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants,
representations and warranties made herein, and of the mutual benefits to be
derived hereby, the parties hereto agree as follows:
ARTICLE I
SALE AND PURCHASE OF THE ASSETS
1.1. Assets. Subject to and upon the terms and conditions set forth in
this Agreement, at the Closing, MD Industries will sell, transfer, convey,
assign and deliver to the Buyer and the Buyer will purchase or acquire from MD
Industries all right, title and interest of MD Industries in and to the
properties, assets and rights relating directly to or used exclusively in
connection with the Business as the same may exist on the Closing Date set forth
below (hereinafter, the "Assets"):
(a) all machinery, equipment, tools, dies, molds and parts and
similar property described in Schedule 1.1(a) attached
hereto;
(b) all inventories of Products, goods, spare parts, replacement
and component parts (collectively, the "Inventories") and
office and other supplies, including Inventories and office
and other supplies held at any location controlled by MD
Industries and Inventories
and office and other supplies previously purchased and in
transit to MD Industries at such locations, all as described
in Schedule 1.1(b) attached hereto which shall be provided by
MD Industries at Closing;
(c) all rights in and to (a) the registered trademarks, service
marks, trade names, product names and copyrights described in
Schedule 1.1(c) attached hereto, together with the goodwill
symbolized thereby; (b) all other rights to trademarks,
service marks, trade names, product names and copyrights
used by MD Industries in the operation of the Business; and
(c) such inventions, processes, designs, formulae, trade
secrets, know-how, confidential and technical information,
manufacturing, engineering and technical drawings, product
specifications and confidential business information developed
by or for MD Industries pertaining solely to the Business
(hereinafter collectively referred to as "Intellectual
Property");
(d) all of the rights under all contracts, arrangements, licenses,
leases and other agreements to which MD Industries is a party,
the right to receive goods and services, pursuant to such
agreements and the right to assert claims and take other
rightful actions in respect of breaches, defaults, and other
violations of such contracts, arrangements, licenses, leases
and other agreements in connection with the Business being
acquired, insofar as such claims are based on events occurring
on or after the Closing Date (excluding, however, from this
subsection 1.1(d): (i) any right to receive payments or
accounts receivable for Products sold or services rendered
before the Closing Date, (ii) all rights of MD Industries
under the Agreement and Plan of Merger dated August 7, 2001,
among News America Incorporated, M.D. Industries, Inc. and MD
Industries and related documents, (iii) all rights of MD
Industries under its loan agreement with LaSalle Bank National
Association and related documents, (iv) all rights of MD
Industries under the Sublease dated July 1, 1999 between The
Revere Group, Ltd. and MD Industries and related documents and
the Lease dated April 30, 1993 between First Industrial, L.P.
and MD Industries and related documents, (v) all rights under
the equipment leases of MD Industries relating to postage
meters and copying machines, (vi) all rights under MD
Industries' limited liability company agreement, (vii) except
to the extent disclosed in Schedule 1.1(d), all rights under
any employment agreements, severance agreements or other
employment-related agreements or plans to which MD Industries
is a party or by which its employees receive benefits, and
(viii) all rights under the sales representative contracts
between MD Industries and other parties (the rights and
agreements referred to
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in the foregoing clauses (i) through (viii) being referred to
as the "Excluded Assets"));
(e) all rights under any of the Intellectual Property to xxx and
seek remedies against infringements thereof, and rights of
priority and protection of interests therein under the laws of
the United States (together with all Intellectual Property
rights included in the other clauses of this Section 1.1, the
"Intellectual Property Assets") insofar as such remedies or
rights are based on events occurring on or after the Closing
Date;
(f) all books, records, manuals and other materials (in any form
or medium), which relate solely to the Business, including,
without limitation, advertising matter, catalogues, price
lists, correspondence, mailing lists, lists of customers,
distribution lists, photographs, production data, sales and
promotional materials and records, purchasing materials and
records, manufacturing and quality control records and
procedures, research and development files, records, data and
laboratory books, Intellectual Property disclosures, media
materials and plates, sales order files and copies of
litigation files, in any event, solely pertaining to the
Business (excluding, however, all records relating to the
formation and capitalization of MD Industries, the minute
books of MD Industries and all records relating to the
Excluded Assets);
(g) to the extent their transfer is permitted by law and also to
the extent they relate solely to the Business, all consents of
any government, any state or other political subdivision
thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or
pertaining to government, including, without limitation, any
government authority, agency, department, board, commission or
instrumentality of the United States or any political
subdivision thereof, and any tribunal or arbitrator(s) of
competent jurisdiction, and any self-regulatory organization,
including all applications therefor;
(h) all guarantees, warranties, indemnities and similar rights in
favor of MD Industries with respect to any Asset.
1.2 Assumed Liabilities. Subject to and upon the conditions set forth
in this Agreement, at the Closing , the Buyer shall assume and become
responsible for all obligations under the contracts, arrangements, licenses,
leases and other agreements (other than the Excluded Assets) described in
Section 1.1(d) insofar as those obligations are to be performed on or after the
Closing Date, including without limitation all of MD Industries' contracts or
purchase orders to acquire goods or services relating to the Business that exist
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as of the Closing Date and all of MD Industries' sales orders and obligations
relating to the Business and providing for the delivery of products to customers
that exist as of the Closing Date (the "Assumed Liabilities").
ARTICLE II
THE CLOSING
2.1. Place and Date. The closing of the sale and purchase of the Assets
(the "Closing") shall take place at 10:00 A.M. local time on the 17th day of
June, 2002 at the offices of Medical Action Industries Inc., 000 Xxxxx Xxxxx,
Xxxxxxxxx, Xxx Xxxx 00000, or such other time and place upon which the parties
may agree. The day on which the Closing actually occurs is herein sometimes
referred to as the "Closing Date".
2.2. Purchase Price. In consideration of the execution, delivery and
performance hereof by MD Industries, Medical Action shall pay or cause to be
paid to MD Industries an aggregate of U.S. $9,500,000.00 (the "Purchase Price").
The Purchase Price shall be payable at the Closing by wire transfer in
immediately available funds to such bank account or accounts as per written
instructions of MD Industries, given to Medical Action at least (5) five days
prior to the payment thereof.
2.3. Excluded Liabilities. Unless otherwise provided for herein, the
Buyer shall not assume any liabilities, obligations or commitments of MD
Industries relating to or arising out of or incurred in connection with the
transactions contemplated by this Agreement, the operation of the Business or
the ownership of the Assets prior to the Closing (the "Excluded Liabilities"),
including but not limited to:
(a) any liabilities or obligations of MD Industries incurred in
connection with the transactions contemplated by this
Agreement to attorneys, accountants, brokers, or others for
services rendered or expenses incurred, by or on behalf of MD
Industries, and all other expenses of MD Industries associated
with the sale of the Business (except as otherwise specified
in this Agreement);
(b) any wages, salary, bonuses, commissions, vacation or holiday
pay, retiree benefits, severance pay, or other amounts due to
any employees or former employees of MD Industries, and any
duties, obligations or liabilities arising under any employee
benefit plan, policy or practice, whether defined by Section
3(3) of the Employee Retirement Income Security Act of 1974,
as amended, or otherwise, relating to the employees of MD
Industries;
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(c) any tax (including, without limitation, any federal, state or
local income or other tax) imposed upon or incurred by MD
Industries relating to the operation of the Business prior to
the Closing Date;
(d) any liabilities, losses and damages and alleged liabilities,
losses and damages arising out of or resulting from: (i)
personal injury, sickness, death, property damage, property
destruction or loss of use of property, or any violation of
federal, state or local laws or regulations relating to the
protection of the environment which, in either case is the
result, in whole or in part, of any environmental impairment,
condition existing, or action taken or omitted by MD
Industries, prior to the Closing Date in respect of the
Business and which is not attributable to the ownership,
operation or use of the Business or the Assets from and after
the Closing Date, and (ii) any accident or occurrence
occurring on or prior to the Closing Date resulting in
personal injury, sickness, death, property damage, property
destruction or loss of use of property or arising out of the
sale of any Products of the Business by MD Industries prior to
the Closing Date;
(e) any warranty and product liabilities and obligations of MD
Industries which exist on the Closing Date arising out of the
sale of the Products of the Business to third parties made
prior to the Closing Date; and
(f) any liabilities for trade accounts payable arising prior to
the Closing.
