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ASSET PURCHASE AGREEMENT
by and between
REHABILICARE INC.
and
XXXXXX HEALTHCARE, INC.
August 6, 1998
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TABLE OF CONTENTS
Page
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ARTICLE I
TRANSFER OF ASSETS; ASSUMPTION OF LIABILITIES
1.01 Transfer of Assets . . . . . . . . . . . . . . . . . . . . . . . 1
1.02 Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . 3
1.03 Assumption of Liabilities . . . . . . . . . . . . . . . . . . . 3
1.04 Excluded Liabilities . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE II
PURCHASE PRICE
2.01 Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.02 Manner of Payment . . . . . . . . . . . . . . . . . . . . . . . 3
2.03 Allocation of Purchase Price . . . . . . . . . . . . . . . . . . 4
ARTICLE III
CLOSING
3.01 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.02 General Procedure . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
4.01 Incorporation and Corporate Power . . . . . . . . . . . . . . . 4
4.02 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.03 Execution, Delivery; Valid and Binding Agreement . . . . . . . . 5
4.04 Authority; No Breach . . . . . . . . . . . . . . . . . . . . . . 5
4.05 Governmental Authorities; Consents . . . . . . . . . . . . . . . 5
4.06 Financial Statements . . . . . . . . . . . . . . . . . . . . . . 5
4.07 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . 5
4.08 No Material Adverse Changes . . . . . . . . . . . . . . . . . . 6
4.09 Absence of Certain Developments . . . . . . . . . . . . . . . . 6
4.10 Title to Properties . . . . . . . . . . . . . . . . . . . . . . 6
4.11 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . 7
4.12 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.13 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.14 Contracts and Commitments . . . . . . . . . . . . . . . . . . . 8
4.15 Intellectual Property Rights . . . . . . . . . . . . . . . . . . 9
4.16 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.17 Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
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4.18 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.19 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . 10
4.20 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.21 Affiliate Transactions . . . . . . . . . . . . . . . . . . . . . 11
4.22 Customers and Suppliers . . . . . . . . . . . . . . . . . . . . 11
4.23 Compliance with Laws; Permits . . . . . . . . . . . . . . . . . 12
4.24 Environmental Matters . . . . . . . . . . . . . . . . . . . . . 12
4.25 Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.26 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
5.01 Incorporation and Corporate Power . . . . . . . . . . . . . . . 13
5.02 Execution, Delivery; Valid and Binding Agreement . . . . . . . . 13
5.03 No Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.04 Governmental Authorities; Consents . . . . . . . . . . . . . . . 13
5.05 Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE VI
COVENANTS OF SELLER
6.01 Conduct of the Business . . . . . . . . . . . . . . . . . . . . 14
6.02 Access to Books and Records . . . . . . . . . . . . . . . . . . 15
6.03 Regulatory Filings . . . . . . . . . . . . . . . . . . . . . . . 15
6.04 Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.05 No Negotiations, etc. . . . . . . . . . . . . . . . . . . . . . 16
6.06 Business Employees . . . . . . . . . . . . . . . . . . . . . . . 16
6.07 Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.08 Services and Premises Agreement . . . . . . . . . . . . . . . . 17
ARTICLE VII
COVENANTS OF BUYER
7.01 Regulatory Filings . . . . . . . . . . . . . . . . . . . . . . . 17
7.02 Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE VIII
CONDITIONS TO CLOSING
8.01 Conditions to Buyer's Obligations . . . . . . . . . . . . . . . 18
8.02 Conditions to Seller's Obligations . . . . . . . . . . . . . . . 19
ARTICLE IX
TERMINATION
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9.01 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . 20
9.02 Effect of Termination . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE X
ADDITIONAL AGREEMENTS
10.01 Consulting Services . . . . . . . . . . . . . . . . . . . . . . 21
10.02 Old Receivables . . . . . . . . . . . . . . . . . . . . . . . . 21
10.03 Noncompetition Covenant . . . . . . . . . . . . . . . . . . . . 21
ARTICLE XI
SURVIVAL; INDEMNIFICATION
11.01 Survival of Representations and Warranties . . . . . . . . . . . 22
11.02 Indemnification by Seller . . . . . . . . . . . . . . . . . . . 22
11.03 Indemnification by Buyer . . . . . . . . . . . . . . . . . . . . 23
11.04 Method of Asserting Claims . . . . . . . . . . . . . . . . . . . 23
ARTICLE XII
MISCELLANEOUS
12.01 Press Releases and Announcements . . . . . . . . . . . . . . . . 24
12.02 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
12.03 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . 25
12.04 Cooperation and Exchange of Information. . . . . . . . . . . . . 25
12.05 Amendment and Waiver . . . . . . . . . . . . . . . . . . . . . . 25
12.06 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
12.07 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
12.08 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 26
12.09 Complete Agreement . . . . . . . . . . . . . . . . . . . . . . . 26
12.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 26
12.11 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 26
EXHIBIT A Assumed Liabilities
EXHIBIT B Assumed Contracts
EXHIBIT C Allocation of Purchase Price
EXHIBIT D Xxxx of Sale
EXHIBIT E Assignment and Assumption Agreement
EXHIBIT F Facilities and Services Agreement
EXHIBIT G Seller Officer Certificate
EXHIBIT H Buyer Officer Certificate
EXHIBIT I Seller Distributors
Schedule 1.01(a) Equipment, Machinery, Furniture Fixtures and Equipment
Schedule 1.01(b) Inventory
Schedule 1.01(e) Contracts
Schedule 1.01(f) Intellectual Property
Schedule 4.10 Leases
Schedule 4.17 Warranties
Schedule 4.18 Employees
Schedule 4.19 Benefit Plans
Schedule 4.20 Insurance
Schedule 4.22 Customers and Suppliers
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of August
6, 1998, is made and entered into by and between Rehabilicare Inc., a Minnesota
corporation ("Buyer"), and Xxxxxx Healthcare, Inc., a Texas corporation
("Seller").
