Exhibit 2.1
Vital Health Technologies, Inc.
Form 10-KSB
File No. 000-15243
ASSIGNMENT OF ASSETS IN LIEU OF FORECLOSURE AGREEMENT
THIS ASSIGNMENT OF ASSETS IN LIEU OF FORECLOSURE AGREEMENT
(the "Agreement"), made and entered into this 12 day of November,
1998, by and between Aurora Capital Management, LLC, a Minnesota
limited liability company ("Secured Party"), 0000 X. Xxxxxx Xxxx
Xxxxx, Xxxx Xxxxx, Xxxxxxxxx 00000, and Vital Heart Systems,
Inc., a Minnesota corporation ("Debtor"), 0000 Xxxxxxx Xxxxxx,
Xxxxx Xxxx Xxxx, Xxxxxxxxx 00000 EIN 00-0000000;
WITNESSETH:
WHEREAS, Debtor has been engaged in a software and hardware
business primarily related to the development of a variance
cardiograph (the "Business"); and
WHEREAS, in connection with Debtor's Business, Debtor heretofore
became indebted and otherwise became obligated to Secured Party
for loans of money and provision of services as set forth in the
Agreement dated January 28, 1997 (the "Business Agreement") and a
corresponding promissory note dated December 30, 1997, copies of
which are attached hereto as Exhibit 1, has become further
indebted pursuant to a promissory note dated August 13, 1998 (the
"Note") a copy of which is attached hereto as Exhibit 2, which
was secured by the assets of Debtor (the "Collateral") as set
forth in the Security Agreement dated August 13, 1998 (the
"Security Agreement") a, copy of which is attached hereto as
Exhibit 3; and
WHEREAS, Debtor has defaulted in the obligations provided for in
such Business Agreement, Note and Security Agreement and has
acknowledged the same to Secured Party; and
WHEREAS, Debtor has received Notice of Retention of Collateral
from Secured Party dated November 11, 1998, a copy of which is
attached hereto as Exhibit 4 (the "Notice") and desires to
relinquish all rights, claims and interests in and to the
Collateral in consideration of any claims for a deficiency
judgment, $ 10 and other good and valuable consideration, the
receipt and sufficiency of which is acknowledged by the parties.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants, and agreements of the parties hereinafter
set forth, the parties hereto, intending to be legally bound, do
hereby agree as follows:
Section 1
RELINQUISHMENT OF ASSETS
1.1 Relinquishment of Assets. Secured Party agrees to
accept, and acquire from Debtor, and Debtor agrees to sell,
transfer, assign, convey, and deliver to Secured Party, all
right, title, and interest of Debtor in and to all of the rights
and assets, real, personal, and mixed, tangible or intangible, in
the Collateral described in the Security Agreement, but expressly
excluding the rights and assets to be retained by Debtor
identified in Section 1.3, and as further qualified by the
reservation by Debtor of the rights identified in Section 1.4.
Subject to such express exclusion and qualification, the
foregoing rights and assets shall hereinafter collectively be
referred to as the "Assets." Without in any way limiting the
generality of the foregoing, the Assets shall include all right
and interest owned or held by Debtor in the following:
a. Inventories. All inventories of (1) computer program
code (in all media) and materials, including the Software
Programs; (2) program documentation, including user materials;
and (3) all other unused or reusable materials, stores, and
supplies, in each case to the extent used in, relating to, or
arising out of the Business (the "Inventory").
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b. Technical Documentation All technical and descriptive
materials (other than Inventory) relating to the acquisition,
design, development, use, or maintenance of computer code,
hardware designs and data and program documentation and materials
used in the Business (the "Technical Documentation").
c. Software Contracts. All contracts, agreements,
licenses, and other commitments and arrangements, oral or
written, with any person or entity respecting the ownership,
license, acquisition, design, development, distribution,
marketing, use, or maintenance of computer program code, related
technical or user documentation, and databases, and hardware
designs and data, in each case relating to or arising out of the
Business (the "Contracts"), including without limitation (1)
licenses from third parties (development and/or marketing); (2)
licenses from third parties (internal use only); (3) development
contracts, work-for-hire agreements, and consulting and
employment agreements; (4) distributorships, dealerships,
franchises, and manufacturer's representative contracts; (5)
licenses and sublicenses to others; and (6) maintenance, support,
or enhancement agreements.