2.4. Consent of Third Parties. Notwithstanding anything to the contrary
in this Agreement, this Agreement shall not constitute an agreement to assign or
transfer any instrument, contract, lease, permit or other agreement or
arrangement or any claim, right or benefit arising thereunder or resulting
therefrom if an assignment or transfer or an attempt to make such an assignment
or transfer without the consent of a third party would constitute a breach or
violation thereof; and any transfer or assignment to the Buyer by MD Industries
of any interest under any such instrument, contract, lease, permit or other
agreement or arrangement that requires the consent of a third party shall be
made subject to such consent or approval being obtained. In the event any such
consent or approval is not obtained on or prior to the Closing Date, MD
Industries shall continue to use commercially reasonable efforts to obtain any
such approval or consent after the Closing Date until such time as such consent
or approval has been obtained, and MD Industries will cooperate with the Buyer
in any lawful and economically feasible arrangement to provide that the Buyer
shall receive the interest of MD Industries, as the case may be, in the benefits
under any such instrument, contract, lease or permit or other agreement or
arrangement, including performance by MD Industries, as the
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case may be, as agent, if economically feasible, provided that the Buyer shall
undertake to pay or satisfy the corresponding liabilities for the enjoyment of
such benefit to the extent the Buyer would have been responsible therefor
hereunder if such consent or approval had been obtained. Nothing in this
Section 2.4 shall be deemed a waiver by the Buyer of its right to receive at the
Closing an effective assignment of all of the Assets, to the extent they are
assignable by MD Industries, nor shall this Section 2.4 be deemed to constitute
an agreement to exclude from the Assets any assets described under Section 1.1.
2.5. Inventory Value. (a) Within five (5) days prior to Closing, MD
Industries shall undertake a physical count of the Inventory being transferred
to Buyer hereunder. MD Industries shall give Buyer at least 72 hours notice of
the time and date on which it plans to commence such physical count and Buyer
will have the right to be present if it so elects. MD Industries shall determine
the value of the Inventory in accordance with the criteria set forth in Schedule
2.5 and its current standard cost basis, in a manner consistent with its past
practices. The value of the Inventory shall be adjusted on the Closing Date to
eliminate the value of any Inventory sold and shipped, and to add the value of
any Inventory purchased between the date of the physical count of the Inventory
and the Closing Date ("Adjusted Inventory").
(b) MD Industries shall prepare for shipping, arrange to have
shipped by such carrier as Buyer shall designate, at Buyer's
cost, and have loaded onto such carrier's truck for shipment
to Buyer, all of the Inventory. MD Industries shall count the
Inventory prior to shipment to Buyer. MD Industries shall
obtain a receipt from the carrier shipping such Inventory for
the quantities of the Inventory counted by MD Industries and
shall promptly provide a copy to Buyer. MD Industries shall
take reasonable precautions to ensure that the Inventory will
not be damaged prior to shipment. All of the Inventory shall
be delivered F.O.B. MD Industries' plant. Title to the
Inventory will pass to Buyer at the time such Inventory is
delivered F.O.B. at MD Industries' plant to a carrier
designated by Buyer for shipment to Buyer.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1. Representations and Warranties of MD Industries. MD Industries
represents and warrants to the Buyer as follows:
3.1.1. Authorization, etc. MD Industries has the company power
and authority to execute and deliver this Agreement and the Trademark Assignment
Agreement in the form attached hereto as Exhibit "B" to which it will be a
party, to perform fully its obligations thereunder, and to consummate
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the transactions contemplated thereby. This Agreement and the Trademark
Assignment Agreement to which MD Industries is a party will be, on the Closing
Date, legal, valid and binding obligations of MD Industries, enforceable against
it in accordance with their respective terms, except as may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws of general application affecting the enforcement of creditors' rights
generally or by general principles of equity, regardless of whether considered
in any proceeding in equity or law.
3.1.2. Corporate Status. (a) MD Industries is a limited
liability company duly organized, validly existing and in good standing under
the laws of the state of Delaware, with full company power and authority to
carry on its business (including the Business) and to own or lease and to
operate its properties as and in the places where such business is conducted and
such properties are owned, leased or operated.
(b) MD Industries is duly qualified or licensed to do business and
is in good standing in each of the jurisdictions specified
opposite its name in Schedule 3.1.2(b), which are the only
jurisdictions in which the operation of the Business or the
character of the properties owned, leased or operated by it in
connection with the Business makes such qualification or
licensing necessary.
(c) MD Industries has delivered to the Buyer complete and correct
copies of its certificate of formation and limited liability
company agreement in each case, as in effect on the date
hereof. MD Industries is not in violation of any of the
provisions of its certificate of formation or limited
liability agreement.
3.1.3. No Conflicts, etc. The execution, delivery and
performance by MD Industries of this Agreement and the Trademark Assignment
Agreement to which it is a party, and the consummation of the transactions
contemplated thereby, do not and will not conflict with or result in a violation
or a default under (with or without the giving of notice or the lapse of time or
both) (i) any applicable law known to MD Industries, (ii) the certificate of
formation or limited liability agreement of MD Industries or (iii) except as set
forth in Schedule 3.1.3, any contract, agreement or other instrument to which MD
Industries is a party or by which its properties or assets, including but not
limited to the Assets, are bound. Except as specified in Schedule 3.1.3, no
governmental approval or other consent is required to be obtained or made by MD
Industries in connection with the execution and delivery of this Agreement and
the Trademark Assignment Agreement or the consummation of the transactions
contemplated thereby.
3.1.4. Financial Statements. MD Industries has (or by the
Closing Date will have) delivered to the Buyer the unaudited balance sheet of MD
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Industries as at December 31, 2001 and the unaudited statements of income and
cash flow for the period ended December 31, 2001, in each case prepared in
accordance with generally accepted accounting principles (the "Financial
Statements"). The Financial Statements are complete and correct in all material
respects. Except as set forth on Schedule 3.1.4, the Financial Statements do not
include any material assets or liabilities not intended to constitute a part of
the Business or the Assets after giving effect to the transactions contemplated
hereby, and present fairly the financial condition of the Business as of
December 31, 2001.
3.1.5. Extent of Knowledge. For purposes of this Agreement,
the "knowledge" of MD Industries (or words to similar effect) shall mean the
knowledge after due inquiry of the employees set forth on Exhibit "C" hereto.
3.1.6. Taxes. (a) MD Industries has duly and timely filed all
tax returns relating to the Business with respect to taxes ("Covered Taxes")
required to be filed on or before the Closing Date ("Covered Returns"). Except
for Covered Taxes set forth on Schedule 3.1.6(a), which are being contested in
good faith and by appropriate proceedings, the following Covered Taxes, to the
knowledge of MD Industries, have been duly and timely paid or accrued: (i) all
Covered Taxes shown to be due on the Covered Returns, (ii) all deficiencies and
assessments of Covered Taxes of which notice has been received by MD Industries
that are or may become payable by the Buyer or chargeable as a lien upon the
Business, and (iii) all other Covered Taxes due and payable or accrued on or
before the Closing Date for which neither filing of Covered Returns nor notice
of deficiency or assessment is required of MD Industries. All taxes required to
be withheld by or on behalf of MD Industries in connection with amounts paid or
owing to any employee, independent contractor, creditor or other party with
respect to the Business ("Withholding Taxes") have been withheld, and such
withheld taxes have either been duly and timely paid or set aside in accounts
for such purpose.
(b) Except as set forth on Schedule 3.1.6(b), no agreement or
other document extending, or having the effect of extending,
the period of assessment or collection of any Covered Taxes or
Withholding Taxes, and no power of attorney with respect to
any such taxes, has been filed with the Internal Revenue
Service (the "IRS") or any other governmental authority.
(c) Except as set forth on Schedule 3.1.6(c), (i) there are no
Covered Taxes or Withholding Taxes asserted in writing by any
governmental authority to be due and (ii) no issue has been
raised in writing by any governmental authority in the course
of any audit with respect to Covered Taxes or Withholding
Taxes. Except as set forth on Schedule 3.1.6(c), no Covered
Taxes and no Withholding Taxes are currently under audit by
any governmental authority.
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Except as set forth on Schedule 3.1.6(c), neither the IRS nor
any other governmental authority is now asserting or, to the
knowledge of MD Industries, threatening to assert against MD
Industries any deficiency or claim for additional Covered
Taxes or any adjustment of Covered Taxes that would, if paid
by the Buyer, have a material adverse effect, and there is no
reasonable basis for any such assertion of which MD Industries
is or reasonably should be aware.
(d) The Buyer will not be required to deduct and withhold any
amount pursuant to Section 1445(a) of the Code upon the
transfer of the Business to the Buyer.
(e) Except as set forth on Schedule 3.1.6(e), there is no
litigation or administrative appeal pending or, to the
knowledge of MD Industries, threatened against or relating to
MD Industries in connection with Covered Taxes.
