EXHIBIT 2
ASSET PURCHASE AGREEMENT
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THIS ASSET PURCHASE AGREEMENT (hereinafter the "Agreement") is made,
executed and entered into on this 3rd day of October, 2001 by and between
MEDI-FLEX HOSPITAL PRODUCTS, INC., a Kansas corporation (hereinafter
"Medi-Flex") and MEDICAL ACTION INDUSTRIES INC., a Delaware corporation
(hereinafter "Medical Action" or "Buyer").
W I T N E S S E T H:
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WHEREAS, Medi-Flex is engaged in the business of manufacturing and
marketing IV start and CVC dressing change kits for the hospital market (the
"Product Line"); and
WHEREAS, the Buyer wishes to purchase or acquire from Medi-Flex and
Medi-Flex wishes to sell, assign and transfer to the Buyer, substantially all of
the assets and properties directly used in connection with the production,
marketing and promotion of the products constituting the Product Line (the
"Products" and such business being referred to as the "Business"), all for the
purchase price and upon the terms and subject to the conditions hereinafter set
forth; and
WHEREAS, concurrently with the execution and delivery of this
Agreement, Medi-Flex and Medical Action will enter into an agreement providing
for the transition of the Business, including the supply of certain components
of the Product Line and raw materials for a specified period after the Closing
(as defined below);
NOW, THEREFORE, in consideration of the mutual covenants,
representations and warranties made herein, and of the mutual benefits to be
derived hereby, the parties hereto agree as follows:
ARTICLE I
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SALE AND PURCHASE OF THE ASSETS
1.1. Assets. Subject to and upon the terms and conditions set forth in
this Agreement, at the Closing, Medi-Flex will sell, transfer, convey, assign
and deliver to the Buyer and the Buyer will purchase or acquire from Medi-Flex
all right, title and interest of Medi-Flex in and to the properties, assets and
rights relating directly to or used exclusively in connection with the Business
as the same may exist on the Closing Date (hereinafter, the "Assets") set forth
below:
(a) all machinery, equipment, tools, dies, molds and parts and
similar property described in Schedule 1.1(a) attached hereto;
(b) all inventories of raw materials, work in process, finished
products, goods, spare parts, replacement and component parts,
and office and other supplies (collectively, the
"Inventories"), including Inventories held at any location
controlled by Medi-Flex and Inventories previously purchased
and in transit to Medi-Flex at such locations, all as described
in Schedule 1.1(b) attached hereto which shall be provided at
closing;
(c) all rights in and to (a) the trademarks, service marks, trade
names, and product names described in Schedule 1.1(c) attached
hereto, including any registrations obtained in connection
therewith, together with the goodwill symbolized thereby; (b)
the copyrights and registrations thereof set forth on Schedule
1.1(c), but excluding the name "Medi-Flex", which shall be
utilized by Medical Action to the extent set forth in Section
4.2.3; and (c) such inventions, processes, designs, formulae,
trade secrets, know-how, confidential and technical
information, manufacturing, engineering and technical drawings,
product specifications and confidential business information
developed by or for Medi-Flex pertaining solely to the Business
(hereinafter collectively referred to as "Intellectual
Property"), all as more specifically described in Schedule
1.1(c) attached hereto;
(d) all of the rights of Medi-Flex under all contracts,
arrangements, licenses, leases and other agreements (excluding,
however, any right to receive payments or accounts receivable
for Products sold or services rendered prior to the Closing
Date, all of which shall be expressly maintained by Medi-Flex),
and the right to receive goods and services, pursuant to such
agreements and to assert claims and take other rightful actions
in respect of breaches, defaults, and other violations of such
contracts, arrangements, licenses, leases and other agreements
and otherwise in connection with the Business being acquired;
(e) all rights under any of the Intellectual Property to xxx and
seek remedies against past, present and future infringements
thereof, and rights of priority and protection of interests
therein under the laws of the United States (together with all
Intellectual Property rights included in the other clauses of
this Section 1.1, the "Intellectual Property Assets");
(f) all books, records, manuals and other materials (in any form or
medium), which relate solely to the Product Line, including,
without limitation, advertising matter, catalogues, price
lists, correspondence, mailing lists, lists of customers,
distribution lists, photographs, production data, sales and
promotional materials and records, purchasing materials and
records, manufacturing and quality control records and
procedures, research and development files, records, data and
laboratory books, Intellectual Property disclosures, media
materials and plates, sales order files and copies of
litigation files, in any event, solely pertaining to the
Product Line;
(g) to the extent their transfer is permitted by law and also to
the extent they relate solely to the Product Line, all consents
of any government, any state or other
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political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions
of or pertaining to government, including, without limitation,
any government authority, agency, department, board, commission
or instrumentality of the United States or any political
subdivision thereof, and any tribunal or arbitrator(s) of
competent jurisdiction, and any self-regulatory organization,
including all applications therefor;
(h) all guarantees, warranties, indemnities and similar rights in
favor of Medi-Flex with respect to any Asset.
ARTICLE II
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THE CLOSING
2.1. Place and Date. The closing of the sale and purchase of the Assets
(the "Closing") shall take place at 10:00 A.M. local time on the 15th day of
November, 2001 at the offices of Medical Action Industries Inc., 000 Xxxxx
Xxxxx, Xxxxxxxxx, Xxx Xxxx 00000, or such other time and place upon which the
parties may agree. The day on which the Closing actually occurs is herein
sometimes referred to as the "Closing Date.
2.2. Purchase Price. In consideration of the execution, delivery and
performance hereof by Medi-Flex, Medical Action shall pay or cause to be paid to
Medi-Flex an aggregate of U.S. $11,250,000.00 as adjusted in Section 2.6 (the
"Purchase Price"). The Purchase Price shall be payable at the Closing by wire
transfer in immediately available funds to such bank account or accounts as per
written instructions of Medi-Flex, given to Medical Action at least five days
prior to the payment thereof.
2.3. Excluded Liabilities. Unless otherwise provided for herein, the
Buyer shall not assume any liabilities, obligations or commitments of Medi-Flex
relating to or arising out of or incurred in connection with the transactions
contemplated by this Agreement, the operation of the Business or the ownership
of the Assets prior to the Closing (the "Excluded Liabilities"), including but
not limited to:
(a) any liabilities or obligations of Medi-Flex incurred in
connection with the transactions contemplated by this Agreement
to attorneys, accountants, brokers, or others for services
rendered or expenses incurred, by or on behalf of Medi-Flex,
and all other expenses associated with the sale of the
Business;
(b) any wages, salary, bonuses, commissions, vacation or holiday
pay, retiree benefits, severance pay, or other amounts due to
any employees or former employees of Medi-Flex, and any duties,
obligations or liabilities arising under any employee benefit
plan, policy or practice, whether defined by Section 3(3) of
the Employee Retirement Income Security Act of 1974, as
amended, or otherwise, relating to the employees of Medi-Flex;
(c) any tax (including, without limitation, any federal, state or
local income, franchise, sales, transfer, recording,
documentary or other tax) imposed upon or
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incurred by Medi-Flex arising out of or in connection with the
negotiation and preparation of this Agreement and the
consummation of and performance of the transactions
contemplated hereby;
(d) any liabilities, losses and damages and alleged liabilities,
losses and damages arising out of or resulting from: (i)
personal injury, sickness, death, property damage, property
destruction or loss of use of property, or any violation of
federal, state or local laws or regulations relating to the
protection of the environment which , in either case is the
result, in whole or in part, of any environmental impairment,
condition existing, or action taken or omitted by Medi-Flex,
prior to the Closing Date in respect of the Business and which
is not attributable to Buyer's ownership, operation or use of
the Business after the Closing Date, and (ii) any accident or
occurrence occurring on or prior to the Closing Date resulting
in personal injury, sickness, death, property damage, property
destruction or loss of use of property or arising out of the
sale of any products of the Business by Medi-Flex prior to the
Closing Date;
(e) any warranty and product liabilities and obligations of
Medi-Flex which exist on the Closing Date arising out of the
sale of the Products of the Business to third parties made
prior to the Closing Date; and
(f) any liabilities for trade accounts payable arising prior to the
Closing.
2.4. Consent of Third Parties. Notwithstanding anything to the contrary
in this Agreement, this Agreement shall not constitute an agreement to assign or
transfer any instrument, contract, lease, permit or other agreement or
arrangement or any claim, right or benefit arising thereunder or resulting
therefrom if an assignment or transfer or an attempt to make such an assignment
or transfer without the consent of a third party would constitute a breach or
violation thereof or affect adversely the rights of the Buyer or Medi-Flex
thereunder; and any transfer or assignment to the Buyer by Medi-Flex of any
interest under any such instrument, contract, lease, permit or other agreement
or arrangement that requires the consent of a third party shall be made subject
to such consent or approval being obtained. In the event any such consent or
approval is not obtained on or prior to the Closing Date, Medi-Flex shall
continue to use commercially reasonable efforts to obtain any such approval or
consent after the Closing Date until such time as such consent or approval has
been obtained, and Medi-Flex will cooperate with the Buyer in any lawful and
economically feasible arrangement to provide that the Buyer shall receive the
interest of Medi-Flex, as the case may be, in the benefits under any such
instrument, contract, lease or permit or other agreement or arrangement,
including performance by Medi-Flex, as the case may be, as agent, if
economically feasible, provided that the Buyer shall undertake to pay or satisfy
the corresponding liabilities for the enjoyment of such benefit to the extent
the Buyer would have been responsible therefor hereunder if such consent or
approval had been obtained. Nothing in this Section 2.4 shall be deemed a waiver
by the Buyer of its right to receive at the Closing an effective assignment of
all of the Assets, to the extent they are assignable by Medi-Flex, nor shall
this Section 2.4 be deemed to constitute an agreement to exclude from the Assets
any assets described under Section 1.1.
