Exhibit 2.2
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STOCK PURCHASE AGREEMENT
by and among
MCKESSON AUTOMATION SYSTEMS INC.,
PARAGON TECHNOLOGIES, INC.,
and
SI/XXXXX, INC.
September 19, 2003
TABLE OF CONTENTS
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Page
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Article 1 Sale and Transfer of shares; closing...................................1
1.1 Shares.........................................................1
1.2 Purchase Price.................................................1
1.3 Closing........................................................1
1.4 Closing Obligations............................................1
Article 2 REPRESENTATIONS AND WARRANTIES OF THE SELLER...........................2
2.1 Organization...................................................2
2.2 Authority......................................................2
2.3 Certain Proceedings............................................3
2.4 Brokers or Finders.............................................3
2.5 Ownership of Shares............................................3
Article 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY..........................3
3.1 Organization...................................................3
3.2 Capital Structure..............................................3
3.3 Obligations With Respect to Capital Stock......................4
3.4 Equity Investments.............................................4
3.5 Authority......................................................4
3.6 Financial Statements...........................................4
3.7 Absence of Certain Changes.....................................5
3.8 Properties and Environmental Matters...........................7
3.9 Receivables....................................................8
3.10 Taxes..........................................................8
3.11 Increases in Compensation......................................9
3.12 Compliance with Law............................................9
3.13 Litigation.....................................................9
3.14 Contracts......................................................9
3.15 No Default....................................................10
3.16 Proprietary Rights............................................11
3.17 Insurance.....................................................13
3.18 Bank Accounts.................................................13
3.19 Brokers or Finders............................................14
3.20 Certain Advances..............................................14
3.21 Related Parties...............................................14
3.22 Employees and Union Activities................................14
3.23 Employee Benefit Plans........................................14
3.24 Employees.....................................................15
3.25 Underlying Documents..........................................16
3.26 Full Disclosure...............................................16
Article 4 REPRESENTATIONS AND WARRANTIES OF BUYER...............................17
4.1 Organization..................................................17
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4.2 Authority.....................................................17
4.3 Certain Proceedings...........................................17
4.4 Brokers or Finders............................................17
Article 5 ADDITIONAL AGREEMENTS.................................................18
5.1 Access to Information.........................................18
5.2 Legal Conditions to the Purchase and Sale.....................18
5.3 Communications................................................18
5.4 Update to Disclosures.........................................18
5.5 Good Faith....................................................18
5.6 Investment Agreement Transfer Provisions; Termination.........18
5.7 Covenant Not to Compete; Related Covenants....................19
5.8 Royalty Payments Due to Seller................................20
5.9 Corporate Guaranties..........................................20
5.10 Closing Financial Statements..................................20
Article 6 CONDITIONS PRECEDENT..................................................21
6.1 Conditions to Obligations of Seller...........................21
6.2 Conditions to Obligations of Buyer............................21
Article 7 Survival; INDEMNIFICATION.............................................22
7.1 Survival......................................................22
7.2 Indemnification by Seller and Buyer...........................23
7.3 Indemnification Period........................................25
7.4 Indemnification Claims........................................25
7.5 Resolution of Conflicts.......................................26
7.6 Exclusive Remedy..............................................26
Article 8 TERMINATION, AMENDMENT AND WAIVER.....................................26
8.1 Termination...................................................26
8.2 Effect of Termination.........................................27
8.3 Amendment.....................................................27
8.4 Extension; Waiver.............................................27
Article 9 GENERAL 27
9.1 Expenses......................................................27
9.2 Further Assurances............................................27
9.3 Assignment....................................................27
9.4 Specific Performance..........................................27
9.5 Notices.......................................................28
9.6 Headings......................................................29
9.7 Counterparts..................................................29
9.8 Binding Nature................................................29
9.9 Merger of Documents...........................................29
9.10 Incorporation of Exhibits and the Disclosure Schedule.........29
9.11 Governing Law.................................................29
9.12 Entire Agreement..............................................29
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STOCK PURCHASE AGREEMENT
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THIS STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of September
19, 2003, by and among McKesson Automation Systems Inc. (f/k/a Automated
Prescription Systems, Inc.), a Louisiana corporation ("Buyer"), Paragon
Technologies, Inc., a Delaware corporation (f/k/a SI Handling Systems, Inc., a
Pennsylvania corporation) ("Seller"), and SI/XXXXX, INC., a Delaware corporation
(the "Company").
WHEREAS, Seller owns 100 shares of common stock, par value $1.00 per
share ("Company Common Stock"), of the Company, which constitutes 50% of the
issued and outstanding shares of capital stock of the Company (the "Shares");
WHEREAS, Buyer owns 100 shares of Company Common Stock, which
constitutes the remaining 50% of the issued and outstanding shares of capital
stock of the Company;
WHEREAS, Buyer and Seller are parties to an Investment Agreement, dated
as of January 27, 1993, as amended (the "Investment Agreement"), with respect to
the Company; and
WHEREAS, Seller desires to sell, and Buyer desires to buy, the Shares,
after which Buyer will own all of the issued and outstanding shares of Company
Common Stock;
NOW THEREFORE, in consideration of the premises and mutual agreements
contained herein and intending to be legally bound, the parties agree as
follows:
ARTICLE 1
SALE AND TRANSFER OF SHARES; CLOSING
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1.1 Shares. Subject to the terms and conditions of this Agreement,
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at the Closing (as hereinafter defined), Seller agrees to sell, transfer and
deliver to Buyer, and Buyer agrees to purchase from Seller, the Shares (the
"Purchase and Sale").
1.2 Purchase Price. The purchase price (the "Purchase Price") for
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the Shares will be $5,600,000.
1.3 Closing. The Purchase and Sale (the "Closing") provided for in
this Agreement shall take place at the offices of Buyer at Xxx Xxxx Xxxxxx, Xxx
Xxxxxxxxx, Xxxxxxxxxx 00000, at 10:00 A.M. on September 19, 2003, or at such
other time and place as the parties hereto shall mutually agree. The time and
date of the Closing is referred to herein as the "Closing Date."
1.4 Closing Obligations. At the Closing:
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(a) Seller will deliver to Buyer:
(i) a certificate or certificates representing the Shares,
duly endorsed (or accompanied by duly executed stock powers) for transfer to
Buyer; and
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(ii) the certificates described in Sections 6.2(a) and (b) of
this Agreement;
(b) Buyer will deliver to Seller:
(i) the Purchase Price by wire transfer to accounts specified
by Seller; and
(ii) the certificates described in Sections 6.1(a) and (b) of
this Agreement;
(c) The Company will deliver to Buyer:
(i) the certificate described in Sections 6.2(c) and (d) of
this Agreement.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE SELLER
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Except as otherwise set forth in written information (the "Disclosure
Schedule") attached hereto, Seller represents and warrants to Buyer (each such
representation and warranty being a material inducement to the execution of this
Agreement by Buyer) as follows:
2.1 Organization. Seller is a corporation duly organized, validly
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existing and in good standing under the laws of the State of Delaware. Seller
has all requisite power and authority to own, lease and operate its properties
and to carry on its business as now being conducted.
2.2 Authority. Seller has all requisite corporate power and
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authority to enter into this Agreement and, subject to satisfaction of the
conditions set forth herein, to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Seller. This Agreement has been duly executed
and delivered by Seller, and constitutes a valid and binding obligation of
Seller, enforceable in accordance with its terms, subject to the effect of
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
federal or state laws affecting the rights of creditors and the effect or
availability of rules of law governing specific performance, injunctive relief
or other equitable remedies (regardless of whether any such remedy is considered
in a proceeding at law or in equity). The execution and delivery of this
Agreement do not or will not, and the consummation of the transactions
contemplated hereby will not, (a) result in the creation or imposition of any
lien on any asset of Seller or (b) conflict with, or result in any violation of
or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any obligation
or to loss of a benefit under (i) any provision of the articles of incorporation
or bylaws of Seller or (ii) any agreement or instrument, permit, franchise,
license, judgment or order, applicable to Seller or its properties or assets,
where such occurrence would, individually or in the aggregate, prevent, delay,
make illegal or otherwise interfere with the consummation of the Purchase and
Sale.
No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or
other governmental authority or instrumentality (a "Governmental Entity"), is
required by or with respect to Seller in connection
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with the execution and delivery of this Agreement by Seller or the consummation
by Seller of the transactions contemplated hereby.
2.3 Certain Proceedings. There is no action, arbitration, audit,
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hearing, investigation, litigation, or suit (whether civil, criminal,
administrative, investigative, or informal) that is pending, or, to the
knowledge of Seller, has been threatened, against Seller and that challenges, or
may have the effect of preventing, delaying, making illegal, or otherwise
interfering with the transactions contemplated by this Agreement.
2.4 Brokers or Finders. Seller has not dealt with any broker or
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finder in connection with the transactions contemplated by this Agreement.
Seller has not incurred, and shall not incur, directly or indirectly, any
liability for any brokerage or finders' fees or agents' commissions or any
similar charges in connection with this Agreement or any transaction
contemplated hereby.
2.5 Ownership of Shares. Seller is, and will be on the Closing Date,
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the record and beneficial owner and holder of the Shares, free and clear of any
charge, claim, community property interest, condition, equitable interest, lien,
option, pledge, security interest, right of first refusal, or restriction of any
kind, including any restriction on use, voting, transfer, receipt of income, or
exercise of any other attribute of ownership (other than any such encumbrance in
favor of Buyer under the Investment Agreement).
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
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Except as otherwise set forth in the Disclosure Schedule attached
hereto, the Company represents and warrants to Buyer (each such representation
and warranty being a material inducement to the execution of this Agreement by
Buyer) as follows:
3.1 Organization. The Company is a corporation duly organized,
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validly existing and in good standing under the laws of the State of Delaware.
The Company is duly qualified to do business and in good standing in the states
set forth in Section 3.1 of the Disclosure Schedule and is not required to be
qualified as a foreign corporation in any other jurisdiction where the failure
to so qualify would have a material adverse effect on the Company and has all
requisite power and authority to own, lease and operate its properties and to
carry on its business as now being conducted. The Company has heretofore
delivered to Buyer true and complete copies of the Company's certificate of
incorporation, as amended, and bylaws as currently in effect.
3.2 Capital Structure. On the date hereof, the authorized capital
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stock of the Company consists of 1,000 shares of Company Common Stock, of which
200 shares are issued and outstanding, and no preferred stock. Section 3.2 of
the Disclosure Schedule sets forth a true and complete list of holders of
Company Common Stock showing the number of shares held by each such stockholder.
All of the outstanding Company Common Stock has been issued in
compliance with applicable federal and state securities laws. All of the
outstanding shares of capital stock are
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duly authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights created by statute, the Company's certificate of
incorporation, as amended, or bylaws or any agreement to which the Company is a
party or is bound.
3.3 Obligations With Respect to Capital Stock. There are no options,
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warrants, calls, rights, commitments or agreements of any character to which the
Company is a party or by which it is bound obligating the Company to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock of the Company or obligating the Company to grant, extend or enter
into any such option, warrant, call, right, commitment or agreement.
3.4 Equity Investments. The Company does not own any equity
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interest, directly or indirectly, in any corporation, partnership, joint
venture, firm or other entity.
3.5 Authority. The Company has all requisite corporate power and
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authority to enter into this Agreement and, subject to satisfaction of the
conditions set forth herein, to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company. This Agreement has been duly
executed and delivered by the Company, and constitutes a valid and binding
obligation of the Company, enforceable in accordance with its terms, subject to
the effect of applicable bankruptcy, insolvency, reorganization, moratorium or
other similar federal or state laws affecting the rights of creditors and the
effect or availability of rules of law governing specific performance,
injunctive relief or other equitable remedies (regardless of whether any such
remedy is considered in a proceeding at law or in equity). The execution and
delivery of this Agreement do not or will not, and the consummation of the
transactions contemplated hereby will not, (a) result in the creation or
imposition of any lien on any asset of the Company or (b) conflict with, or
result in any violation of or default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a benefit under (i) any provision
of the certificate of incorporation or bylaws of the Company or (ii) any
agreement or instrument, permit, franchise, license, judgment or order,
applicable to the Company or its properties or assets, where such occurrence
would, individually or in the aggregate, have a material adverse effect on the
Company or prevent, delay, make illegal or otherwise interfere with the
consummation of the Purchase and Sale. Section 3.5 of the Disclosure Schedule
sets forth a full and complete list of all necessary consents, waivers and
approvals ("Consents") of third parties applicable to the operations of the
Company that are required to be obtained by the Company in connection with the
execution and delivery of this Agreement by the Company and the performance of
the Company's obligations hereunder.
No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by or with
respect to the Company in connection with the execution and delivery of this
Agreement by the Company or the consummation by the Company of the transactions
contemplated hereby.
3.6 Financial Statements. Section 3.6 of the Disclosure Schedule
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includes copies of the audited financial statements of the Company as of and for
the years ended
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December 31, 2002 and December 31, 2001 and copies of the Company's unaudited
balance sheet as of June 30, 2003 (the "Company Balance Sheet") and the related
unaudited statement of operations, changes in stockholders' equity, and cash
flows for the six-month period then ended (collectively, the "Company Financial
Statements"). The Company Financial Statements are complete, true and accurate
in all material respects and prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis during the periods
involved, except as noted in the notes to the Company Financial Statements, and
are in accordance with the Company's books and records, and fairly present the
financial position of the Company and the results of its operations as of the
date and for the periods indicated therein. The reserves reflected in the
Company Financial Statements for incurred but not yet reported claims make
sufficient provision for such liabilities and have been established in
accordance with GAAP consistently applied. At the date of the Company Balance
Sheet (the "Company Balance Sheet Date") and as of the Closing Date, the Company
had and will have no liabilities or obligations, either secured or unsecured
(whether accrued, absolute, contingent or otherwise) not reflected on the
Company Balance Sheet or the accompanying notes thereto except for liabilities
and obligations as may have arisen in the ordinary course of business prior to
the date of the Company Balance Sheet and which, under GAAP, would not have been
required to be reflected on the Company Balance Sheet and except for liabilities
incurred in the ordinary course of business since the Company Balance Sheet Date
which are usual and normal in amount in relation to the Company's past
experience.
3.7 Absence of Certain Changes. Since the Company Balance Sheet
--------------------------
Date, except as disclosed in Section 3.7 of the Disclosure Schedule, the Company
has conducted its business only in the ordinary and usual course and, without
limiting the generality of the foregoing:
(a) There have been no changes in the condition (financial or
otherwise), business, net worth, assets, properties, employees, operations,
obligations or liabilities of the Company which, in the aggregate, have had or
could be expected to have a material adverse effect on the condition, business,
net worth, assets, properties or operations of the Company.
(b) The Company has not issued, nor authorized for issuance, nor
entered into any commitment to issue, any equity security, bond, note or other
security of the Company. (c) The Company has not incurred additional debt for
borrowed money, nor incurred any obligation or liability except in the ordinary
and usual course of business and in any event not in excess of $50,000 for any
single occurrence.
(d) The Company has not paid any obligation or liability, nor
discharged, settled or satisfied any claim, lien or encumbrance, except for
current liabilities in the ordinary and usual course of business and in any
event not in excess of $50,000 for any single occurrence.
(e) The Company has not declared or made any dividend, payment or
other distribution on or with respect to any share of capital stock of the
Company, except as approved by the Company's Board of Directors.
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(f) The Company has not purchased, redeemed or otherwise acquired
or committed itself to acquire, directly or indirectly, any share or shares of
capital stock of the Company.
(g) The Company has not mortgaged, pledged, or otherwise,
voluntarily or involuntarily, encumbered any of its assets or properties, except
for liens for current taxes which are not yet delinquent and purchase-money
liens arising out of the purchase or sale of services or products made in the
ordinary and usual course of business and in any event not in excess of $15,000
for any single item or $50,000 in the aggregate.
(h) The Company has not disposed of, or agreed to dispose of, by
sale, lease, license or otherwise, any asset or property, tangible or
intangible, except, in the case of such assets and property, in the ordinary and
usual course of business, and in each case, with respect to all such assets or
property (other than systems or parts), for a consideration believed to be at
least equal to the fair value of such asset or property and in any event not in
excess of $15,000 for any single item or $50,000 in the aggregate.
(i) The Company has not purchased or agreed to purchase or otherwise
acquire any securities of any corporation, partnership, joint venture, firm or
other entity. The Company has not made any expenditure or commitment for the
purchase, acquisition, construction or improvement of a capital asset, except in
the ordinary and usual course of business and in any event not in excess of
$15,000 for any single item or $50,000 in the aggregate.
(j) The Company has not entered into any transaction or contract, or
made any commitment to do the same, except in the ordinary and usual course of
business.
(k) The Company has not sold, assigned, transferred or conveyed, or
committed itself to sell, assign, transfer or convey, any Proprietary Rights (as
defined in Section 3.16), except for the licensing of Company software or
technology in the ordinary and usual course of business.
(l) The Company has not adopted or amended any bonus, incentive,
profit-sharing, stock option, stock purchase, pension, retirement,
deferred-compensation, severance, life insurance, medical or other benefit plan,
agreement, trust, fund or arrangement for the benefit of employees of any kind
whatsoever, nor entered into or amended any agreement relating to employment,
services as an independent contractor or consultant, or severance or termination
pay, nor agreed to do any of the foregoing, except as approved by the Company's
Board of Directors.