WHEREAS, Seller is engaged in the business of manufacturing, licensing
and distributing diversified products and services in the pain management
industry;
WHEREAS, as part of its business, Seller markets and sells to patients
of various providers, and to Xxxxxx Permanente, through its Homecare business
unit, electrotherapy pain management and wound care products for home use,
including, without limitation, nerve and muscle stimulators, portable
electrotherapy units, transcutaneous nerve stimulation units and drug delivery
gels and pads (such products being hereafter referred to as the "Products" and
the business of marketing and selling the Products, including the Kaiser
Business (as defined below), but not including the Current WholeSale Business
(as defined below), being hereafter referred to as the "Business");
WHEREAS, as part of the Business, Seller sells the Products to Xxxxxx
Permanente and its affiliates, patients and physicians (the "Kaiser Business");
WHEREAS, Seller also distributes the Products through sale to the
distributors and dealers (such sales of the Products to such distributors, but
not including the Kaiser Business, being hereafter referred to as the "Current
Wholesale Business") and manufactures, licenses, markets and distributes
products that are not electrotherapy products to other markets, including
distribution of other products for third-party billing through its AMC division
(the distribution and sale through the Current Wholesale Business, together with
the manufacture, distribution and sale of such other products, being hereafter
referred to as the "Excluded Business");
WHEREAS, Seller desires to sell and assign to Buyer, and Buyer desires
to purchase and assume from Seller, on the terms and subject to the conditions
set forth in this Agreement, substantially all of the assets and certain
liabilities of Seller that are currently being used by Seller in the conduct of
the Business.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements and the conditions set forth in this
Agreement, Buyer and Seller hereby agree as follows:
ARTICLE I
TRANSFER OF ASSETS; ASSUMPTION OF LIABILITIES
1.01 TRANSFER OF ASSETS. On the terms and subject to the conditions
set forth in this Agreement, Seller shall, at the Closing (as defined in Section
3.01 hereof), sell, transfer and assign to Buyer, and Buyer shall purchase and
acquire from Seller, all of Seller's right, title and interest, as of the
Closing Date (as defined in Section 3.01 hereof), in and to all of the assets
set forth below (collectively, the "Assets"):
(a) The equipment, machinery, vehicles, furniture, fixtures,
furnishings and leasehold improvements owned by Seller and used by Seller
in the operation of the Business, which are identified in Schedule 1.01(a)
hereto;
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(b) Seller's inventories of supplies, raw materials, parts, finished
goods, work-in-process, product labels and packaging materials used in
connection with the Business, including, without limitation, those
inventories described in Schedule 1.01(b) hereto;
(c) Seller's interest in all orders or contracts for the purchase
of supplies, raw materials, parts, product labels and packaging materials
used in connection with the Business;
(d) Seller's interest in the licenses, contracts or agreements with
respect to the Business which are listed in Schedule 1.01(d);
(e) All unfilled or uncompleted customer contracts, commitments or
purchase or sales orders received and accepted by Seller in connection with
the Business in the ordinary course of business to the extent assignable;
(f) Seller's documents or other tangible materials embodying
technology or intellectual property rights owned by, licensed to or
otherwise controlled by Seller and used in connection with the Business,
whether such properties are located on Seller's business premises or on the
business premises of Seller's suppliers or customers,including all software
programs used in or developed for support of the Business, and Seller's
rights in patents, patent applications, trademarks, service marks, trade
names, corporate names, copyrights, trade secrets, and other intellectual
property rights owned by, licensed to or otherwise controlled by Seller or
used in, developed for use in or necessary to the conduct of the Business
as now conducted or planned all of which are listed in Schedule 1.01(f);
(g) All of Seller's books, records and other documents and
information relating to the Assets or the Business, including, without
limitation, all customer, and prospect lists, customer identities, customer
requirements and customer specifications, sales literature, inventory
records, purchase orders and invoices, sales orders and sales order log
books, customer information, commission records, correspondence, employee
payroll and personnel records, product data, material safety data sheets,
price lists, product demonstrations, quotes and bids and all product
catalogs and brochures;
(h) All accounts or notes receivable (excluding intra-company
accounts) owing to Seller that relate to the Business, as reflected in
electronic records delivered, or made available to Buyer, at the facilities
of Seller on the Closing Date and as reflected in the Closing Date Trial
Balance delivered to Buyer at Closing;
(i) The current telephone listings of the Business and the right to
use the telephone numbers currently being used at the principal offices and
other offices or facilities of the Business, to the extent they are
assignable;
(j) All permits, licenses and other governmental approvals held by
Seller with respect to the Business, to the extent they are assignable;
(k) All insurance policies of Seller obtained in connection with the
Business and all rights of Seller (including rights to receive dividends)
under or arising out of such insurance policies, to the extent they are
assignable;
(l) Goodwill, all related tangibles and intangibles which Seller
uses in the conduct of the Business and all rights to continue to use the
Assets in the conduct of a going business.
The parties hereto expressly agree that Buyer is not assuming any of the
liabilities, obligations or
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undertakings relating to the foregoing Assets, except for those liabilities and
obligations specifically assumed by Buyer in Section 1.03 hereof.
1.02 EXCLUDED ASSETS. Notwithstanding the terms of Section 1.01, the
following assets shall be retained by Seller and shall not be sold, transferred
or assigned to Buyer in connection with the purchase of the Assets:
(a) All bank accounts of Seller;
(b) All corporate certificates of authority and corporate minute
books and the corporate stock record or register of Seller;
(c) Such licenses, permits or other certificates of authority which,
by their terms, are nonassignable, all of which are identified in the
Disclosure Schedule under the caption referencing Section 4.14 or Section
4.24 as being retained by the Seller; and
(d) All assets not used in connection with the Business
1.03 ASSUMPTION OF LIABILITIES. Buyer shall assume, pay, perform in
accordance with their terms or otherwise satisfy, as of the Closing Date:
(a) The liabilities of Seller set forth in Exhibit A hereto; and
(b) Seller's obligations under the leases, agreements, contracts,
arrangements and licenses described in Exhibit B hereto.
1.04 EXCLUDED LIABILITIES. Other than as set forth above in Section
1.03, Seller shall retain, and Buyer shall not assume, and nothing contained in
this Agreement shall be construed as an assumption by Buyer of, any liabilities,
obligations or undertakings of Seller of any nature whatsoever, whether accrued,
absolute, fixed or contingent, known or unknown due or to become due,
unliquidated or otherwise. Seller shall be responsible for all of the
liabilities, obligations and undertakings of Seller not assumed by Buyer
pursuant to Section 1.03 hereof.
ARTICLE II
PURCHASE PRICE
2.01 AMOUNT. The total purchase price (the "Purchase Price") for the
Assets shall be Three Million, Six Hundred and Fifty Thousand Dollars
($3,650,000), plus the value of the liabilities and obligations of Seller to be
assumed by Buyer pursuant to Section 1.03 and plus the cost of any inventory
related to the Kaiser Business hereafter purchased by Buyer. Buyer shall not,
in any event, be required to pay for the inventory associated with the Kaiser
Business unless and until it has been provided with a list of such inventory,
has had a reasonable opportunity to inspect such inventory, and has found such
inventory acceptable.
2.02 MANNER OF PAYMENT. Buyer shall pay the cash portion of the
Purchase Price for the Assets to Seller on the Closing Date by wire transfer to
Seller's account at Comerica Bank--Texas, 0000 Xxxx Xxxxxxxxxxx, 0xx xxxxx,
Xxxxxx Xxxxx 0000000 for credit to Xxxxxx Healthcare, ABA # 000000000 (account #
188-0000000).
2.03 ALLOCATION OF PURCHASE PRICE. The Buyer and Seller have
allocated the Purchase Price among the Assets as set forth on Exhibit C, which
exhibit shall be updated as of the Closing Date in such a manner as determined
by Buyer subject to Seller's consent (which shall not be unreasonably
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withheld), after taking into account the applicable Treasury Regulations and the
fair market value of such items. Buyer shall prepare for filing all Returns (as
defined in Section 4.13(a)) that may be required with respect to the transaction
provided for herein pursuant to Section 1060 of the Internal Revenue Code of
1986, as amended (the "Code"), any Treasury Regulations promulgated thereunder,
any other similar provision of the Code and any other similar, applicable
foreign, state or local tax law or regulation. Seller shall provide information
that may be required by Buyer for the purpose of preparing such Returns, execute
and file such Returns as requested by Buyer and file all other returns and tax
information on a basis that is consistent with such Returns prepared by Buyer.