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2.5. Inventory Value. (a) Within five (5) days prior to Closing,
Medi-Flex shall undertake a physical count of the Inventory being transferred to
Buyer hereunder. Medi-Flex shall give Buyer at least 72 hours notice of the time
and date on which it plans to commence such physical count and Buyer will have
the right to be present if it so elects. Medi-Flex shall determine the value of
the Inventory in accordance with the criteria set forth in Schedule 2.5 and its
current standard cost basis, in a manner consistent with its past practices. The
value of the Inventory shall be adjusted on the Closing Date to eliminate the
value of any Inventory sold and shipped, and to add the value of any Inventory
purchased between the date of the physical count of the Inventory and the
Closing Date ("Adjusted Inventory").
(b) Medi-Flex shall prepare for shipping, arrange to have shipped
by such carrier as Buyer shall designate, at Buyer's cost, and
have loaded onto such carrier's truck for shipment to Buyer,
all of the Inventory. Medi-Flex shall count the Inventory prior
to shipment to Buyer. Medi-Flex shall obtain a receipt from the
carrier shipping such Inventory for the quantities of the
Inventory counted by Medi-Flex and shall promptly provide a
copy to Buyer. Medi-Flex shall take reasonable precautions to
ensure that the Inventory will not be damaged prior to
shipment. All of the Inventory shall be delivered F.O.B.
Medi-Flex's plant. Title to the Inventory will pass to Buyer at
the time such Inventory is delivered F.O.B. at Medi-Flex's
plant to a carrier designated by Buyer for shipment to Buyer.
2.6. Purchase Price Adjustment. In the event that the value of the
Adjusted Inventory is greater than $650,000.00, the Purchase Price shall be
increased, on a dollar for dollar basis, for the increase in the Adjusted
Inventory, and such increase shall be payable at the Closing pursuant to Section
2.2 above.
ARTICLE III
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REPRESENTATIONS AND WARRANTIES
3.1. Representations and Warranties of Medi-Flex. Medi-Flex represents
and warrants to the Buyer as follows:
3.1.1. Authorization, etc. Medi-Flex has the corporate power and
authority to execute and deliver this Agreement and the Trademark Assignment
Agreement in the form attached hereto as Exhibit "A", the Non-Competition
Agreement attached hereto as Exhibit "B", the Transition Agreement attached
hereto as Exhibit "C" and the Supply Agreement attached hereto as Exhibit "D"
(the Trademark Assignment Agreement, the Non-Competition Agreement, the
Transition Agreement and the Supply Agreement being referred to herein as the
"Collateral Agreements") to which it will be a party, to perform fully its
obligations thereunder, and to consummate the transactions contemplated thereby.
This Agreement and each of the Collateral Agreements to which Medi-Flex is a
party will be, on the Closing Date, legal, valid and binding obligations of
Medi-Flex, enforceable against it in accordance with their respective terms.
3.1.2. Corporate Status. (a) Medi-Flex is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Kansas, with full corporate power and authority to carry on its business
(including its portion of the Business) and to own or lease
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and to operate its properties as and in the places where such business is
conducted and such properties are owned, leased or operated.
(b) Medi-Flex is duly qualified or licensed to do business and is
in good standing in each of the jurisdictions specified
opposite its name in Schedule 3.1.2(b), which are the only
jurisdictions in which the operation of the Business or the
character of the properties owned, leased or operated by it in
connection with the Business makes such qualification or
licensing necessary.
(c) Medi-Flex has delivered to the Buyer complete and correct
copies of its certificate of incorporation and by-laws or other
organizational documents, in each case, as in effect on the
date hereof. Medi-Flex is not in violation of any of the
provisions of its certificate of incorporation or by-laws or
other organizational documents.
3.1.3. No Conflicts, etc. The execution, delivery and
performance by Medi-Flex of this Agreement and each of the Collateral Agreements
to which it is a party, and the consummation of the transactions contemplated
thereby, do not and will not conflict with or result in a violation or a default
under (with or without the giving of notice or the lapse of time or both) (i)
any applicable law known to Medi-Flex or any of the properties or assets of
Medi-Flex (including but not limited to the Assets), (ii) the certificate of
incorporation or by-laws or other organizational documents of Medi-Flex or (iii)
except as set forth in Schedule 3.1.3, any contract, agreement or other
instrument to which Medi-Flex is a party or by which its properties or assets,
including but not limited to the Assets, may be bound or affected. Except as
specified in Schedule 3.1.3, no governmental approval or other consent is
required to be obtained or made by Medi-Flex in connection with the execution
and delivery of this Agreement and the Collateral Agreements or the consummation
of the transactions contemplated thereby.
3.1.4. Financial Statements. Medi-Flex has (or by the Closing
Date will have) delivered to the Buyer the following audited financial
statements of the Business as at and for the period ended December 31, 2000 (i)
net sales, and direct deductions therefrom, including sales discounts and
allowances, freight and returns; (ii) total cost of sales, including an
allocation of warehousing, shipping, utilities, insurance, quality control and
employee costs; The plant costs will be allocated between the Business and the
remaining operations of Medi-Flex; (iii) selling and administrative expenses
directly identifiable with the Business; (iv) Allocated corporate general
administrative expenses; (v) statements of Assets to be acquired by the Buyer at
December 31, 2000; (vi) footnotes to these statements indicating the basis of
presentation; (the "Audited Financial Statements"). The Audited Financial
Statements are complete and correct in all material respects. The Audited
Financial Statements do not include any material assets or liabilities not
intended to constitute a part of the Business or the Assets after giving effect
to the transactions contemplated hereby, and present fairly the financial
condition of the Business as at their respective dates.
3.1.5. Extent of Knowledge. For purposes of this Agreement, to
the best of its knowledge after due inquiry shall be limited in scope to the
knowledge of the employees set forth on Exhibit "E" hereto.
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3.1.6. Taxes. (a) Medi-Flex has duly and timely filed all tax
returns relating to the Business with respect to taxes ("Covered Taxes")
required to be filed on or before the Closing Date ("Covered Returns"). Except
for Covered Taxes set forth on Schedule 3.1.6(a), which are being contested in
good faith and by appropriate proceedings, the following Covered Taxes, to the
best of its knowledge after due inquiry, have been duly and timely paid: (i) all
Covered Taxes shown to be due on the Covered Returns, (ii) all deficiencies and
assessments of Covered Taxes of which notice has been received by Medi-Flex that
are or may become payable by the Buyer or chargeable as a lien upon the
Business, and (iii) all other Covered Taxes due and payable on or before the
Closing Date for which neither filing of Covered Returns nor notice of
deficiency or assessment is required of Medi-Flex, or reasonably should be aware
that are or may become payable by the Buyer or chargeable as a lien upon the
Business. All taxes required to be withheld by or on behalf of Medi-Flex in
connection with amounts paid or owing to any employee, independent contractor,
creditor or other party with respect to the Business ("Withholding Taxes") have
been withheld, and such withheld taxes have either been duly and timely paid or
set aside in accounts for such purpose.
(b) Except as set forth on Schedule 3.1.6(b), no agreement or other
document extending, or having the effect of extending, the
period of assessment or collection of any Covered Taxes or
Withholding Taxes, and no power of attorney with respect to any
such taxes, has been filed with the Internal Revenue Service
(the "IRS") or any other governmental authority.
(c) Except as set forth on Schedule 3.1.6(c), (i) there are no
Covered Taxes or Withholding Taxes asserted in writing by any
governmental authority to be due and (ii) no issue has been
raised in writing by any governmental authority in the course
of any audit with respect to Covered Taxes or Withholding
Taxes. Except as set forth on Schedule 3.1.6(c), no Covered
Taxes and no Withholding Taxes are currently under audit by any
governmental authority. Except as set forth on Schedule
3.1.6(c), neither the IRS nor any other governmental authority
is now asserting or, to the best knowledge of Medi-Flex,
threatening to assert against Medi-Flex any deficiency or claim
for additional Covered Taxes or any adjustment of Covered Taxes
that would, if paid by the Buyer, have a material adverse
effect, and there is no reasonable basis for any such assertion
of which Medi-Flex is or reasonably should be aware.