d. Computer Equipment. All equipment and devices
(including data processing hardware and related
telecommunications equipment, media, and tools) used in the
Business (the "Computer Equipment"), including Debtor's rights
under all related warranties, if any.
e. Office Furniture. All office furniture and fixtures
used in the Business (the "Office Furniture").
f. Leases. None.
g. Other Contracts. All contracts, agreements, licenses,
commitments, arrangements, and permissions respect the Software
Business (the "General Contracts") to the extent not otherwise
classified as Software Contracts in Schedule 1.1.a, Leases in
Schedule 1.1.d, or Insurance Policies in Schedule 1.1.m. As of
the Determination Date, the General Contracts consist of the
items listed in Schedule 1.1.g.
h. Real Property. None
i. Business Records. All business and marketing records,
including, inventory records, budgets, customer lists, employment
and consulting agreements, supplier lists, information and data
respecting leased or owned equipment, files, correspondence and
mailing lists, advertising materials and brochures, and other
business records used in the Business, but excluding accounting
and operating records, asset ledgers, tax records, records
relating to federal and state securities agencies, corporate
minute books personnel records, payroll records and all other
accounting records (the "Business Records").
j. Authorizations. All governmental approvals,
authorizations, certifications, consents, variances, permissions,
licenses, and permits to or from, or filings, notices, or
recordings to or with, federal, state, and local governmental
authorities (the "Authorizations").
k. Accounts Receivable. All accounts receivable, including
all license fees and maintenance fees and charges owing or to
become owing to Debtor under Contracts, in each case relating to
or arising from the Business (the "Accounts Receivable").
l. Intellectual Property. All patents, trademarks, service
marks, trade names, and copyrights (including registrations,
licenses, and applications pertaining thereto, whether published
or unpublished), and all other intellectual property rights,
trade secrets, and other proprietary information, processes, and
formulae used in the Business or otherwise necessary for the
ownership and use of the Assets and the conduct of the Business
(the "Intellectual Property").
m. Insurance Policies. All insurance and reinsurance,
surety, bonding, or indemnity policies, binders, or contracts,
and the benefits of any prior insurance coverage to the extent
still available, as established or obtained with respect to the
Business (the "Insurance Policies").
n. Claims. All claims Debtor may have against any person
relating to or arising from the Assets or the Business, including
rights to recoveries for damages or defective goods, to refunds,
insurance claims, and chooses in action ("Claims").
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o. Liquid Assets. None
p. Business Interests, Participations, and Ownership
Positions. All interests, participations, and ownership
positions held by Debtor in any corporation, partnership, joint
venture, comarketing arrangement, or similar enterprise or
undertaking relating to the Business.
As of the Determination Date, such Assets consist of the items
contained in Schedule 1.
1.2 Intent of the Parties. Although the Schedule to this
Agreement is intended to be complete, to the extent any rights or
assets of Debtor primarily relate to the Business or are
otherwise necessary for the ownership and use of the Assets and
the conduct of the Business, but are not properly itemized or do
not appear on the applicable Schedule where required, then,
unless this Agreement otherwise provides directly for Secured
Party to provide for or obtain such rights or assets in a
different way, the general language of Section 1. 1 shall govern
and such rights and assets shall nonetheless be deemed
transferred to Secured Party at Closing. It is mutually
acknowledged that the Schedule to Section 1. 1 is to be prepared
as it relates to the Collateral in the possession of Secured
Party and the parties have agreed on their contents shall not
impair the effectiveness of this Agreement.
1.3 Excluded Assets. Debtor shall not sell, transfer or
assign to Secured Party, and Secured Party shall not accept
assignment from Debtor of, the assets identified in Schedule 1.3
(the "Excluded Assets").
1.4 Reservation of Rights by Debtor. None. Debtor
knowingly waives all rights to the Collateral, and acknowledges
and agrees that Debtor has defaulted under the Business
Agreement, Note, and Security Agreement Secured Party has
properly asserted its rights to retention
Section 2.