ARTICLE III
CLOSING
3.01 CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") will take place at the offices of Xxxxxx & Whitney,
000 Xxxxx Xxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx at 12:00 p.m. on the date of this
Agreement or at such other place and on such other date as is mutually agreeable
to Buyer and Seller. The date on which the Closing occurs is referred to herein
as the "Closing Date," and the Closing shall be deemed effective as of 8:00
a.m., Minneapolis time, on the Closing Date.
3.02 GENERAL PROCEDURE. At the Closing, each party shall deliver to
the party entitled to receipt thereof the documents required to be delivered
pursuant to Article VIII hereof and such other documents, instruments and
materials (or complete and accurate copies thereof, where appropriate) as may be
reasonably required in order to effectuate the intent and provisions of this
Agreement, and all such documents, instruments and materials shall be
satisfactory in form and substance to counsel for the receiving party. The
conveyance, transfer, assignment and delivery of the Assets shall be effected by
Seller's execution and delivery to Buyer of a xxxx of sale substantially in the
form attached hereto as Exhibit D (the "Xxxx of Sale") and such other
instruments of conveyance, transfer, assignment and delivery as Buyer shall
reasonably request to cause Seller to transfer, convey, assign and deliver the
Assets to Buyer, and the assignment and assumption of Seller's Liabilities to
Buyer shall be effected by Seller's and Buyer's execution of an assignment and
assumption agreement substantially in the form attached hereto as Exhibit E (the
"Assignment and Assumption Agreement").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer that, except as set
forth in the Disclosure Schedule delivered by Seller to Buyer on the date hereof
(the "Disclosure Schedule") (which Disclosure Schedule sets forth the exceptions
to the representations and warranties contained in this Article IV under
captions referencing the Sections to which such exceptions apply):
4.01 INCORPORATION AND CORPORATE POWER. Seller is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Texas and has all requisite corporate power and authority and all
authorizations, licenses, permits and certifications necessary to carry on the
Business as now being conducted and to own, lease and operate the Assets.
Seller is qualified as a foreign corporation to do business in every
jurisdiction in which the nature of its business or its ownership of property
requires it to be qualified and in which the failure to be so qualified would
have a material adverse effect on the financial or operating condition of the
Business.
4.02 SUBSIDIARIES. The Assets do not include any stock, partnership
interest, joint venture interest or any other security or ownership interest
issued by any other corporation, organization
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or entity.
4.03 EXECUTION, DELIVERY; VALID AND BINDING AGREEMENT. The
execution, delivery and performance of this Agreement by Seller and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of Seller, and no other proceedings on its
part are necessary to authorize the execution, delivery and performance of this
Agreement. This Agreement has been duly executed and delivered by Seller and,
assuming that this Agreement is the valid and binding agreement of Buyer,
constitutes the valid and binding obligation of Seller, enforceable in
accordance with its terms.
4.04 AUTHORITY; NO BREACH. Seller has the requisite corporate power
and authority to execute and deliver this Agreement and to perform its
obligations hereunder. The execution, delivery and performance of this
Agreement by Seller and the consummation of the transactions contemplated hereby
do not conflict with or result in any breach of any of the provisions of, or
constitute a default under, result in a violation of, result in the creation of
a right of termination or acceleration or any lien, security interest, charge or
authorization, consent, approval, exemption or other action by or notice to any
court or other governmental body, under the provisions of the Articles of
Incorporation or Bylaws of Seller or any indenture, mortgage, lease, loan
agreement or other agreement or instrument by which Seller or the Assets are
bound or affected (other than consents required under Section 8.01(d) hereof,
which Seller undertakes to obtain prior to the Closing Date), or any law,
statute, rule or regulation or order, judgment or decree to which Seller or the
Assets are subject.
4.05 GOVERNMENTAL AUTHORITIES; CONSENTS. The Seller is not required
to submit any notice, report or other filing with any governmental authority in
connection with the execution or delivery by it of this Agreement or the
consummation of the transactions contemplated hereby. No consent, approval or
authorization of any governmental or regulatory authority is required to be
obtained by Seller in connection with its execution, delivery and performance of
this Agreement.
4.06 FINANCIAL STATEMENTS. Seller has delivered to Buyer copies of
(a) the unaudited balance sheet, as of June 30, 1998, of the Business (the
"Latest Balance Sheet") and the unaudited statements of earnings of the Business
for the six-month period ended June 30, 1998 (such statements and the Latest
Balance Sheet being herein referred to as the "Latest Financial Statements") and
(b) the unaudited balance sheets, as of December 31, 1997 of the Business and
the unaudited statements of earnings of the Business for the twelve-month period
ended December 31, 1997 (collectively, the "Annual Financial Statements"). The
Latest Financial Statements and the Annual Financial Statements are based upon
the information contained in the books and records of Seller and fairly present
the financial condition of the Business as of the dates thereof and results of
operations for the periods referred to therein.
4.07 ABSENCE OF UNDISCLOSED LIABILITIES. With respect to the Assets
or the operations of the Business, Seller has no liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise, whether due or to become due,
whether known or unknown, and regardless of when asserted) arising out of
transactions or events heretofore entered into, or any action or inaction, or
any state of facts existing, with respect to or based upon transactions or
events heretofore occurring, except (i) as reflected in the Latest Balance
Sheet, or (ii) liabilities which have arisen after the date of the Latest
Balance Sheet in the ordinary course of business (none of which is a material
uninsured liability for breach of contract, breach of warranty, tort,
infringement, claim or lawsuit).
4.08 NO MATERIAL ADVERSE CHANGES. Since the date of the Latest
Balance Sheet (the "Balance Sheet Date"), there has been no material adverse
change in the assets, financial condition, operating results, customer, employee
or supplier relations, business condition or prospects of Seller.