(d) The Buyer will not be required to deduct and withhold any
amount pursuant to Section 1445(a) of the Code upon the
transfer of the Business to the Buyer.
(e) Except as set forth on Schedule 3.1.6(e), there is no
litigation or administrative appeal pending or, to the best
knowledge of Medi-Flex, threatened against or relating to
Medi-Flex in connection with Covered Taxes.
3.1.7. Absence of Changes. Except as set forth in Schedule 3.1.7, since
December 31, 2000, to the best of its knowledge after due inquiry, Medi-Flex has
conducted the Business only in the ordinary course consistent with prior
practice and has not, on behalf of, in connection with or relating to the
Business or the Assets:
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(a) suffered any material adverse effect;
(b) incurred any obligation or liability, absolute, accrued,
contingent or otherwise, whether due or to become due, except
current liabilities for trade or business obligations incurred
in connection with the purchase of goods or services in the
ordinary course of business consistent with prior practice,
none of which liabilities, in any case or in the aggregate,
could have a material adverse effect;
(c) discharged or satisfied any lien other than those then required
to be discharged or satisfied, or paid any obligation or
liability, absolute, accrued, contingent or otherwise, whether
due or to become due, other than current liabilities shown on
the Audited Balance Sheet and current liabilities incurred
since the date thereof in the ordinary course of business
consistent with prior practice;
(d) mortgaged, pledged or subjected to lien, any property, business
or assets, tangible or intangible, held in connection with the
Business;
(e) sold, transferred, leased to others or otherwise disposed of
any of the Assets, except for inventory sold in the ordinary
course of business, or cancelled or compromised any debt or
claim, or waived or released by right of substantial value;
(f) received any notice of termination of any contract, lease or
other agreement resulting in a material adverse change or
suffered any damage, destruction or loss (whether or not
covered by insurance) resulting in material adverse change;
(g) transferred or granted any rights under, or entered into any
settlement regarding the breach or infringement of, any
Intellectual Property, or modified any existing rights with
respect thereto;
(h) encountered any labor union organizing activity, had any actual
or threatened employee strikes, work stoppages, slowdowns or
lockouts, or had any material change in its relations with its
customers or suppliers;
(i) instituted, settled or agreed to settle any litigation, action
or proceeding before any court or governmental body relating to
the Business or the Assets other than in the ordinary course of
business consistent with past practices but not in any case
involving amounts in excess of $25,000.00;
(j) entered into any transaction, contract or commitment other than
in the ordinary course of business or paid or agreed to pay any
brokerage or finder's fee, taxes or other expenses in
connection with this Agreement or the transactions contemplated
hereby; or
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(k) taken any action or omitted to take any action that would
result in the occurrence of any of the foregoing.
3.1.8. Litigation. Except as set forth on Schedule 3.1.8, to
the best of its knowledge after due inquiry, there is no action, claim, demand,
suit, proceeding, arbitration, grievance, citation, summons, subpoena, inquiry
or investigation of any nature, civil, criminal, regulatory or otherwise, in law
or in equity, pending or threatened against or relating to Medi-Flex in
connection with the Assets or the Business or against or relating to the
transactions contemplated by this Agreement, and to the best of its knowledge,
there is no basis for the same. Except as set forth in such Schedule 3.1.8, no
citations, fines or penalties have been asserted against any Seller with respect
to the Division since January 1, 1999, under any environmental law, by the Food
and Drug Administration, or any foreign, federal, state or local law relating to
occupational health or safety.
3.1.9. Compliance with Laws; Governmental Approvals and
Consents; Governmental Contracts. (a) Except as disclosed in Schedule 3.1.9(a),
since January 1, 1999, to the best of its knowledge after due inquiry, Medi-Flex
has complied in all material respects with all applicable laws applicable to the
Business or the Assets, and has not received any notice alleging any such
conflict, violation, breach or default.
(b) Schedule 3.1.9(b) sets forth all governmental approvals and
other consents necessary for, or otherwise material to, the
conduct of the Business. Except as set forth in Schedule
3.1.9(b), all such governmental approvals and consents have
been duly obtained and are in full force and effect, and
Medi-Flex is in full compliance with each of such governmental
approvals and consents held by it with respect to the Assets
and the Business.
(c) Schedule 3.1.9(c) sets forth all contracts with any
governmental authority.
3.1.10. Operation of the Business. Except as set forth in
Schedule 3.1.10, (a) Medi-Flex has conducted the Business only through Medi-Flex
and not through any other divisions or any direct or indirect subsidiary or
affiliate of Medi-Flex and (b) no part of the Business is operated by Medi-Flex
through any entity other than Medi-Flex.
3.1.11. Assets. Except as disclosed in Schedule 3.1.11,
Medi-Flex has good title to all the Assets free and clear of any and all liens.
Except for the Inventory, the Assets are being transferred in "as is" condition
and, to the knowledge of Medi-Flex, there are no facts or conditions affecting
the Assets which could, individually or in the aggregate (subject to the
necessity for routine maintenance), interfere in any material respect with the
use or operation thereof as currently used or operated, or their adequacy for
such use.
3.1.12. Contracts. (a) To the best of its knowledge after due
inquiry, Schedule 3.1.12 (a) contains, except with respect to open purchase
orders, which shall be provided at Closing, a complete and correct list of all
agreements, contracts, commitments and other instruments and arrangements
(whether written or oral) of the types described below (x) by
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which any of the Assets are bound or affected or (y) to which Medi-Flex is a
party or by which it is bound in connection with the Business or the Assets (the
"Contracts").
(i) licenses, licensing arrangements and other contracts
providing in whole or in part for the use of, or
limiting the use of, any Intellectual Property;
(ii) brokerage or finder's agreements;
(iii) joint venture, partnership and similar contracts
involving a sharing of profits or expenses (including
but not limited to joint research and development and
joint marketing contracts);
(iv) asset purchase agreements and other acquisition or
divestiture agreements, including but not limited to
any agreements relating to the sale, lease or disposal
of any Assets (other than sales of inventory in the
ordinary course of business) or involving continuing
indemnity or other obligations;
(v) orders and other contracts for the purchase or sale of
materials, supplies, products or services, each of
which involves aggregate payments in excess of
$20,000.00 in the case of purchases or $5,000.00 in the
case of sales;
(vi) sales agency, manufacturer's representative, marketing
or distributorship agreements;
(vii) contracts, agreements or arrangements with respect to
the representation of the Business in foreign
countries; and
(viii) any other contracts, agreements or commitments that are
material to the Business.
(b) Medi-Flex has delivered to the Buyer complete and correct
copies of all written Contracts, together with all amendments
thereto, and accurate descriptions of all material terms of all
oral Contracts, set forth or required to be set forth in
Schedule 3.1.12(a).
(c) To the best of Medi-Flex's knowledge after due inquiry, all
Contracts are in full force and effect and enforceable against
each party thereto. To the best of Medi-Flex's knowledge after
due inquiry, there does not exist under any Contract any event
of default or event or condition that, after notice or lapse of
time or both, would constitute a violation, breach or event of
default thereunder on the part of Medi-Flex or any other party
thereto except as set forth in Schedule 3.1.12(c) and except
for such events or conditions that, individually and in the
aggregate, (i) has not had or resulted in, and will not have or
result in, a material adverse effect and (ii) has not and will
not materially impair the ability of Medi-Flex to perform its
obligations under this Agreement and under the Collateral
Agreements. Except as
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set forth in Schedule 3.1.12(c), no consent of any third party
is required under any Contract as a result of or in connection
with, and the enforceability of any Contract will not be
affected in any manner by, the execution, delivery and
performance of this Agreement, any of the Collateral Agreements
or the consummation of the transactions contemplated thereby.
(d) There is no outstanding power of attorney relating to the
Business.
3.1.13. Territorial Restrictions. Except as set forth in
Schedule 3.1.13, Medi-Flex is not restricted by any written agreement or
understanding with any other person (other than governmental authorities) from
carrying on the Business anywhere in the world. The Buyer, solely as a result of
its purchase of the Business from Medi-Flex pursuant hereto and the assumption
of the Assumed Liabilities, will not thereby become restricted in carrying on
any business anywhere in the world.
3.1.14. Inventories. All Inventories are of good, usable and
merchantable quality in all material respects and, except as set forth on
Schedule 3.1.14, (a) all Inventories are of such quality as to meet the quality
control standards of Medi-Flex and any applicable governmental quality control
standards, (b) all Inventories that are finished goods are saleable as current
inventories at the current prices thereof in the ordinary course of business,
and (c) all Inventories are recorded on the books of the Business at the lower
of cost or market value determined in accordance with GAAP. Schedule 3.1.14
lists the locations of all Inventories.