(m) The Company has not effected or agreed to effect any change in
its directors, officers or key employees.
(n) The Company has not effected or committed itself to effect any
amendment or modification in its certificate of incorporation, as amended, or
bylaws.
(o) To the knowledge of the Company, no statute has been enacted nor
has any rule or regulation been adopted by any state whose laws apply to the
business of the Company or any federal agency or authority which could have an
adverse effect on the condition (financial or
6
otherwise), business, net worth, assets, prospects, properties, employees,
operations, obligations or liabilities of the Company which has not yet been
reflected in the operating results of the Company.
3.8 Properties and Environmental Matters.
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(a) The Company does not own and has never owned any real property.
The Company Balance Sheet reflects all of the real and personal property used by
the Company in its business or otherwise held by the Company, except for (i)
property acquired or disposed of in the ordinary and usual course of the
business of the Company since the Company Balance Sheet Date, and (ii) real and
personal property not required under GAAP to be reflected thereon. Except as
reflected in the notes to the Company Balance Sheet or on Schedule 3.8 of the
Disclosure Schedule, the Company has good and marketable title to all assets and
properties listed on the Company Balance Sheet and thereafter acquired, free and
clear of any imperfections of title, lien, claim, encumbrance, restriction,
charge or equity of any nature whatsoever, except for the lien of current taxes
not yet delinquent. All of the fixed assets and properties reflected on the
Company Balance Sheet or thereafter acquired are in satisfactory condition and
repair for the requirements of the business as presently conducted by the
Company.
(b) The Company is, and at all times has been, in compliance with
all local, state and federal statutes, orders, rules, ordinances and regulations
relating to pollution or protection of the environment, including, without
limitation, laws relating to exposures, emissions, discharges, releases or
threatened releases of Hazardous Substances into or on land, ambient air,
surface water, groundwater, personal property or structures (including the
protection, cleanup, removal, remediation or damage thereof), or otherwise
related to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, discharge or handling of Hazardous Substances. "Hazardous
Substances" shall mean any pollutant, contaminant, material, substance or waste
regulated, restricted or prohibited by any law, regulation or ordinance or
designated by any governmental agency to be hazardous, toxic, radioactive,
biohazardous or otherwise a danger to health or the environment.
(c) To the knowledge of the Company, there are no Hazardous
Substances in, under or on the soil, surface water or groundwater on, under or
around any properties at any time owned, leased or occupied by the Company. The
Company has not disposed of any Hazardous Substances on or about such property;
and the Company has not disposed of any materials at any site being investigated
or remediated for contamination or possible contamination of the environment.
(d) There have been no judicial or administrative proceedings or
other investigations and there are no judicial or administrative proceedings or
other investigations pending or, to the knowledge of the Company, threatened
alleging violation by the Company of any local, state or federal laws respecting
land use, pollution or protection of the environment including, without
limitation, laws regulating the use, storage, transportation or disposal of
Hazardous Substances; and the Company has not received any notice of any
investigation, claim or proceeding against the Company by any individual or
governmental entity relating to Hazardous Substances and the Company is not
aware of any fact or circumstance which could
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involve the Company in any environmental litigation, proceeding, investigation
or claim or impose any environmental liability upon the Company.
(e) Section 3.8(e) of the Disclosure Schedule sets forth a complete
list of all real property leased by the Company or under option to purchase by
the Company. All such property leased by the Company is held under valid,
subsisting and enforceable leases and, to the knowledge of the Company, neither
the real property leased by the Company nor the operations of the Company
thereon, violate any applicable building code, zoning requirement or
classification, or pollution control ordinance or statute relating to the
property or to such operations, and such non-violation is not dependent, in any
instance, on so-called non-conforming use exemptions.
(f) Section 3.8(f) of the Disclosure Schedule contains a complete
list of all permits, consents and approvals which the Company is required to
have under local, state or federal laws respecting land use, pollution or
protection of the environment for the construction of their facilities and the
operation of its businesses. The Company has obtained each and every one of such
permits, consents and approvals and is, and at all times have been, in
compliance with each and every one of the terms and conditions thereof. Further,
all of the listed permits, consents and approvals are in full force and effect,
none have been modified, and there is no proceeding pending which may result in
the reversal, rescission, termination, modification or suspension of any such
permit, consent or approval.
(g) The Company has kept all records and made all filings required
by all applicable local, state and federal laws relating to land use, pollution
and protection of the environment with respect to all exposures, emissions,
discharges and releases into the environment and the proper use, storage,
transportation and disposal of all Hazardous Substances.
3.9 Receivables. All of the accounts receivable of the Company shown
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on the Company Balance Sheet or reflected on the accounting records of the
Company as of the Closing Date represent valid and legally enforceable
obligations arising in the ordinary and usual course of business and are
collectible net of an appropriate offset for bad debt in an amount consistent
with the Company's past experience.
3.10 Taxes. The Company has duly filed with the appropriate United
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States, state, local and foreign governmental agencies all tax returns and
reports required to be filed with respect to tax periods ending through the
Closing Date (subject to permitted extensions applicable to such filings), which
returns are accurate and complete in all material respects, and have paid or
accrued in full all taxes, duties, charges, withholding obligations and other
governmental liabilities as well as any interest, penalties, assessments or
deficiencies, if any, due to, or claimed to be due by, any governmental
authority. (All such items are collectively referred to herein as "Taxes"). The
Company Balance Sheet fully accrues or reserves all current and deferred Taxes.
The Company is not a party to any pending action or proceeding for the
assessment or collection of Taxes, nor, to the knowledge of the Company, is any
such action or proceeding threatened by any governmental authority. Since the
Company Balance Sheet Date, no liability for Taxes has been incurred other than
in the ordinary course of business. There are no liens for Taxes except for
liens for property taxes not yet delinquent. The Company is not a
8
party to any Tax sharing, Tax allocation, Tax indemnity or statute of
limitations extension or waiver agreement and in the past five (5) years has not
been included on any consolidated, combined or unitary return with any entity.
3.11 Increases in Compensation. Except as set forth in Section 3.11
-------------------------
of the Disclosure Schedule, since the Company Balance Sheet Date, the Company
has not paid or committed itself to pay to or for the benefit of any of its
directors, officers, employees or stockholders any compensation of any kind
other than wages, salaries and benefits at times and rates in effect on the
Company Balance Sheet Date, subject to wage increases of less than four percent
(4%) paid or payable to employees other than officers and directors, nor has the
Company effected or agreed to effect any amendment or supplement to any employee
profit sharing, stock option, stock purchase, pension, bonus, incentive,
retirement, medical reimbursement, life insurance, deferred compensation or any
other employee benefit plan or arrangement, except as approved by the Company's
Board of Directors.
3.12 Compliance with Law. All licenses, franchises, permits,
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clearances, consents, certificates and other evidences of authority of the
Company which are necessary to the conduct of the business of the Company the
absence of which would have a material adverse effect on the operations of the
Company ("Permits") are in full force and effect and the Company is not in
violation of any Permit. The business of the Company has been conducted in all
material respects in accordance with all applicable laws, regulations, orders
and other requirements of governmental authorities.
3.13 Litigation. There is no claim, dispute, action, proceeding,
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notice, order, suit, appeal or investigation, at law or in equity, pending
against the Company, or involving any of its assets or properties, before any
court, agency, authority, arbitration panel or other tribunal (other than those,
if any, with respect to which service of process or similar notice has not yet
been made on the Company), and, to the knowledge of the Company, none have been
threatened. There are no facts which, if known to stockholders, customers,
governmental authorities or other persons, would result in any such claim,
dispute, action, proceeding, suit or appeal or investigation which would have an
adverse effect on the condition (financial or otherwise), business, net worth,
assets, prospects, properties or operations of the Company. The Company is not
subject to any order, writ, injunction or decree of any court, agency,
authority, arbitration panel or other tribunal, nor is the Company in default
with respect to any notice, order, writ, injunction or decree.
3.14 Contracts.
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(a) Section 3.14(a) of the Disclosure Schedule sets forth a complete
list of each executory contract and agreement (copies of which have been
provided to Buyer) in the following categories to which the Company is a party,
or by which it is bound in any respect, (i) agreements for the purchase, sale,
lease or other disposition of equipment, goods, materials, research and
development, supplies, studies or capital assets, or for the performance of
services, in any case involving more than $25,000 in any twelve (12) month
period; (ii) contracts or agreements for the joint performance of work or
services, and all other joint venture agreements; (iii) management or employment
contracts, consulting contracts, collective bargaining contracts, termination
and severance agreements; (iv) notes, mortgages, deeds of trust, loan
agreements, security agreements, guarantees, debentures, indentures, credit
agreements
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and other evidences of indebtedness; (v) pension, retirement, profit-sharing,
deferred compensation, bonus, incentive, life insurance, hospitalization or
other employee benefit plans or arrangements (including, without limitation, any
contracts or agreements with trustees, insurance companies or others relating to
any such employee benefit plan or arrangement); (vi) stock option, stock
purchase, warrant, repurchase or other contracts or agreements relating to any
share of capital stock of the Company; (vii) contracts or agreements with
agents, brokers, consignees, sale representatives or distributors; (viii)
contracts or agreements with any director, officer, employee, consultant or
stockholder; (ix) powers of attorney or similar authorizations granted by the
Company to third parties; (x) licenses, sublicenses, royalty agreements and
other contracts or agreements to which the Company is a party, or otherwise
subject, relating to technical assistance or to Proprietary Rights as defined
below; and (xi) other material contracts.
(b) Except as set forth in Section 3.14(b) of the Disclosure
Schedule, the Company has not entered into any contract or agreement containing
covenants limiting its right to compete in any business or with any person
(other than the Investment Agreement). As used in this Agreement, the terms
"contract" and "agreement" include every contract, agreement, commitment,
understanding and promise, whether written or oral.
3.15 No Default.
----------
(a) Each of the contracts, agreements or other instruments referred
to in Section 3.14 of this Agreement and Section 3.14 of the Disclosure Schedule
is a legal, binding and enforceable obligation by or against the Company in
accordance with its terms, subject to the effect of applicable bankruptcy,
insolvency, reorganization, moratorium or other similar federal or state laws
affecting the rights of creditors and the effect or availability of rules of law
governing specific performance, injunctive relief or other equitable remedies
(regardless of whether any such remedy is considered in a proceeding at law or
in equity). No party with whom the Company has an agreement or contract is in
default thereunder or has breached any terms or provisions thereof which default
or breach would materially adversely affect the benefits to be received by the
Company thereunder.
(b) Except as set forth in Section 3.15(b) of the Disclosure
Schedule, the Company has performed, or is now performing, the obligations of,
and the Company is not in default (or would by the lapse of time and/or the
giving of notice be in default) in respect of, any contract, agreement,
commitment, understanding or arrangement (written or oral) binding upon it or
its assets or properties, which default would materially adversely affect the
benefits to be received by the Company thereunder. No third party has raised any
claim, dispute or controversy with respect to any of the executory contracts of
the Company, nor has the Company received notice or warning of alleged
nonperformance, delay in delivery or other noncompliance by the Company with
respect to its obligations under any of those contracts, nor are there any facts
which exist indicating that any of those contracts may be totally or partially
terminated or suspended by the other parties thereto.
10
3.16 Proprietary Rights.
------------------
(a) Section 3.16(a) of the Disclosure Schedule sets forth a complete
and accurate list of all patents, patent applications, and all material
trademarks, trade names, service marks, logos, and all material registrations
for copyrights owned by the Company or in which it has any rights or licenses,
and all applications therefor. Such list specifies, as applicable: (i) the title
of the patent, trademark, trade name, service xxxx, copyright or application
therefor or registration thereof and (ii) the jurisdiction by or in which such
patent, trademark, trade name, service xxxx or copyright has been issued or
registered or in which an application has been filed, including the registration
or application numbers. Schedule 3.16(a) of the Disclosure Schedule shall also
set forth all material licenses, sublicenses and similar agreements, except for
standard end-user object code internal-use software license agreements for
technology that has not been incorporated into the Company's products, to which
the Company is a party or pursuant to which any other party is authorized by the
Company to use, exercise or receive any benefit from any Proprietary Rights.
(b) The Company owns or possesses valid and enforceable licenses or
other rights to use all computer software and hardware, source code, patents,
patent applications, trademarks, trademark applications, trade secrets, service
marks, trade names, logos, trade dress, copyrights, inventions, business and
marketing plans, industrial property rights, copyrights, trademarks, trade
names, logos and service marks and all goodwill associated therewith, including
applications therefor, and all technical information, customer lists, management
information systems, drawings, designs, processes and quality control data and
all similar materials recording or evidencing proprietary expertise or
information, or other rights with respect thereto used or currently proposed to
be used consistent with the Company's current business plan in the business of
the Company (collectively referred to as "Proprietary Rights"), and the same are
sufficient to conduct the Company's business as it has been and is now being
conducted or as it is currently proposed to be conducted consistent with the
Company's current business plan. "Company Proprietary Rights" shall mean all
Proprietary Rights which the Company owns or has the exclusive right to use.
Except as set forth in Section 3.16(b) of the Disclosure Schedule, the Company
is the sole and exclusive owner or licensee of all right, title, and interest in
and to each of the Company Proprietary Rights (except for, in the case of
Company Proprietary Rights licensed to the Company, any right, title and
interest reserved by the licensor), free and clear of all liens, security
interests, charges, encumbrances (except for licenses granted to third parties
in the ordinary course of business), equities, and other adverse claims, and has
the right to use, sell, license, sublicense, assign and dispose, in each case
without payment to a third party, all of the Company Proprietary Rights and the
products, processes and materials covered thereby. Except as set forth in
Section 3.16(b) of the Disclosure Schedule, there is no contract pursuant to
which any person or entity has any right (whether or not currently exercisable)
to use, license, distribute, transfer or otherwise exploit or otherwise dispose
of any Company Proprietary Right (except for, in the case of Company Proprietary
Rights licensed to the Company, any right, title and interest reserved by the
licensor).
(c) Except as set forth on Schedule 3.16(c) of the Disclosure
Schedule, the operations of the Company as currently and formerly conducted and
as planned to be conducted consistent with the Company's business plan do not
(i) conflict with
11
or infringe, and no person or entity has asserted to the Company that such
operations or past operations conflict with or infringe, any proprietary rights,
owned, possessed or used by any third party, (ii) violate any term or provision
of any license or contract concerning the proprietary rights of any third party,
(iii) violate the individual rights of any third party (including, but not
limited to, privacy or publicity), or (iv) constitute unfair competition or an
unfair trade practice under any laws or regulations. There are no claims,
disputes, actions, proceedings, suits or appeals pending against the Company
with respect to any Proprietary Rights, and, to the knowledge of the Company,
none has been threatened against the Company. The Company Proprietary Rights are
free of any unresolved ownership disputes with respect to any third party and,
to the knowledge of the Company, there is no unauthorized use, infringement or
misappropriation of any of such Company Proprietary Rights by any third party,
including any employee or former employee of the Company, nor is there any
breach of any license, sublicense or other agreement authorizing another party
to use Proprietary Rights provided by Company to such party. The Company has not
entered into any agreement (i) granting any third party the right to bring
infringement actions with respect to, or otherwise to enforce rights with
respect to, any Proprietary Rights. Section 3.16(c) of the Disclosure Schedule
contains a complete and accurate list of all contracts, licenses and agreements
pursuant to which Company has agreed to, or assumed, any obligation or duty to
warrant, indemnify, reimburse, hold harmless, guaranty or otherwise assume or
incur any obligation or liability on behalf of its customers or licensees, or
provide any right of rescission, for any infringement claims that do not relate
to proprietary rights owned by the Company.
(d) Section 3.16(d) of the Disclosure Schedule contains a complete
and accurate list of any proceedings before any patent or trademark authority to
which the Company is a party, a description of the subject matter of each
proceeding, and the current status of each proceeding, including, without
limitation, interferences, priority contests, opposition, and protests. Such
list includes any pending applications for reissue or reexamination of a patent.
The Company has the exclusive right to file, prosecute and maintain any such
applications for patents or trademarks and the patents and registrations that
issue therefrom. Except as set forth in Section 3.16(d) of the Disclosure
Schedule, the Company has registered the copyright with the U.S. Copyright
Office and its equivalent in any relevant foreign jurisdiction for the latest
version of the Company Proprietary Rights that constitutes or includes a
copyrightable work.
(e) All patents and registered trademarks, service marks, and other
company, product or service identifiers and registered copyrights held by the
Company are valid and enforceable, are currently in compliance with formal legal
requirements and are not subject to any maintenance or renewal fees or taxes or
actions falling due within ninety (90) days after the Closing Date. Section
3.16(e) of the Disclosure Schedule contains a complete and accurate list of all
material actions that must be taken by the Company within one hundred eighty
(180) days from the date hereof, including the payment of any registration,
maintenance, renewal fees, annuity fees and taxes, or the filing of any
documents, applications or certificates for the purposes of maintaining,
perfecting or preserving or renewing any Company Proprietary Rights.
(f) All disclosures of the Company's trade secrets to third parties
have been pursuant to non-disclosure agreements pursuant to which the
confidentiality and use of such information has been protected. The Company has
taken reasonable measures and precautions to maintain the secrecy and
confidentiality of the Proprietary Rights used or currently proposed to
12
be used consistent with the Company's current business plan in the conduct of
its business, the value of which to the Company is contingent upon maintenance
of the confidentiality thereof.