4.09 ABSENCE OF CERTAIN DEVELOPMENTS. Since the Balance Sheet Date,
Seller has not, in each case, with respect to the Business:
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(a) mortgaged, pledged or subjected to any lien, charge or any other
encumbrance, any of the Assets except (i) liens for current property taxes not
yet due and payable, (ii) liens imposed by law and incurred in the ordinary
course of business for obligations not yet due to carriers, warehousemen,
laborers, materialmen and the like, or (iii) liens in respect of pledges or
deposits under workers' compensation laws;
(b) sold, assigned or transferred (including, without limitation,
transfers to any employees, affiliates or shareholders) any tangible assets of
the Business or canceled any debts or claims, in each case, except in the
ordinary course of business;
(c) sold, assigned or transferred (including, without limitation,
transfers to any employees, affiliates or shareholders) any patents, trademarks,
trade names, copyrights, trade secrets or other intangible assets used in or
held for use in the Business;
(d) waived any rights of material value or suffered any extraordinary
losses or adverse changes in collection loss experience, whether or not in the
ordinary course of business or consistent with past practice;
(e) taken any other action or entered into any other transaction
other than in the ordinary course of business and in accordance with past custom
and practice, or entered into any transaction with any "insider" (as defined in
Section 4.21 hereof) other than transactions contemplated by this Agreement;
(f) suffered any material theft, damage, destruction or loss of or to
any property or properties owned or used by it in connection with the Business,
whether or not covered by insurance;
(g) made or granted any bonus or any wage, salary or compensation
increase to any employee or consultant of the Business, or made or granted any
increase in any employee benefit plan or arrangement, or amended or terminated
any existing employee benefit plan or arrangement, or adopted any new employee
benefit plan or arrangement or made any commitment or incurred any liability to
any labor organization;
4.10 TITLE TO PROPERTIES.
(a) Seller does not own any real property used in connection with the
Business. The real property leases (the "Leases") described under the caption
referencing this Section 4.10 in the Disclosure Schedule constitute all of the
real property used or occupied by Seller in connection with the Business (the
"Real Property").
(b) The Leases are in full force and effect, and Seller holds a valid
and existing leasehold interest under each of the Leases for the term set forth
under such caption in the Disclosure Schedule. Seller has delivered to Buyer
complete and accurate copies of each of the Leases, and none of the Leases has
been modified in any respect, except to the extent that such modifications are
disclosed by the copies delivered to Buyer. Seller is not in default, and no
circumstances exist which, if unremedied, would, either with or without notice
or the passage of time or both, result in such default under any of the Leases;
nor, to the best knowledge of Seller, is any other party to any of the Leases in
default.
(c) Seller owns good and indefeasible title to the Assets, including
each of the tangible assets reflected on the Latest Balance Sheet or acquired
since the date thereof, free and clear of all liens and encumbrances, except for
(i) liens for current taxes not yet due and payable, (ii) the properties subject
to the Leases, (iii) assets disposed of since the date of the Latest Balance
Sheet in the ordinary course of business, (iv) liens imposed by law and incurred
in the ordinary course of business for obligations not yet due to carriers,
warehousemen, laborers and materialmen and (v) liens in respect of pledges or
deposits
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under workers' compensation laws, all of which liens aggregate less than $1,000.
(d) Schedule 1.01(a) sets forth a description of all the Assets which
constitute equipment, machinery, motor vehicles, furniture, fixtures,
furnishings and leasehold improvements. All of the buildings, machinery,
equipment and other tangible assets necessary for the conduct of the Business,
including those set forth in Schedule 1.01(a), are in good condition and repair,
ordinary wear and tear excepted, and are usable in the ordinary course of
business. There are no defects in such assets or other conditions relating
thereto which, in the aggregate, materially adversely affect the operation or
value of such assets. Seller owns, or leases under valid leases, all buildings,
machinery, equipment and other tangible assets necessary for the conduct of the
Business.
4.11 ACCOUNTS RECEIVABLE. The accounts receivable of the Business
reflected on the Latest Balance Sheet (the "Latest Balance Sheet Trial Balance")
and any additional accounts receivable accrued since the Balance Sheet Date,
each to the extent less than 360 days old (the "Current Year Receivables") are
valid receivables, are not subject to valid counterclaims or setoffs, and are
collectible in accordance with their terms, except to the extent of the bad debt
reserve reflected on the Latest Balance Sheet.
4.12 INVENTORY. Seller's inventory of raw materials, work in process
and finished goods relating to the Business consists of items of a quality and
quantity usable and, with respect to finished goods only, salable at the
Seller's normal profit levels, in each case, in the ordinary course of the
business. As of the date of the Latest Balance Sheet, the values at which such
inventory is carried on the Latest Balance Sheet are in accordance with
generally accepted accounting principles. Schedule 1.01(b) is (i) a true and
correct list as of July 31, 1998 of the inventories of the portion of the
Business operated from Akron, Ohio (the "Ohio Inventories"), and (ii) a true and
correct list of the inventories of portion of the Business (operated as "Texas
T.E.N.S") operated from Houston, Texas as of January 12, 1998 (the "Texas
Inventories"). There has not been any increase or decrease in the Ohio
Inventories since July 31, 1998, or in the Texas Inventories since January 12,
1998 except increases resulting from purchase of inventory and decreases
resulting from sales of inventory, in each case in the ordinary course of
business. There has not, in either case, been any material increase or decrease
in the value of the Ohio Inventories or the Texas Inventories since such
respective dates. To the extent that Schedule 1.01(b) refers to "Xxxxxx
Healthcare Inventory by Group," such Schedule is referring to Ohio Inventories
and to the extent referred to therein (i) as "on hand," such Ohio Inventories
are maintained and on hand at the offices of Seller at 000 Xxxx Xxxxxx, Xxxxx,
Xxxx and (ii) as "Consgmt," such inventories are maintained at healthcare
providers on consignment, (iii) as "rental," such inventory was, as of July 30,
1998, rented to end-users, and (iv) as "trial" such inventory was demonstration
or trial inventory. To the extent that Schedule 1.01(b) is referring to "Texas
Tens" such inventory represent Texas Inventories and to the extent listed
therein (i) as rental and consigned, is located with providers or renters, (ii)
as "physical inventory," is located at the Seller's premises in Sugar Land,
Texas.
4.13 TAX MATTERS.
(a) Each of Seller and any subsidiary, any affiliated, combined or
unitary group of which the Company or any subsidiary is or was a member, any
"Plans" (as defined in Section 4.19 hereof), as the case may be (each, a "Tax
Affiliate" and, collectively, the "Tax Affiliates"), has: (i) timely filed (or
has had timely filed on its behalf) all returns, declarations, reports,
estimates, information returns, and statements ("Returns") required to be filed
or sent by it in respect of any "Taxes" (as defined in subsection (p) below) or
required to be filed or sent by it by any taxing authority having jurisdiction;
(ii) timely and properly paid (or has had paid on its behalf) all Taxes shown to
be due and payable on such Returns; (iii) established on its Latest Balance
Sheet, in accordance with generally accepted accounting principles, reserves
that are adequate for the payment of any Taxes not yet due and payable; (iv)
complied with all applicable laws, rules, and regulations relating to the
withholding of Taxes and the payment thereof (including, without limitation,
withholding of Taxes under Sections 1441 and 1442 of the Internal Revenue
7
Code of 1986, as amended (the "Code"), or similar provisions under any foreign
laws), and timely and properly withheld from individual employee wages and paid
over to the proper governmental authorities all amounts required to be so
withheld and paid over under all applicable laws.
(b) There are no liens for Taxes upon any of the Assets, except for
current taxes not yet due and payable.
(c) Seller represents and warrants that the tangible personal
property being transferred in Texas to Buyer pursuant to this Agreement
constitutes the entire operating assets of a separate identifiable segment of a
business for purposes of Section 151.304(b)(2) of the Texas Tax Code and Section
3.316(d) of Title 34 of the Texas Administrative Code. Therefore, Buyer's
acquisition of such tangible personal property (excluding motor vehicles) is
exempt from Texas sales and use taxes as an occassional sale pursuant to Section
151.304 of the Texas Code and Section 3.316(d) of the Texas Administrative Code.