3.1.15. Customers. To the best of its knowledge after due
inquiry, Schedule 3.1.15 sets forth (a) the names and addresses of the ten (10)
largest customers (ranked by sales dollars) of Medi-Flex with respect to the
Business that ordered Products from Medi-Flex during the twelve month period
ended December 31, 2000 and (b) the amount for which each such customer was
invoiced during such period. Except as set forth on Schedule 3.1.15, to the best
of Medi-Flex's knowledge after due inquiry, no such customer (i) has ceased, or
will cease, to use the Products, (ii) has substantially reduced or will
substantially reduce, the use of Products or (iii) has sought, or is seeking, to
reduce the price it will pay for Products, including in each case after the
consummation of the transactions contemplated hereby.
3.1.16. Suppliers; Raw Materials. To the best of its knowledge
after due inquiry, Schedule 3.1.16 sets forth (a) the names and addresses of
Medi-Flex's ten (10) largest suppliers (and any affiliate thereof) with respect
to the Business (ranked by dollars) of materials and ingredients used in
connection with the production and packaging of the Products during the twelve
month period ended December 31, 2000 and (b) the amount for which each such
supplier invoiced Medi-Flex during such period. Except as set forth on Schedule
3.1.16, Medi-Flex has no knowledge after due inquiry, that there has been any
material adverse change in the price of such raw materials, supplies,
merchandise or other goods or services, or that any such supplier will not sell
raw materials, supplies, merchandise and other goods to the Buyer at any time
after the Closing Date on terms and conditions similar to those used in its
current sales to Medi-Flex, subject to general and customary price increases.
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3.1.17. Product Warranties. To the best of its knowledge after
due inquiry, except as set forth in Schedule 3.1.17 and for warranties under
applicable law, (a) there are no warranties, express or implied, written or
oral, with respect to the products of the Business and (b) there are no pending
or threatened claims with respect to any such warranty.
3.1.18. Absence of Certain Business Practices. To the best of
its knowledge after due inquiry, neither Medi-Flex, any officer, employee or
agent of Medi-Flex, or any other person acting on their behalf, has, directly or
indirectly, within the past five years given or agreed to give any gift or
similar benefit to any customer, supplier, governmental employee or other person
who is or may be in a position to help or hinder the Business (or assist
Medi-Flex in connection with any actual or proposed transaction relating to the
Business) (i) which subjected or might have subjected Medi-Flex to any damage or
penalty in any civil, criminal or governmental litigation or proceeding, (ii)
which if not given in the past, might have had a material adverse effect, (iii)
which if not continued in the future, might have a material adverse effect or
subject Medi-Flex to suit or penalty in any private or governmental litigation
or proceeding, (iv) for any of the purposes described in Section 162(c) of the
Code or (v) for the purpose of establishing or maintaining any concealed fund or
concealed bank account.
3.1.19. Intellectual Property. (a) Title. Schedule 1.1(d)
contains, to the best of its knowledge after due inquiry, a complete and correct
list of all Intellectual Property that is owned by Medi-Flex and primarily
related to, used in, held for use in connection with, or necessary for the
conduct of, or otherwise material to the Business (the "Owned Intellectual
Property") other than (i) inventions, trade secrets, processes, formulas,
compositions, designs and confidential business and technical information and
(ii) Intellectual Property that is both not registered or subject to application
for registration and not material to the Business. To the best of its knowledge
after due inquiry, Medi-Flex owns or has the right to use pursuant to license,
sublicense, agreement or permission all Intellectual Property Assets, free from
any liens and free from any requirement of any past, present or future royalty
payments, license fees, charges or other payments, or conditions or restrictions
whatsoever. The Intellectual Property Assets comprise all of the Intellectual
Property necessary for the Buyer to conduct and operate the Business as now
being conducted by Medi-Flex.
(b) Transfer. Immediately after the Closing, the Buyer will own all
of the Owned Intellectual Property and will have a right to use
all other Intellectual Property Assets, free from any liens and
on the same terms and conditions as in effect prior to the
Closing.
(c) No Infringement. Medi-Flex has no notice of any claim by any
person or party that the conduct of the Business infringes or
otherwise conflicts with any rights of any person in respect of
any Intellectual Property. To the best of its knowledge after
due inquiry, none of the Intellectual Property Assets is being
infringed by any other person.
(d) Licensing Arrangements. Schedule 3.1.19(d) sets forth all
material agreements, arrangements or laws (i) pursuant to which
Medi-Flex has licensed Intellectual Property Assets to, or the
use of Intellectual Property Assets is otherwise
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permitted (through non-assertion, settlement or similar
agreements or otherwise) by, any other person and (ii) pursuant
to which Medi-Flex has had Intellectual Property licensed to
it, or has otherwise been permitted to use Intellectual
Property (through non-assertion, settlement or similar
agreements or otherwise). To the knowledge of Medi-Flex, all of
the agreements or arrangements set forth on Schedule 3.1.19(d)
(x) are in full force and effect in accordance with their terms
and no default exists thereunder by Medi-Flex, or by any other
party thereto, (y) are free and clear of all liens, and (z) do
not contain any change in control or other terms or conditions
that will become applicable or inapplicable as a result of the
consummation of the transactions contemplated by this
Agreement. Medi-Flex has delivered to the Buyer true and
complete copies of all licenses and arrangements (including
amendments) set forth on Schedule 3.1.19(d). All royalties,
license fees, charges and other amounts payable by, on behalf
of, to, or for the account of, Medi-Flex in respect of any
Intellectual Property are disclosed in the Financial
Statements.
(e) No Intellectual Property Litigation. To the best of Medi-Flex's
knowledge after due inquiry, no claim or demand of any person
has been made nor is there any proceeding that is pending, or
threatened, nor is there a reasonable basis therefor, which (i)
challenges the rights of Medi-Flex in respect of any
Intellectual Property Assets, (ii) asserts that Medi-Flex is
infringing or otherwise in conflict with, or is, except as set
forth in Schedule 3.1.19(e), required to pay any royalty,
license fee, charge or other amount with regard to, any
Intellectual Property, or (iii) claims that any default exists
under any agreement or arrangement listed on Schedule
3.1.19(d). None of the Intellectual Property Assets is subject
to any outstanding order, ruling, decree, judgment or
stipulation by or with any court, arbitrator, or administrative
agency, nor has been the subject of any litigation within the
last five years, whether or not resolved in favor of Medi-Flex.
(f) Due Registration, Etc. That portion of the Owned Intellectual
Property identified as registered on Schedule 3.1.19(f) has
been duly registered with, as the case may be, the United
States Patent and Trademark Office, United States Copyright
Office or such other filing offices, domestic or foreign, and
Medi-Flex has taken such other actions, to increase the
protection afforded under applicable United States laws or
regulations, and to the best of Medi-Flex's knowledge after due
inquiry, such registrations, filings, issuances and other
actions remain in full force and effect, in each case to the
extent material to the Business.
(g) Use of Name and Xxxx. Except as set forth in Schedule
3.1.19(g), there are, and immediately after the Closing will
be, no contractual restriction or limitations pursuant to any
orders, decisions, injunctions, judgments, awards or decrees of
any governmental authority on the Buyer's right to use the
names and marks listed on Schedule 3.1.19(g) in the conduct of
the Business as presently carried on by Medi-Flex or as such
Business may be extended by the Buyer.
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3.1.20. Insurance. Schedule 3.1.20 contains a complete and
correct list and summary description of all insurance policies maintained by
Medi-Flex for the benefit of or in connection with the Assets or the Business.
Medi-Flex has delivered to the Buyer complete and correct copies of all such
policies together with all riders and copies of all such policies together with
all riders and amendments thereto. To Medi-Flex's knowledge, such policies are
in full force and effect, and all premiums due thereon have been paid. Medi-Flex
agrees to maintain its current insurance program for a period of three (3) years
from the Closing Date ("Extended Insurance Period"). In the event of the
cancellation of its current claims-made insurance, or in the event the insurance
is written on an Occurrence policy form in the future, Medi-Flex shall maintain
an Extended Reporting period in connection with such policy for the remainder of
the Extended Insurance Period. Schedule 3.1.20 sets out all product liability
claims made by Medi-Flex under any policy of insurance during the past two years
with respect to the Business and in the opinion of Medi-Flex reasonably formed
and held, there is no basis on which a claim should or could be made under any
such policy with respect to it.
3.1.21. Confidentiality. Except as set forth on Schedule
3.1.21, to the best of its knowledge after due inquiry, Medi-Flex has taken
reasonable steps to minimize unauthorized disclosure of all material
confidential information (including, without limitation, any proprietary
information) with respect to the Business.
3.1.22. No Guarantees. To the best of its knowledge after due
inquiry, none of the obligations or liabilities of the Business or of Medi-Flex
incurred in connection with the operation of the Business is guaranteed by or
subject to a similar contingent obligation of any other person. Medi-Flex has
not guaranteed or become subject to a similar contingent obligation in respect
of the obligations or liabilities of any other person. There are no outstanding
letters of credit, surety bonds or similar instrument so Medi-Flex in connection
with the Business or Assets.