(g) The Company has secured valid and binding written assignments
from all persons who, in any capacity (including current and former consultants,
independent contractors, directors, officers and employees) contributed to the
creation or development of the Company Proprietary Rights of all right, title
and interest to such contributions that the Company does not already own by
operation of law. No current or former employee, officer, director, shareholder,
consultant or independent contractor of or to the Company has any right, claim
or interest in or with respect to any Company Proprietary Right created by or on
behalf of the Company. To the extent required in order to protect the Company's
ownership rights in and to such Company Proprietary Rights in accordance with
applicable laws and regulations, the Company has recorded each assignment of
Company Proprietary Rights with the relevant governmental or regulatory
authority, including the United States Patent and Trademark Office, the United
States Copyright Office, or their respective equivalents in any relevant foreign
jurisdiction, as the case may be.
(h) No employee, consultant or contractor of the Company is in
violation of any term of any employment contract, proprietary information
agreement, inventions agreement, non-competition agreement, consulting
agreement, or any other contract or agreement relating to the relationship of
any such employee with the Company or any previous employer. No employee of the
Company has entered into any contract that restricts or limits in any way the
scope or type of work in which the employee may be engaged to anyone other than
the Company or requires the employee to transfer, assign, or disclose
information concerning his work to anyone other than the Company.
3.17 Insurance. Section 3.17 of the Disclosure Schedule sets forth a
---------
complete list of all policies of insurance to which the Company is a party or is
a beneficiary or named insured. The Company has in full force and effect, with
all premiums due thereon paid, the policies of insurance set forth therein. For
the period since January 1, 2002, except as set forth in Section 3.17 of the
Disclosure Schedule, there were no claims in excess of $5,000 asserted under any
of the insurance policies of the Company, including without limitation, the
motor vehicle, general liability, professional liability, products liability,
and worker's compensation insurance policies of the Company.
3.18 Bank Accounts. The Company has furnished to Buyer and
-------------
subsequently will furnish at the Closing a true and correct list setting forth
the names and addresses of all banks, other institutions and state governmental
departments at which the Company has accounts, deposits or safety deposit boxes,
or special deposits required to be held by such state governmental departments
with the nature of such account and the names of all persons authorized to draw
on or give instructions with respect to such accounts or deposits, or to have
access thereto, and the names and addresses of all persons, if any, holding a
power-of-attorney on behalf of the Company. All cash in such accounts is held in
demand deposits and is not subject to any restriction or limitation as to
withdrawal, except for certain amounts held as term deposits with maturities of
no more than thirty (30) days.
13
3.19 Brokers or Finders. The Company has not dealt with any broker or
------------------
finder in connection with the transactions contemplated by this Agreement. The
Company has not incurred, and shall not incur, directly or indirectly, any
liability for any brokerage or finders' fees or agents' commissions or any
similar charges in connection with this Agreement or any transaction
contemplated hereby.
3.20 Certain Advances. There are no receivables of the Company owing
----------------
from directors, officers, employees, consultants or stockholders of the Company
(other than Buyer), or owing by any affiliate of any director or officer of the
Company, other than advances in the ordinary and usual course of business to
officers and employees for reimbursable business expenses which are not in
excess of $5,000 for any one individual.
3.21 Related Parties. Except as set forth in Section 3.21 of the
---------------
Disclosure Schedule, no officer or director of the Company, or any affiliate of
any such person, has, either directly or indirectly, (a) an interest in any
corporation, partnership, firm or other person or entity which competes, or
potentially will compete, directly or indirectly, with the Company, or (b) a
beneficial interest in any contract or agreement to which the Company is a party
or by which the Company may be bound. For purposes of this Section 3.21, there
shall be disregarded any interest which arose solely from a product supply or
service arrangement in the ordinary course of the Company's business or the
ownership of less than a five percent (5%) equity interest in a corporation
whose stock is regularly traded on any national securities exchange or in the
over-the-counter market.
3.22 Employees and Union Activities. The Company has complied with
------------------------------
all applicable state and federal laws related to employment. None of the
employees of the Company are represented by any union or are parties to any
collective bargaining arrangement, and no attempts are being made to organize or
unionize any of the employees of the Company.
3.23 Employee Benefit Plans.
----------------------
(a) Section 3.23 of the Disclosure Schedule sets forth each
"employee benefit plan," as defined in section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and all other plans,
agreements, or arrangements involving direct or indirect compensation (excluding
workers' compensation, unemployment compensation and similar government-mandated
programs) currently or previously maintained, contributed to or entered into by
the Company for the benefit of any employee or former employee of the Company
under which the Company has any present or future obligation or liability
(collectively, the "Employee Plans"). Copies of all Employee Plans (and, if
applicable, related trust agreements), and all amendments thereto and material
written interpretations thereof have been provided to Buyer. The Company has no
Employee Plan which, individually or collectively, constitute(s) (i) an
"employee pension benefit plan," as defined in Section 3(2) of ERISA, that is
subject to Title IV of ERISA or (ii) a "multiemployer plan," as defined in
Section 3(37) of ERISA.
(b) No other entity ("ERISA Affiliate") that is a member of a
"controlled group of corporations" with or under "common control" with the
Company, as defined in Section
14
414(b) or 414(c) of the Code, currently or previously maintained, contributed or
entered into an employee benefit plan, as defined in Section 3(3) of ERISA.
(c) Each Employee Plan that is intended to be qualified under
section 401(a) of the Code is so qualified and has been so qualified during the
period from its adoption to the date of this Agreement.
(d) The Company has furnished to Buyer copies or descriptions of
each severance or other similar contract, arrangement or policy and each plan,
agreement, policy or arrangement (written or oral) providing for insurance
coverage (including any self-insured arrangements), vacation benefits,
disability benefits, early retirement benefits, death benefits, hospitalization
benefits, retirement benefits, deferred compensation, profit-sharing, bonuses,
stock options, stock purchase, phantom stock, stock appreciation or other forms
of compensation or post-retirement benefits that (i) is not an Employee Plan,
(ii) is entered into, maintained or contributed to, as the case may be, by the
Company and (iii) covers any employee or former employee of the Company or any
ERISA Affiliate of the Company. Such contracts, plans and arrangements as are
described in this Section are herein referred to collectively as the "Benefit
Arrangements." Each Benefit Arrangement has been maintained in substantial and
material compliance with its terms and with the requirements prescribed by any
and all statutes, orders, rules and regulations that are applicable to such
Benefit Arrangements.
(e) Except for continued "COBRA" health coverage required pursuant
to Code Section 4980B, the Company is not a party to any Employee Plan, Benefit
Arrangement or other agreement, contract, arrangement or policy, written or
unwritten, that requires the Company to provide, at any cost to the Company, any
health or life insurance coverage to any former employee of the Company.
(f) The Company is not a party to any contract, instrument,
agreement or arrangement with a "disqualified individual" (as defined in Section
280G(c) of the Code) that could result in a disallowance of the deduction for
any "excess parachute payment" (as defined in Section 280G(b)(i) of the Code) or
subject any such disqualified individual to the excise tax imposed under Section
4999 of the Code.
(g) Each Employee Plan and Benefit Arrangement complies in all
material respects with all applicable requirements of (i) the Age Discrimination
in Employment Act of 1967, as amended, and the regulations thereunder, (ii)
Title VII of the Civil Rights Act of 1964, as amended, and the regulations
thereunder, (iii) any applicable provisions of the Code, including Section 4980B
thereof, and (iv) any other applicable law. (h) There is no pending or, to the
knowledge of the Company, threatened litigation relating to any Employee Plan or
Benefit Arrangement. All contributions due under each Employee Plan or Benefit
Arrangement have been paid or accrued on the books of the Company.
3.24 Employees. Section 3.24 of the Disclosure Schedule sets forth
---------
the following information for each employee, officer or director of the Company,
including, without limitation, each employee on leave of absence or layoff
status: name; job title; date of hire;
15
current compensation paid or payable and showing any change in compensation
since December 31, 2002; and vacation accrued at December 31, 2002 and service
credited for purposes of vesting and eligibility to participate under the
Employee Plans. No employee or director of the Company is a party to, or is
otherwise bound by, any agreement or arrangement, including, without limitation,
any confidentiality, noncompetition or proprietary rights agreement between such
employee or director and any other entity or person ("Proprietary Rights
Agreement") which in any way adversely affected, affects or will affect (i) the
performance of his duties as an employee or director of the Company or (ii) the
ability of the Company to conduct its business. Except as disclosed in Section
3.24 of the Disclosure Schedule, no director, officer or other key employee of
the Company has indicated to the Company that he or she terminate his or her
employment with the Company. At Buyer's request, the Company, at Company's
expense, shall (and prior to the Closing Date shall cause the Company to) use
its best efforts in order that Buyer may enjoy to the extent permitted by law
the Company's record rating and benefits under the workers' compensation laws
and unemployment compensation laws of the states and countries in which there is
coverage of employees of the Company, any of whom may be employees of the
Company after the Closing Date.
Section 3.24 of the Disclosure Schedule sets forth the following for
each retired employee or director (or their dependents or beneficiaries) of the
Company receiving benefits or scheduled to receive benefits in the future: name,
pension benefit, pension option election, retiree medical insurance coverage,
retiree life insurance coverage and other benefits.
3.25 Underlying Documents. Copies of any underlying documents listed
--------------------
or described as having been disclosed to Buyer pursuant to this Agreement and
furnished to Buyer are true and correct copies, and there are no amendments or
modifications thereto, that have not been disclosed to Buyer. The minute books
of the Company contain complete and accurate records of all meetings and other
corporate actions taken by the directors and stockholders of the Company.
3.26 Full Disclosure. Any information furnished by or on behalf of
---------------
the Company to Buyer in writing pursuant to this Agreement (including without
limitation all information and financial data pertaining to the Company) and any
information contained in the Disclosure Schedule referred to in this Agreement,
at any time prior to the Closing Date, does not and will not contain any untrue
statement of a material fact and does not and will not omit to state any
material fact necessary to make any statement, in light of the circumstances
under which such statement is made, not misleading.
16
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer represents and warrants to Seller (each such representation and
warranty being a material inducement to the execution of this Agreement by
Seller) as follows:
4.1 Organization. Buyer is a corporation duly organized, validly
------------
existing and in good standing under the laws of the State of Louisiana. The
Buyer has all requisite power and authority to own, lease and operate its
properties and to carry on its business as now being conducted.
4.2 Authority. Buyer has all requisite corporate power and authority
---------
to enter into this Agreement and, subject to satisfaction of the conditions set
forth herein, to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Buyer. This Agreement has been duly executed and delivered by
Buyer, and constitutes a valid and binding obligation of Buyer, enforceable in
accordance with its terms, subject to the effect of applicable bankruptcy,
insolvency, reorganization, moratorium or other similar federal or state laws
affecting the rights of creditors and the effect or availability of rules of law
governing specific performance, injunctive relief or other equitable remedies
(regardless of whether any such remedy is considered in a proceeding at law or
in equity). The execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby will not, (a) result in the
creation or imposition of any lien on any asset of Buyer or (b) conflict with,
or result in any violation of or default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a benefit under (i) any provision
of the articles of incorporation or bylaws of Buyer or (ii) any agreement or
instrument, permit, franchise, license, judgment or order, applicable to Buyer
or its properties or assets, where such occurrence would, individually or in the
aggregate, prevent, delay, make illegal or otherwise interfere with the
consummation of the Purchase and Sale.
No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by or with
respect to Seller in connection with the execution and delivery of this
Agreement by Buyer or the consummation by Buyer of the transactions contemplated
hereby.
4.3 Certain Proceedings. There is no action, arbitration, audit,
-------------------
hearing, investigation, litigation, or suit (whether civil, criminal,
administrative, investigative, or informal) that is pending, or, to the
knowledge of Buyer, has been threatened against, Buyer and that challenges, or
may have the effect of preventing, delaying, making illegal, or otherwise
interfering with the transactions contemplated by this Agreement.
4.4 Brokers or Finders. Buyer has not dealt with any broker or
------------------
finder in connection with the transactions contemplated by this Agreement. Buyer
has not incurred, and shall not incur, directly or indirectly, any liability for
any brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
17
ARTICLE 5
ADDITIONAL AGREEMENTS
---------------------
5.1 Access to Information. The Company shall afford to Buyer and
---------------------
shall cause its independent accountants to afford to Buyer and Buyer's
accountants, counsel and other representatives, reasonable access during normal
business hours to the Company's properties, books, contracts, commitments and
records, and to Buyer's independent accountants, reasonable access to the audit
work papers and other records of the Company's accountants. The Company shall
use commercially reasonable efforts to furnish promptly to Buyer a copy of all
information concerning the business, properties and personnel of the Company as
Buyer may request.
5.2 Legal Conditions to the Purchase and Sale. Each party will take
-----------------------------------------
all commercially reasonable actions necessary to comply promptly with all legal
requirements which may be imposed on such party with respect to the Purchase and
Sale and will promptly cooperate with and furnish information to the other party
in connection with any such requirements imposed upon such other party or any
subsidiary of such other party in connection with the Purchase and Sale. Each
party will take all commercially reasonable actions to obtain (and to cooperate
with the other party in obtaining) any consent, authorization, order or approval
of, or any exemption by, any governmental authority, or other third party,
required to be obtained or made by such party or its subsidiaries (or by the
other party) in connection with the Purchase and Sale or the taking of any
action contemplated thereby or by this Agreement.
5.3 Communications. Neither Seller nor Buyer will furnish any
--------------
communication to its stockholders or to the public generally if the subject
matter thereof relates to the other party or to the transactions contemplated by
this Agreement without the prior approval of the other party as to the content
thereof, which approval shall not be unreasonably withheld, and subject to each
party's compliance with applicable law or stock exchange requirements.
5.4 Update to Disclosures. Without limiting Buyer's right to rely
---------------------
on the representations and warranties as of the date of this Agreement, the
Company and Seller shall provide Buyer with updates to the disclosures provided
or made available to Buyer as to facts which arise between the date of this
Agreement and the Closing Date and which, if they had occurred and been known
prior to the date of this Agreement, would have been required to have been
disclosed in order to make the representations and warranties contained in
Articles 2 and 3 true and correct as of the date of this Agreement.
5.5 Good Faith. Each party shall act in good faith in an attempt to
----------
cause to be satisfied all the conditions precedent to its obligations and those
of the other parties to this Agreement over which it has control or influence.
Each party will act in good faith and take all commercially reasonable action
within its capability necessary to render accurate as of the Closing Date its
representations and warranties contained in this Agreement.
5.6 Investment Agreement Transfer Provisions; Termination. This
-----------------------------------------------------
Agreement shall be deemed to be the written consent of each of Buyer and Seller
to the Purchase and Sale for purposes of Section 3.A of the Investment Agreement
and Buyer and Seller acknowledge that the provisions of Sections 3.B and 3.C of
the Investment Agreement are inapplicable to the
18
Purchase and Sale. Effective as of the Closing, the parties hereby agree
that the Investment Agreement has been terminated in all respects.
5.7 Covenant Not to Compete; Related Covenants.
------------------------------------------
(a) In furtherance of Section 5 of the Investment Agreement, Seller
hereby agrees and acknowledges that during the period commencing on the Closing
Date and ending on the third anniversary of the Closing Date, Seller shall not,
directly or indirectly:
(i) engage in the manufacture, use or sale of integrated
prescription fulfillment systems;
(ii) provide any person or entity with any information with
respect to purchasers of Seller's products or any expertise, consulting or other
advice or assistance with respect to integrating Seller's products with a
business, or otherwise developing products or services, that would compete with
the Company in the business described in clause (i) above;
(iii) own any interest in, manage, operate, control, invest in,
lend money to, acquire or hold any interest in or participate in any person,
corporation, partnership, joint venture, association or other entity or
enterprise that owns or operates any enterprise engaged in the business
described in clause (i) above;
(iv) request or advise any customers of the Company to cancel
any contracts, or curtail their dealings, with the Company or engage in any
trade disparagement with respect to Buyer, the Company or any of their
respective affiliates;
(v) refer any customers of Seller to, or otherwise endorse,
either publicly or privately, any competitor of the Company with respect to the
business described in clause (i) above; nor
(vi) solicit for employment or hire any employee of the Company.
For purposes of this Section 5.7, "integrated prescription fulfillment
systems" means facilities, systems or systems upgrades that are installed or
proposed to be installed or are designed for, or intended to be used for, mail
order, specialty distribution or any other prescription fulfillment system or
production process that involves the application to a container (such as a
bottle or vial), automatically or manually, where the container has been
automatically processed by such system or process and Buyer's drug dispensing
products or similar products could be utilized, of a patient-specific
prescription label.
(b) The Company hereby agrees and acknowledges that during the
period commencing on the Closing Date and ending on the third anniversary of the
Closing Date, the Company shall not, directly or indirectly:
(i) request or advise any customers of Seller to cancel any
contracts, or curtail their dealings, with Seller or engage in any trade
disparagement with respect to Seller or any of its affiliates; nor
19
(ii) solicit for employment or hire any employee of Seller.