NONASSUMPTION OF LIABILITIES
2.1 Liabilities. Debtor acknowledges, affirms and agrees
that Secured Party has not and will not assume any liabilities of
Debtor. Without in any way limiting the foregoing, but by way of
example and not limitation Secured Party does not assume and
responsibility or obligation whatsoever for any of the following
liabilities or obligations expressly identified in this Section
2.2 (the "excluded Liabilities"):
a. Liabilities. Any none numerated liability or obligation
of Debtor of any kind, known or unknown, contingent or otherwise
relating to the Business.
b. Taxes. Any liability or obligation of Debtor for-
federal, state, or local income, franchise, property sales or
use, or recapture taxes, assessments, and penalties, whether
arising out of the transactions contemplated by this Agreement or
otherwise.
c. Violations of Law. Any liability or obligation
resulting from violations of any applicable laws or regulations
by Debtor prior to the Closing Date or infringement of third-
party rights or interests.
d. Employee Liabilities. Any employee liabilities relating
to present and past employees of the Business with respect to
plans, programs, policies, commitments, and other benefit
entitlement established or existing on or prior to Closing
(whether or not such liabilities are accrued or payable at
Closing, and whether or not such liabilities are contingent in
nature), including
1. Any liability or obligation for workers' compensation.
2. Any current or future liabilities to employees retiring on,
before, or after Closing, and their dependents.
3. Any current or future liabilities for benefits that may
have been accrued or earned by any employees associated
with the Business on or before Closing under any pension
plans relating to service prior to the Closing Date.
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4. Any current of future liabilities for claims incurred
prior to Closing and related expenses with respect to any
employees associated with the Business under any welfare or
disability plans established or existing at or prior to Closing,
regardless of when filed with, Debtor, or the claims
administrator for any such plan.
5. Any retrospective premium on pension, savings, thrift,
or profit-sharing plan contribution relating to any employees
associated with the Business incurred or accrued prior to the
Closing Date, regardless of when invoiced or recorded.
6. Any monetary liability for wages or severance payments
that may have arisen or may arise at any time in favor of any of
Debtor's employees or former employees under any plan, program,
policy, commitment, contract, or other benefit entitlement.
e. Product Liability. Any liability or obligation for
product liability or warranty claims or damage claims arising out
of defects in or failures of any product, program, or material of
Debtor or the Business provided, distributed, licensed, or
delivered prior to the Closing Date.
f. Litigation. Any Litigation (as defined in Section 4.20)
pending or threatened against Debtor or the Assets.
g. Improperly Recorded Liabilities. Any liability or
obligation that under generally accepted accounting principles
("GSSP") would be required to have been accrued and reflected in
the financial statements of the Business.
Section 3
RETENTION OF ASSETS
3.1 Retention Notice. Debtor acknowledges and agrees that
it has received notice of default, an opportunity to cure such
default, failed to cure such default, and received notice of
retention of the assets subject to the Security Agreement
pursuant to Minnesota Statutes Section 336.9-505. Buyer agrees
that Secured Party has exercised its right of retention and
waives any claims to the Collateral or to the contrary.
Section 4
CLOSING
4.1 Closing. The closing of this Agreement is effective
immediately purchase and sale of the Assets and the transfer and
assumption of the Assumed Liabilities (the "Closing (the "Closing
Date").
4.2 Actions at Closing. At Closing, Secured Party and
Debtor shall take the following actions, in addition to such
other actions as may otherwise be required under this Agreement:
a. Copies of Consents. Debtor shall deliver to Secured
Party copies of all Required Contract Consents and all Required
Government Consents.
b. Conveyance Instruments. Debtor shall deliver to Secured
Party such, bills of sale, assignments, and other instruments of
conveyance and transfer as Secured Party may reasonably request
to effect the assignment to Secured Party of the Assets.
c. Entry Into Premises. Debtor shall give Secured Party
complete and unrestricted access to the facilities of the
Business.
4.3 Further Assurances. At and after the Closing, without
further consideration, Debtor shall take all such other action
and shall procure or execute, acknowledge, and deliver all such
further certificates, conveyance instruments, consents, and other
documents as Secured Party or its counsel may reasonably request
(1) to vest in Secured Party, and perfect and protect Secured
Party's right,title, and interest in, and enjoyment of,the Assets and
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the Business, or (2) to ensure more effectively the compliance of
Debtor with its agreements, covenants, warranties,and representatives
under this Agreement.