(d) Seller represents and warrants that the tangible personal
property being transferred in Ohio to Buyer pursuant to this Agreement is
property that was obtained by Seller, through purchase or otherwise, for
Seller's own use in Ohio and that was previously subject to Ohio's taxing
jurisdiction on its sale or use. Therefore, Buyer's acquisition of such
tangible personal property (excluding motor vehicles, is exempt from Ohio sales
and use taxes as a casual sale pursuant to Sections 5739.01(L) and 5739.02(B)(8)
of the Ohio Code.
4.14 CONTRACTS AND COMMITMENTS.
(a) Schedule 1.01(d) lists all agreements, whether oral or written,
to which Seller is a party, which are currently in effect, and which relate to
the operation of the Business or the Assets, including, without limitation: (i)
each contract for the employment of any officer, individual employee or other
person on a full-time or consulting basis who performs functions in connection
with the Business or relating to severance pay for any such person; (ii) each
confidentiality agreement; (iii) each agreement or indenture relating to the
borrowing of money or to mortgaging, pledging or otherwise placing a lien on any
of the Assets; (iv) each lease or agreement relating to the Business under which
Seller is lessee of, or holds or operates any property, real or personal, owned
by any other party, for which the annual rental exceeds $2,000; (v) each
contract or group of related contracts (including purchase orders) with the same
party for the purchase of products or services under which the undelivered
balance of such products or services of the Business is in excess of $2,000;
(vi) each contract or group of related contracts with the same party for the
sale of products or services of the Business under which the undelivered balance
of such products or services has a sales price in excess of $2,000; (vii) each
contract or group of related contracts relating to the Business with the same
party (other than any contract or group of related contracts for the purchase or
sale of products or services) continuing over a period of more than six months
from the date or dates thereof, not terminable by it on 30 days' or less notice
without penalty and involving more than $2,000; (viii) each contract which
prohibits Seller from freely engaging in business anywhere in the world; (ix)
each contract for the sale or distribution of any of the products of the
Business (including any distributor, sales and original equipment manufacturer
contract); (x) each franchise agreement relating to the Business; (xi) each
license agreement or agreement providing for the payment or receipt of royalties
or other compensation by Seller in connection with the intellectual property
rights listed in Schedule 1.01(g); (vii) each contract or commitment for capital
expenditures of the Business in excess of $2,000; (xviii) agreement for the sale
of any Asset; or (xix) other agreement which is either material to the Business
or was not entered into in the ordinary course of business.
(b) Seller has performed all obligations required to be performed by
it in connection with the contracts or commitments contained in Schedule 1.01(d)
and is not in receipt of any claim of default under any contract or commitment
required to be disclosed under such caption; Seller has no present expectation
or intention of not fully performing any material obligation pursuant to any
contract or commitment required to be disclosed under such caption; and Seller
has no knowledge of any breach or
8
anticipated breach by any other party to any contract or commitment required to
be disclosed under such caption.
(c) Prior to the date of this Agreement, Buyer has been supplied with
a true and correct copy of each written contract or commitment, and a written
description of each oral contract or commitment, contained in Schedule 1.01(d),
together with all amendments, waivers or other changes thereto.
4.15 INTELLECTUAL PROPERTY RIGHTS. Schedule 1.01(f) describes all
rights in patents, patent applications, trademarks, service marks, trade names,
corporate names, copyrights, trade secrets, know-how or other intellectual
property rights owned by, licensed to or otherwise controlled by Seller in
connection with the conduct of the Business or used in, developed for use in or
necessary to the conduct of the Business as now conducted or planned to be
conducted. Seller owns and possesses all right, title and interest, or holds a
valid license, in and to the rights set forth under such caption. Schedule
1.01(g) describes all intellectual property rights which have been licensed to
third parties and those intellectual property rights which are licensed from
third parties. Seller has taken all necessary action to protect the
intellectual property rights set forth under such caption. Seller has not
received any notice of, nor are there any facts known to Seller which indicate a
likelihood of, any infringement or misappropriation by, or conflict from, any
third party with respect to the intellectual property rights listed in the
Disclosure Schedule; no claim by any third party contesting the validity of any
intellectual property rights listed under such caption has been made, is
currently outstanding or, to the best knowledge of the Company, is threatened;
Seller has not received any notice of any infringement, misappropriation or
violation by Seller of any intellectual property rights of any third parties and
Seller has not infringed, misappropriated or otherwise violated any such
intellectual property rights; and no infringement, illicit copying,
misappropriation or violation has occurred or will occur with respect to
products currently being sold by Seller or with respect to the products
currently under development (in their present state of development) or with
respect to the conduct of the Business as now conducted.
4.16 LITIGATION. There are no actions, suits, proceedings, orders or
investigations pending or, to the best knowledge of Seller, threatened against
Seller, at law or in equity, or before or by any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, and there is no reasonable basis known to
Seller for any of the foregoing, in each case that materially effect the
Business, or that would or could constitute an encumbrance on the Assets or
effect the Seller's ability to consummate the transactions contemplated by this
Agreement.
4.17 WARRANTIES. The Disclosure Schedule summarizes under the
caption referencing this Section 4.17 all claims outstanding, pending or, to the
best knowledge of Seller, threatened for breach of any warranty relating to any
products of the Business sold by Seller prior to the date hereof. The
description of Seller's product warranties set forth under the caption
referencing this Section 4.17 is correct and complete. The reserves for
warranty claims on the Latest Balance Sheet are consistent with Seller's prior
practices and are fully adequate to cover all warranty claims made or to be made
against any products of the Business sold prior to the date thereof.
4.18 EMPLOYEES. The Disclosure Schedule, under the caption
referencing this Section 4.18, lists, as of the date set forth in the Disclosure
Schedule, each employee of Seller who performs functions in connection with the
Business (the "Business Employees") and the position, title, remuneration
(including any scheduled salary or remuneration increases), date of employment
and accrued vacation pay of each such employee. With respect to such employees
of Seller who perform functions in connection with the Business: (a) to the best
knowledge of Seller, no such employee or group of employees has any plans to
terminate his or its employment; (b) Seller has complied with all laws relating
to the employment of labor, including provisions thereof relating to wages,
hours, equal opportunity, collective bargaining and the payment of social
security and other taxes; (c) Seller has no material labor
9
relations problem pending and its labor relations are satisfactory; (d) there
are no workers' compensation claims pending against Seller nor is Seller aware
of any facts that would give rise to such a claim; (e) to the best knowledge of
Seller, no employee of Seller is subject to any secrecy or noncompetition
agreement or any other agreement or restriction of any kind that would impede in
any way the ability of such employee to carry out fully all activities of such
employee in furtherance of the Business; and (f) no employee or former employee
of Seller has any claim with respect to any intellectual property rights of
Seller set forth under the caption referencing Section 4.18 hereof in the
Disclosure Schedule.