(c) Buyer hereby agrees and acknowledges that during the period
commencing on the Closing Date and ending on the third anniversary of the
Closing Date, Buyer shall not, directly or indirectly:
(i) request or advise any customers of Seller to cancel any
contracts, or curtail their dealings, with Seller or engage in any trade
disparagement with respect to Seller or any of its affiliates; nor
(ii) solicit for employment or hire any employee of Seller.
5.8 Royalty Payments Due to Seller. Buyer acknowledges that Seller
------------------------------
shall be entitled to receive all accrued royalty payments for the marketing and
sales efforts on behalf of the Company as contemplated by Section 4 of the
Amendment to Investment Agreement, dated as of January 27, 1993, by and between
Buyer and Seller (the "Amendment"), for the period ending immediately prior to
the Closing (or such earlier date as, for ease of calculation, is mutually
agreed between Buyer and Seller). In accordance with Section 6 of the Amendment,
such payments, if any, shall be made within ninety (90) days after the end of
the fiscal quarter in which the Closing Date falls with final adjustments, if
any, to be made after a year-end audit is completed. As soon as practicable
following such fiscal quarter, and in any event within thirty (30) days
following such fiscal quarter, Buyer shall cause the Company to prepare and
deliver to Seller unaudited financial statements related to such royalty
payments, if any. Such financial statements shall be prepared in accordance with
GAAP consistent with past practices.
5.9 Corporate Guaranties. Buyer shall use its commercially
--------------------
reasonable efforts to provide for Seller's full and permanent release from its
obligations as a guarantor of the Company's indebtedness for borrowed money to
Wachovia Bank (f/k/a First Union National Bank). To the extent Seller has not
been released from such obligations on or prior to the Closing Date, Buyer
agrees to defend and indemnify Seller against, and hold it harmless on an
after-Tax basis from, any and all losses, liabilities, claims, suits,
proceedings, demands, judgments, damages, expenses and costs, including, without
limitation, reasonable counsel fees, costs and expenses incurred in the
investigation, defense or settlement of any claims covered by this indemnity
which Seller may suffer or incur by reason of the failure to procure the release
of such guarantee.
5.10 Closing Financial Statements. Within no more than thirty (30)
----------------------------
days following the Closing Date, Buyer shall cause the Company to prepare and
deliver to Seller a balance sheet of the Company as of the Closing Date and
statements of income and cash flows for the period commencing on January 1, 2003
and ending on the Closing Date, which financial statements shall be complete,
true and accurate in all material respects and prepared in accordance with GAAP
consistent with past practices.
20
ARTICLE 6
CONDITIONS PRECEDENT
--------------------
6.1 Conditions to Obligations of Seller. The obligations of the
-----------------------------------
Seller (but no other party to this Agreement) to effect the Purchase and Sale
shall be subject to the satisfaction on or prior to the Closing Date of the
following conditions unless waived in writing by Seller:
(a) Representations and Warranties. The representations and
------------------------------
warranties of Buyer set forth in Article 4 of this Agreement shall be true and
correct as of the date of this Agreement and as if made at and as of the Closing
Date, and Seller shall have received a certificate signed by an executive
officer of Buyer to such effect.
(b) Performance of Obligations of Buyer. Buyer shall have performed
-----------------------------------
all obligations required to be performed by it under this Agreement prior to the
Closing Date, and Seller shall have received a certificate signed by an
executive officer of Buyer to such effect.
(c) Government Approvals. All authorizations, consents, orders or
--------------------
approvals of, or declarations or filings with, or expiration of waiting periods
imposed by, any governmental authority necessary for the consummation of the
transactions contemplated by this Agreement shall have been filed, occurred or
been obtained.
(d) No Proceeding or Litigation. No order actually restraining,
---------------------------
preventing or changing this Agreement or the transactions contemplated hereby
shall have been entered by any court or governmental or regulatory authority.
(e) Consents. Company shall have received the Consents identified in
--------
Section 3.5 of the Disclosure Schedule and all other consents, authorizations
and approvals necessary in connection with the consummation of the transactions
contemplated by this Agreement or to enable the Company to continue to carry on
the business of the Company as presently conducted, and no such consent,
authorization or approval shall have been revoked.
6.2 Conditions to Obligations of Buyer. The obligations of Buyer
----------------------------------
(but no other party to this Agreement) to effect the Purchase and Sale are
subject to the satisfaction on or prior to the Closing Date of the following
conditions, unless waived in writing by Buyer:
(a) Representations and Warranties of Seller. The representations
----------------------------------------
and warranties of Seller set forth in Article 2 of this Agreement shall be true
and correct as of the date of this Agreement and as if made at and as of the
Closing Date, and Buyer shall have received a certificate signed by an executive
officer of Seller to such effect.
(b) Performance of Obligations of Seller. Seller shall have
------------------------------------
performed all obligations required to be performed by it under this Agreement
prior to the Closing Date, and Buyer shall have received a certificate signed by
an executive officer of Seller to such effect.
(c) Representations and Warranties of the Company. The
---------------------------------------------
representations and warranties of the Company set forth in Article 3 of this
Agreement shall be true and correct as of
21
the date of this Agreement and as if made at and as of the Closing Date, and
Buyer shall have received a certificate signed by an executive officer of the
Company to such effect.
(d) Performance of Obligations of the Company. The Company shall
-----------------------------------------
have performed all obligations required to be performed by it under this
Agreement prior to the Closing Date, and Buyer shall have received a certificate
signed by an executive officer of the Company to such effect.
(e) No Adverse Change. Since the date of this Agreement there shall
-----------------
have been no changes in the condition (financial or otherwise), business,
prospects, employees, operations, obligations or liabilities of the Company
which, in the aggregate, have had or could be expected to have a material
adverse effect on the financial condition, business, or operations of the
Company.
(f) Employment Agreement. The Company and Xxxxxxx X. Xxxxxx shall
--------------------
have entered into the employment agreement attached hereto as Exhibit A, which
---------
agreement shall be effective immediately following the Closing.
(g) Master Purchase Agreement. Seller and the Company shall have
-------------------------
entered into the Master Purchase Agreement attached hereto as Exhibit B.
---------
(h) License Agreement. Seller, Buyer and the Company shall have
-----------------
entered into the License Agreement attached hereto as Exhibit C.
---------
(i) No Proceeding or Litigation. No order actually restraining,
---------------------------
preventing or changing this Agreement or the transactions contemplated hereby
shall have been entered by any court or governmental or regulatory authorities.
(j) Government Approvals. All authorizations, consents, orders or
--------------------
approvals of, or declarations or filings with, or expiration of waiting periods
imposed by, any governmental authority necessary for the consummation of the
transactions contemplated by this Agreement shall have been filed, occurred or
been obtained.
(k) Consents. Company shall have received the Consents identified in
--------
Section 3.5 of the Disclosure Schedule and all other consents, authorizations
and approvals necessary in connection with the consummation of the transactions
contemplated by this Agreement or to enable the Company to continue to carry on
the business of the Company as presently conducted, and no such consent,
authorization or approval shall have been revoked.
ARTICLE 7
SURVIVAL; INDEMNIFICATION
-------------------------
7.1 Survival. All representations and warranties contained in
--------
Articles 2, 3 and 4, and all representations and warranties contained in
certificates delivered pursuant to this Agreement will survive the Closing for a
period of twelve (12) months; provided, however, that the representations and
------------------
warranties set forth in Sections 2.1 through 2.5, Section 3.10 and Sections 4.1
through 4.4 (and such representations and warranties contained in certificates
22
delivered pursuant to this Agreement relating thereto) shall survive the Closing
until the expiration of the relevant statutes of limitation (including any
extensions thereof). All covenants and other agreements of the parties shall
survive the Closing until they terminate by their terms.
7.2 Indemnification by Seller and Buyer.
-----------------------------------
(a) Seller, subject to the limitations set forth in Sections 7.2(d)
and 7.2(e) hereof, agrees to defend and indemnify Buyer, and its affiliates,
directors, officers, stockholders, employees, agents, successors and assigns
(collectively, "Buyer's Indemnified Persons"), against and hold each of them
harmless on an after-Tax basis from:
(i) any and all losses, liabilities, claims, suits,
proceedings, demands, judgments, damages, expenses and costs, including, without
limitation, reasonable counsel fees, costs and expenses incurred in the
investigation, defense or settlement of any claims covered by this indemnity
which any of Buyer's Indemnified Persons may suffer or incur by reason of the
inaccuracy or breach of any of the representations and warranties of Seller
contained in this Agreement or any document, certificate or agreement delivered
pursuant hereto; and
(ii) fifty percent (50%) of any and all losses, liabilities,
claims, suits, proceedings, demands, judgments, damages, expenses and costs,
including, without limitation, reasonable counsel fees, costs and expenses
incurred in the investigation, defense or settlement of any claims covered by
this indemnity which any of Buyer's Indemnified Persons may suffer or incur by
reason of the inaccuracy or breach of any of the representations and warranties
of the Company contained in this Agreement or any document, certificate or
agreement delivered pursuant hereto (without giving effect to any materiality
qualifications in order for such condition, event or state of fact to cause such
representation or warranty to be inaccurate); provided, however, that Seller
shall not be obligated to indemnify any Buyer's Indemnified Persons in
connection with any inaccuracy or breach of any representation or warranty of
the Company if, at the time of such inaccuracy or breach, (A) any officer of
Buyer had actual knowledge of all material facts that formed the basis for such
inaccuracy or breach and (B) such officer had a full understanding and
appreciation of the existence and magnitude of the Seller Indemnifiable Damages
(as defined below) arising from or related to such inaccuracy or breach. In the
event that Seller asserts that it is not obligated to indemnify Buyer on the
basis of the foregoing proviso, Seller shall have the burden of demonstrating
that Buyer possessed actual knowledge as set forth in clauses (A) and (B)
hereof. Notwithstanding anything to the contrary set forth herein, in the event
(1) the representations and warranties of the Company contained in the second
sentence of Section 3.6 are inaccurate due to the existence of liabilities
described therein which are not usual and normal in amount in relation to the
Company's past experience and which are not listed on the Disclosure Schedule or
(2) the representations and warranties of the Company contained in Section
3.7(c), Section 3.7(d), or Section 3.7(i) are inaccurate due to the existence of
events described therein which exceed the dollar limits set forth therein and
which are not listed on the Disclosure Schedule, Seller's indemnification
obligation under this Section 7.2(a)(ii) arising as a result of or resulting
from such inaccuracy or breach shall be determined by offsetting the fair market
value of any benefit received by the Company by reason of the events giving rise
to such inaccuracy or breach against the fair market value of any adverse effect
that may be suffered or incurred by reason of such inaccuracy or breach.
23
Such amounts described in subsections (i) and (ii) above being
hereinafter referred to as "Seller Indemnifiable Damages."
(b) Buyer, subject to the limitations set forth in Sections 7.2(d)
and 7.2(e) hereof, agrees to defend and indemnify Seller, and its affiliates,
directors, officers, stockholders, employees, agents, successors and assigns
(collectively, "Seller's Indemnified Persons" and, together with Buyer's
Indemnified Persons, "Indemnified Persons"), against and hold each of them
harmless on an after-Tax basis from any and all losses, liabilities, claims,
suits, proceedings, demands, judgments, damages, expenses and costs, including,
without limitation, reasonable counsel fees, costs and expenses incurred in the
investigation, defense or settlement of any claims covered by this indemnity
which any of Seller's Indemnified Persons may suffer or incur by reason of the
inaccuracy or breach of any of the representations and warranties of Buyer
contained in this Agreement or any document, certificate or agreement delivered
pursuant hereto; provided, however, that Buyer shall not be obligated to
indemnify any Seller's Indemnified Persons in connection with any inaccuracy or
breach of any representation or warranty of Buyer if, at the time of such
inaccuracy or breach, (A) any officer of Seller had actual knowledge of all
material facts that formed the basis for such inaccuracy or breach and (B) such
officer had a full understanding and appreciation of the existence and magnitude
of the Buyer Indemnifiable Damages (as defined below) arising from or related to
such inaccuracy or breach. In the event that Buyer asserts that it is not
obligated to indemnify Seller on the basis of the foregoing proviso, Buyer shall
have the burden of demonstrating that Seller possessed actual knowledge as set
forth in clauses (A) and (B) hereof. Such amounts described in this subsection
(b) are hereinafter referred to as "Buyer Indemnifiable Damages" and, together
with the Seller Indemnifiable Damages, as "Indemnifiable Damages."
(c) Seller and Buyer (the "Indemnifying Parties") waive any right to
require the other to (i) proceed against any person or entity, (ii) proceed
against or exhaust any collateral or security or any part thereof or (iii)
pursue any other remedy in its power, and waive any defense arising by reason of
any inability of any other obligor to pay or any defense based on bankruptcy or
insolvency or other similar limitations on creditors' remedies with respect to
any other person.
(d) The indemnity referred to in Sections 7.2(a) and 7.2(b) shall
only apply to Indemnifiable Damages claimed by Indemnified Persons prior to the
expiration of the Indemnification Period defined below under Section 7.3. No
Buyer's Indemnified Person may seek recovery under the indemnities set forth
herein unless and until the Indemnifiable Damages of such persons in the
aggregate are greater than $200,000 (the "Damage Threshold"), in which case such
indemnity shall apply to the full amount of Indemnifiable Damages in excess of
the Damage Threshold, which excess amount shall be allocated among and payable
to the Buyer's Indemnified Persons in proportion to their pro rata share of all
Seller Indemnifiable Damages. No Seller's Indemnified Person may seek recovery
under the indemnities set forth herein unless and until the Indemnifiable
Damages of such persons in the aggregate are greater than the Damage Threshold,
in which case such indemnity shall apply to the full amount of Indemnifiable
Damages in excess of the Damage Threshold, which excess amount shall be
allocated among and payable to the Seller's Indemnified Persons in proportion to
their pro rata share of all Buyer Indemnifiable Damages. No Indemnified Persons
shall be entitled to indemnification under Sections 7.2(a) or 7.2(b) to the
extent that such Indemnified Persons have actually received insurance proceeds
with respect to the Indemnifiable Damages incurred by them pursuant to
24
insurance policies owned by the Company; provided that the foregoing shall not
apply to insurance proceeds ("Excess Proceeds") received under insurance
policies owned by the Company after the Closing Date to the extent that the
scope of coverage (including policy limits) is greater than under the Company's
insurance policies listed on Schedule 3.17 of the Disclosure Schedule. In the
event that the Indemnified Persons receive insurance proceeds (other than Excess
Proceeds) with respect to Indemnifiable Damages for which such Indemnified
Persons have received money damages hereunder, such Indemnified Persons shall
remit such proceeds to the Indemnifying Party that paid such money damages.
Buyer agrees that Seller shall be entitled to cause the Company (or to the
extent another entity has succeeded to the interest of the Company, such other
entity) to purchase additional insurance if Seller reimburses the Company or
such other entity for the cost of such insurance.
(e) An Indemnifying Party's aggregate liability under Sections
7.2(a) and 7.2(b) hereof shall not exceed an amount equal to $1,320,000;
provided that if the Indemnifying Party's indemnity obligation arises from any
--------
fraud by such Indemnifying Party, the indemnification obligation of such
Indemnifying Party under Sections 7.2(a) and 7.2(b) hereof shall not be limited
in amount.
7.3 Indemnification Period. The indemnification period shall last
----------------------
until the twelve (12) month anniversary of the Closing Date (the
"Indemnification Period"); provided, however, that, with respect to the
--------
representations and warranties set forth in Sections 2.1 through 2.5, Section
3.10 and Sections 4.1 through 4.4 (and such representations and warranties
contained in certificates delivered pursuant to this Agreement relating
thereto), the Indemnification Period shall last until the expiration of the
relevant statutes of limitation (including any extensions thereof).
7.4 Indemnification Claims. Upon receipt by an Indemnifying Party
----------------------
on or before the last day of the Indemnification Period of a certificate signed
by any officer of the Indemnifying Party (an "Officer's Certificate"): (a)
stating that the Indemnified Person has paid or accrued Indemnifiable Damages in
an aggregate stated amount to which such party is entitled to indemnity pursuant
to this Agreement, and (b) specifying in reasonable detail the individual items
of Indemnifiable Damages included in the amount so stated, the date each such
item was paid or accrued, and the nature of the misrepresentation, breach of
warranty or claim to which such item is related, the Indemnifying Party shall,
subject to the provisions of Section 7.5 hereof, deliver to the Indemnified
Person, as promptly as practicable, the amount of money sufficient to indemnify
the Indemnified Person against such Indemnifiable Damages. Failure to promptly
make an Indemnification Claim shall not relieve the Indemnifying Party from the
obligation to indemnify the Indemnified Person except to the extent that the
Indemnifying Party suffers actual and material prejudice as a result of such
failure. In the event the Indemnification Claim involves a claim brought against
the Indemnified Person by a third party (a "Third Party Claim"), (a) the
Indemnifying Party shall have the right to participate in, but not control, the
defense of such Third Party Claim, with its counsel and at its sole cost and
expense and (b) the Indemnified Person shall not settle or compromise such Third
Party Claim or consent to the entry of any judgment applicable to such Third
Party Claim without the prior written consent of the Indemnifying Party.