3.1.23. Brokers, Finders, etc. Except as set forth on Schedule
3.1.23, all negotiations relating to this Agreement, the Collateral Agreements,
and the transactions contemplated thereby, have been carried on without the
participation of any person acting on behalf of Medi-Flex in such manner as to
give rise to any valid claim against the Buyer or any of its subsidiaries for
any brokerage or finder's commission, fee or similar compensation, or for any
bonus payable to any officer, director, employee, agent or sales representative
of or consultant to Medi-Flex upon consummation of the transactions contemplated
hereby or thereby.
3.2. Representations and Warranties of the Buyer. The Buyer
represents and warrants to Medi-Flex as follows:
3.2.1. Corporate Status; Authorization, etc. Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation with full corporate power and authority
to execute and deliver this Agreement and the Collateral Agreements, to perform
its obligations thereunder and to consummate the transactions contemplated
thereby. This Agreement and the Collateral Agreements constitute valid and
legally binding obligations of the Buyer, enforceable against the Buyer in
accordance with their respective terms.
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3.2.2. No Conflicts, etc. The execution, delivery and
performance by the Buyer of this Agreement and the Collateral Agreements and the
consummation of the transactions contemplated thereby do not and will not
conflict with or result in a violation of or under (with or without the giving
of notice or the lapse of time, or both) (i) the certificate of incorporation or
by-laws or other organizational documents of the Buyer, (ii) any applicable law
applicable to the Buyer or any of its or their properties or assets or (iii) any
contract, agreement or other instrument applicable to the Buyer or any of its or
their properties or assets, except, in the case of clause (iii), for violations
and defaults that, individually and in the aggregate, have not and will not
materially impair the ability of the Buyer to perform their obligations under
this Agreement or under any of the Collateral Agreements to which they are a
party. Except as specified in Schedule 3.2.2, no governmental approval or other
consent is required to be obtained or made by the Buyer in connection with the
execution and delivery of this Agreement or the Collateral Agreements or the
consummation of the transactions contemplated thereby.
3.2.3. Litigation. There is no action, claim, suit or
proceeding pending, or to the Buyer's knowledge threatened, in connection with
or relating to the transactions contemplated by this Agreement or of any action
taken or to be taken in connection herewith or the consummation of the
transactions contemplated hereby.
3.2.4. Brokers, Finders, etc. All negotiations relating to
this Agreement and the transactions contemplated hereby have been carried on
without the participation of any person acting on behalf of the Buyer in such
manner as to give rise to any valid claim against the Buyer for any brokerage or
finder's commission, fee or similar compensation.
3.2.5. Reporting Obligations of Buyer. Buyer has duly filed on
a timely basis all reports and registration statements to be filed by Buyer
under the Exchange Act of 1934, as amended and the Securities Act of 1933, as
amended and the rules and regulations adopted by the Securities and Exchange
Commission ("SEC") thereunder. No filings by Buyer with the SEC contain an
untrue statement of a material fact necessary in order to make the statements
contained therein or in any related documents not misleading in light of the
circumstances under which they were made.
3.2.6. Availability of Funds. Buyer has, or will have on or
before the Closing, sufficient funds available to pay the Purchase Price and to
satisfy its other obligations hereunder.
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ARTICLE IV
COVENANTS
4.1. Covenants of Medi-Flex.
4.1.1. Conduct of Business. From the date hereof to the
Closing Date, except as expressly permitted or required by this Agreement or as
otherwise consented to by the Buyer in writing, Medi-Flex will:
(a) carry on the Business in, and only in, the ordinary
course, in substantially the same manner as heretofore
conducted, and use all reasonable efforts to preserve
intact its present business organization, maintain its
properties in good operating condition and repair, keep
available the service of its present officers and
significant employees, and preserve its relationship
with customers, suppliers and others having business
dealings with it, to the end that its goodwill and going
business shall be in all material respects unimpaired
following the Closing;
(b) pay accounts payable and other obligations of the
Business when they become due and payable in the
ordinary course of business consistent with prior
practice;
(c) perform in all material respects all of its obligations
under all contracts and other agreements and instruments
relating to or affecting the Business or the Assets, and
comply in all material respect with all applicable laws
applicable to it, the Assets or the Business;
(d) not enter into or assume any material agreement,
contract or instrument relating to the Business, or
enter into or permit any material amendment, supplement,
waiver or other modification in respect thereof; and
(e) not take any action or omit to take any action, which
action or omission would result in a breach of any of
the representations and warranties set forth in Section
3.1.7.
4.1.2. Further Assurances. Following the Closing, Medi-Flex
shall, from time to time, execute and deliver such additional instruments,
documents, conveyances or assurances and take such other actions as shall be
necessary, or otherwise reasonably requested by the Buyer, to confirm and assure
the rights and obligations provided for in this Agreement and in the Collateral
Agreements and render effective the consummation of the transactions
contemplated thereby.
4.1.3. Liability for Transfer Taxes. Medi-Flex shall be
responsible for the timely payment of, and shall indemnify and hold harmless the
Buyer against, all sales (including, without limitation, bulk sales), use, value
added, documentary, stamp, gross receipts,
16
registration, transfer, conveyance, excise, recording, license and other similar
taxes and fees ("Transfer Taxes"), if any, arising out of or in connection with
or attributable to the transactions effected pursuant to this Agreement and the
Collateral Agreements. Medi-Flex shall prepare and timely file all tax returns
required to be filed in respect of Transfer Taxes (including, without
limitation, all notices required to be given with respect to bulk sales taxes),
provided that the Buyer shall be permitted to prepare any such Tax Returns that
are its primarily responsibility under applicable law. The Buyer's preparation
of any such tax returns shall be subject to Medi-Flex's approval, which approval
shall not be withheld unreasonably.
4.1.4. Use of Business Name. After the Closing, except as
otherwise provided for herein, Medi-Flex will not, directly or indirectly, use
or do business, or allow any affiliate to use or due business, or assist any
third party in using or doing business, under the names and marks set forth in
Schedule 1.1(c) (or any other name confusingly similar to such names and marks).
4.1.5. Financial Statements. Until the Closing, on or before
the 25th day of each month, Medi-Flex shall deliver to the Buyer unaudited
consolidated financial statements of the Business as at and for the monthly
period ending the last day of the preceding month (the "Subsequent Monthly
Financial Statements"), which shall include the same presentation included in
the Audited Financial Statements as set forth in section 3.1.4 (i) - (vi). At
the time that the Subsequent Monthly Financial Statements are delivered to the
Buyer, Medi-Flex shall by such delivery be deemed to have made the
representations and warranties to the Buyer with respect to such Subsequent
Monthly Financial Statements set forth in Section 3.1.4.
4.1.6. Returns and Rebates. (a) Medi-Flex accepts the
financial responsibility for all product returns of the Business which occurred
prior to the Closing Date; provided, however, that Buyer hereby agrees to
purchase from Medi-Flex any returned products which have a remaining shelf life
of not less than 12 months (except for products that have been returned for
quality reasons) which are resalable in the ordinary course of business at the
same prices at which other similar products sold, provided that the value of the
products so returned does not exceed $100,000.00;
(b) Medi-Flex agrees to reimburse Buyer for any rebate amount
claimed by any customer in connection with (and limited to)
sales of the Products made and invoiced by such customers
within sixty-five (65) days after the Closing Date, provided,
however, that Medi-Flex shall have no such liability except to
the extent the rebate amount claimed is properly documented to
Medi-Flex and would be properly payable under Medi-Flex's
rebate policy existing on the date of this Agreement. Buyer
shall be solely responsible for paying any such rebate amounts
in respect of sales of the Business sold and invoiced to
end-user purchasers sixty-six (66) or more days after the
Closing Date.
(c) Each of the parties shall cooperate fully with the other in
forwarding to the proper party any misdirected rebate requests
that it receives.
4.2. Covenants of the Buyer.
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4.2.1. Further Actions. (a) The Buyer agrees to use all
reasonable good faith efforts to take all actions and to do all things
necessary, proper or advisable to consummate the transactions contemplated
hereby.
(b) The Buyer will, as promptly as practicable, file or supply, or
cause to be filed or supplied, all applications, notifications
and information required to be filed or supplied by each of
them pursuant to applicable law in connection with this
Agreement, the Collateral Agreements, its acquisition of the
Assets pursuant to this Agreement and the consummation of the
other transactions contemplated thereby.
(c) The Buyer will coordinate and cooperate with Medi-Flex in
exchanging such information and supplying such reasonable
assistance as may be reasonably requested by Medi-Flex in
connection with the filings and other actions.
4.2.2. Further Assurances. Following the Closing, the Buyer
shall execute and deliver such additional instruments, documents, conveyances or
assurances and take such other actions as shall be necessary, or otherwise
reasonably requested by Medi-Flex, to confirm and assure the rights and
obligations provided for in this Agreement and in the Collateral Agreements and
render effective the consummation of the transactions contemplated thereby.