4.19 EMPLOYEE BENEFIT PLANS.
(a) Except as set forth under the caption referencing Section 4.19
hereof in the Disclosure Schedule, with respect to all employees and former
employees of Seller who perform or performed functions in connection with the
Business and all dependents and beneficiaries of such employees and former
employees: (i) Seller does not maintain or contribute to any nonqualified
deferred compensation or retirement plans, contracts or arrangements; (ii)
Seller does not maintain or contribute to any qualified defined contribution
plans (as defined in Section 3(34) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), or Section 414(i) of the Code; (iii) Seller
does not maintain or contribute to any qualified defined benefit plans (as
defined in Section 3(35) of ERISA or Section 414(j) of the Code); and (iv)
Seller does not maintain or contribute to any employee welfare benefit plans (as
defined in Section 3(1) of ERISA).
(b) To the extent required (either as a matter of law or to obtain
the intended tax treatment and tax benefits), all employee benefit plans (as
defined in Section 3(3) of ERISA) which Seller does maintain or to which it does
contribute (collectively, the "Plans") comply in all material respects with the
requirements of ERISA and the Code. With respect to the Plans, (i) all required
contributions which are due have been made and a proper accrual has been made
for all contributions due in the current fiscal year; (ii) there are no actions,
suits or claims pending, other than routine uncontested claims for benefits; and
(iii) there have been no prohibited transactions (as defined in Section 406 of
ERISA or Section 4975 of the Code).
(c) Buyer has received true and complete copies of (i) the most
recent determination letter, if any, received by Seller from the Internal
Revenue Service regarding the Plans which Seller maintains or to which it
contributes and any amendment to any Plan made subsequent to any Plan amendments
covered by any such determination letter; (ii) the most recent financial
statements and annual report or return for the Plans; and (iii) the most
recently prepared actuarial valuation reports.
(d) Seller does not contribute (and has not ever contributed) to any
multi-employer plan, as defined in Section 3(37) of ERISA. Seller has no actual
or potential liabilities under Section 4201 of ERISA for any complete or partial
withdrawal from a multi-employer plan. Seller has no actual or potential
liability for death or medical benefits after separation from employment, other
than (i) death benefits under the employee benefit plans or programs (whether or
not subject to ERISA) set forth under the caption referencing this Section 4.19
in the Disclosure Schedule and (ii) health care continuation benefits described
in Section 4980B of the Code.
(e) Neither Seller nor any of its directors, officers, employees or
other "fiduciaries", as such term is defined in Section 3(21) of ERISA, has
committed any breach of fiduciary responsibility imposed by ERISA or any other
applicable law with respect to the Plans which would subject Seller, Buyer,
Buyer's subsidiaries or any of their respective directors, officers or employees
to any liability under ERISA or any applicable law.
(f) Seller has not incurred any liability for any tax or civil
penalty or any disqualification of any employee benefit plan (as defined in
Section 3(3) of ERISA) imposed by Sections 4980B and 4975 of the Code and Part 6
of Title I and Section 502(i) of ERISA.
10
4.20 INSURANCE. The Disclosure Schedule, under the caption
referencing this Section 4.20, lists and briefly describes each insurance policy
maintained by Seller with respect to the Assets and operations of the Business
and sets forth the date of expiration of each such insurance policy. All of
such insurance policies are in full force and effect and are issued by insurers
of recognized responsibility. Seller is not in default with respect to its
obligations under any of any insurance policies relating to the Assets or the
Business.
4.21 AFFILIATE TRANSACTIONS. No officer, director or employee of
Seller or any member of the immediate family of any such officer, director or
employee, or any entity in which any of such persons owns any beneficial
interest (other than any publicly-held corporation whose stock is traded on a
national securities exchange or in the over-the-counter market and less than one
percent of the stock of which is beneficially owned by any of such persons)
(collectively "insiders"), has any agreement with Seller (other than normal
employment arrangements) or any interest in any property, real, personal or
mixed, tangible or intangible, used in or pertaining to the Business of Seller
(other than ownership of capital stock of Seller). None of the insiders has any
direct or indirect interest in any competitor, supplier or customer of the
Business or in any person, firm or entity from whom or to whom Seller leases any
property used in the Business, or in any other person, firm or entity with whom
the Business transacts business of any nature.
4.22 CUSTOMERS AND SUPPLIERS. The Disclosure Schedule, under the
caption referencing this Section 4.22, lists the 10 largest suppliers of Seller
relating to the Business for the fiscal year ended December 31, 1997 and for the
six-month period ended June 30, 1998 and sets forth opposite the name of each
such supplier the approximate percentage of net sales to, or purchases by, the
Business attributable to such customer or supplier for each such period. Since
the Balance Sheet Date, no supplier listed on the Disclosure Schedule under the
caption referencing this Section 4.22 has indicated that it will stop or
decrease the rate of business done with Seller except for changes in the
ordinary course of Seller's business.
4.23 COMPLIANCE WITH LAWS; PERMITS.
(a) Seller and its officers, directors, agents and employees have
complied in all material respects with all applicable laws, regulations and
other requirements, including, but not limited to, federal, state, local and
foreign laws, ordinances, rules, regulations and other requirements pertaining
to product labeling, consumer products safety, equal employment opportunity,
employee retirement, affirmative action and other hiring practices, occupational
safety and health, workers' compensation, unemployment and building and zoning
codes, which materially affect the Business, the Assets or the Real Property and
to which Seller may be subject, and, to Seller's knowledge, no claims have been
filed against Seller alleging a violation of any such laws, regulations or other
requirements. Seller has no knowledge of any action, pending or threatened, to
change the zoning or building ordinances or any other laws, rules, regulations
or ordinances affecting the Assets or the Real Property. Seller is not relying
on any exemption from or deferral of any such applicable law, regulation or
other requirement that would not be available to Buyer after it acquires the
Assets.
(b) Seller has, in full force and effect, all licenses, permits and
certificates, from federal, state, local and foreign authorities (including,
without limitation, federal and state agencies regulating occupational health
and safety) necessary to conduct its Business and own and operate Assets
(collectively, the "Permits") for which the failure to have such Permits would
singly or in the aggregate have a material adverse effect on the Business or the
Assets. A true, correct and complete list of all the Permits is set forth under
the caption referencing this Section 4.23 in the Disclosure Schedule, with an
indication as to whether the Permit is assignable to Buyer. Seller has
conducted its business in compliance with all material terms and conditions of
the Permits.
11
(c) In connection with the Business, Seller has not made or agreed to
make gifts of money, other property or similar benefits (other than incidental
gifts of articles of nominal value) to any actual or potential customer,
supplier, governmental employee or any other person in a position to assist or
hinder Seller in connection with any actual or proposed transaction.