25
7.5 Resolution of Conflicts.
-----------------------
(a) If an Indemnifying Party shall object in writing to the
indemnity of any Indemnified Persons in respect of any claim or claims made in
any Officer's Certificate, Seller and Buyer shall attempt in good faith to
resolve any disputes promptly by negotiation between executives of Buyer and
executives of Seller who, if possible, shall be at a higher management level
than the individuals with direct responsibility for administration of this
Agreement (the "Negotiators"). Any party may give the other parties written
notice of any dispute not resolved in the normal course of business. Within
fifteen (15) days after delivery of the notice, the receiving party shall submit
to the others a written response. The notice and response shall include (i) a
statement of each party's position and a summary of arguments supporting that
position, and (ii) the name and title of the Negotiators and of any other person
who will accompany them. Within thirty (30) days after delivery of the disputing
party's notice, the Negotiators shall meet at a mutually acceptable time and
place, and thereafter as often as they reasonably deem necessary, to attempt to
resolve the dispute. All reasonable requests for information made by one party
to the others will be honored.
(b) If the matter has not been resolved by these persons within
sixty (60) days of the disputing party's notice, or if the parties fail to meet
within thirty (30) days, any party may pursue other remedies in accordance with
the provisions set forth below. All negotiations pursuant to this clause shall
be confidential and shall be treated as compromise and settlement negotiations.
(c) Each party shall continue to perform its obligations under this
Agreement pending final resolution of any dispute arising out of or relating
hereto.
(d) For the avoidance of doubt, the limitations on liabilities set
forth in this Article 7 shall only apply to those obligations specifically set
forth in this Agreement and shall in no way be interpreted to limit any
liability of Seller or Buyer arising from or related to such party's obligations
under other agreements, including, without limitation, the Master Purchase
Agreement, the License Agreement or any other past or future commercial
agreement between the Company or Buyer, on the one hand, and the Seller, on the
other hand.
7.6 Exclusive Remedy. From and after the Closing Date, the
----------------
indemnification provisions in this Article 7 shall be the exclusive remedy of
the parties with respect to breaches of representations and warranties in this
Agreement, except for actions grounded in fraud, with respect to which the
remedies and limitations set forth in this Agreement shall not apply or in any
manner limit the scope or availability of any remedy at law or equity. For the
avoidance of doubt, the representations and warranties by the Company in Article
3 of this Agreement are for the sole benefit of the Indemnified Persons, and no
Indemnified Persons shall have recourse against the Company or any other person
for breaches of those representations and warranties.
ARTICLE 8
TERMINATION, AMENDMENT AND WAIVER
---------------------------------
8.1 Termination. This Agreement may be terminated at any time by
-----------
mutual written consent of Seller and Buyer.
26
8.2 Effect of Termination. In the event of termination of this
---------------------
Agreement by either Seller or Buyer as provided in Section 8.1, written notice
shall forthwith be given to the other parties and this Agreement shall terminate
and the transactions contemplated hereby shall be abandoned without further
action by any party hereto. If this Agreement is terminated as provided herein
no party hereto shall have any liability or further obligation to any other
party to this Agreement, except that nothing herein shall relieve any party from
liability for any breach of this Agreement prior to such termination.
8.3 Amendment. This Agreement may be amended by the parties hereto,
---------
at any time by an instrument in writing signed on behalf of each of the parties
hereto.
8.4 Extension; Waiver. Buyer or Seller, by such corporate action as
-----------------
shall be appropriate, may, to the extent legally allowed, (a) extend the
time for the performance of any of the obligations or other acts of the other
parties hereto, (b) waive any inaccuracies in the representations and
warranties made to Buyer or Seller contained herein or in any document
delivered pursuant hereto and (c) waive compliance with any of the agreements
or conditions for the benefit thereof contained herein. Any agreement on
the part of a party hereto to any such extension or waiver shall be valid if set
forth in an instrument in writing signed on behalf of such party.
ARTICLE 9
GENERAL
-------
9.1 Expenses. Each of the Buyer, Seller and the Company shall pay
--------
its own fees and expenses incurred incident to the preparation and carrying out
of the transactions herein contemplated.
9.2 Further Assurances. From time to time (whether at or after the
------------------
Closing Date), at the request of Buyer and without further consideration, and at
their own expense, the Company and Seller will execute and deliver to Buyer such
other documents, and take such other action, as Buyer may reasonably request in
order to consummate the transactions contemplated hereby.
9.3 Assignment. This Agreement and all the provisions hereof shall
----------
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto without the prior written consent of the other parties.
9.4 Specific Performance. Each party's obligation under this
--------------------
Agreement is unique. If any party should default in its obligations under this
Agreement, the parties each acknowledge that it would be extremely impracticable
to measure the resulting damages; accordingly, the non-defaulting party, in
addition to any other available rights or remedies, may xxx in equity for
specific performance and the parties each expressly waive the defense that a
remedy in damages will be adequate and expressly waive any requirement in an
action for specific performance for the posting of a bond by the adverse party
or parties.
27
9.5 Notices. Any notice, request, instruction or other document to
-------
be given hereunder by any party to the other shall be in writing and delivered
personally or sent by certified mail, postage prepaid, by telecopy, or by
courier service, as follows:
To Buyer:
McKesson Automation Systems Inc.
000 Xxxxxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Telecopy No.: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxxxx, Vice President
with a copy to:
McKesson Corporation
Xxx Xxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Telecopy No.: (000) 000-0000
Attention: General Counsel
To Seller:
Paragon Technologies, Inc.
000 Xxxxxxx Xxxx
X.X. Xxx 00 Xxxxxx, XX 00000-0000 Telecopy No.: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx, Chief Executive Officer
with a copy to:
Xxxxxx Xxxxxxxx LLP
000 Xxxxxx Xxxx
000 Xxxxxxx Xxxx
Xxxxxx, XX 00000
Telecopy No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx, Esq.
28
To the Company:
SI/XXXXX, INC.
000 Xxxxx Xxxx
Xxxxxxxxx, XX 00000
Telecopy No.: (000) 000-0000
Attention: Xxxx X. Xxxxxxx
with a copy to Buyer and
McKesson Corporation
Xxx Xxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Telecopy No.: (000) 000-0000
Attention: General Counsel
or to such other persons as may be designated in writing by the parties, by a
notice given as aforesaid.
9.6 Headings. The headings of the several sections of this Agreement
--------
are inserted for convenience of reference only and are not intended to affect
the meaning or interpretation of this Agreement.
9.7 Counterparts. This Agreement may be executed in counterparts,
------------
and when so executed each counterpart shall be deemed to be an original, and
said counterparts together shall constitute one and the same instrument.
9.8 Binding Nature. This Agreement shall be binding upon and inure
--------------
to the benefit of the parties hereto. No party may assign or transfer any rights
under this Agreement.
9.9 Merger of Documents. This Agreement and all agreements and
-------------------
documents contemplated hereby constitute one agreement and are interdependent
upon each other in all respects.
9.10 Incorporation of Exhibits and the Disclosure Schedule. AlL
-----------------------------------------------------
Exhibits and the Disclosure Schedule attached hereto are by this reference
incorporated herein and made a part hereof for all purposes as if fully set
forth herein.
9.11 Governing Law. This Agreement shall be governed by and
-------------
construed under the laws of the State of Delaware (irrespective of its choice of
law principles).
9.12 Entire Agreement. This Agreement (including the Exhibits hereto)
----------------
embody the entire agreement and understanding between the parties relating to
the subject matter hereof and supersedes all prior agreements, understandings
and communications relating to such subject matter. There are no
representations, agreements, arrangements or understandings, oral or written,
between the parties relating to the subject matter hereof which are not
expressly set
29
forth herein or therein, and neither party has been induced to enter into this
Agreement except by the agreements expressly contained herein and therein.
[the remainder of this page intentionally left blank]
30
IN WITNESS WHEREOF, Buyer, Seller and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized
all as of the date first above written.
MCKESSON AUTOMATION SYSTEMS INC.
/s/ Xxxx Xxxxxxxx
-------------------------------------------
Xxxx Xxxxxxxx, President
PARAGON TECHNOLOGIES, INC.
/s/ Xxxxxxx X. Xxxxxxx
-------------------------------------------
Xxxxxxx X. Xxxxxxx, Chief Executive Officer
SI/XXXXX, INC.
/s/ Xxxxxxx X. Xxxxxx
-------------------------------------------
Xxxxxxx X. Xxxxxx, President
EXHIBIT A
---------
Form of Employment Agreement
----------------------------
This exhibit is not filed herewith pursuant to Item 601(b)(2) of Regulation
S-K. A copy of the omitted exhibit will be furnished supplementally to the
Securities and Exchange Commission upon request.
EXHIBIT B
---------
MASTER PURCHASE AGREEMENT
between
SI/XXXXX, INC.
and
PARAGON TECHNOLOGIES, INC.
Page 1
TABLE OF CONTENTS
SECTIONS TITLE
1. DEFINITIONS
2. WARRANTIES OF OWNERSHIP
3. GRANT OF RIGHTS FROM PARAGON TO SI/XXXXX
4. SUPPLY COMMITMENT
5. EXCLUSIVITY
6. ORDERING AND DELIVERY
7. PRICE, PAYMENT AND RISK OF LOSS
8. WARRANTY
9. TECHNICAL SUPPORT
10. INDEMNITY
11. TERMINATION
12. LIMITATION OF LIABILITIES AND DISCLAIMER OF WARRANTIES
13. CONFIDENTIAL INFORMATION AND INFORMATION EXCHANGES
14. INTELLECTUAL PROPERTY MATTERS
16. INDEMNIFICATION & INSURANCE
16. LEGAL AND REGULATORY COMPLIANCE
17. AUDIT
18. FORCE MAJEURE
19. GENERAL
APPENDICES TITLE
A PRODUCTS
B SPECIFICATIONS
C SUPPORT
Page 2
MASTER PURCHASE AGREEMENT
This Master Purchase Agreement ("Agreement") entered into this 19th day of
September, 2003 ("Effective Date"), by and between SI/XXXXX, INC., ("SI/XXXXX");
and PARAGON TECHNOLOGIES, INC. ("PARAGON").
WHEREAS, PARAGON manufactures and/or supplies certain products, and
provides certain associated services;
WHEREAS, SI/XXXXX wishes to obtain such products, and associated
services, in order to provide such products to its customers;
NOW, THEREFORE, in consideration of the mutual promises of the parties,
and for good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties, intending to be legally bound hereby, agree to
the following terms:
1. DEFINITIONS
-----------
"Acceptance" shall mean that SI/XXXXX, or the applicable SI/XXXXX
Customer, has provided acceptance of the Products or the Products are
in five (5) contiguous days of commercial operation, whichever occurs
first.
"Confidential Information" shall mean all technical or business
information, including without limitation all customer information, in
whole or in part, that is marked or designated as confidential or
proprietary at the time of disclosure by one party to the other, or is
disclosed in circumstances of confidence, or that would be understood
by SI/XXXXX and PARAGON, exercising reasonable business judgment, to be
confidential.
"Costs" shall mean the following direct costs incurred by PARAGON with
respect to the production and supply of Products and as such costs are
used in determining PARAGON's gross margin: (i) internal labor charges
at a burdened labor rate reflecting salaries of the departments
charging time to a project and an amount determined by management to be
an appropriate representation of benefits and labor costs associated
with the management of direct labor employees, which labor charges may
include charges for project management, engineering services related to
design changes and implementation of a system, custom software
engineering required to meet customer specific performance needs,
installation services as necessary, provided that, for the avoidance of
doubt, such costs shall not include costs associated with PARAGON's
information technology (except to the extent directly associated with
the department of PARAGON charging time in respect of a project
hereunder), payroll processing, human resources management and
executive salaries; (ii) reasonable travel, lodging, meals &
entertainment expenses directly related to installation and
implementation of the Products; (iii) subcontracted services performed
either on a fixed cost or time and materials basis related to
engineering, design, manufacture and installation of the Products; (iv)
materials purchased and incorporated into the Products, including
components and subsystems such as conveyor systems, computer equipment,
furniture and motors; (iv) spare parts purchased and provided for use
on an as needed basis; and (v) a reasonable cost reserve estimated for
potential warranty related expenses, with such reserve not to exceed
two percent (2%) of the selling price.
"Delivery Date" shall mean the date when the Product shall be delivered
to the Delivery Location.
"Delivery Location" shall mean the Product destination location(s) so
designated on the Purchase Order(s), usually an SI/XXXXX Customer site.
Page 3
"Integrated Prescription Fulfillment System" means facilities, systems
or systems upgrades that are installed or proposed to be installed or
are designed for, or intended to be used for, central fill, mail order,
specialty distribution or any other prescription fulfillment system or
production process that involves the application to a container (such
as a bottle or vial), automatically or manually, where the container
has been automatically processed by such system or process and McKesson
Automation Systems Inc.'s drug dispensing products or similar products
could be utilized, of a patient-specific prescription label.
"Maximum Delivery Period" shall mean, with respect to delivery of a
particular Product, a period of six (6) months commencing on the date
that the Purchase Order is accepted by PARAGON for such Product.
"New" when applied to a Product, components, or part, shall mean that
the Product has never been placed in operational service by a customer
of either party for such items, or used by PARAGON for ongoing
operation.
"Renewal Period" shall mean a period of twelve (12) months.
"Purchase Order" shall mean either the "hard copy" document or
electronic transmission used by SI/XXXXX to order a Product, and any
Services, under this Agreement.
"Product" shall mean, collectively and/or individually, the products
described in Appendix A, and all associated documentation.
"Services" shall mean the services to be provided by PARAGON to
SI/XXXXX as detailed in any Purchase Order(s).
"SI/XXXXX Customer" shall mean any purchaser or prospective purchaser
of an Integrated Prescription Fulfillment System for which PARAGON's
Products and/or Services may be required and/or utilized.
"Specifications" shall mean those documents and specifications provided
by SI/XXXXX in association with a Purchase Order for Products, or as
otherwise agreed to in writing by the parties.
"Term" shall mean the three (3) year period beginning on the Effective
Date and each successive Renewal Period.
"Territory" shall mean the United States, its territories and
possessions as of August 22, 1989 and Canada.
"Warranty Period" shall mean:
(a) with respect to Products which require installation
services, a period of twelve (12) months commencing upon
date of Acceptance.
(b) with respect to all other Products, a period of twelve
(12) months from shipment by PARAGON to SI/XXXXX
or the SI/XXXXX Customer.
2. WARRANTIES OF OWNERSHIP
-----------------------
2.1 PARAGON warrants that it has developed, is the owner of and/or
it possesses all rights necessary to sell the Products to SI/XXXXX pursuant to
the terms of this Agreement.
2.2 PARAGON warrants that title to all Products shipped to SI/XXXXX
or drop shipped directly to SI/XXXXX Customers pursuant to this Agreement shall
pass to SI/XXXXX or an SI/XXXXX Customer, as
Page 4
the case may be, free and clear of any liens, charges, encumbrances,
restrictions or rights created in, by or against the Products or against PARAGON
upon receipt of payment in full by PARAGON, except any patent or proprietary
rights of PARAGON and/or one or more of PARAGON's third party suppliers.
2.3 PARAGON represents that it is unaware of any trade secret
misappropriation or patent or copyright infringement, or claims thereof, with
respect to the Product(s) or arising out of the sale of the Product to SI/XXXXX
for use in the Territory.
3. GRANT OF RIGHTS FROM PARAGON TO SI/XXXXX
----------------------------------------
3.1 Subject to the terms and conditions set forth herein, and at the
prices and fees set forth herein and during the Term and any Renewal Period of
this Agreement, PARAGON shall:
(a) sell and provide, and SI/XXXXX shall have the right to
purchase and obtain, the Products from PARAGON; and
(b) provide, and SI/XXXXX shall have the right to obtain, the
software support services set forth in Appendix C.
3.2 SI/XXXXX shall have the right to market, promote, and distribute
the Products to SI/XXXXX Customers.
3.3 Some of the Products may be or contain third party software,
hardware and/or equipment. Except where additional identification or terms are
explicitly specified by PARAGON with respect to this third party software,
hardware and/or equipment and agreed to in writing by SI/XXXXX, the terms and
conditions of this Agreement shall apply.
4. SUPPLY COMMITMENT
----------------
4.1 During the Term, SI/XXXXX must purchase all of its requirements
of Products from PARAGON unless: (i) an SI/XXXXX Customer has specified, in a
written request for performance to SI/XXXXX, a Product other than a Product
manufactured by or on behalf of PARAGON or (ii) an SI/XXXXX Customer has
requested in writing certain products, configuration, functional or delivery
requirements that PARAGON cannot provide. Notwithstanding anything to the
contrary in this Agreement, in the event that PARAGON materially breaches its
obligations under Sections 2, 3, 4.2, 5, 6.5, 7, 8.1 (last sentence), 8.3, 9,
10, 11, 13, 15, 16, 17 or 19.7, and only with respect to Sections 2, 3, 4.2,
6.5, 7, 8, 9, 11, 15, 16 or 17, fails to cure such breach within forty-five (45)
days from the date SI/XXXXX gives PARAGON written notice of such breach, the
above purchase requirement in this Section 4.1 shall no longer apply to SI/XXXXX
as of the date of such material breach or PARAGON's failure to timely cure in
the case of breach of Sections 2, 3, 4.2, 6.5, 7, 8, 9, 11, 15, 16 or 17, and
such obligation shall not apply to SI/XXXXX for the remainder of the Term.