Section 5
INDEMNITY
5.1 Indemnification by Debtor. Debtor shall indemnify,
defend, and hold harmless Secured Party and its respective
successors and assigns and the directors, officers, employees,
and agents of each (collectively, the "Secured Party Group"), at,
and at any time after, the Closing, from and against any and all
demands, claims, actions, or causes of action, assessments,
losses, damages, liabilities, costs, and expenses, including
reasonable fees and expenses of counsel, other expenses of
investigation, handling, and litigation, and settlement amounts
together with interest and penalties (collectively, a "Loss" or
"Losses"), asserted against, resulting to, imposed upon, or
incurred by the Secured Party Group, directly or indirectly, by
reason of, resulting from, or arising in connection with any of
the following:
a. Breach of Obligation. Any breach of any representation,
warranty, or agreement of Debtor contained in or made pursuant to
this Agreement, including the agreements and other instruments
contemplated hereby.
b. Excluded Liabilities. Any liabilities or obligations of
any kind or nature whatsoever, whether accrued, absolute,
contingent, or otherwise, known or unknown, arising out of or in
connection with the conduct of the Business or the ownership or
use of the Assets prior to the Closing.
c. Failure to Obtain Consents. Any failure to obtain the
Required Government Consents or the Required Contract Consents.
d. Noncompliance with Bulk Sales Law. Any failure to
comply with any "bulk sales" or similar laws relating to notices
to creditors.
e. Incidental Matters. To the extent not covered by the
foregoing, any and all demands, claims, actions or causes of
action, assessments, losses, damages, liabilities, costs, and
expenses, including reasonable fees and expenses of counsel,
other expenses of investigation, handling, and litigation, and
settlement amounts, together with interest and penalties,
incident to the foregoing.
5.2 Notice of Claim. The Secured Party entitled to
indemnification shall promptly deliver to the Debtor notice in
writing (the "Required Notice") of any claim for recovery under
Section 14, specifying in reasonable detail the nature of the
Loss, and, if known, the amount, or an estimate of the amount, of
the liability arising therefrom (the "Claim"). The Secured Party
shall provide to the Debtor as promptly as practicable thereafter
information and documentation reasonably requested by the Debtor
to support and verify the claim asserted, provided that, in so
doing, it may restrict or condition any disclosure in the
interest of preserving privileges of importance in any
foreseeable litigation.
5.3 Defense. If the facts pertaining to the Loss arise out
of the claim of any third party (other than a member of the
Secured Party Group) available by virtue of the circumstances of
the Loss, the Debtor may assume the defense or the prosecution
thereof, including the employment of counsel or accountants, at
its cost and expense. The Secured Party shall have the right to
employ counsel separate from counsel employed by the Debtor in
any such action and to participate therein, but the fees and
expenses of such counsel employed by the Secured Party shall be
at its expense. The Secured Party shall have the right to
determine and adopt (or, in the case of a proposal by Debtor, to
approve) a settlement of such matter in its reasonable
discretion, except that Secured Party need not consent to any
settlement that (1) imposes any nonmoneraty obligation or (2)
Debtor does not agree to pay in full. The Debtor shall not be
liable for any settlement of any such claim effected without its
prior written consent, which shall not be unreasonably withheld.
Whether or not the Debtor chooses to so defend or prosecute such
claim, all the parties hereto shall cooperate in the defense or
prosecution thereof and shall furnish such records, information,
and testimony, and attend such conferences, discovery
proceedings, hearings, trials, and appeals, as may be reasonably
requested in connection therewith.
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Section 6
MISCELLANEOUS
6.1 Entire Agreement. This Agreement (including the
Schedule), and the other certificates, agreements, and other
instruments to be executed and delivered by the parties in
connection with the transactions contemplated hereby; constitute
the sole understanding of the parties with respect to the subject
matter hereof. No amendment, modification, or alteration of the
terms or provisions of this Agreement shall be binding unless the
same shall be in writing and duly executed by the parties hereto.