4.24 ENVIRONMENTAL MATTERS. Seller, with respect to the Business and
the Real Property, is in material compliance with all applicable all applicable
laws, rules, directives, permits, licenses and judgments relating to pollution,
contamination or protection of the environment ("Environmental Laws"). Seller
has not received notice alleging in any manner that Seller is, or might be
potentially responsible for, any release of hazardous materials, or any costs
arising under or violation of Environmental Laws with respect to the Business or
the Assets. No expenditure will be required in order for Buyer to comply with
any Environmental Laws in effect at the time of the Closing in connection with
the operation or continued operation of the Business or the Real Property in a
manner consistent with the current operation thereof by Seller. Seller, on
behalf of itself and its successors and assigns, hereby waives, releases and
agrees not to bring any claim, demand, cause of action or proceeding, including
without limitation any cost recovery action, against Buyer under any
Environmental Law in connection with the Buyer's purchase, ownership or
operation of the Business and the Assets.
4.25 BROKERAGE. No third party shall be entitled to receive any
brokerage commissions, finder's fees, fees for financial advisory services or
similar compensation in connection with the transactions contemplated by this
Agreement based on any arrangement or agreement made by or on behalf of Seller.
4.26 DISCLOSURE. Neither this Agreement nor any of the Exhibits
hereto nor any of the documents delivered by or on behalf of Seller pursuant to
Article VIII hereof nor the Disclosure Schedule nor any of the financial
statements referred to in Section 4.06 hereof, taken as a whole, contain any
untrue statement of a material fact regarding Seller or the Business or any of
the other matters dealt with in this Article IV relating to Seller or the
transactions contemplated by this Agreement. This Agreement, the Exhibits
hereto, the documents delivered to Buyer by or on behalf of Seller pursuant to
Article VIII hereof, the Disclosure Schedule and the financial statements
referred to in Section 4.06 hereof, taken as a whole, do not omit any material
fact necessary to make the statements contained herein or therein, in light of
the circumstances in which they were made, not misleading, and there is no fact
which has not been disclosed to Buyer of which any officer or director of Seller
is aware which materially affects adversely or could reasonably be anticipated
to materially affect adversely the Assets or the Business.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller that:
5.01 INCORPORATION AND CORPORATE POWER. Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Minnesota, with the requisite corporate power and authority to enter into
this Agreement and perform its obligations hereunder.
5.02 EXECUTION, DELIVERY; VALID AND BINDING AGREEMENT. The
execution, delivery and performance of this Agreement by Buyer and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all requisite corporate action, and no other corporate proceedings
on its part are necessary to authorize the execution, delivery or performance of
this Agreement. This Agreement has been duly executed and delivered by Buyer
and constitutes the valid and binding obligation of Buyer, enforceable in
accordance with its terms.
12
5.03 NO BREACH. The execution, delivery and performance of this
Agreement by Buyer and the consummation by Buyer of the transactions
contemplated hereby do not conflict with or result in any breach of any of the
provisions of, constitute a default under, result in a violation of, result in
the creation of a right of termination or acceleration or any lien, security
interest, charge or encumbrance upon any assets of Buyer, or require any
authorization, consent, approval, exemption or other action by or notice to any
court or other governmental body, under the provisions of the Articles of
Incorporation or Bylaws of Buyer or any indenture, mortgage, lease, loan
agreement or other agreement or instrument by which Buyer is bound or affected,
or any law, statute, rule or regulation or order, judgment or decree to which
Buyer is subject.
5.04 GOVERNMENTAL AUTHORITIES; CONSENTS. Buyer is not required to
submit any notice, report or other filing with any governmental authority in
connection with the execution or delivery by it of this Agreement or the
consummation of the transactions contemplated hereby. No consent, approval or
authorization of any governmental or regulatory authority or any other party or
person is required to be obtained by Buyer in connection with its execution,
delivery and performance of this Agreement or the transactions contemplated
hereby.
5.05 BROKERAGE. No third party shall be entitled to receive any
brokerage commissions, finder's fees, fees for financial advisory services or
similar compensation in connection with the transactions contemplated by this
Agreement based on any arrangement or agreement made by or on behalf of Buyer.
ARTICLE VI
COVENANTS OF SELLER
6.01 CONDUCT OF THE BUSINESS. In connection with the Assets or the
Business, Seller agrees to observe each term set forth in this Section 6.01 and
agrees that, from the date hereof until the Closing Date, unless otherwise
consented to by Buyer in writing:
(a) The Business shall be conducted only in, and Seller shall not
take any action except in, the ordinary course of Seller's business, on an
arm's-length basis and in accordance in all material respects with all
applicable laws, rules and regulations and Seller's past custom and practice;
(b) Seller shall not, directly or indirectly, do or permit to occur
any of the following insofar as they relate to Business or the Assets: (i) sell,
pledge, dispose of or encumber any of the Assets, except in the ordinary course
of business; (ii) acquire (by merger, exchange, consolidation, acquisition of
stock or assets or otherwise) any corporation, partnership, joint venture or
other business organization or division or material assets thereof; (iii) incur
any indebtedness for borrowed money or issue any debt securities except the
borrowing of working capital in the ordinary course of business and consistent
with past practice; (iv) permit any accounts payable owed to trade creditors to
remain outstanding more than 60 days; (v) accelerate, beyond the normal
collection cycle, collection of accounts receivable; or (vi) enter into or
propose to enter into, or modify or propose to modify, any agreement,
arrangement or understanding with respect to any of the matters set forth in
this Section 6.01(b);
(c) Seller shall not, directly or indirectly, enter into or modify
any employment, severance or similar agreements or arrangements with, or grant
any bonuses, salary increases, severance or termination pay to, any Business
Employee, other than in accordance with contractual obligations in existence on
the date of this Agreement;
(d) Seller shall not cancel or terminate its current insurance
policies covering the Assets
13
and the Business, or cause any of the coverage thereunder to lapse, unless
simultaneously with such termination, cancellation or lapse, replacement
policies providing coverage equal to or greater than the coverage under the
canceled, terminated or lapsed policies for substantially similar premiums are
in full force and effect;
(e) Seller shall (i) use its best efforts to preserve intact the
organization and goodwill of the Business, keep available the services of
Seller's officers and employees as a group and maintain satisfactory
relationships with suppliers, distributors, customers and others having business
relationships with Seller in connection with the Business; (ii) confer on a
regular and frequent basis with representatives of Buyer to report operational
matters and the general status of ongoing operations with respect to the
Business; (iii) not intentionally take any action which would render, or which
reasonably may be expected to render, any representation or warranty made by it
in this Agreement untrue at the Closing; (iv) notify Buyer of any emergency or
other change in the normal course of the Business or in the operation of the
properties of the Business and of any governmental or third party complaints,
investigations or hearings (or communications indicating that the same may be
contemplated) if such emergency, change, complaint, investigation or hearing
would be material, individually or in the aggregate, to the business, operations
or financial condition of Seller or to Seller's or Buyer's ability to consummate
the transactions contemplated by this Agreement; and (v) promptly notify Buyer
in writing if Seller shall discover that any representation or warranty made by
it in this Agreement was when made, or has subsequently become, untrue in any
respect;
(f) Seller shall (i) file any Tax returns, elections or information
statements with respect to any liabilities for Taxes of Seller or other matters
relating to Taxes of Seller which affect the Assets and pursuant to applicable
law must be filed prior to the Closing Date; (ii) promptly upon filing provide
copies of any such Tax returns, elections or information statements to Buyer;
(iii) make any such Tax elections or other discretionary positions with respect
to Taxes taken by or affecting Seller only upon prior consultation with and
consent of Buyer; and (iv) not amend any Return;
(g) Neither Seller nor any of its Affiliates shall make any election
without respect to Taxes, change an annual accounting period, adopt or change
any accounting method or file any amended return, report or form, if such
election, adoption, change or filing would have the effect of increasing the Tax
liability of the Buyer with respect to any period ending after the Closing Date;
and
(h) Seller shall not perform any act referenced by (or omit to
perform any act which omission is referenced by) the terms of Section 4.09.