Notwithstanding anything to the contrary in this Agreement, in the event that
PARAGON does not agree in writing to be bound to the payment of any penalty
provisions as submitted in writing by a customer to SI/XXXXX, then SI/XXXXX
shall not be bound by the restrictions in this Section 4.1 solely with respect
to the applicable project.
4.2 PARAGON shall fulfill all Purchase Orders in accordance with the
provisions of this Agreement and within the Maximum Delivery Period. PARAGON
shall not have the right to reject Purchase Orders complying with the terms of
this Agreement, except that PARAGON may reject a Purchase Order if: (a) the
Specifications for the Products are beyond PARAGON's capability; (b) the Product
will be installed outside the Territory; or (c) the Purchase Order has a
required Delivery Date that is less than the Maximum Delivery Period and PARAGON
has not already accepted such Purchase Order with a stated Delivery Date that is
less than the Maximum Delivery Date.
4.3 The Term of this Agreement shall be for three (3) years and
renewed annually for successive Renewal Periods in the event that the parties
mutually agree in writing to extend the term of the Agreement
Page 5
for such Renewal Period. SI/XXXXX and PARAGON shall have the rights and
obligations in this Agreement during any applicable Renewal Period, including,
without limitation, SI/XXXXX'x right to purchase at the prices to be calculated
per the terms and conditions of this Agreement.
5. EXCLUSIVITY
-----------
5.1 PARAGON hereby agrees and acknowledges that commencing on the
Effective Date and during the Term, PARAGON shall not, directly or indirectly,
sell or otherwise provide any Products or other automated dispensing equipment
to any person or entity (i) whose primary line of business is competitive with
SI/XXXXX in the field of Integrated Prescription Fulfillment Systems or (ii)
with respect to whom PARAGON knows or should know, based on PARAGON's review of
the specifications and layout and a duty of reasonable inquiry under the
circumstances, of such person's or entity's intent to use the Product or other
automated dispensing equipment as part of an Integrated Prescription Fulfillment
System. In the event that PARAGON learns that a person or entity that has
purchased or otherwise acquired a Product or other automated dispensing
equipment directly or indirectly from or through PARAGON during the Term, other
than through SI/XXXXX or as otherwise permitted herein, uses such as part of an
Integrated Prescription Fulfillment System, thereafter such person or entity
shall be deemed to be a person or entity described in, and subject to, the
restrictions set forth in clause (i) above in this Section 5.1. Notwithstanding
anything in this Section 5.1 to the contrary:
(a) PARAGON shall not be in violation of Section 5.1,
clauses (i) or (ii) above, if PARAGON seeks to sell or sells a Product to
persons or entities engaged in the business of providing Integrated Prescription
Fulfillment Systems, or to customers or potential customers of SI/XXXXX, if
SI/XXXXX has received a written request, but declined, to supply the Products to
such customers or potential customers, provided that the foregoing exception
shall apply only (y) to the specific project in respect of which SI/XXXXX
declined to supply the Product and (z) with respect to clause (i) above subject
to SI/XXXXX'x written approval of such sale to such person or entity, provided
that SI/XXXXX shall have ten (10) business days following PARAGON's written
notice to both the President of SI/XXXXX and the President of McKesson Automated
Prescription Systems of its desire to make such sale in which to give PARAGON
written notice of its approval or rejection of such proposed sale, and failing
such timely notice of approval or rejection SI/XXXXX shall be deemed to have
given its approval to such sale. Notwithstanding anything to the contrary set
forth in Section 19, any notice required to be given under this Section 5.1(a)
shall be deemed given when receipt is confirmed by telephone call to the office
of the person to whom the notice is directed if sent by facsimile or delivered
personally, on the next business day if sent by internationally recognized
courier for next-day delivery, and on the second day following the postmark date
if sent by prepaid registered or certified mail, return receipt requested; and
(b) PARAGON shall not be in violation of Section 5.1, clause
(ii) above, if PARAGON seeks to sell or sells its products to customers or
potential customers of SI/XXXXX where that customer or potential customer has
specified, in a written request for performance to SI/XXXXX, a product other
than PARAGON's products and provided that such right to seek to sell or to sell
with respect to such customer or potential customer shall not extend more than
one (1) year from the date of such Customer request.
5.2 Notwithstanding anything to the contrary, in the event that this
Agreement is terminated by SI/XXXXX pursuant to Section 11.1(a), PARAGON's
obligations set forth above in this Section 5 shall survive until a date that is
three (3) years from the Effective Date or, in the event that the Agreement is
terminated by SI/XXXXX pursuant to Section 11.1(a) during a Renewal Period, the
expiration date of such Renewal Period. In the event that this Agreement is
terminated by PARAGON pursuant to Section 11.2 due to SI/XXXXX'x bankruptcy or
by PARAGON pursuant to Section 11.1(c) due to SI/XXXXX'x material breach of its
payment obligations or Sections 4, 11, 13, 17 or 19.7, PARAGON's obligations set
forth above in this Section 5 shall terminate immediately.
6. ORDERING AND DELIVERY
---------------------
6.1 Should the terms of any Purchase Order conflict with the terms
of this Agreement, the terms of this Agreement shall govern unless the parties
expressly agree in writing to the contrary. This Agreement
Page 6
shall continue to apply to a Purchase Order issued during the Term until all
obligations herein are performed. Notwithstanding that a Purchase Order does not
refer to this Agreement, any Purchase Order issued by SI/XXXXX during the Term
shall be deemed to have been issued pursuant to this Agreement unless the
parties expressly agree to the contrary.
6.2 A Purchase Order shall set forth a description of the following:
(a) the Product, (b) prices, (c) Delivery Location, (d) the location where the
invoice shall be sent for payment, (e) method of shipment and shipping agent, as
applicable, (f) quantity and (g) requested Delivery Date, (h) name of SI/XXXXX
or SI/XXXXX Customer, (i) the applicable Specification; and (j) required
Delivery Date (which shall not be less than the Maximum Delivery Period unless
otherwise set forth in the applicable Purchase Order accepted by the parties).
Unless PARAGON advises otherwise, SI/XXXXX shall submit Purchase Orders to:
Paragon Technologies, Inc.
000 Xxxxxxx Xxxx
Xxxxxx, Xxxxxxxxxxxx 00000
Attention: Sales Department
Phone: (000) 000-0000
Fax: (000) 000-0000
6.3 PARAGON shall provide written price quotation and corresponding Delivery
Dates ("Quote") within thirty (30) days from SI/XXXXX'x request for such. All
Purchase Orders shall be deemed accepted by PARAGON upon written acknowledgement
of acceptance by PARAGON. All accepted Purchase Orders shall be binding upon the
parties, except as otherwise expressly set forth herein.
6.4 Unless SI/XXXXX agrees otherwise in advance of shipment, PARAGON shall
deliver complete Purchase Orders, and all Products delivered against a Purchase
Order shall be New unless the parties agree expressly in writing to the
contrary. SI/XXXXX may reject any partial delivery. In addition, if PARAGON
fails to deliver the Product by the required Delivery Date (as set forth in the
acknowledged Purchase Order), then SI/XXXXX may terminate the Purchase Order for
the applicable Product and, subject to the applicable limitations set forth in
Section 12, obtain its cost of cover from PARAGON, along with any penalty
amounts as such have been agreed upon by PARAGON in writing.
6.5 SI/XXXXX may reschedule and cancel any Purchase Order(s) as so
designated; provided that SI/XXXXX agrees to pay all Cancellation Charges (as
defined below) associated with the cancellation of a Purchase Order, and all
costs and expenses directly incurred by PARAGON as a result of the rescheduling
of a Purchase Order, as further set forth below in this Section 6.5.
(a) PARAGON's "Cancellation Charge" shall mean an amount equal to the
sum of: (i) the value of SI/XXXXX'x Purchase Order(s) being rescheduled or
cancelled, to the extent such is performed to date (determined on a percentage
of completion basis, including all items of overhead, selling, general and
administrative expense and profit, in a manner consistent with PARAGON's
publicly filed financial statements); (ii) to the extent not included in clause
(i), the value of any services, equipment or other materials that cannot be
returned to PARAGON's suppliers or subcontractors at no cost; and (iii) to the
extent not included in clause (i), the documented re-stocking, cancellation or
termination charges incurred in terminating all orders and subcontracts with
PARAGON's suppliers and subcontractors. In no event shall the Cancellation
Charge due PARAGON as a result of the cancellation of a Purchase Order(s) by
SI/XXXXX exceed the aggregate value of the particular cancelled Purchase
Order(s) less any payments previously made to PARAGON in respect of the
cancelled Purchase Order(s). In the event that SI/XXXXX'x payments previously
made to PARAGON in respect of the cancelled Purchase Order(s) exceed the
Cancellation Charge due PARAGON as a result of the cancellation of a Purchase
Order(s) by SI/XXXXX, PARAGON shall be obligated to remit the difference to
SI/XXXXX.
(b) As PARAGON's sole remedy for and SI/XXXXX'x sole liability for
and in connection with any termination for convenience, SI/XXXXX shall pay the
above described amounts within thirty (30)
Page 7
days after receipt of PARAGON's invoice. Upon payment in full of such invoice,
PARAGON shall ship the equipment covered by the terminated Purchase Order (in
what ever stage of completion) to SI/XXXXX.
(c) In the event of a rescheduling, SI/XXXXX shall reimburse PARAGON
for all costs and expense it incurs in effecting such rescheduling such as
storage charges and shipping charges.
(d) PARAGON shall use commercially reasonable efforts to minimize the
Cancellation Charge and fees associated with rescheduling of Purchase Orders,
including without limitation, returning materials to its suppliers and
subcontractors, canceling materials on order and by adhering to SI/XXXXX'x
written notification to stop work.
(f) For the avoidance of doubt, the terms and conditions of this
Section 6.5 shall not apply to SI/XXXXX'x exercise of its rights under Sections
11.1(a) or 11.1(b), and SI/XXXXX'x exercise of its rights under Section 11.1(a)
or 11.1(b) shall not result in any of the amounts described above being owed by
SI/XXXXX.
7. PRICE, PAYMENT AND RISK OF LOSS
-------------------------------
7.1 The prices to be calculated under this Agreement are: (a) in U.S.
dollars, (b) exclusive of any applicable excise and sales taxes now existing or
hereinafter imposed by any applicable taxing authority, and (c) exclusive of
transportation charges and duty applicable to ship the Product to the Delivery
Location. Such taxes, transportation charges and duty for which SI/XXXXX is
liable shall be separately stated on the invoice. PARAGON agrees not to assess
any applicable excise or sales tax where SI/XXXXX furnishes PARAGON a tax
exemption certificate, a certificate of authority, a direct pay permit and/or
any equivalent acceptable to the applicable taxing authority. If SI/XXXXX is
required by law to withhold any tax with respect to a payment to PARAGON,
SI/XXXXX will (i) withhold the appropriate amount from the payment, (ii) pay the
withheld amount to the applicable authority, as required by law, and (iii)
furnish to PARAGON certified copies of tax receipts and any other documentation
reasonably requested by PARAGON as proof of SI/XXXXX'x payment of the
withholding tax. On each invoice submitted to SI/XXXXX, PARAGON shall reference
the number of the Purchase Order(s) issued for the Product covered by such
invoice. Payment shall be as set forth in Section 7.3 below.
7.2 Notwithstanding anything in this Agreement to the contrary, the prices
for the Products shall be set at no greater than the Cost incurred by PARAGON
with a fifty three and eight tenths percent (53.8%) xxxx-up. PARAGON agrees that
the fee for annual maintenance services as set forth in Appendix C shall in no
event exceed fifteen thousand dollars ($15,000) per year for all Products set
forth in a Purchase Order; provided that if a Purchase Order includes Products
to be installed at more than one location, the limitation on the fee of fifteen
thousand dollars ($15,000) per year shall be applied separately to each
location.
7.3 Unless otherwise provided in the Purchase Order, PARAGON may submit
invoices for payment to SI/XXXXX:
(a) for Products:
(i) thirty percent (30%) upon placement and acceptance of
the Purchase Order;
(ii) three equal installments of twenty percent
(20%) each based on project-specific milestones; and
(iii) ten percent (10%) upon Acceptance.
(b) for time and material contracts relating to
engineering services for less than 14 days of work
will be invoiced upon completion at fifteen (15%)
percent lower than PARAGON's then-current market
based pricing for such services.
Page 8
(c) for time and material contracts relating to
engineering services for greater than 14 days of work
will be invoiced every 14 days at fifteen (15%)
percent lower than PARAGON's then-current market
based pricing, as such pricing is generally
applicable to PARAGON's customer base, for such services.
(d) for the services set forth in Appendix C and any
other annual technical or maintenance plans: ninety
(90) days prior to the anniversary date of such
annual technical support or maintenance plans, for
the following year.
7.4 The commercial terms shall be FCA (Incoterms 2000) PARAGON's facility or
source of supply unless SI/XXXXX and PARAGON agree otherwise in writing;
provided that for the avoidance of doubt, SI/XXXXX shall have the right to
inspect goods prior to shipment.
7.5 SI/XXXXX shall have the right to withhold payment of amounts disputed in
good faith, without PARAGON's assertion of non-payment and/or a payment default.
8. PRODUCT WARRANTY
----------------
8.1 During the Warranty Period, PARAGON warrants that the Products shall be
free from defects in material and workmanship, and shall perform in accordance
with the Specifications and be painted according to PARAGON colors and painting
methods, and conform to OSHA and the electrical codes of NEC, NEMA and JIC. If
during the Warranty Period, PARAGON is notified of a defect in the Products that
is due to a breach of such warranty, PARAGON shall, at PARAGON's option and as
SI/XXXXX'x sole and exclusive remedy, correct, modify, repair or replace the
Products at PARAGON's expense. All corrections, modifications, repairs or
replacements due to material defects in the Products shall be carried out within
thirty-five (35) days from the date PARAGON receives notice of such defect.
8.2 All Products corrected, modified, repaired or replaced in accordance
with Section 8.1 shall, from the date of receipt of the repaired Products at
SI/XXXXX'x designated delivery location, be re-warranted for the remainder of
the original Warranty Period, provided that in the event that PARAGON is in
process of resolving a defect in the Products during the Warranty Period,
PARAGON shall continue such efforts with respect to such Products regardless of
any expiration of the Warranty Period. All claims must be made during the
Warranty Period.
8.3 If any defect notified in accordance with Section 8.1 is not remedied
within the period specified, SI/XXXXX may, without prejudice to its other rights
and remedies herein, in respect of PARAGON's failure to remedy such defect, (i)
proceed to do the work at PARAGON's risk and expense, whether by itself or
through the use of a third party (with SI/XXXXX to invoice, and PARAGON to pay,
all reasonable costs associated therewith), and/or (ii) return the Product for a
refund of all amounts paid for such Product.
8.4 PARAGON's obligations under this Section 8 shall not apply to (i)
Products or components thereof such as fuses and bulbs that are normally
consumed in operation, or have a normal life inherently shorter than the
Warranty Period; (ii) defects that are the result of improper storage,
installation, use, modification, maintenance or repair by SI/XXXXX or its
customer or the end user (including, without limitation, operation of the
Products outside the environmental parameters defined in the Specifications); or
(iii) Products or components thereof that due to no fault of PARAGON have been
subjected to misuse or have been involved in an accident, fire, explosion, or
Act of God.
9. TECHNICAL SUPPORT
-----------------
9.1 PARAGON shall provide technical support in respect of a particular
Product during the Warranty Period for such Product at no cost to SI/XXXXX
and/or SI/XXXXX'x Customer pursuant to the provisions of Appendix C.
Page 9
9.2 SI/XXXXX may elect, for its own or an SI/XXXXX Customer's behalf, at
least ninety (90) days prior to the expiration of the Warranty Period, to
purchase technical support as defined in Appendix C. PARAGON will invoice
annually ninety (90) in advance for this support. SI/XXXXX shall pay the invoice
in advance of this support period.
10. INDEMNITY
---------
10.1 PARAGON will indemnify and hold harmless SI/XXXXX and its parent,
subsidiaries and affiliates (including their employees, officers and directors)
(collectively referred to as the "Indemnified Parties") from fines, penalties,
losses, costs, damages, injuries, claims, expenses or liabilities that result
from (a) any third party claim, suit, action or proceeding to the extent that a
Product was responsible for the injury or death of a person or damage to
property, (b) an alleged infringement of third party rights in a Product
("Infringement Claim Liabilities"), or (c) PARAGON's breach of the warranties
set forth in Sections 2 or 16. The fines, penalties, losses, costs, damages,
injuries, claims or liabilities resulting from Section 10.1(a) through (c) will
be known collectively as "Claims". PARAGON will not be responsible for
indemnifying or holding harmless SI/XXXXX to the extent that the Claims result
from (i) the Product being designed or modified by SI/XXXXX, (ii) the Product
being used by SI/XXXXX or SI/XXXXX Customers in combination with non-PARAGON
products without PARAGON's approval, (iii) if the injury or claim is a result of
the use of the Products in a manner not intended or the negligence or willful
misconduct of SI/XXXXX, the SI/XXXXX Customer, or the end-user of the Product.