6.2 Parties Bound by Agreement; Successors and Assigns.
The terms, conditions, and obligations of this Agreement shall
inure to the benefit of and be binding upon the parties hereto
and the respective successors and assigns thereof. Without the
prior written consent of the other party, Secured Party may
assign its rights, duties, or obligations hereunder or any part
thereof to any other person or entity, which shall thereupon
become Secured Party, provided that at the time of such
assignment Secured Party unconditionally and irrevocably
guarantees the payment and performance of any duties or
obligations so assigned.
6.3 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall for all purposes be deemed
to be an original and all of which shall constitute the same
instrument.
6.4 Headings. The headings of the Sections and paragraphs
of this Agreement are inserted for convenience only and shall not
be deemed to constitute part of this Agreement or to affect the
construction hereof
6.5 Modification and Waiver. Any of the terms or
conditions of this Agreement may be waived in writing at any time
by the party that is entitled to the benefits thereof. No waiver
of any of the provisions of this Agreement shall be deemed to or
shall constitute a waiver of any other provision hereof (whether
or not similar).
6.6 Expenses. Debtor and Secured Party shall each pay all
costs and expenses incurred by it or on its behalf in connection
with this Agreement and the transactions contemplated hereby,
including fees and expenses of its own financial consultants,
accounts, and counsel. Debtor shall reimburse Secured Party for
one half of the costs of the preparation, examination, and audit
of the Closing Date Balance Sheet by (Secured Party's accounting
firm).
6.7 Notices. Any notice, request, instruction, or other
document to be given hereunder by any party hereto to any other
party hereto shall be in writing and delivered personally or sent
by registered or certified mail, postage prepaid, if to Debtor
to:
VITAL HEART SYSTEMS, INC.
0000 Xxxxxxxxx Xxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxx Xxxxxxx Director
if to Secured Party to:
AURORA CAPITAL MANAGEMENT, LLC
0000 X. Xxxxxx Xxxx Xxxxx
Xxxx Xxxxx, Xxxxxxxxx 00000
Attention: Xxxxxxx Xxxxxx
or at such other address for a party as shall be specified by
like notice. Any notice that is delivered personally in the
manner provided herein shall be deemed to have been duly given to
the party to whom it is directed upon actual receipt by such
party (or its agent for notices hereunder). Any notice that is
addressed and mailed in the manner herein provided shall be
conclusively presumed to have been duly given to the party to
which it is addressed at the close of business, local time of the
recipient, on the fourth business day after the day it is so
placed in the mail.
6.8 Bulk Sales Law. The parties waive compliance with any
bulk sales laws or similar laws relating to notices to creditors.
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6.9 Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of
Minnesota without giving effect to the principles of conflicts of
law thereof.
6.10 Public Announcements. Debtor shall not issue any such
press release or make any public statement without the agreement
of the Secured Party, except as such party's counsel advises in
writing may be required by law.
6.11 Third-Party Beneficiaries. With the exception of (1)
the parties to this Agreement and (2) the Secured Party Group
with respect to the matters insuring to their benefit hereunder,
there shall exist no right of any person to claim a beneficial
interest in this Agreement or any rights occurring by virtue of
this Agreement.
6.12 "Including." Words of inclusion shall not be construed
as terms of limitation herein, so that references to "included"
matters shall be regarded as nonexcutive, noncharacterizing
illustrations.
6.13 References. Whenever reference is made in this
Agreement to any Article, Section, or Schedule, such reference
shall be deemed to apply to the specified Article or Section of
this Agreement or the specified Schedule to this Agreement.
6.14 Survival of Agreements. All Covenants, agreements,
representations, and warranties made herein shall survive the
execution and delivery of this Agreement and the Closing.
6.15 Incorporation of Exhibits. All Exhibits and Schedules are
incorporated herein by this reference and form part of this
Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed on its behalf on the date indicated.
AURORA CAPITAL MANAGEMENT LLC
By: /s/ Xxxxxxx Xxxxxx
Title: President
Date: 11-12-98
VITAL HEART SYSTEMS, INC.
By:/s/ Xxxx Xxxxxxx
Title: Director
Date: 11-12-98
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