4.2.3. Use of Business Names by the Buyer. To the extent the
trademarks, service marks, brand names or trade, corporate or business names of
Medi-Flex used in connection with any of Medi-Flex's products (other than the
Products) are used by the Business on stationery, signage, invoices, receipts,
forms, packaging, advertising and promotional materials, product, training and
service literature and materials, computer programs or like materials ("Marked
Materials") or appear on Inventory at the Closing, the Buyer may use such Marked
Materials or sell such Inventory after Closing for a period of one (1) year
without altering or modifying such Marked Materials or Inventory, or removing
such trademarks, service marks, brand names, or trade, corporate or business
names, but Medical Action and the Buyer shall not thereafter use such
trademarks, service marks, brand names or trade, corporate or business names in
any other manner without the prior written consent of Medi-Flex, provided
however that Buyer maintains the traceability as to their purchase, manufacture
and subsequent sale of all such raw materials, components and finished goods as
the case may be.
4.2.4. Investigation By Buyer. Prior to the date hereof,
Medi-Flex has allowed (and between the date hereof and the Closing Date,
Medi-Flex will continue to allow) Buyer and its Representatives, at Buyer's own
expense during regular business hours, to inspect the Assets and to inspect and
make copies of contracts, books and records or information requested by Buyer
and reasonably related to the conduct of the Business, including historical
financial information. All information will be provided to Buyer in the form
that the information may presently exist or be readily available. Buyer
acknowledges and agrees that it has completed such investigation as it deems
necessary to enter into this Agreement. Buyer further covenants and agrees that
prior to the Closing, it shall not contact any of Medi-Flex's customers and/or
suppliers without Medi-Flex's consent and participation in any such
communications.
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4.2.5. Employee Matters. To the extent that Buyer, in its sole
discretion, determines to offer employment to any persons employed by Medi-Flex
as of the Closing Date, Buyer will be responsible for all salary and benefits of
such persons employed by Buyer from and after the date they become employees of
Buyer, such salary and benefits to be determined by Buyer in its sole
discretion.
ARTICLE V
CONDITIONS PRECEDENT
5.1. Conditions to Obligations of Each Party. The obligations of
the parties to consummate the transactions contemplated hereby shall be subject
to the fulfillment on or prior to the Closing Date of the following conditions:
5.1.1. No Injunction, etc. Consummation of the transactions
contemplated hereby shall not have been restrained, enjoined or otherwise
prohibited by any applicable law, including any order, injunction, decree or
judgment of any court or other governmental authority. No court or other
governmental authority shall have determined any applicable law to make illegal
the consummation of the transactions contemplated hereby or the Collateral
Agreements, and no proceeding with respect to the application of any such
applicable law to such effect shall be pending.
5.1.2. Collateral Agreements. The parties shall have executed
each of the Collateral Agreements.
5.2. Conditions to Obligations of the Buyer. The obligations of the
Buyer to consummate the transactions contemplated hereby shall be subject to the
fulfillment (or waiver by Buyer) on or prior to the Closing Date of the
following additional conditions, which Medi-Flex agrees to use reasonable good
faith efforts to cause to be fulfilled:
5.2.1. Representations, Performance. The representations and
warranties of Medi-Flex contained in this Agreement and in the Collateral
Agreements and made pursuant to Section 3.1 shall be true and correct in all
respects (in the case of any representation or warranty containing any
materiality qualification) or in all material respects (in the case of any
representation or warranty without any materiality qualification) at and as of
the date hereof. Medi-Flex shall have duly performed and complied in all
material respects with all agreements and conditions required by this Agreement
and each of the Collateral Agreements to be performed or complied with by it
prior to or on the Closing Date. Medi-Flex shall have delivered to the Buyer a
certificate, dated the Closing Date and signed by its duly authorized officers,
to the foregoing effect.
5.2.2. Consents. Medi-Flex shall have obtained and shall have
delivered to the Buyer copies of (i) all governmental approvals required to be
obtained by it in connection with the execution and delivery of this Agreement
and the Collateral Agreements and the consummation of the transactions
contemplated hereby or thereby and (ii) all consents (including, without
limitation, all consents required under any contract) necessary to be obtained
19
in order to consummate the sale and transfer of the Assets pursuant to this
Agreement and the consummation of the other transactions contemplated hereby and
by the Collateral Agreements, unless the failure to obtain such consent would
not, individually or in the aggregate, have a material adverse effect.
5.2.3. No Material Adverse Effect. Except as set forth in
Schedule 3.1.8, no event, occurrence, fact, condition, change, development or
effect shall have occurred, exist or come to exist since the Audited Financials
that, individually or in the aggregate, has constituted or resulted in, or could
reasonably be expected to constitute or result in, a material adverse effect.
5.2.4. Opinion of Counsel. Medical Action shall have received
an opinion, addressed to it and dated the Closing Date, from counsel to
Medi-Flex, in substance and form reasonably satisfactory to Medical Action.
5.2.5. Corporate Proceedings. All corporate and other
proceedings of Medi-Flex in connection with this Agreement and the Collateral
Agreements and the transactions contemplated thereby, and all documents and
instruments incident thereto, shall be reasonably satisfactory in substance and
form to the Buyer and its counsel, and the Buyer and its counsel shall have
received all such documents and instruments, or copies thereof, certified if
requested, as may be reasonably requested.
5.2.6. Transfer Documents. Medi-Flex shall have delivered to
the Buyer at the Closing all documents, certificates and agreements necessary to
transfer to the Buyer good and marketable title to the Assets, free and clear of
any and all liens thereon, other than those included in the Assumed Liabilities,
including without limitation:
(a) a xxxx of sale, assignment and general conveyance, in
form and substance reasonably satisfactory to the Buyer,
dated the Closing Date, with respect to the Assets;
(b) assignments of all contracts, Intellectual Property and
any other agreements and instruments constituting
Assets, dated the Closing Date, assigning to the Buyer
all of Medi-Flex's right, title and interest therein and
thereto, with any required consent endorsed thereon.
5.2.7. Additional Conditions to Obligations of Buyer. The
obligations of Buyer to consummate the transactions contemplated hereby shall be
further conditioned (unless waived) upon the following:
(a) Medi-Flex's delivery on or before October 15, 2001 of
the Audited Financial Statements; and
(b) Written notification by the Securities and Exchange
Commission of their concurrence that the filing by the
Buyer of the Audited Financials will meet the
requirements of Rule 305 of Regulation S-X;
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5.3. Conditions to Obligations of Medi-Flex. The obligation of
Medi-Flex to consummate the transactions contemplated hereby shall be subject to
the fulfillment (or wavier) on or prior to the Closing Date, of the following
additional conditions, which the Buyer agrees to use reasonable good faith
efforts to cause to be fulfilled.
5.3.1. Representations, Performance, etc. The representations
and warranties of the Buyer contained in this Agreement and the Collateral
Agreements in Section 3.2 shall be true and correct in all respects (in the case
of any representation or warranty containing any materiality qualification) or
in all material respects (in the case of any representation or warranty without
any materiality qualification) at and as of the date hereof and shall be
repeated and shall be true and correct in all respects (in the case of any
representation or warranty containing any materiality qualification) or in all
material respects (in the case of any representation or warranty without any
materiality qualifications) on and as of the Closing Date with the same effect
as through made at and as of such time. The Buyer shall have duly performed and
complied in all material respects with all agreements and conditions required by
this Agreement and the Collateral Agreements to be performed or complied with by
them prior to or on the Closing Date. The Buyer shall have delivered to
Medi-Flex a certificate, dated the Closing Date and signed by its duly
authorized officer, to the foregoing effect.
5.3.2. Opinion of Counsel. Medi-Flex shall have received an
opinion, addressed to it and dated the Closing Date, of Xxxxxxx X. Satin, Esq.,
General Counsel for the Buyer in form and substance reasonably satisfactory to
Medi-Flex.
5.3.3. Corporate Proceedings. All corporate proceedings of the
Buyer in connection with this Agreement and the Collateral Agreements and the
transactions contemplated thereby, and all documents and instruments incident
thereto, shall be reasonably satisfactory in substance and form to Medi-Flex and
its counsel, and Medi-Flex and its counsel shall have received all such
documents and instruments, or copies thereof, certified if requested, as may be
reasonably requested.
5.3.4. Consents and Approvals. The Buyer shall have obtained
all governmental approvals necessary to consummate the transactions contemplated
hereby.
5.3.5. Collateral Agreements. The Buyer shall have entered
into each of the Collateral Agreements to which it is a party and paid the
Purchase Price.
ARTICLE VI
MISCELLANEOUS
6.1. Indemnification. (a) By Medi-Flex. Medi-Flex covenants and
agrees to defend, indemnify and hold harmless the Buyer, its officers,
directors, employees, agents, advisers, representatives and affiliates
(collectively, the "the Buyer Indemnitees") from and against, and pay or
reimburse the Buyer for, any and all claims, liabilities, obligations, losses,
fines, costs, royalties, proceedings, deficiencies or damages (whether absolute,
accrued, conditional or otherwise and whether or not resulting from third party
claims), including out-of-pocket expenses and reasonable attorney's and
accountants' fees incurred in the investigation or
21
defense of any of the same or in asserting any of their respective rights
hereunder (collectively, "Losses"), resulting from or arising out of:
(i) any inaccuracy of any representation or warranty made by
Medi-Flex in this Agreement or any of the Collateral
Agreements;
(ii) any failure of Medi-Flex to perform any covenant or
agreement under this Agreement or any of the Collateral
Agreements;
(iii) any Excluded Liabilities;
(iv) any and all taxes of Medi-Flex not relating to or
arising out of the Business;
(v) any product liability claim asserted by a third party
with respect to Products sold or manufactured by
Medi-Flex; and
(vi) any failure of Medi-Flex to comply with applicable bulk
sales laws (in consideration of which indemnification
obligations the Buyer hereby waives compliance by
Medi-Flex with any applicable bulk sales laws).