10.2 At its expense PARAGON will (a) defend against or settle Claims, and (b)
pay reasonable related costs and attorneys' fees. As an express condition to
PARAGON's obligations under Section 10.1, PARAGON will have sole control of the
settlement or defense of Claims, but the Indemnified Parties shall cooperate
with and may participate in the defense or settlement at its own expense and
PARAGON shall not make any settlement, admission or statement (i) of any
wrongdoing or liability on the part of the Indemnified Parties, or (ii) that
would require any performance obligation on the Indemnified Parties, or (iii)
inhibit the Indemnified Parties from conducting business, without the prior
written consent of such Indemnified Parties. Further, PARAGON shall be relieved
of its obligations under Section 10.1 and 10.2 to the extent that it is
prejudiced by SI/XXXXX'x failure to promptly notify PARAGON of the event giving
rise to the Claim. SI/XXXXX agrees that, in the event it chooses not to
participate in the defense or settlement of a Claim or it chooses to participate
but does not register an objection, it shall not dispute any judgment made by
PARAGON with respect to a Claim or PARAGON's defense of such Claim, except in
the event of PARAGON's gross negligence or willful misconduct.
10.3 If SI/XXXXX or an SI/XXXXX Customer is enjoined from using Products due
to an Infringement Claim Liability caused by PARAGON, PARAGON at its expense
must take commercially reasonable efforts to provide SI/XXXXX with a workaround.
The workaround will be PARAGON's (a) obtaining the right for SI/XXXXX and its
Customers to use the Product as provided under this Agreement, (b) substituting
a functionally equivalent product that does not infringe, or (c) modifying the
offending Product so that it no longer infringes.
11. TERMINATION
-----------
11.1 In the event of any material breach of this Agreement by either party,
which breach shall continue for forty-five (45) or more days after written
notice of such breach (including a reasonably detailed statement of the nature
of such breach) shall have been given to the breaching party by the aggrieved
party, the aggrieved party shall be entitled to avail itself cumulatively of any
and all remedies available at law or in equity (except to the extent that this
Agreement specifies a sole and exclusive remedy) and:
(a) if (i) the aggrieved party is SI/XXXXX, and (ii) PARAGON's
breach does not relate specifically to a Purchase Order or
such breach is PARAGON's second breach with respect to a
Purchase Order, then SI/XXXXX may terminate this Agreement in
its entirety and/or cancel, in whole or in part, any
outstanding Purchase Order, whether or not partially fulfilled
by PARAGON, with each party having their respective rights and
remedies under law or equity; provided that SI/XXXXX shall
only be liable for work
Page 10
performed prior to the date of termination and amounts due and
owing to PARAGON, and SI/XXXXX shall not be liable for the
charges set forth in Section 6.5;
(b) if (i) the aggrieved party is SI/XXXXX, (ii) PARAGON's breach
relates to a specific Purchase Order, and (iii) such is
PARAGON's first breach of a Purchase Order, then SI/XXXXX may
cancel, in whole or in part, only such breached Purchase
Order, whether or not partially fulfilled by PARAGON, with
each party having their respective rights and remedies under
law or equity; provided that SI/XXXXX shall only be liable for
work performed prior to the date of termination and amounts
due and owing to PARAGON, and SI/XXXXX shall not be liable for
the charges set forth in Section 6.5; and
(c) if the aggrieved party is PARAGON, PARAGON may (i) terminate
this Agreement in its entirety, or (ii) suspend performance
under any Purchase Order without liability for so long as the
breach continues uncorrected.
11.2 Either party may terminate this Agreement if the other party is or
becomes a party to any bankruptcy or receivership proceeding which is
uncontested by either party for thirty (30) days, or, if contested, is not
dismissed or terminated within sixty (60) days, or if the other party seeks to
make a compromise, arrangement or assignment for the benefit of its creditors or
if a receiver or receiver-manager is appointed over any of either party's
assets.
11.3 Upon any termination of this Agreement, each party, if requested, shall
return to the other party all property owned by that other party, including all
copies of all items that constitute the Confidential Information of the other
party. PARAGON shall complete any unfilled Purchase Orders then outstanding,
unless termination is due to SI/XXXXX'x default.
12. LIMITATION OF LIABILITIES AND DISCLAIMER OF WARRANTIES
------------------------------------------------------
12.1 EXCEPT FOR THE WARRANTIES EXPRESSLY SET FORTH IN THIS AGREEMENT, THE
PARTIES SPECIFICALLY DISCLAIM ALL OTHER REPRESENTATIONS AND WARRANTIES OF ANY
KIND, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTIES OF FITNESS FOR A PARTICULAR
PURPOSE, MERCHANTABILITY, NON-INFRINGEMENT AND TITLE.
12.2 EXCEPT FOR THE PARTIES' RESPECTIVE OBLIGATIONS UNDER SECTIONS 4, 5, 10,
13 AND 15, THE TOTAL LIABILITY OF EITHER PARTY FOR ALL CLAIMS OF ANY KIND FOR
ANY LOSS OR DAMAGE, WHETHER IN CONTRACT, WARRANTY, TORT (INCLUDING NEGLIGENCE),
STRICT LIABILITY OR OTHERWISE, ARISING OUT OF, CONNECTED WITH, OR RESULTING FROM
THE PERFORMANCE OR NON-PERFORMANCE OF THIS AGREEMENT SHALL IN NO CASE EXCEED (a)
ONE MILLION DOLLARS ($1,000,000) IN THE EVENT THAT SUCH BREACH RELATES TO TERMS
AND CONDITIONS OF THIS AGREEMENT GENERALLY OR (b) THE AMOUNTS PAID OR PAYABLE
UNDER A SPECIFIC PURCHASE ORDER IF THE PRODUCTS OR SERVICES GIVING RISE TO
LIABILITY RELATE TO A SPECIFIC PURCHASE ORDER.
12.3 EXCEPT FOR THE PARTIES' RESPECTIVE OBLIGATIONS UNDER SECTIONS 4, 5, 10,
13 AND 15, THE PARTIES SHALL NOT BE LIABLE TO EACH OTHER FOR ANY INDIRECT,
INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES, INCLUDING LOST PROFITS AND
REVENUES, FAILURE TO REALIZE EXPECTED SAVINGS, OR ANY OTHER COMMERCIAL OR
ECONOMIC LOSSES OF ANY KIND, EVEN IF ADVISED OF THE POSSIBILITY OF THEM.
13. CONFIDENTIAL INFORMATION & INFORMATION EXCHANGES
------------------------------------------------
13.1 Confidential Information shall be used exclusively by the employees of
the receiving party with a need-to-know such information for the purposes of
this Agreement (as well as consultants and subcontractors and other parties
("Third Party Recipients") with a need-to-know the Confidential
Page 11
Information; provided that, prior to the disclosure, the Third Party Recipients
have signed a confidentiality agreement on terms no less stringent than those
set out herein) and such party shall not, except as previously authorized in
writing by the disclosing party, publish, disclose or make use of Confidential
Information unless such information was already known by the receiving party
free of any obligation of confidentiality or unless and until such Confidential
Information shall have ceased to be proprietary as evidenced by general public
knowledge or shall have been legally acquired free of any obligation of
confidentiality or shall have been independently developed by such party without
reference or resort to the other party's confidential information, or as set
forth in Section 13.2. This prohibition against disclosure, publication or use
of Confidential Information shall not restrict either party from developing
similar information in the exercise of its own technical skill, so long as such
party can demonstrate that such other information was independently developed by
such party without making reference to the other's Confidential Information. The
obligations and rights of the parties under this Section shall survive any
cancellation or termination of the Agreement.
13.2 In the event that a party that has received the Confidential Information
of the other party receives a request to disclose all or any part of such
Confidential Information under the terms of a subpoena or order from any
governmental body or otherwise required by law, such receiving party agrees to
(i) immediately notify the other party of the existence, terms and circumstances
surrounding such a request or law; (ii) consult with the other party on the
advisability of taking legally available steps to resist or narrow such request;
and (iii) if disclosure of such Confidential Information is required, furnish
only that portion of the Confidential Information which, in the written opinion
of counsel of such receiving party, it is legally compelled to disclose.
13.3 The parties shall not engage in any advertising, sales promotion
materials, press releases or any other publicity matters use the name or any
trademarks of the other party, or the names of any of the other party's
organizations or any variation thereof, or language from which the connection of
said names may be implied, without the other party's prior written approval.
13.4 Notwithstanding anything herein to the contrary, either party (and each
employee, representative, or other agent of such party) may disclose to any and
all persons, without limitation of any kind, the U.S. federal tax treatment and
tax structure of the transaction and all materials of any kind (including
opinions or other tax analyses) that are provided to such party relating to such
U.S. federal tax treatment and tax structure. For this purpose, "tax structure"
is any fact that may be relevant to understanding the U.S. federal tax treatment
of the transaction.
14. INTELLECTUAL PROPERTY RIGHTS
----------------------------
14.1 Rights to Background Technology. Each party owns and shall continue to
-------------------------------
own all rights in its intellectual property (including without limitation all
patent, copyright, trade secret and other proprietary rights) ("Intellectual
Property"), except as otherwise expressly agreed upon in writing by the parties.
14.2 Rights to Specifications. All Intellectual Property embodied in
Specifications provided by SI/XXXXX to PARAGON shall be solely owned by
SI/XXXXX.
14.3 Other Intellectual Property. The parties have addressed other
Intellectual Property rights in that certain License Agreement, dated September
19, 2003, entered into by the parties herein.
15. INDEMNIFICATION & INSURANCE
---------------------------
15.1 Each party shall indemnify, defend, and hold harmless the other party
and its parent, subsidiaries and affiliates (including their employees, officers
and directors), from any liability, claims, judgments, costs or expenses
(including, without limitation, reasonable attorneys' fees) arising from any
claim or allegation that may be made by a third party for bodily injury,
including death, to persons or damage to property which is caused by the
negligence or willful misconduct of the indemnifying party. As an express
condition to each party's obligations under this Section 15.1, the indemnifying
party will have sole control
Page 12
of the settlement or defense of claims and allegations, but the party entitled
to indemnification may participate in the defense or settlement at its own
expense and the indemnifying party shall not make any settlement, admission or
statement (i) of any wrongdoing or liability on the part of the indemnified
party, or (ii) that would require any performance obligation on the indemnified
party, or (iii) inhibit the indemnified party from conducting business, without
the prior written consent of such indemnified party. Further, the indemnifying
party shall be relieved of its obligations under this Section with respect to a
claim to the extent that the indemnifying party it is prejudiced by indemnifying
party's failure to promptly notify the indemnifying party of the event giving
rise to such claim.
15.2 PARAGON shall maintain during its performance under this Agreement
Comprehensive General Liability Insurance, including contractual, products
liability and broad form vendors' endorsement with limits of $1,000,000 in
primary plus $4,000,000 in excess combined single limit per occurrence coverage
for bodily injury and property damage. PARAGON shall also maintain (a)
employer's liability insurance with a minimum liability limit of $500,000 plus
$500,000 in excess coverage and, (b) workers' compensation, with the statutory
requirement for coverage.
15.3 Such insurance shall be primary and non-contributory with respect to any
insurance which SI/XXXXX may have and SI/XXXXX shall be named as an additional
insured on such policies for which additional insured coverage is available.
Prior to the commencement of the Term, PARAGON shall furnish to SI/XXXXX a
certificate of insurance evidencing that such insurance is in effect. The
certificate shall also state that SI/XXXXX shall be notified by PARAGON's
insurance carrier(s) within thirty (30) days of any cancellation or material
change to the foregoing insurance. PARAGON shall in such event furnish a new
certificate in the event of cancellation or expiration of any insurance
evidencing that replacement coverage is in effect.
16. LEGAL AND REGULATORY COMPLIANCE
-------------------------------
PARAGON warrants that all Products provided under this Agreement shall
conform to all applicable laws, governmental orders and regulations.
17. AUDIT
-----
Each party shall, during the term of this Agreement and for a period of
two (2) years after any termination or expiration hereof, maintain complete and
accurate books and records relating to its fulfillment of its obligations under
this Agreement (including without limitation PARAGON's obligation to set its
fees in accordance with Section 7). During the Term of this Agreement and such
two (2) year period, each party shall have the right to conduct an audit of the
other party as more specifically set forth in this Section 17. PARAGON may audit
SI/XXXXX under this Section 17 solely with respect to SI/XXXXX'x fulfillment of
its obligations under Section 4. SI/XXXXX may audit PARAGON under this Section
17 solely with respect to PARAGON's fulfillment of its obligations under
Sections 4 and 7. Each party agrees that (a) it shall not audit the other party
more than once per calendar year and (b) any audit shall be conducted, upon
reasonable prior notice and during normal business hours, with a reputable
accounting firm (the "Accountants"), provided that the party conducting the
audit shall not use the designated accountants of the party being audited. Prior
to giving the Accountants access to such records, the Accountants must sign a
confidentiality agreement with the audited party containing terms and conditions
for the benefit of the audited party materially similar to those set forth in
Section 13 of this Agreement; provided that such agreement shall permit the
Accountants to disclose to the auditing party only information concerning: (i)
the method by which PARAGON determined its pricing under Section 7 for a
particular Purchase Order(s), if the audited party is PARAGON, (ii) the
non-compliance of the audited party with the applicable terms of this Agreement,
(iii) the name of the customer and project on which such non-compliance
occurred, if relevant, and (iv) the basis for the auditor's conclusion
(including without limitation the amount of any overpayment by SI/XXXXX to
PARAGON, if applicable). Each party shall pay the charges that it incurs in the
course of the audit; provided that if any inspection reveals an overpayment by
SI/XXXXX to PARAGON of more than seven and a half percent (7.5%) for any
particular Purchase Order, then without limiting SI/XXXXX'x other rights
hereunder, PARAGON shall reimburse
Page 13
SI/XXXXX for the fees and expenses of the Accountant incurred in conducting such
inspection and shall promptly refund SI/XXXXX the overpaid amount.
18. FORCE MAJEURE
-------------
18.1 If the performance of any part of this Agreement by either party is
significantly delayed or rendered impossible by reason of natural disaster, act
of God, acts of war, or other event(s) beyond the control of the party whose
performance is affected and which event is traditionally recognized by judicial
bodies as a force majeure event (hereinafter referred to as "Force Majeure
Event"), the party whose performance has been affected shall immediately give
notice to the other party of the nature of the Force Majeure Event and the
extent of delay expected. Upon receipt of such notice by the party whose
performance is not affected, the performance of this Agreement or any affected
Purchase Order by the affected party shall be suspended, but only to the extent
required by the Force Majeure Event. Such suspension shall continue until the
affected party is reasonably able to resume its performance under this Agreement
or the Purchase Order affected by the Force Majeure Event. Any applicable
schedule related to a party's performance under this Agreement directly affected
by a Force Majeure Event shall be extended on a day-for-day basis to the extent
of such suspension or such longer time as the Parties may agree in writing is
appropriate under the circumstances.
18.2 Upon the occurrence of a Force Majeure Event the affected party shall
undertake reasonable efforts to continue performance hereunder by redirecting
its efforts to duties under this Agreement or parts thereof which are not
affected by the Force Majeure Event and shall continue to progress to the
greatest extent possible. Upon the conclusion of the Force Majeure Event the
affected party shall proceed on those parts of its performance which were
affected by the Force Majeure Event as soon as possible and shall use reasonable
efforts to mitigate the damages in time, cost, and other losses caused by the
Force Majeure Event. Each party agrees to use reasonable efforts to minimize the
delays and costs associated with a Force Majeure Event, and each party agrees to
assume its own costs (including costs related to delay) associated with Force
Majeure Events. Notwithstanding the foregoing in this Section 18 or otherwise in
this Agreement, in the event that either party suffers a Force Majeure Event for
more than one hundred eighty (180) days, either party shall have the right to
terminate this Agreement.
19. GENERAL
-------
19.1 Any notice required or permitted by this Agreement shall be in writing
and shall be sent by facsimile, prepaid registered or certified mail, return
receipt requested, internationally recognized courier or personal delivery,
addressed to the other party at the address specified below. Such notice shall
be deemed to have been given when delivered or, if delivery is not accomplished
by some fault of the addressee, when tendered.
SI/XXXXX: SI/XXXXX, INC.
0000 Xxxxxxx Xxxx
Xxxxx 000
Xxxxxxxxxx, XX 00000
Telecopy No.: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx, President
with copies to:
McKesson Corporation
000 Xxxxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Telecopy No.: (000) 000-0000
Attention: Xxxxxx Xxxxxxxxxx, Counsel
Page 14
McKesson Automated Prescription Systems
000 Xxxxxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Telecopy No.: (000) 000-0000
Attention: Xxxx Xxxxxxxx, President
PARAGON: Paragon Technologies, Inc.
000 Xxxxxxx Xxxx
X.X. Xxx 00 Xxxxxx, XX 00000-0000
Telecopy No.: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx,
Chief Executive Officer
with a copy to:
Xxxxxx Xxxxxxxx LLP
000 Xxxxxx Xxxx
000 Xxxxxxx Xxxx
Xxxxxx, XX 00000
Telecopy No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx, Esq.
19.2 Any notices must be made by prepaid, registered mail or courier, or by
similar means and shall be deemed effective upon receipt.
19.3 PARAGON and SI/XXXXX are independent contractors. Neither party shall be
an agent, employee, joint venture, or partner of the other party, nor shall such
party at any time hold itself out to be in such a relationship to the other
party and shall have no authority to bind the other party to make contracts on
behalf of the other party. Neither party's employees shall not be considered the
employees of the other party or be entitled to any benefits such party grants
its employees.