3.1.7. Absence of Changes. Except as set forth in Schedule 3.1.7, since
December 31, 2001, to the knowledge of MD Industries, MD Industries has
conducted the Business only in the ordinary course consistent with MD
Industries' prior practice and has not, on behalf of, in connection with or
relating to the Business or the Assets:
(a) suffered any material adverse effect;
(b) incurred any obligation or liability, absolute, accrued,
contingent or otherwise, whether due or to become due, except
current liabilities for trade or business obligations incurred
in connection with the purchase of goods or services in the
ordinary course of business consistent with prior practice,
none of which liabilities, in any case or in the aggregate,
could have a material adverse effect;
(c) discharged or satisfied any lien other than those then
required to be discharged or satisfied, or paid any obligation
or liability, absolute, accrued, contingent or otherwise,
whether due or to become due, other than current liabilities
shown on the balance sheet described in Section 3.1.4 and
current liabilities incurred since the date thereof in the
ordinary course of business consistent with prior practice;
(d) mortgaged, pledged or subjected to lien, any property,
business or assets, tangible or intangible, held in connection
with the Business;
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(e) sold, transferred, leased to others or otherwise disposed of
any of the Assets, except for inventory sold in the ordinary
course of business, or cancelled or compromised any debt or
claim, or waived or released any right of substantial value;
(f) received any notice of termination of any contract, lease or
other agreement resulting in a material adverse change or
suffered any damage, destruction or loss (whether or not
covered by insurance) resulting in a material adverse change
to the financial condition of the Business;
(g) transferred or granted any rights under, or entered into any
settlement regarding the breach or infringement of, any
Intellectual Property, or modified any existing rights with
respect thereto;
(h) encountered any labor union organizing activity, had any
actual or threatened employee strikes, work stoppages,
slowdowns or lockouts, or had any material change in its
relations with its customers or suppliers;
(i) instituted, settled or agreed to settle any litigation, action
or proceeding before any court or governmental body relating
to the Business or the Assets other than in the ordinary
course of business consistent with past practices but not in
any case involving amounts in excess of $25,000.00;
(j) entered into any transaction, contract or commitment other
than in the ordinary course of business or paid or agreed to
pay any brokerage or finder's fee, taxes or other expenses in
connection with this Agreement or the transactions
contemplated hereby; or
(k) taken any action or omitted to take any action that would
result in the occurrence of any of the foregoing.
3.1.8. Litigation. Except as set forth on Schedule 3.1.8, to
the knowledge of MD Industries, there is no action, claim, demand, suit,
proceeding, arbitration, grievance, citation, summons, subpoena, inquiry or
investigation of any nature, civil, criminal, regulatory or otherwise, in law or
in equity, pending or threatened against or relating to MD Industries in
connection with the Assets or the Business or the transactions contemplated by
this Agreement, and to the knowledge of MD Industries, there is no basis for the
same. Except as set forth in such Schedule 3.1.8, to the knowledge of MD
Industries, no citations, fines or penalties have been asserted against MD
Industries with respect to the Business since January 1, 1999, under any
environmental law, by the Food and Drug Administration, or any foreign, federal,
state or local law relating to occupational health or safety.
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3.1.9. Compliance with Laws; Governmental Approvals and
Consents; Governmental Contracts. (a) Except as disclosed in Schedule 3.1.9(a),
since August 7, 2001, to the knowledge of MD Industries, MD Industries has
complied in all material respects with all laws applicable to the Business or
the Assets, and has not received any notice alleging any such conflict,
violation, breach or default.
(b) Schedule 3.1.9(b) sets forth all governmental approvals and
other consents necessary for, or otherwise material to, the
conduct of the Business. Except as set forth in Schedule
3.1.9(b), all such governmental approvals and consents have
been duly obtained and are in full force and effect, and MD
Industries is in full compliance with each of such
governmental approvals and consents held by it with respect to
the Assets and the Business.
(c) Schedule 3.1.9(c) sets forth all contracts with any
governmental authority to which MD Industries is a party.
3.1.10. Operation of the Business. Except as set forth in
Schedule 3.1.10, (a) MD Industries has conducted the Business only through MD
Industries and not through any other divisions or any direct or indirect
subsidiary or affiliate of MD Industries and (b) no part of the Business is
operated by MD Industries through any entity other than MD Industries.
3.1.11. Assets. Except as disclosed in Schedule 3.1.11, MD
Industries has good title to all the Assets free and clear of any and all liens.
EXCEPT FOR THE INVENTORY, THE ASSETS ARE BEING TRANSFERRED IN "AS IS" CONDITION.
To the knowledge of MD Industries, there are no facts or conditions affecting
the Assets described in Schedule 1.1(a) which could, individually or in the
aggregate (subject to the necessity for routine maintenance), interfere in any
material respect with the use or operation thereof as currently used or
operated, or their adequacy for such use.
3.1.12. Contracts. (a) To the knowledge of MD Industries,
Schedule 3.1.12 (a) contains, except with respect to open purchase orders, which
shall be provided by MD Industries at Closing, other than the contracts relating
to the Excluded Assets, a complete and correct list of all agreements,
contracts, commitments and other instruments and arrangements (whether written
or oral) of the types described below (x) by which any of the Assets are bound
or affected or (y) to which MD Industries is a party or by which it is bound in
connection with the Business or the Assets, other than the contracts relating to
the Excluded Assets (the "Contracts").
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(i) licenses, licensing arrangements and other contracts
providing in whole or in part for the use of, or
limiting the use of, any Intellectual Property;
(ii) brokerage or finder's agreements;
(iii) joint venture, partnership and similar contracts
involving a sharing of profits or expenses (including
but not limited to joint research and development and
joint marketing contracts);
(iv) asset purchase agreements and other acquisition or
divestiture agreements, including but not limited to
any agreements relating to the sale, lease or
disposal of any Assets (other than sales of inventory
in the ordinary course of business) or involving
continuing indemnity or other obligations;
(v) orders and other contracts for the purchase or sale
of materials, supplies, products or services, each of
which involves aggregate payments in excess of
$20,000.00 in the case of purchases or $5,000.00 in
the case of sales;
(vi) sales agency, manufacturer's representative,
marketing or distributorship agreements;
(vii) contracts, agreements or arrangements with respect to
the representation of the Business in foreign
countries; and
(viii) any other contracts, agreements or commitments that
are material to the Business.
(b) MD Industries has delivered to the Buyer complete and correct
copies of all written Contracts, together with all amendments
thereto, and accurate descriptions of all material terms of
all oral Contracts, set forth or required to be set forth in
Schedule 3.1.12(a).
(c) To the knowledge of MD Industries', all Contracts that are in
written and executed form are in full force and effect and
enforceable against each party thereto. To the knowledge of MD
Industries', there does not exist under any Contract any event
of default or event or condition that, after notice or lapse
of time or both, would constitute a violation, breach or event
of default thereunder on the part of MD Industries or any
other party thereto except as set forth in Schedule 3.1.12(c)
and except for such events
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or conditions that, individually and in the aggregate, (i) has
not had or resulted in, and will not have or result in, a
material adverse effect on the financial condition of MD
Industries and (ii) has not and will not materially impair the
ability of MD Industries to perform its obligations under this
Agreement and under the Trademark Assignment Agreement. Except
as set forth in Schedule 3.1.12(c), no consent of any third
party is required under any Contract as a result of or in
connection with, and the enforceability of any Contract will
not be affected in any manner by, the execution, delivery
and performance of this Agreement or the Trademark Assignment
Agreement or the consummation of the transactions contemplated
thereby.
(d) There is no outstanding power of attorney granted by MD
Industries relating to the Business.
3.1.13. Territorial Restrictions. Except as set forth in
Schedule 3.1.13, MD Industries is not restricted by any written agreement or
understanding with any other person (other than governmental authorities) from
carrying on the Business anywhere in the world. The Buyer, solely as a result of
its purchase of the Business from MD Industries pursuant hereto and the
assumption of the Assumed Liabilities, will not become restricted in carrying on
any business anywhere in the world due to any restrictions described in Schedule
3.1.13.
3.1.14. Inventories. All Inventories are of good, usable and
merchantable quality in all material respects and, except as set forth on
Schedule 3.1.14, (a) all Inventories are of such quality as to meet the quality
control standards of MD Industries and any applicable governmental quality
control standards, (b) all Inventories that are finished goods are saleable as
current inventories at the current prices thereof in the ordinary course of
business, and (c) all Inventories are recorded on the books of the Business at
the lower of cost or market value determined in accordance with GAAP. Schedule
3.1.14 lists the locations of all Inventories.