(b) By the Buyer. The Buyer covenants and agrees to defend,
indemnify and hold harmless Medi-Flex and its officers, directors, employees,
agents, advisers, representatives and affiliates (collectively, the "Medi-Flex
Indemnitees") from and against any and all Losses resulting from or arising out
of:
(i) any inaccuracy in any representation or warranty by the
Buyer made or contained in this Agreement or any of the
Collateral Agreements;
(ii) any failure of the Buyer to perform any covenant or
agreement made or contained in this Agreement or any of
the Collateral Agreements;
(iii) the use by the Buyer of any Medi-Flex tradenames or
trademarks after the Closing Date as contemplated by
Section 4.2.3; and
(iv) the operation of the Business by the Buyer or the
Buyer's or Medical Action's ownership, operation or use
of the Assets following the Closing Date.
(c) Indemnification Procedures. In the case of any claim asserted
by a third party against a party entitled to indemnification under this
Agreement (the "Indemnified Party"), notice shall be given by the Indemnified
Party to the party required to provide indemnification (the "Indemnifying
Party") promptly after such Indemnified Party has actual knowledge of any claim
as to which indemnity may be sought, and the Indemnified Party shall permit the
Indemnifying Party (at the expense of such Indemnifying Party) to assume the
defense of any claim or any litigation resulting therefrom, provided that (i)
the counsel for the Indemnifying
22
Party who shall conduct the defense of such claim or litigation shall be
reasonably satisfactory to the Indemnified Party, (ii) the Indemnified Party may
participate in such defense at such Indemnified Party's expense, and (iii) the
omission by any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its indemnification obligation under this
Agreement, except to the extent that such omission results in a failure of
actual notice to the Indemnifying Party and such Indemnifying Party is
materially damaged as a result of such failure to give notice. Except with the
prior written consent of the Indemnified Party, no Indemnifying Party, in the
defense of any such claim or litigation, shall consent to entry of any judgment
or enter into any settlement that provides for injunctive or other nonmonetary
relief affecting the Indemnified Party or that does not include as a
unconditional term thereof the giving by each claimant or plaintiff to such
Indemnified Party of a release from all liability with respect to such claim or
litigation. In the event that the Indemnified Party shall in good faith
determine that the conduct of the defense of any claim subject to
indemnification hereunder or any proposed settlement of any such claim by the
Indemnifying Party might be expected to affect adversely the Indemnified Party's
Tax liability or the ability of the Buyer to conduct its business, or that the
Indemnified Party may have available to it one or more defenses or counterclaims
that are inconsistent with one or more of those that may be available to the
Indemnifying Party in respect of such claim or any litigation relating thereto,
the Indemnified Party shall have the right at all times to take over and assume
control over the defense, settlement, negotiations or litigation relating to any
such claim at the sole cost of the Indemnifying Party, provided that if the
Indemnified Party does so take over and assume control, the Indemnified Party
shall not settle such claim or litigation without the written consent of the
Indemnifying Party, such consent not to be unreasonably withheld.
(d) If the Indemnifying Party fails diligently to prosecute or
settle the third party claim, or if the Indemnifying Party gives notice to the
Indemnifying Party that it has decided to not accept the defense of the
Indemnified Party as provided above, then the Indemnified Party shall have the
right (but not the obligation) to defend, at the sole cost and expense of the
Indemnifying Party, the third party claim by all appropriate proceedings, which
proceedings will be prosecuted diligently by the indemnified Party to a final
conclusion or settled at the discretion of the Indemnified Party. The
Indemnified Party will have full control of such defense and proceedings,
including any compromise or settlement thereof, provided that if requested by
the Indemnified Party, the Indemnifying Party shall cooperate, at the sole cost
and expense of the Indemnifying Party, with the Indemnified Party and its
counsel in developing the strategy and providing assistance in dealing with the
third party claim. In the event a compromise or settlement of the Third Party
Claim requires more than a monetary payment, such compromise or settlement must
have the written consent of the Indemnifying Party, which consent can be
withheld in the sole discretion of the Indemnifying Party.
(e) Notwithstanding the foregoing provisions of Section 6.1(d),
if the Indemnifying Party notifies the Indemnified Party that the Indemnifying
Party disputes its obligation to indemnify the Indemnified Party against the
third party claim, and upon the resolution of such dispute pursuant to an order
of a court of competent jurisdiction, the Indemnifying Party shall either, in
accordance with such court order: (x) be required to bear the costs and expenses
of the Indemnified Party's defense pursuant to Section 6.1(d) of the
Indemnifying Party's participation therein at the Indemnified Party's request,
and the Indemnified Party will reimburse the
23
Indemnifying Party in full for any such costs and expenses related to reaching
such resolution (including reasonable attorneys and other professionals fees and
costs) and, in addition, the Indemnifying Party shall pay the Indemnified Party
an amount equal to twenty percent (20%) of the total amount incurred by the
Indemnified Party for all of such costs and expenses, or (y) the Indemnifying
Party will not be required to indemnify the Indemnified Party. In the event of
any appeal of the order of the court, the appealing party shall be required to
comply with its duties to indemnify in this Section 6.1 pending a final and
nonappealable decision by any appellate court. The Indemnifying Party may
participate in, but not control, any defense or settlement controlled by the
Indemnified Party pursuant to Section 6.1(d), but the Indemnifying Party shall
bear its own costs and expenses with respect thereto if such participation is
not at the request of the Indemnified Party.
(f) Time Limitation. All claims for indemnification under clause
(i) of the first sentence of Section 6.1(a) or clause (i) of the first sentence
of Section 6.1(b) must be asserted within 30 days of the termination of the
respective survival periods set forth in Section 6.2.
(g) Dollar Limitation. Notwithstanding anything set forth in this
Section 6 to the contrary, no party shall assert a claim for indemnification
hereunder, unless and until the amount of all Losses determined to have been
incurred or suffered at the time by the Indemnified Party exceeds, in the
aggregate, $5,000.00. The parties further acknowledge and agree that the total
indemnification obligations of each party under this Agreement or any of the
Collateral Agreements shall not exceed, in the aggregate for such party,
$2,500,000.00.
6.2. Survival of Representations and Warranties, etc. The
representations and warranties contained in this Agreement shall survive the
execution and delivery of this Agreement, any examination by or on behalf of the
parties hereto and the completion of the transactions contemplated herein, but
only to the extent specified below:
(a) except as set forth in clauses (b), (c) and (d) below, the
representations and warranties contained in Section 3.1 and
Section 3.2 shall survive for a period of one (1) year
following the Closing Date.
(b) the representations and warranties contained in Sections
3.1.1, 3.1.2, 3.1.3 and 3.2.1 shall survive without
limitation; and
(c) the representations and warranties of Medi-Flex contained in
Section 3.1.6 shall survive as to any tax covered by such
representations and warranties for so long as any statute of
limitations for such Tax remains open, in whole or in part,
including without limitation by reason of waiver of such
statute of limitations.
(d) the representations and warranties contained in Section
3.1.20 shall survive for three (3) years following the
Closing Date.
6.3. Expenses. Except as provided in Section 4.1.3, Medi-Flex, on
the one hand, and the Buyer, on the other hand, shall bear their respective
expenses, costs and fees (including attorneys', auditors' and financing
commitment fees) in connection with the transactions
24
contemplated hereby, including the preparation, execution and delivery of this
Agreement and compliance herewith (the "Transaction Expenses").
6.4. Severability. If any provision of this Agreement, including
any phrase, sentence, clause, Section or subsection is inoperative or
unenforceable for any reason, such circumstances shall not have the effect of
rendering the provision in question inoperative or unenforceable in any other
case or circumstance, or of rendering any other provision or provisions herein
contained invalid, inoperative, or unenforceable to any extent whatsoever.
6.5. Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly give if (a) delivered
personally, (b) mailed by first-class, registered or certified mail, return
receipt requested, postage prepaid, (c) sent by next-day or overnight mail or
delivery, or (d) sent by telecopy or telegram.
(i) if to the Buyer, to:
Medical Action Industries Inc.
000 Xxxxx Xxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxxxx,
Chief Executive Officer
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
25
with a copy to:
Xxxxxxx X. Satin, Esq.
General Counsel
Medical Action Industries Inc.
000 Xxxxx Xxxxx
Xxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
(ii) if to Medi-Flex, to:
Medi-Flex Hospital Products, Inc.