19.4 The failure of a party to enforce any provision of this Agreement shall
not constitute a waiver of such provision or the right of such party to enforce
such and every other provision.
19.5 The validity, interpretation and performance of this Agreement, the
rights and obligations arising hereunder and any purchase made hereunder shall
be governed by the laws of the State of Delaware, except for its rules with
respect to the conflict of laws.
19.6 Neither of the parties shall be considered to be the drafter of this
Agreement, or any provision in it, for the purpose of any statute, case law or
rule of interpretation or construction that would or might cause any provision
to be construed against the drafter.
19.7 Neither party shall assign this Agreement, or any rights hereunder or
subcontract any of its obligations under this Agreement without the prior
written consent of the other party, such consent not to be unreasonably
withheld, and any assignment in breach of this section shall be deemed null and
void.
19.8 Section headings are inserted for convenience only and shall not be
used to interpret this Agreement.
19.9 The following Sections shall survive termination or expiration of this
Agreement: Section 1, 3.2 (solely with respect to SI/XXXXX Customers with whom
SI/XXXXX has an existing contract), 5, 8, and 10 through and including 19.
Page 15
19.10 If any provision of this Agreement is or becomes illegal or
unenforceable in whole or in part, the remaining provisions shall nevertheless
be valid and binding so long as they continue to express the original intent of
the parties.
19.11 This Agreement and the Appendices to it constitute the entire agreement
between the parties with respect to the subject matter hereof and supersede all
prior agreements, proposals, commitments, writings and communications of any
nature whatsoever. This Agreement may not be modified or any right of a party
waived, except by means of an amendment which expressly references this
Agreement and is duly executed by each of the parties.
Page 16
IN WITNESS WHEREOF, the parties hereto have signed this Agreement by their duly
authorized representatives.
SI/XXXXX, INC. PARAGON TECHNOLOGIES, INC.
By: /s/ Xxxxxxx X. Xxxxxx By: /s/ Xxxxxxx X. Xxxxxxx
--------------------- ----------------------
Xxxxxxx X. Xxxxxx Xxxxxxx X. Xxxxxxx
President Chief Executive Officer
Date: September 19, 2003 Date: September 19, 2003
Page 17
APPENDIX A
PRODUCTS
--------
"Products" shall mean automated picking machines designed for automated order
picking of products, which are typically stackable, and include all of the
following: (i) product channels (which may be single or multi-level) located on
one or both sides of the belt and fixed to a frame, which frame resembles an "A"
in the cross section, (ii) a conveyor running throughout the machine bringing
the products to the "dumping station" at one end of the machine or depositing
products directly into totes or buckets along the length of the machine, (iii)
the ability to process several orders at a time and the utilization of a
computer to assign a certain area on the conveyor so that the length with
respect to each target depends on the size of the order, or tote, or bucket for
every order so that the length of each target area depends on the size of the
respective order, and (iv) one or more electrically-driven dispensers per
"channel" and the ability to control speed electrically or utilize traveling
dispensers that pick from several channels. Product options include (a)
replenishment-assist trolleys and personnel crossovers, (b) dual, long, or
specialty dispensers, (c) any combination and quantity of standard fixed frames,
single-level traveling dispenser frames, or dual-level traveling dispenser
frames with traditional dump station, (d) channel guides, restrictors, and
plastic (magic), (e) product gathering belt, (f) control system hardware and
software, and (g) tote shakers and automatic tote closers.
Products include, but are not limited to, the following items:
Fixed Frame Designs
-------------------
Fixed Frames with channels on both sides with traditional dump station
Fixed Frames with channels on one side and channels on other side with
traditional dump station Fixed Frames with channels on both sides with "totes
through" design Fixed Frames with channels on one side and channels on other
side with "totes through" design Replenishment trolleys and crossovers as
required for above Dual, Long, or Specialty Dispensers as required for above
Channel guides, restrictors, and plastic (magic) as required for above Product
gathering belt as required for above Control System Hardware and Software as
required for above
Traveling Frame Designs
-----------------------
Single Level Traveling Dispenser Frames with traditional dump station Dual Level
Traveling Dispenser Frames with traditional dump station Channel guides,
restrictors, and plastic (magic) as required for above Product gathering belt as
required for above Control System Hardware and Software as required for above
Combo Designs
-------------
Any combination and quantity of Standard Fixed Frames, Single Level Traveling
Dispenser Frames, or Dual Level Traveling Dispenser Frames with traditional dump
station Channel guides, restrictors, and plastic (magic) as required for above
Product gathering belt as required for above Control System Hardware and
Software as required for above
Page 18
EXHIBIT C
---------
LICENSE AGREEMENT
This License Agreement (the "Agreement") is effective as of September
19, 2003 (the "Effective Date"), by and between SI/XXXXX, INC. ("Licensee") and
PARAGON TECHNOLOGIES, INC. ("Licensor").
WHEREAS, the parties wish to formalize their agreement in writing with
respect to certain intellectual property;
WHEREAS, the parties wish this Agreement to supercede any prior written
agreement with respect to the subject matter hereof; and
NOW, THEREFORE, in consideration of the mutual promises of the parties,
and for good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties, intending to be legally bound hereby, agree to
the following terms:
1. LICENSE GRANT
1.1. License to Intellectual Property. To the extent that Licensor
--------------------------------
provided or otherwise disclosed Intellectual Property (as defined in Section
1.2) to the Licensee prior to the Effective Date, Licensor hereby grants
Licensee an unrestricted, non-exclusive, irrevocable, perpetual, royalty-free,
worldwide license to all such Intellectual Property that permits Licensee to use
such Intellectual Property in any way Licensee determines is necessary or
desirable in the operation of its business, whenever and however conducted,
including, without limitation, making, using, selling, developing, offering for
sale and importing any product or service. In no event, however, shall the
foregoing be construed to be a license to any Intellectual Property that
comprises Licensor's Products (as defined in Exhibit A) or otherwise permit
Licensee to manufacture, offer for sale, sell or import Licensor's Products.
Licensor hereby reserves to itself all rights in and to the Intellectual
Property that comprises Licensor's Products. In no event shall the foregoing or
any other provision of this Agreement be construed to grant any right to or in
any trademark or trade name of any party, whether registered or unregistered.
1.2. Definition of Intellectual Property. For the purposes of this
-----------------------------------
Agreement, "Intellectual Property" means any or all of the following and all
rights in, arising out of, or associated therewith: (i) all United States
patents and applications therefor and all reissues, divisions, renewals,
extensions, provisionals, continuations and continuations-in-part thereof; (ii)
all inventions (whether patentable or not), invention disclosures, improvements,
trade secrets, proprietary information, know-how, technology, and technical
data, and all documentation relating to any of the foregoing; (iii) all
copyrights, copyrights registrations and applications therefore, and all other
rights corresponding thereto throughout the world; (iv) all industrial designs
and any registrations and applications therefore throughout the world; (v) all
mask works and any registrations and applications therefore throughout the
world; (vi) all databases and data collections and all rights therein throughout
the world; (vii) all moral and economic rights of authors and inventors, however
denominated, throughout the world, and (viii) any similar or equivalent rights
to any of the foregoing anywhere in the world.
1.3. Assignment of Intellectual Property. Licensor shall not assign
-----------------------------------
the Intellectual Property, nor any of its rights therein, in whole or in part,
unless such assignment is made subject to the license granted in this Agreement.
2. OWNERSHIP
2.1. Ownership of Intellectual Property. Licensee acknowledges and
----------------------------------
agrees that all Intellectual Property licensed to Licensee under Section 1.1 as
of the Effective Date is and shall remain the sole property of Licensor or its
respective licensors.
2.2. Ownership of Jointly Developed IP and Solely Developed IP;
----------------------------------------------------------
License to Licensor.
-------------------
a. Except as set forth in Section 2.2(c) below, Licensee
shall be the sole and exclusive owner to all right, title and interest in and to
Jointly Developed IP and Solely Developed IP (as such terms are defined in
Exhibit A), including without limitation, all Intellectual Property therein. To
the extent any Jointly Developed IP or Solely Developed IP does not qualify as a
work-made-for-hire under the Copyright Act or if Licensor should otherwise be
deemed to retain any rights to such, then Licensor does hereby expressly and
irrevocably assign and transfer all rights, title, and interest, worldwide, in
and to the Jointly Developed IP and Solely Developed IP, including without
limitation, all patent, copyright, trade secret and other intellectual property
rights therein. Licensee shall solely and exclusively own such Jointly Developed
IP regardless if such intellectual property constitutes an Improvement. Licensor
agrees, without demanding any further consideration, to execute all documents
reasonably requested by Licensee for perfection and to effect recordation of
Licensee's rights to the Jointly Developed IP and Solely Developed IP, in each
case at Licensee's cost and expense.
b. Licensee hereby grants Licensor an unrestricted,
non-exclusive, irrevocable, perpetual, royalty-free, worldwide license to the
Jointly Developed IP that permits Licensor to use the Jointly Developed IP in
any way that Licensor determines is necessary or desirable in the operation of
its business whenever and however conducted, including, without limitation,
making, using, selling, developing, offering for sale and importing any product
or service, but subject to the covenant not to compete set forth in Section 5.7
of the Stock Purchase Agreement dated the Effective Date by and among Licensor,
Licensee and McKesson Automation Systems Inc.
c. Licensor shall be the sole and exclusive owner to all
right, title and interest in and to Technology that comprises Licensor's
Products ("Licensor's IP"), including without limitation, all Intellectual
Property therein. To the extent any of Licensor's IP does not qualify as a
work-made-for-hire under the Copyright Act or if Licensee should otherwise be
deemed to retain any rights to such, then Licensee does hereby expressly and
irrevocably assign and transfer all right, title, and interest, worldwide, in
and to the Licensor's IP, including without limitation, all patent, copyright,
trade secret and other intellectual property rights therein. Licensor shall
solely and exclusively own such Licensor's IP regardless if such intellectual
property constitutes an Improvement. Licensee agrees, without demanding any
further consideration, to execute all documents reasonably requested by Licensor
for perfection and to effect recordation of Licensor's rights to the Licensor's
IP, in each case at Licensor's cost and expense.
3. DISCLAIMER OF WARRANTIES
EACH PARTY ACKNOWLEDGES AND AGREES THAT NEITHER PARTY NOR ANY OF THEIR
RESPECTIVE SUBSIDIARIES MAKES ANY REPRESENTATIONS OR EXTENDS ANY WARRANTIES
WHATSOEVER UNDER THIS AGREEMENT, INCLUDING WITHOUT LIMITATION ANY IMPLIED
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE,
ENFORCEABILITY OR NON-INFRINGEMENT.
2
4. LIMITATION OF LIABILITY
IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR ANY SPECIAL,
CONSEQUENTIAL, INDIRECT, INCIDENTAL OR PUNITIVE DAMAGES OR LOST PROFITS, HOWEVER
CAUSED AND ON ANY THEORY OF LIABILITY (INCLUDING NEGLIGENCE) ARISING IN ANY WAY
OUT OF THIS AGREEMENT, WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES. IN NO EVENT SHALL EITHER PARTY'S LIABILITY TO THE
OTHER PARTY HEREUNDER EXCEED ONE HUNDRED THOUSAND DOLLARS ($100,000).
5. MISCELLANEOUS PROVISIONS
5.1. Any notice required or permitted by this Agreement shall be in
writing and shall be sent by facsimile, prepaid registered or certified mail,
return receipt requested, internationally recognized courier or personal
delivery, addressed to the other party at the address specified below. Such
notice shall be deemed to have been given when delivered or, if delivery is not
accomplished by some fault of the addressee, when tendered.
LICENSEE: SI/XXXXX, INC.
0000 Xxxxxxx Xxxx
Xxxxx 000
Xxxxxxxxxx, XX 00000
Telecopy No.: (000) 000-0000
Attention: Xxxxxxx Xxxxxx, President
with a copy to:
McKesson Corporation
000 Xxxxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Telecopy No.: (000) 000-0000
Attention: Xxxxxx Xxxxxxxxxx, Counsel
LICENSOR: Paragon Technologies, Inc.
000 Xxxxxxx Xxxx
X.X. Xxx 00
Xxxxxx, XX 00000-0000
Telecopy No.: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx, Chief Executive Officer
with a copy to:
Xxxxxx Xxxxxxxx LLP
000 Xxxxxx Xxxx
000 Xxxxxxx Xxxx
Xxxxxx, XX 00000
Telecopy No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx, Esq.
3
5.2. Any notices must be made by prepaid, registered mail or courier,
or by similar means and shall be deemed effective upon receipt.
5.3. Licensor and Licensee are independent contractors. Neither party
shall be an agent, employee, joint venture, or partner of the other party, nor
shall such party at any time hold itself out to be in such a relationship to the
other party and shall have no authority to bind the other party to make
contracts on behalf of the other party. Neither party's employees shall not be
considered the employees of the other party or be entitled to any benefits such
party grants its employees.
5.4. The failure of a party to enforce any provision of this
Agreement shall not constitute a waiver of such provision or the right of such
party to enforce such and every other provision.
5.5. The validity, interpretation and performance of this Agreement,
the rights and obligations arising hereunder and any purchase made hereunder
shall be governed by the laws of the State of Delaware, except for its rules
with respect to the conflict of laws.
5.6. Neither of the parties shall be considered to be the drafter of
this Agreement, or any provision in it, for the purpose of any statute, case law
or rule of interpretation or construction that would or might cause any
provision to be construed against the drafter.
5.7. Neither party shall assign this Agreement, or any rights
hereunder or subcontract any of its obligations under this Agreement without the
prior written consent of the other party, such consent not to be unreasonably
withheld or delayed.
5.8. Section headings are inserted for convenience only and shall not
be used to interpret this Agreement.
5.9. If any provision of this Agreement is or becomes illegal or
unenforceable in whole or in part, the remaining provisions shall nevertheless
be valid and binding so long as they continue to express the original intent of
the parties.
5.10. This Agreement and the Appendices to it constitute the entire
agreement between the parties with respect to the subject matter hereof and
supersede all prior agreements, proposals, commitments, writings and
communications of any nature whatsoever. For the avoidance of doubt, and solely
with respect to the subject matter hereof, this Agreement supercedes and
replaces the applicable terms in that certain Investment Agreement, dated
January 27, 1993, and as amended January 28, 1995, September 23, 1998, and
November 27, 2000, and as otherwise amended. This Agreement may not be modified
or any right of a party waived, except by means of an amendment which expressly
references this Agreement and is duly executed by each of the parties.
4
IN WITNESS WHEREOF, the parties hereto have signed this Agreement by
their duly authorized representatives.
SI/XXXXX, INC. PARAGON TECHNOLOGIES, INC.
By: /s/ Xxxxxxx X. Xxxxxx By: /s/ Xxxxxxx X. Xxxxxxx
Print Name: Xxxxxxx X. Xxxxxx Xxxxxxx X. Xxxxxxx
Title: President Chief Executive Officer
Date: September 19, 2003 Date: September 19, 2003
5
EXHIBIT A
---------
DEFINITIONS
1. "Improvements" to the Intellectual Property means any modifications,
derivative works or translations to the Intellectual Property.
2. "Jointly Developed IP" shall mean any Technology that is jointly
conceived, developed or invented by Licensor and Licensee prior to the Effective
Date.
3. "Licensor's Products" shall mean automated picking machines designed for
automated order picking of products, which are typically stackable, and include
all of the following: (i) product channels (which may be single or multi-level)
located on one or both sides of the belt and fixed to a frame, which frame
resembles an "A" in the cross section, (ii) a conveyor running throughout the
machine bringing the products to the "dumping station" at one end of the machine
or depositing products directly into totes or buckets along the length of the
machine, (iii) the ability to process several orders at a time and the
utilization of a computer to assign a certain area on the conveyor so that the
length with respect to each target depends on the size of the order, or tote, or
bucket for every order so that the length of each target area depends on the
size of the respective order, and (iv) one or more electrically-driven
dispensers per "channel" and the ability to control speed electrically or
utilize traveling dispensers that pick from several channels. Product options
include (a) replenishment-assist trolleys and personnel crossovers, (b) dual,
long, or specialty dispensers, (c) any combination and quantity of standard
fixed frames, single-level traveling dispenser frames, or dual-level traveling
dispenser frames with traditional dump station, (d) channel guides, restrictors,
and plastic (magic), (e) product gathering belt, (f) control system hardware and
software, and (g) tote shakers and automatic tote closers.
4. "Solely Developed IP" shall mean Improvements to the Technology made,
conceived, reduced to practice or generated solely by Licensee.
5. "Technology" means any and all of the following, in any format:
(i) equipment design and integration, design tools, documentation, technical
information, specifications, annotations or comments; (ii) technological models,
design documents, schematics, diagrams, logic diagrams and product
specifications; (iii) know-how, show-how, techniques, technical information,
works of authorship or other creative works, processes, devices, prototypes,
test methodologies, hardware development tools, drawings, records,
documentation, ideas, knowledge, data or the like; (iv) any media on which any
of the foregoing is recorded, and any other tangible embodiments of any of the
foregoing, as such was or is contributed, provided or disclosed by Licensor to
Licensee. The term Technology includes Intellectual Property embodied therein,
but expressly does not include trademarks, trade names, or service marks.
6