3.1.15. Customers. To the knowledge of MD Industries, Schedule
3.1.15 sets forth (a) the names and addresses of the ten (10) largest customers
(ranked by sales dollars) of MD Industries with respect to the Business that
ordered Products from MD Industries during the twelve month period ended March
31, 2002 and (b) the amount for which each such customer was invoiced during
such period. Except as set forth on Schedule 3.1.15, to the knowledge of MD
Industries', no such customer (i) has ceased, or has expressed an intent to
cease, to use the Products, (ii) has substantially reduced or has expressed an
intent to substantially reduce, the use of the Products or (iii) has sought, or
has expressed an intent to seek, to reduce the
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price it will pay for the Products, including in each case after the
consummation of the transactions contemplated hereby.
3.1.16. Suppliers; Raw Materials. To the knowledge of MD
Industries, Schedule 3.1.16 sets forth (a) the names and addresses of MD
Industries' ten (10) largest suppliers (and any affiliate thereof) with respect
to the Business (ranked by dollars) of materials and ingredients used in
connection with the production and packaging of the Products during the twelve
month period ended March 31, 2002 and (b) the amount for which each such
supplier invoiced MD Industries during such period. Except as set forth on
Schedule 3.1.16, to the knowledge of MD Industries, there has been no material
adverse change in the price of such raw materials, supplies, merchandise or
other goods or services, and no such supplier has expressed an intent not to
sell materials, supplies, merchandise and other goods to the Buyer at any time
after the Closing Date on terms and conditions similar to those used in its
current sales to MD Industries, subject to general and customary price
increases.
3.1.17. Product Warranties. To the knowledge of MD Industries,
except as set forth in Schedule 3.1.17 and except for warranties under
applicable law, (a) there are no warranties, express or implied, written or
oral, with respect to the Products of the Business and (b) there are no pending
or threatened claims with respect to any such warranty.
3.1.18. Absence of Certain Business Practices. To the
knowledge of MD Industries, except for rebates to customers under MD Industries'
existing rebate policy, neither MD Industries nor any officer or employee of MD
Industries, has, directly or indirectly, since August 7, 2001, given or agreed
to give any gift or similar benefit to any customer, supplier, governmental
employee or other person who is or may be in a position to help or hinder the
Business (or assist MD Industries in connection with any actual or proposed
transaction relating to the Business) (i) which subjected or reasonably is
expected to subject MD Industries to any damage or penalty in any civil,
criminal or governmental litigation or proceeding, (ii) which if not given in
the past, would reasonably be expected to have had a material adverse effect on
the financial condition of MD Industries, (iii) which if not continued in the
future, would reasonably be expected to have a material adverse effect or
subject MD Industries to suit or penalty in any private or governmental
litigation or proceeding, (iv) for any of the purposes described in Section
162(c) of the Code or (v) for the purpose of establishing or maintaining any
concealed fund or concealed bank account.
3.1.19. Intellectual Property. (a) Title. Schedule 1.1(d)
contains, to the knowledge of MD Industries, a complete and correct list of all
Intellectual Property that is owned by MD Industries and primarily related to,
used in, held for use in connection with, or necessary for the conduct of, or
14
otherwise material to the Business other than (i) inventions, trade secrets,
processes, formulas, compositions, designs and confidential business and
technical information and (ii) Intellectual Property that is not registered or
subject to application for registration (the "Owned Intellectual Property").
Except as set forth on Schedule 3.1.19, to the knowledge of MD Industries, MD
Industries owns or has the right to use pursuant to license, sublicense,
agreement or permission all Intellectual Property, free from any liens and free
from any requirement of any past, present or future royalty payments, license
fees, charges or other payments, or conditions or restrictions whatsoever.
(b) Transfer. Immediately after the Closing, the Buyer will own
all of the Owned Intellectual Property and will have a right
to use all other Intellectual Property Assets, free from any
liens and on the same terms and conditions as in effect prior
to the Closing.
(c) No Infringement. MD Industries has received no written notice
of any claim by any person or party that the conduct of the
Business infringes or otherwise conflicts with any rights of
any person in respect of any Intellectual Property. To the
knowledge of MD Industries, none of the Intellectual Property
is being infringed by any other person.
(d) Licensing Arrangements. Schedule 3.1.19(d) sets forth all
material agreements, arrangements or laws (i) pursuant to
which MD Industries has licensed Intellectual Property Assets
to, or the use of Intellectual Property Assets is otherwise
permitted (through non-assertion, settlement or similar
agreements or otherwise) by, any other person and (ii)
pursuant to which MD Industries has had Intellectual Property
licensed to it, or has otherwise been permitted to use
Intellectual Property (through non-assertion, settlement or
similar agreements or otherwise). To the knowledge of MD
Industries, all of the agreements or arrangements set forth on
Schedule 3.1.19(d) (x) are in full force and effect in
accordance with their terms and no default exists thereunder
by MD Industries, or by any other party thereto, (y) are free
and clear of all liens, and (z) do not contain any change in
control or other terms or conditions that will become
applicable or inapplicable as a result of the consummation of
the transactions contemplated by this Agreement. MD Industries
has delivered to the Buyer true and complete copies of all
licenses and arrangements (including amendments) set forth on
Schedule 3.1.19(d). All royalties, license fees, charges and
other amounts payable by, on behalf of, to, or for the account
of, MD Industries in respect of any Intellectual Property are
disclosed in the Financial Statements.
15
(e) No Intellectual Property Litigation. To the knowledge of MD
Industries, no claim or demand of any person has been made nor
is there any proceeding that is pending, or threatened, nor is
there a reasonable basis therefor, which (i) challenges the
rights of MD Industries in respect of any Intellectual
Property, (ii) asserts that MD Industries is infringing or
otherwise in conflict with, or is, except as set forth in
Schedule 3.1.19(e), required to pay any royalty, license fee,
charge or other amount with regard to, any Intellectual
Property, or (iii) claims that any default exists under any
agreement or arrangement listed on Schedule 3.1.19(d). None
of the Intellectual Property is subject to any outstanding
order, ruling, decree, judgment or stipulation by or with any
court, arbitrator, or administrative agency, or has been the
subject of any litigation since August 7, 2001, whether or not
resolved in favor of MD Industries.
(f) Due Registration, Etc. That portion of the Owned Intellectual
Property identified as registered on Schedule 3.1.19(f) has
been duly registered with, as the case may be, the United
States Patent and Trademark Office or the United States
Copyright Office and to knowledge of MD Industries, such
registrations remain in full force and effect, in each case to
the extent material to the Business.
(g) Use of Name and Xxxx. Except as set forth in Schedule
3.1.19(g), to the knowledge of MD Industries, there are, and
immediately after the Closing will be, no contractual
restriction or limitations pursuant to any orders, decisions,
injunctions, judgments, awards or decrees of any governmental
authority on the Buyer's right to use the names and marks
listed on Schedule 3.1.19(g) in the conduct of the Business as
presently carried on by MD Industries or as such Business may
be extended by the Buyer.
3.1.20. Insurance. Schedule 3.1.20 contains a complete and
correct list and summary description of all insurance policies maintained by MD
Industries for the benefit of or in connection with the Assets or the Business.
MD Industries has delivered to the Buyer complete and correct copies of all such
policies together with all riders and copies of all such policies together with
all riders and amendments thereto. To the knowledge of MD Industries, such
policies are in full force and effect, and all premiums due thereon have been
paid. Schedule 3.1.20 sets out all product liability claims made by MD
Industries under any policy of insurance since August 7, 2001, with respect to
the Business and to the knowledge of MD Industries, there is no basis on which a
claim should be made under any such policy with respect to the Business.
16
3.1.21. No Guarantees. Except as set forth on Schedule 3.1.21,
to the knowledge of MD Industries, none of the obligations or liabilities of the
Business or of MD Industries incurred in connection with the operation of the
Business is guaranteed by or subject to a similar contingent obligation of any
other person. Except as set forth on Schedule 3.1.21, MD Industries has not
guaranteed or become subject to a similar contingent obligation in respect of
the obligations or liabilities of any other person. To the knowledge of MD
Industries, there are no outstanding letters of credit, surety bonds or similar
instrument under which MD Industries is liable in connection with the Business
or the Assets.
3.1.22. Brokers, Finders, etc. Except as set forth on Schedule
3.1.23, all negotiations relating to this Agreement, the Trademark Assignment
Agreement, and the transactions contemplated thereby, have been carried on
without the participation of any person acting on behalf of MD Industries in
such manner as to give rise to any valid claim against the Buyer or any of its
subsidiaries for any brokerage or finder's commission, fee or similar
compensation, or for any bonus payable to any officer, director, employee, agent
or sales representative of or consultant to MD Industries upon consummation of
the transactions contemplated hereby or thereby.