0000 X. 000xx Xxxxxx, Xxxxx 000
Xxxxxxxx Xxxx, Xxxxxx 00000-0000
Attention: A. Xxxxxx Xxxxxxxxxx,
President
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
with a copy to:
Xxxxx X. Xxxx, Esq.
Xxxxxxxxxx, Xxxxxxx & Xxxxx, P.C.
000 X. 00xx Xxxxxx, Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
or, in each case, at such other address as may be specified in writing to the
other parties hereto.
All such notices, requests, demands, waivers and other communications
shall be deemed to have been received (w) if by personal delivery on the day
after such delivery, (x) if by certified or registered mail, on the seventh
business day after the mailing thereof, (y) if by next-day or overnight mail or
delivery, on the day delivered, (z) if by telecopy or telegram, on the next day
following the day on which such telecopy or telegram was sent, provided that a
copy is also sent by certified or registered mail.
6.6. Miscellaneous.
6.6.1. Headings. The headings contained in this Agreement are
for purposes of convenience only and shall not affect the meaning or
interpretation of this Agreement.
6.6.2. Entire Agreement. This Agreement (including the
Schedules hereto) and the Collateral Agreements (when executed and delivered)
constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof.
26
6.6.3. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original and all of which shall
together constitute one and the same instrument.
6.6.4. Governing Law, etc. This Agreement shall be governed in
all respects, including as to validity, interpretation and effect, by the
internal laws of the State of New York, without giving effect to the conflict of
laws rules thereof. The Buyer and Medi-Flex hereby irrevocably submit to the
jurisdiction of the courts of the State of New York and the Federal courts of
the United States of America located in the State, City and County of New York
solely in respect of the interpretation and enforcement of the provisions of
this Agreement and of the documents referred to in this Agreement, and hereby
waive, and agree not to assert, as a defense in any action, suit or proceeding
for the interpretation or enforcement hereof or of any such document, that it is
not subject thereto or that such action, suit or proceeding may not be brought
or is not maintainable in said courts or that the venue thereof may not be
appropriate or that this Agreement or any of such document may not be enforced
in or by said courts, and the parties hereto irrevocably agree that all claims
with respect to such action or proceeding shall be heard and determined in such
a New York State or Federal court. The Buyer, Medical Action and Medi-Flex
hereby consent to and grant any such court jurisdiction over the person of such
parties and over the subject matter of any such dispute and agree that mailing
of process or other papers in connection with any such action or proceeding in
the manner provided in Section 6.5, or in such other manner as may be permitted
by law, shall be valid and sufficient service thereof.
6.6.5. Binding Effect. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
successors and permitted assigns.
6.6.6. Assignment. This Agreement shall not be assignable or
otherwise transferable by any party hereto without the prior written consent of
the other parties hereto.
6.6.7. No Third Party Beneficiaries. Except as provided in
Section 6.1 with respect to indemnification of Indemnified Parties hereunder,
nothing in this Agreement shall confer any rights upon any person or entity
other than the parties hereto and their respective heirs, successors and
permitted assigns.
6.6.8. Amendment; Waivers, etc. No amendment, modification or
discharge of this Agreement, and no waiver hereunder, shall be binding unless
set forth in writing and duly executed by the party against whom enforcement of
the amendment, modification, discharge or waiver is sought. Any such waiver
shall constitute a waiver only with respect to the specific matter described in
such writing and shall in no way impair the rights of the party granting such
waiver in any other respect or at any other time. Neither the waiver by any of
the parties hereto of a breach of or a default under any of the provisions of
this Agreement, nor the failure by any of the parties, on one or more occasions,
to enforce any of the provisions of this Agreement or to exercise any right or
privilege hereunder, shall be construed as a waiver of any other breach or
default of a similar nature, or as a waiver of any of such provisions, rights or
privileges hereunder. The rights and remedies herein provided are cumulative and
are not exclusive of any rights or remedies that any party may otherwise have at
law or in equity. The rights and remedies of any party based upon, arising out
of or otherwise in respect of any inaccuracy or
27
breach of any representation, warranty, covenant or agreement or failure to
fulfill any condition shall in no way be limited by the fact that the act,
omission, occurrence or other state of facts upon which any claim of any such
inaccuracy or breach is based may also be the subject matter of any other
representation, warranty, covenant or agreement as to which there is no
inaccuracy or breach. The representations and warranties of Medi-Flex shall not
be affected or deemed waived by reason of any investigation made by or on behalf
of the Buyer (including but not limited to by any of its advisors, consultants
or representatives) or by reason of the fact that the Buyer or any of such
advisors, consultants or representatives knew or should have known that any such
representation or warranty is or might be inaccurate.
ARTICLE VII
TERMINATION
7.1. Termination. This Agreement may be terminated at any time
prior to the Closing Date:
(a) by the written agreement of the Buyer and Medi-Flex;
(b) by the Buyer by written notice to Medi-Flex if (i) the
representations and warranties of Medi-Flex shall not
have been true and correct in all respects (in the case
of any representation or warranty containing any
materiality qualification) or in all material respects
(in the case of any representation or warranty without
any materiality qualification) as of the date when made
or (ii) if any of the conditions set forth in Section
5.1 or 5.2 shall not have been, or if it becomes
apparent that any of such conditions will not be,
fulfilled by 5:00 p.m. New York City time on December
31, 2001, unless failure shall be due to the failure of
the Buyer to perform or comply with any of the
covenants, agreements or conditions hereof to be
performed or complied with by it prior to the Closing;
or
(c) by Medi-Flex by written notice to the Buyer if (i) the
representations and warranties of the Buyer shall not
have been true and correct in all respects (in the case
of any representation or warranty containing any
materiality qualification) or in all material respects
(in the case of any representation or warranty without
any materiality qualification) as of the date when made
or (ii) if any of the conditions set forth in Sections
5.1 or 5.3 shall not have been, or if it becomes
apparent that any of such conditions will not be,
fulfilled by 5:00 p.m. New York City time on December
31, 2001, unless such failure shall be due to the
failure of Medi-Flex to perform or comply with any of
the covenants, agreements or conditions hereof to be
performed or complied with by it prior to the Closing.
7.2. Effect of Termination. The parties acknowledge that pursuant
to the Transition Agreement, Medical Action intends to pre-pay certain costs of
Medi-Flex's production of an inventory buildup of the Products, up to the amount
of $820,000.00 (the "Production Advance"). Such amount shall be disbursed by
Medical Action to Medi-Flex in installments in accordance
28
with the terms of such Transition Agreement. Medi-Flex shall ship the finished
Products to Medical Action in accordance with the schedule contemplated by the
Transition Agreement.
In the event the Closing does not occur for reasons other than those
set forth in Section 7.1(b) above (a "Medical Action Termination"), Medi-Flex
shall be entitled to liquidated damages in the amount of $250,000.00
("Liquidated Damages") as its exclusive remedy for a Medical Action Termination.
The Liquidated Damage shall not be a penalty but shall represent a fair payment
to Medi-Flex for its losses and costs in connection with a Medical Action
Termination. In addition, in the event of a Medical Action Termination, Medical
Action shall not be entitled to receive or keep any of such inventory, all of
which shall be returned to, or otherwise belong to, Medi-Flex. In the event
Medical Action has paid all or any portion of the Production Advance prior to
the Medical Action Termination, (i) Medi-Flex shall be entitled to retain sums
up to $250,000.00; (ii) Medical Action shall be obligated to pay Medi-Flex any
amounts necessary to increase the cumulative Production Advance paid to
Medi-Flex so that Medi-Flex shall receive $250,000.00; and (iii) Medi-Flex shall
pay Medical Action any sums paid to Medi-Flex in excess of $250,000.00 out of
sales of its inventory as soon as possible after a Medical Action Termination.
In the event the Closing does not occur for reasons other than those
set forth in Section 7.1(c) above (a "Medi-Flex Termination"), Medical Action
shall be entitled to Liquidated Damages as its exclusive remedy for a Medi-Flex
Termination. The Liquidated Damages shall not be a penalty but shall represent a
fair payment to Medical Action for its losses and costs in connection with a
Medi-Flex Termination. In addition, in the event of a Medi-Flex Termination, (i)
Medi-Flex shall reimburse Medical Action in the cumulative amount of the
Production Advance paid by Medical Action to Medi-Flex prior to the notice of
termination; and (ii) Medical Action shall return any inventory of finished
Products previously shipped by Medi-Flex to Medical Action which is in Medical
Action's care, custody or control as of the date of the Medi-Flex Termination.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
MEDICAL ACTION INDUSTRIES INC.
By: /s/ Xxxx X. Xxxxxxxxx
---------------------------------------
Xxxx X. Xxxxxxxxx
Chief Executive Officer and President
MEDI-FLEX HOSPITAL PRODUCTS, INC.
By: /s/ A. Xxxxxx Xxxxxxxxxx
---------------------------------------
A. Xxxxxx Xxxxxxxxxx
Chief Executive Officer and President
29