3.2. Representations and Warranties of the Buyer. The Buyer
represents and warrants to MD Industries as follows:
3.2.1. Corporate Status; Authorization, etc. The Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware with full corporate power and authority to carry on its
business and to own or lease and to operate its properties as and in the places
where such business is conducted and such properties are owned, leased or
operated. The Buyer has the corporate power and authority to execute and deliver
this Agreement and the Trademark Assignment Agreement, to perform fully its
obligations thereunder and to consummate the transactions contemplated thereby.
This Agreement is, and the Trademark Assignment Agreement will be, on the
Closing Date, legal, valid and binding obligations of the Buyer, enforceable
against the Buyer in accordance with their respective terms, except as may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws of general application affecting the enforcement of
creditors' rights generally or by general principles of equity, regardless of
whether considered in any proceeding in equity or law.
3.2.2. No Conflicts, etc. The execution, delivery and
performance by the Buyer of this Agreement and the Trademark Assignment
Agreement and the consummation of the transactions contemplated thereby do not
and will not conflict with or result in a violation of or default under (with or
without the giving of notice or the lapse of time, or both) (i) the certificate
of incorporation or by-laws or other organizational documents of the Buyer, (ii)
any law
17
applicable to the Buyer or any of its properties or assets or (iii) any
contract, agreement or other instrument to which the Buyer is a party or by
which or any of its properties or assets may bound or affected. Except as
specified in Schedule 3.2.2, no governmental approval or other consent is
required to be obtained or made by the Buyer in connection with the execution
and delivery of this Agreement or the Trademark Assignment Agreement or the
consummation of the transactions contemplated thereby.
3.2.3. Litigation. There is no action, claim, suit or
proceeding pending, or to the Buyer's knowledge threatened, in connection with
or relating to the transactions contemplated by this Agreement or of any action
taken or to be taken in connection herewith or the consummation of the
transactions contemplated hereby.
3.2.4. Brokers, Finders, etc. All negotiations relating to
this Agreement and the transactions contemplated hereby have been carried on
without the participation of any person acting on behalf of the Buyer in such
manner as to give rise to any valid claim against the Buyer for any brokerage or
finder's commission, fee or similar compensation.
3.2.5. Reporting Obligations of Buyer. Buyer has duly filed on
a timely basis all reports and registration statements to be filed by Buyer
under the Exchange Act of 1934, as amended and the Securities Act of 1933, as
amended and the rules and regulations adopted by the Securities and Exchange
Commission ("SEC") thereunder. No filings by Buyer with the SEC contain an
untrue statement of a material fact necessary in order to make the statements
contained therein or in any related documents not misleading in light of the
circumstances under which they were made.
3.2.6. Availability of Funds. Buyer has, or will have on or
before the Closing, sufficient funds available to pay the Purchase Price and to
satisfy its other obligations hereunder.
3.2.7 Knowledge as to Representations of MD Industries. The
Buyer does not know of any inaccuracy in the representations or warranties made
by MD Industries in this Agreement.
ARTICLE IV
COVENANTS
4.1. Covenants of MD Industries.
4.1.1. Conduct of Business. From the date hereof to the
Closing Date, except as expressly permitted or required by this Agreement,
described on Schedule 4.1.1, or as otherwise consented to by the Buyer in
writing, MD Industries will:
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(a) carry on the Business in, and only in, the ordinary
course, in substantially the same manner as
heretofore conducted, and use all reasonable efforts
to preserve intact its present business organization,
maintain its properties in good operating condition
and repair, keep available the service of its present
officers and significant employees, and preserve its
relationship with customers, suppliers and others
having business dealings with it, to the end that its
goodwill and going business shall be in all material
respects unimpaired following the Closing;
(b) pay accounts payable and other obligations of the
Business when they become due and payable in the
ordinary course of business consistent with prior
practice;
(c) perform in all material respects all of its
obligations under all contracts and other agreements
and instruments relating to or affecting the Business
or the Assets, and comply in all material respect
with all applicable laws applicable to it, the Assets
or the Business;
(d) not enter into or assume any material agreement,
contract or instrument relating to the Business, or
enter into or permit any material amendment,
supplement, waiver or other modification in respect
thereof; and
(e) not take any action or omit to take any action, which
action or omission would result in a breach of any of
the representations and warranties set forth in
Section 3.1.7.
4.1.2. Further Assurances. Following the Closing, MD
Industries shall, from time to time, execute and deliver such additional
instruments, documents, conveyances or assurances and take such other actions as
shall be necessary, or otherwise reasonably requested by the Buyer, to confirm
and assure the rights and obligations provided for in this Agreement and in the
Trademark Assignment Agreement and render effective the consummation of the
transactions contemplated thereby.
4.1.3. Use of Business Name. After the Closing, MD Industries
will not, directly or indirectly, use or do business, or allow any affiliate to
use or due business, or assist any third party in using or doing business, under
the names and marks set forth in Schedule 1.1(c) (or any other name confusingly
similar to such names and marks).
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4.1.4. Returns and Rebates. (a) MD Industries accepts the
financial responsibility for all product returns of the Business which occurred
prior to the Closing Date; provided, however, that Buyer hereby agrees to
purchase from MD Industries any returned products which have a remaining shelf
life of not less than 12 months (except for products that have been returned for
quality reasons) which are resalable in the ordinary course of business at the
same prices at which other similar products sold, provided that the value of the
products so returned does not exceed $100,000.00;
(b) MD Industries agrees to reimburse Buyer for any rebate amount
claimed by any customer in connection with (and limited to)
sales of the Products made and invoiced by such customers
within sixty (60) days after the Closing Date, provided,
however, that MD Industries shall have no such liability
except to the extent the rebate claimed is properly documented
to MD Industries, would be properly payable under MD
Industries rebate policy existing on the date of this
Agreement, and in no event, shall exceed $200,000. Buyer shall
be solely responsible for paying any such rebate amounts in
respect of sales of the Business sold and invoiced to end-user
purchasers sixty-one (61) or more days after the Closing Date.
(c) Each of the parties shall cooperate fully with the other in
forwarding to the proper party any misdirected rebate requests
that it receives.
4.2. Covenants of the Buyer.
4.2.1. Further Actions. (a) The Buyer agrees to use all
reasonable good faith efforts to take all actions and to do all things
necessary, proper or advisable to consummate the transactions contemplated
hereby.
(b) The Buyer will, as promptly as practicable, file or supply, or
cause to be filed or supplied, all applications, notifications
and information required to be filed or supplied by each of
them pursuant to applicable law in connection with this
Agreement, the Trademark Assignment Agreement, its acquisition
of the Assets pursuant to this Agreement and the consummation
of the other transactions contemplated thereby.
(c) The Buyer will coordinate and cooperate with MD Industries in
exchanging such information and supplying such reasonable
assistance as may be reasonably requested by MD Industries in
connection with any filings and other actions.
20
4.2.2. Further Assurances. Following the Closing, the Buyer
shall execute and deliver such additional instruments, documents, conveyances or
assurances and take such other actions as shall be necessary, or otherwise
reasonably requested by MD Industries, to confirm and assure the rights and
obligations provided for in this Agreement and in the Trademark Assignment
Agreement and render effective the consummation of the transactions contemplated
thereby.
4.2.3. Investigation By Buyer. Prior to the date hereof, MD
Industries has allowed (and between the date hereof and the Closing Date, MD
Industries will continue to allow) Buyer and its Representatives, at Buyer's own
expense during regular business hours, to inspect the Assets and to inspect and
make copies of contracts, books and records or information requested by Buyer
and reasonably related to the conduct of the Business, including historical
financial information. All information will be provided to Buyer in the form
that the information may presently exist or be readily available. Buyer
acknowledges and agrees that it has completed such investigation as it deems
necessary to enter into this Agreement. Buyer further covenants and agrees that
prior to the Closing, it shall not contact any of MD Industries' customers
and/or suppliers without MD Industries' consent and participation in any such
communications.
4.2.4. Employee Matters. To the extent that Buyer, in its sole
discretion, determines to offer employment to any persons employed by MD
Industries as of the Closing Date, Buyer will be responsible for all salary and
benefits of such persons employed by Buyer from and after the date they become
employees of Buyer, such salary and benefits to be determined by Buyer in its
sole discretion.
4.2.5 Retention of Records. The Buyer shall retain for a
period of seven (7) years after the Closing Date, the books and records of the
Business relating to all periods commencing or ending before the Closing Date
and, during regular business hours, on no less than 48 hours prior written
notice from MD Industries, shall (a) give MD Industries and its authorized
representatives reasonable access to those books and records, (b) permit MD
Industries or its representatives to make such inspections (and copies of any
documents at MD Industries' expense) thereof as MD Industries may reasonably
request and (c) furnish MD Industries with such financial and operating data and
other information for periods before the Closing Date or otherwise relating to
MD Industries' responsibilities with respect to the Business and its operations
and properties as MD Industries may from time to time reasonably request. All
costs incurred relating to such inspection shall be paid by MD Industries.
4.2.6. Allocation of Purchase Price. The Buyer and MD
Industries shall, within sixty (60) days of Closing, complete and execute Form
8594, Asset
21
Acquisition Statement, under Section 1060 of the Internal Revenue Code and
deliver a copy of such form to the other party. In addition, each party will
file such form in its tax returns for all periods which include the Closing Date
and cause all tax returns filed by it to be consistent with the information on
such form agreed to by the parties.
4.2.7. Treatment of Inventories. The Buyer and MD Industries
acknowledge that the inventories included as part of the assets to be sold and
transferred to the Buyer pursuant to this Agreement are being sold and
transferred to the Buyer for resale purposes only, and each party shall cause
any tax returns or other reports or related documents filed, or otherwise
provided to any other party (including, without limitation, a governmental
agency) to be consistent with such understanding.
ARTICLE V
CONDITIONS PRECEDENT
5.1. Conditions to Obligations of Each Party. The obligations of the
parties to consummate the transactions contemplated hereby shall be subject to
the fulfillment on or prior to the Closing Date of the following conditions:
5.1.1. No Injunction, etc. Consummation of the transactions
contemplated hereby shall not have been restrained, enjoined or otherwise
prohibited by any applicable law, including any order, injunction, decree or
judgment of any court or other governmental authority. No court or other
governmental authority shall have determined any applicable law to make illegal
the consummation of the transactions contemplated hereby or the Trademark
Assignment Agreement, and no proceeding with respect to the application of any
such applicable law to such effect shall be pending.
5.1.2. Trademark Assignment Agreement. The parties shall have
executed the Trademark Assignment Agreement.
5.2. Conditions to Obligations of the Buyer. The obligations of the
Buyer to consummate the transactions contemplated hereby shall be subject to the
fulfillment (or waiver by Buyer) on or prior to the Closing Date of the
following additional conditions, which MD Industries agrees to use reasonable
good faith efforts to cause to be fulfilled:
5.2.1. Representations, Performance. The representations and
warranties of MD Industries contained in this Agreement and in the Trademark
Assignment Agreement and made pursuant to Section 3.1 shall be true and correct
in all respects (in the case of any representation or warranty containing any
materiality qualification) or in all material respects (in the case of any
representation or warranty without any materiality qualification) at and as of
the date hereof. MD Industries shall have duly performed and complied in all
22
material respects with all agreements and conditions required by this Agreement
and the Trademark Assignment Agreement to be performed or complied with by it
prior to or on the Closing Date. MD Industries shall have delivered to the Buyer
a certificate, dated the Closing Date and signed by its duly authorized
officers, to the foregoing effect.
5.2.2. Consents. MD Industries shall have obtained and shall
have delivered to the Buyer copies of (i) all governmental approvals required to
be obtained by it in connection with the execution and delivery of this
Agreement and the Trademark Assignment Agreement and the consummation of the
transactions contemplated hereby or thereby and (ii) subject to Section 2.4, all
consents (including, without limitation, all consents required under any
contract) necessary to be obtained in order to consummate the sale and transfer
of the Assets pursuant to this Agreement and the consummation of the other
transactions contemplated hereby and by the Trademark Assignment Agreement,
unless the failure to obtain such consent would not, individually or in the
aggregate, have a material adverse effect on the financial condition on the
Business.
5.2.3. No Material Adverse Effect. Except as set forth in
Schedule 3.1.8, no event, occurrence, fact, condition, change, development or
effect shall have occurred, exist or come to exist since March 31, 2002, that,
individually or in the aggregate, has constituted or resulted in, or could
reasonably be expected to constitute or result in, a material adverse effect on
the financial condition of the Business.
5.2.4. Opinion of Counsel. Medical Action shall have received
an opinion, addressed to it and dated the Closing Date, from counsel to MD
Industries, in substance and form reasonably satisfactory to Medical Action.
5.2.5. Corporate Proceedings. All company and other
proceedings of MD Industries in connection with this Agreement and the Trademark
Assignment Agreement and the transactions contemplated thereby, and all
documents and instruments incident thereto, shall be reasonably satisfactory in
substance and form to the Buyer and its counsel, and the Buyer and its counsel
shall have received all such documents and instruments, or copies thereof,
certified if requested, as may be reasonably requested.
5.2.6. Transfer Documents. MD Industries shall have delivered
to the Buyer at the Closing all documents, certificates and agreements necessary
to transfer to the Buyer good and marketable title to the Assets, free and clear
of any and all liens thereon (other than liens designated as "Permitted Liens"
on Schedule 3.1.11), including without limitation:
23
(a) a xxxx of sale, assignment and general conveyance, in
form and substance reasonably satisfactory to the
Buyer, dated the Closing Date, with respect to the
Assets;
(b) assignments of all contracts, Intellectual Property
and any other agreements and instruments constituting
Assets, dated the Closing Date, assigning to the
Buyer all of MD Industries' right, title and interest
therein and thereto, with any required consent
endorsed thereon.
5.3. Conditions to Obligations of MD Industries. The obligation of MD
Industries to consummate the transactions contemplated hereby shall be subject
to the fulfillment (or waiver) on or prior to the Closing Date, of the following
additional conditions, which the Buyer agrees to use reasonable good faith
efforts to cause to be fulfilled.
5.3.1. Representations, Performance, etc. The representations
and warranties of the Buyer contained in this Agreement and the Trademark
Assignment Agreement in Section 3.2 shall be true and correct in all respects
(in the case of any representation or warranty containing any materiality
qualification) or in all material respects (in the case of any representation or
warranty without any materiality qualification) at and as of the date hereof and
shall be repeated and shall be true and correct in all respects (in the case of
any representation or warranty containing any materiality qualification) or in
all material respects (in the case of any representation or warranty without any
materiality qualifications) on and as of the Closing Date with the same effect
as through made at and as of such time. The Buyer shall have duly performed and
complied in all material respects with all agreements and conditions required by
this Agreement and the Trademark Assignment Agreement to be performed or
complied with by them prior to or on the Closing Date. The Buyer shall have
delivered to MD Industries a certificate, dated the Closing Date and signed by
its duly authorized officer, to the foregoing effect.
5.3.2. Opinion of Counsel. MD Industries shall have received
an opinion, addressed to it and dated the Closing Date, of Xxxxxxx X. Satin,
Esq., General Counsel for the Buyer in form and substance reasonably
satisfactory to MD Industries.
5.3.3. Corporate Proceedings. All corporate and other
proceedings of the Buyer in connection with this Agreement and the Trademark
Assignment Agreement and the transactions contemplated thereby, and all
documents and instruments incident thereto, shall be reasonably satisfactory in
substance and form to MD Industries and its counsel, and MD Industries and its
counsel shall have received all such documents and instruments, or copies
thereof, certified if requested, as may be reasonably requested.
24
5.3.4. Consents and Approvals. The Buyer shall have obtained
and shall have delivered to MD Industries copies of (i) all government approvals
required to be obtained by it in connection with the execution and delivery of
this Agreement and the Trademark Assignment Agreement and the consummation of
the transactions contemplated hereby or thereby and (ii) all consents necessary
to be obtained in order to consummate the transactions contemplated hereby and
by the Trademark Assignment Agreement.
ARTICLE VI
MISCELLANEOUS
6.1. Indemnification. (a) By MD Industries. MD Industries covenants and
agrees to defend, indemnify and hold harmless the Buyer, its officers,
directors, employees, agents, advisers, representatives and affiliates
(collectively, the "the Buyer Indemnitees") from and against, and pay or
reimburse the Buyer for, any and all claims, liabilities, obligations, losses,
fines, costs, royalties, proceedings, deficiencies or damages actually incurred
(whether or not resulting from third-party claims), including out-of-pocket
expenses and reasonable attorney's and accountants' fees incurred in the
investigation or defense of any of the same or in asserting any of their
respective rights hereunder (collectively, "Losses"), resulting from or arising
out of:
(i) any inaccuracy of any representation or warranty made
by MD Industries in this Agreement or the Trademark
Assignment Agreement;
(ii) any failure of MD Industries to perform any covenant
or agreement under this Agreement or the Trademark
Assignment Agreement;
(iii) any Excluded Liabilities;
(iv) any and all taxes of MD Industries not relating to or
arising out of the Business;
(v) any product liability claim asserted by a third party
with respect to Products sold or manufactured by MD
Industries; and
(vi) any failure of MD Industries to comply with
applicable bulk sales laws (in consideration of which
indemnification obligations the Buyer hereby waives
compliance by MD Industries with any applicable bulk
sales laws and agrees that it will not make any
filings pursuant to any such laws).
25
(b) By the Buyer. The Buyer covenants and agrees to defend, indemnify
and hold harmless MD Industries and its officers, directors, employees, agents,
advisers, representatives and affiliates (collectively, the "MD Industries
Indemnitees") from and against any and all Losses resulting from or arising out
of:
(i) any inaccuracy in any representation or warranty by
the Buyer made or contained in this Agreement or the
Trademark Assignment Agreement;
(ii) any failure of the Buyer to perform any covenant or
agreement made or contained in this Agreement or the
Trademark Assignment Agreement; and
(iii) the operation of the Business by the Buyer or the
Buyer's or Medical Action's ownership, operation or
use of the Assets following the Closing Date.
(c) Indemnification Procedures. In the case of any claim asserted by a
third party against a party entitled to indemnification under this Agreement
(the "Indemnified Party"), notice shall be given by the Indemnified Party to the
party required to provide indemnification (the "Indemnifying Party") promptly
after such Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought, and the Indemnified Party shall permit the Indemnifying
Party (at the expense of such Indemnifying Party) to assume the defense of any
claim or any litigation resulting therefrom, provided that (i) the counsel for
the Indemnifying Party who shall conduct the defense of such claim or litigation
shall be reasonably satisfactory to the Indemnified Party, (ii) the Indemnified
Party may participate in such defense at such Indemnified Party's expense, and
(iii) the omission by any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its indemnification obligation under
this Agreement, except to the extent that such omission results in a failure of
actual notice to the Indemnifying Party and such Indemnifying Party is
materially damaged as a result of such failure to give notice. Except with the
prior written consent of the Indemnified Party, no Indemnifying Party, in the
defense of any such claim or litigation, shall consent to entry of any judgment
or enter into any settlement that provides for injunctive or other nonmonetary
relief affecting the Indemnified Party or that does not include as a
unconditional term thereof the giving by each claimant or plaintiff to such
Indemnified Party of a release from all liability with respect to such claim or
litigation. In the event that the Indemnified Party shall in good faith
determine that the conduct of the defense of any claim subject to
indemnification hereunder or any proposed settlement of any such claim by the
Indemnifying Party might be expected to affect adversely the Indemnified Party's
Tax liability or the ability of the Buyer to conduct its business, or that the
Indemnified Party may have available to it one or more defenses or
26
counterclaims that are inconsistent with one or more of those that may be
available to the Indemnifying Party in respect of such claim or any litigation
relating thereto, the Indemnified Party shall have the right at all times to
take over and assume control over the defense, settlement, negotiations or
litigation relating to any such claim at the sole cost of the Indemnifying
Party, provided that if the Indemnified Party does so take over and assume
control, the Indemnified Party shall not settle such claim or litigation without
the written consent of the Indemnifying Party, such consent not to be
unreasonably withheld.
(d) If the Indemnifying Party fails diligently to prosecute or settle
the third party claim, or if the Indemnifying Party gives notice to the
Indemnifying Party that it has decided to not accept the defense of the
Indemnified Party as provided above, then the Indemnified Party shall have the
right (but not the obligation) to defend, at the sole cost and expense of the
Indemnifying Party, the third party claim by all appropriate proceedings, which
proceedings will be prosecuted diligently by the indemnified Party to a final
conclusion or settled at the discretion of the Indemnified Party. The
Indemnified Party will have full control of such defense and proceedings,
including any compromise or settlement thereof, provided that if requested by
the Indemnified Party, the Indemnifying Party shall cooperate, at the sole cost
and expense of the Indemnifying Party, with the Indemnified Party and its
counsel in developing the strategy and providing assistance in dealing with the
third party claim. In the event a compromise or settlement of the Third Party
Claim requires more than a monetary payment, such compromise or settlement must
have the written consent of the Indemnifying Party, which consent can be
withheld in the sole discretion of the Indemnifying Party.
(e) Notwithstanding the foregoing provisions of Section 6.1(d), if the
Indemnifying Party notifies the Indemnified Party that the Indemnifying Party
disputes its obligation to indemnify the Indemnified Party against the third
party claim, and upon the resolution of such dispute pursuant to an order of a
court of competent jurisdiction, the Indemnifying Party shall either, in
accordance with such court order: (x) be required to bear the costs and expenses
of the Indemnified Party's defense pursuant to Section 6.1(d) of the
Indemnifying Party's participation therein at the Indemnified Party's request,
then the Indemnified Party will reimburse the Indemnifying Party in full for any
such costs and expenses related to reaching such resolution (including
reasonable attorneys and other professionals fees and costs) and, in addition,
the Indemnifying Party shall pay the Indemnified Party an amount equal to twenty
percent (20%) of the total amount incurred by the Indemnified Party for all of
such costs and expenses, or (y) the Indemnifying Party will not be required to
indemnify the Indemnified Party. In the event of any appeal of the order of the
court, the appealing party shall be required to comply with its duties to
indemnify in this Section 6.1 pending a final and nonappealable decision by any
appellate court. The Indemnifying Party may participate in,
27
but not control, any defense or settlement controlled by the Indemnified Party
pursuant to Section 6.1(d), but the Indemnifying Party shall bear its own costs
and expenses with respect thereto if such participation is not at the request of
the Indemnified Party.
(f) Time Limitation. All claims for indemnification under clause (i) of
the first sentence of Section 6.1(a) or clause (i) of the first sentence of
Section 6.1(b) must be asserted before the termination of the respective
survival periods set forth in Section 6.2; provided, however, that any claim
first asserted in writing before the termination of the survival period of the
applicable representation or warranty may continue to be asserted after such
expiration and shall continue to be subject to the applicable indemnification
provisions of this Agreement after such expiration.
(g) Dollar Limitation. Notwithstanding anything set forth in this
Section 6 to the contrary, no party shall assert a claim for indemnification
hereunder, unless and until the amount of all Losses determined to have been
incurred or suffered at the time by the Indemnified Party exceeds, in the
aggregate, $25,000.00, and then only to the extent of such excess. The parties
further acknowledge and agree that the total indemnification obligations of each
party under this Agreement or the Trademark Assignment Agreement shall not
exceed, in the aggregate for such party, $1,500,000.00.
(h) Scope of Remedies. Except for any proceedings seeking specific
performance, the sole remedy for any liability of any party to, or benefiting
from, this Agreement with respect to the transactions described in this
Agreement, regardless of whether any other remedy might otherwise be available
at law or in equity, shall be the right to enforce the indemnification
obligations set forth in this Article 6.
6.2. Survival of Representations and Warranties, etc. The
representations and warranties contained in this Agreement shall survive the
execution and delivery of this Agreement, any examination by or on behalf of the
parties hereto and the completion of the transactions contemplated herein, but
only to the extent specified below:
(a) except as set forth in clauses (b), (c) and (d) below, the
representations and warranties contained in Section 3.1 and
Section 3.2 shall survive for a period of one (1) year
following the Closing Date.
(b) the representations and warranties contained in Sections
3.1.1, 3.1.2, 3.1.3, 3.2.1 and 3.2.2 shall survive without
limitation; and
(c) the representations and warranties of MD Industries contained
in Section 3.1.6 shall survive as to any tax covered by such
28
representations and warranties for so long as any statute of
limitations for such Tax remains open, in whole or in part,
including without limitation by reason of waiver of such
statute of limitations.
6.3. Expenses. MD Industries, on the one hand, and the Buyer, on the
other hand, shall bear their respective expenses, costs and fees (including
attorneys', auditors' and financing commitment fees) in connection with the
transactions contemplated hereby, including the preparation, execution and
delivery of this Agreement and compliance herewith (the "Transaction Expenses"),
except as otherwise provided in this Agreement.
6.4. Severability. If any provision of this Agreement, including any
phrase, sentence, clause, Section or subsection is inoperative or unenforceable
for any reason, such circumstances shall not have the effect of rendering the
provision in question inoperative or unenforceable in any other case or
circumstance, or of rendering any other provision or provisions herein contained
invalid, inoperative, or unenforceable to any extent whatsoever.
6.5. Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly give if (a) delivered
personally, (b) mailed by first-class, registered or certified mail, return
receipt requested, postage prepaid, (c) sent by next-day or overnight mail or
delivery, or (d) sent by telecopy or telegram.
(i) if to the Buyer, to: (ii) if to MD Industries, to:
Medical Action Industries Inc. MD Industries Acquisition LLC
000 Xxxxx Xxxxx X/X Xxxxxxx Capital Management, Inc.
Xxxxxxxxx, XX 00000 000 Xxxx Xxxxxx, Xxxxx 0000
Attention: Xxxx X. Xxxxxxxxx, Xxxx Xxxxx, Xxxxx 00000
Chief Executive Officer Attention:
Telephone: (000) 000-0000 Telephone:
Telecopier: (000) 000-0000 Telecopier: (000) 000-0000
with a copy to: with a copy to:
Xxxxxxx X. Satin, Esq. Attention: Xxxxx X. Xxxxxxx, Esq.
General Counsel Fulbright & Xxxxxxxx L.L.P.
Medical Action Industries Inc. 0000 Xxxx Xxxxxx, Xxxxx 0000
000 Xxxxx Xxxxx Xxxxxx, XX 00000
Xxxxxxxxx, XX 00000
Telephone: (000) 000-0000 Telephone: (000) 000-0000
Telecopier: (000) 000-0000 Telecopier: (000) 000-0000
29
or, in each case, at such other address as may be specified in writing to the
other parties hereto.
All such notices, requests, demands, waivers and other communications
shall be deemed to have been received (w) if by personal delivery on the day
after such delivery, (x) if by certified or registered mail, on the seventh
business day after the mailing thereof, (y) if by next-day or overnight mail or
delivery, on the day delivered, (z) if by telecopy or telegram, on the next day
following the day on which such telecopy or telegram was sent, provided that a
copy is also sent by certified or registered mail.
6.6. Miscellaneous.
6.6.1. Headings. The headings contained in this Agreement are
for purposes of convenience only and shall not affect the meaning or
interpretation of this Agreement.
6.6.2. Entire Agreement. This Agreement (including the
Schedules hereto) and the Trademark Assignment Agreement (when executed and
delivered) constitute the entire agreement and supersede all prior agreements
and understandings, both written and oral, between the parties with respect to
the subject matter hereof.
6.6.3. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original and all of which shall
together constitute one and the same instrument.
6.6.4. Governing Law, etc. This Agreement shall be governed in
all respects, including as to validity, interpretation and effect, by the
internal laws of the State of New York, without giving effect to the conflict of
laws rules thereof. The Buyer and MD Industries hereby irrevocably submit to the
jurisdiction of the courts of the State of New York and the Federal courts of
the United States of America located in the State, City and County of New York
solely in respect of the interpretation and enforcement of the provisions of
this Agreement and of the documents referred to in this Agreement, and hereby
waive, and agree not to assert, as a defense in any action, suit or proceeding
for the interpretation or enforcement hereof or of any such document, that it is
not subject thereto or that such action, suit or proceeding may not be brought
or is not maintainable in said courts or that the venue thereof may not be
appropriate or that this Agreement or any of such document may not be enforced
in or by said courts, and the parties hereto irrevocably agree that all claims
with respect to such action or proceeding shall be heard and determined in such
a New York State or Federal court. The Buyer, Medical Action and MD Industries
hereby consent to and grant any such court jurisdiction over the person of such
parties and over the subject matter of any such dispute and agree that mailing
of process or other papers in connection with any such
30
action or proceeding in the manner provided in Section 6.5, or in such other
manner as may be permitted by law, shall be valid and sufficient service
thereof.
6.6.5. Binding Effect. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
successors and permitted assigns.
6.6.6. Assignment. This Agreement shall not be assignable or
otherwise transferable by any party hereto without the prior written consent of
the other parties hereto.
6.6.7. No Third Party Beneficiaries. Except as provided in
Section 6.1 with respect to indemnification of Indemnified Parties hereunder,
nothing in this Agreement shall confer any rights upon any person or entity
other than the parties hereto and their respective heirs, successors and
permitted assigns.
6.6.8. Amendment; Waivers, etc. No amendment, modification or
discharge of this Agreement, and no waiver hereunder, shall be binding unless
set forth in writing and duly executed by the party against whom enforcement of
the amendment, modification, discharge or waiver is sought. Any such waiver
shall constitute a waiver only with respect to the specific matter described in
such writing and shall in no way impair the rights of the party granting such
waiver in any other respect or at any other time. Neither the waiver by any of
the parties hereto of a breach of or a default under any of the provisions of
this Agreement, nor the failure by any of the parties, on one or more occasions,
to enforce any of the provisions of this Agreement or to exercise any right or
privilege hereunder, shall be construed as a waiver of any other breach or
default of a similar nature, or as a waiver of any of such provisions, rights or
privileges hereunder. The rights and remedies herein provided are cumulative and
are not exclusive of any rights or remedies that any party may otherwise have at
law or in equity. The rights and remedies of any party based upon, arising out
of or otherwise in respect of any inaccuracy or breach of any representation,
warranty, covenant or agreement or failure to fulfill any condition shall in no
way be limited by the fact that the act, omission, occurrence or other state of
facts upon which any claim of any such inaccuracy or breach is based may also be
the subject matter of any other representation, warranty, covenant or agreement
as to which there is no inaccuracy or breach. The representations and warranties
of MD Industries shall not be affected or deemed waived by reason of any
investigation made by or on behalf of the Buyer (including but not limited to by
any of its advisors, consultants or representatives) or by reason of the fact
that the Buyer or any of such advisors, consultants or representatives knew or
should have known that any such representation or warranty is or might be
inaccurate.
31
ARTICLE VII
TERMINATION
7.1. Termination. This Agreement may be terminated at any time
prior to the Closing Date:
(a) by the written agreement of the Buyer and MD
Industries;
(b) by the Buyer by written notice to MD Industries if
(i) the representations and warranties of MD
Industries shall not have been true and correct in
all respects(in the case of any representation or
warranty containing any materiality qualification)
or in all material respects (in the case of any
representation or warranty without any materiality
qualification) ten (10) days after the Buyer has
given written notice thereof to MD Industries as to
such breach or (ii) if any of the conditions set
forth in Section 5.1 or 5.2 shall not have been, or
if it becomes apparent that any of such conditions
will not be, fulfilled by 5:00 p.m. New York City
time on December 31, 2002, unless failure shall be
due to the failure of the Buyer to perform or comply
with any of the covenants, agreements or conditions
hereof to be performed or complied with by it prior
to the Closing; or
(c) by MD Industries by written notice to the Buyer if
(i) the representations and warranties of the Buyer
shall not have been true and correct in all respects
(in the case of any representation or warranty
containing any materiality qualification) or in all
material respects (in the case of any representation
or warranty without any materiality qualification)
ten (10) days after the Buyer has given written
notice thereof to MD Industries as to such breach or
(ii) if any of the conditions set forth in Sections
5.1 or 5.3 shall not have been, or if it becomes
apparent that any of such conditions will not be,
fulfilled by 5:00 p.m. New York City time on December
31, 2002, unless such failure shall be due to the
failure of MD Industries to perform or comply with
any of the covenants, agreements or conditions hereof
to be performed or complied with by it prior to the
Closing.
7.2. Effect of Termination. In the event of the termination of this
Agreement pursuant to the provisions of Section 7.1, this Agreement shall become
void and have no effect, without any liability to any person in respect hereof
or of the transactions contemplated hereby on the part of any party hereto, or
any of its directors, officers, employees, agents, consultants,
32
representatives, advisors or stockholders, except as specified in Section 6.3
and except for any liability resulting from such party's breach of this
Agreement.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
MEDICAL ACTION INDUSTRIES INC. MD INDUSTRIES ACQUISITION LLC
By: /s/ Xxxx X. Xxxxxxxxx By: /s/ Xxxx Xxxxxxx
--------------------------- --------------------------
Xxxx X. Xxxxxxxxx
Chief Executive Officer and President
The undersigned hereby
guarantees the performance
of each and every obligation
of MD Industries under this
Agreement, but the total of
any payments made pursuant to
such guaranty shall not
exceed $1.5 million, less any
amounts actually paid to the
Buyer pursuant to the
indemnification provision set
forth in Section 6.1 of this
Agreement.
THRULINE INC.
By: /s/ Xxxx Xxxxxxx
--------------------------
33