6.02 ACCESS TO BOOKS AND RECORDS. Between the date hereof and the
Closing Date, Seller shall afford to Buyer and its authorized representatives
(the "Buyer's Representatives") full access at all reasonable times and upon
reasonable notice to the offices, properties, books, records, officers,
employees and other items of the Business, and the work papers of Xxxxxx
Xxxxxxxx LLP, Seller's independent accountants, relating to work done by Xxxxxx
Xxxxxxxx LLP for Seller (insofar as the work relates to the Business or the
Assets) for the fiscal year ended December 31, 1997, and otherwise provide such
assistance as is reasonably requested by Buyer in order that Buyer may have a
full opportunity to make such investigation and evaluation as it shall
reasonably desire to make of the Business and the Assets. In addition, Seller
and its officers and directors shall cooperate fully (including providing
introductions where necessary) with Buyer to enable Buyer to contact such third
parties, including customers, prospective customers, specifying agencies,
vendors or suppliers of the Business, as Buyer deems reasonably necessary to
complete its due diligence; PROVIDED THAT Buyer agrees not to initiate such
contacts without the prior approval of Seller, which approval will not be
unreasonably withheld.
6.03 REGULATORY FILINGS. As promptly as practicable after the
execution of this Agreement, Seller shall make or cause to be made all filings
and submissions under any laws or regulations applicable to the Business for the
consummation of the transactions contemplated herein.
14
Seller will coordinate and cooperate with Buyer in exchanging such information,
will not make any such filing without providing to Buyer a final copy thereof
for its review and consent at least two full business days in advance of the
proposed filing and will provide such reasonable assistance as Buyer may request
in connection with all of the foregoing.
6.04 CONDITIONS. Seller shall take all commercially reasonable
actions necessary or desirable to cause the conditions set forth in Section 8.01
to be satisfied and to consummate the transactions contemplated herein as soon
as reasonably possible after the satisfaction thereof (but in any event within
three business days of such date).
6.05 NO NEGOTIATIONS, ETC. Seller shall not directly or indirectly,
through any officer, director, agent or otherwise, solicit, initiate or
encourage submission of any proposal or offer from any person or entity
(including any of its or their officers or employees) relating to the
acquisition or purchase of the Business or any of the Assets.
6.06 BUSINESS EMPLOYEES.
(a) Seller agrees that Buyer may hire effective as of the Closing Date
all of the Business Employees except the two employees covered by the Facilities
and Services Agreement. Seller agrees to cooperate with Buyer in providing
notice of termination to such Business Employees as of the Closing Date.
(b) All Employees who accept employment with Buyer as of the Closing Date
shall be eligible to participate in the employee benefit plans and other fringe
benefits of Buyer on the same basis as such plans and benefits are offered to
employees of Buyer with comparable positions with Buyer. For purposes of this
Section, "employee benefit plans and other fringe benefits," includes, without
limitation, health insurance benefits, disability, life and accident insurance,
sickness benefits, and vacation. All eligibility waiting periods and
pre-existing condition exclusions shall be waived under Buyer's employee benefit
plans with respect to such Business Employees and their dependents to the extent
they had been waived or satisfied under similar plans of the Seller immediately
prior to the Closing Date. Notwithstanding anything in this Section 6.06(b) or
elsewhere in this Section 6.06, Buyer shall not be obligated to provide an
Employee with any pension, medical, vacation or other benefits that are not
currently provided by Buyer to its existing employees or with any benefits that
exceed the level of benefits provided by Buyer to its existing employees.
(c) Seller shall be responsible for payments for accrued vacation not
taken by a Business Employee prior to the Closing Date and for all earned
incentive compensation including bonuses, if any, with respect to service
completed prior to the Closing Date. Seller shall offer Employees who accept
positions with Buyer the option to receive cash or to transfer to Buyer their
accrued vacation days or fractions thereof earned but unused while employed by
Seller. In the event any Employee elects to receive cash upon employment by
Buyer, Seller shall make a cash payment to such Employee within 10 days after
the Closing Date. In the event any such Employee elects to have his or her
accrued vacation transferred upon employment by Buyer, Buyer shall give such
Employee credit after the Closing Date for the same number of vacation days or
fractions thereof he or she has accrued with Seller as of the Closing Date. In
the event Employees elect to have their accrued vacation carried over to Buyer,
Seller shall pay to Buyer within 10 days after the Closing Date an amount equal
to the cash value of each such Employee's accrued vacation before payroll
deductions. In subsequent calendar years, Employees will be eligible to earn
vacation according to the schedule specified in Buyer's vacation policy.
(d) Seller shall retain the responsibility for payment of all medical,
dental, health and disability claims incurred by any Employee on or prior to the
Closing Date, and Buyer shall not assume any liability with respect to such
claims, including liability for continuing payments after Closing for claims
incurred at or prior to the Closing. Buyer agrees to use its best efforts to
ensure that any preexisting
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condition clause in any of Buyer's health or disability insurance coverage shall
not be applicable to Employees who accept employment with Buyer. Buyer assumes
responsibility for payment of all medical, dental, health and disability claims
incurred by Employees in its employ after the Closing Date.
(e) Seller shall be responsible for providing any Employee whose
"qualifying event," within the meaning of Section 4980B(f) of the Code, occurs
on or prior to the Closing Date (and such Employee's "qualified beneficiaries"
within the meaning of Section 4980B(f) of the Code) with the continuation of
group health coverage required by Section 4980B(f) of the Code ("Continuation
Coverage") under the terms of the health plan maintained by Seller. Buyer shall
be responsible for Continuation Coverage to any Employee who accepts employment
with Buyer (and each Employee's qualified beneficiaries) whose qualifying event
occurs after the Closing Date to the extent required by law.
6.07 AGENTS. Immediately after execution of this Agreement, Seller
shall notify the sales agents, sales representatives or other persons who
sell any products or services offered by the Business on behalf of Seller
(collectively, "Agents") of the execution of this Agreement and its intention
to assign its rights and obligations under any agreement with such Agents to
Buyer. Subject to any existing agreement with the same, and at the direction
of Buyer, Seller shall cancel any contract with an Agent who refuses such
assignment in accordance with its obligations under Section 10.03. Seller
shall cooperate with Buyer in negotiating new arrangements between such
agents, distributors and dealers and Buyer.
6.08 SERVICES AND PREMISES AGREEMENT. Seller shall, at the request
of Buyer, obtain the consent of the lessors of the Real Property in Akron,
Ohio to the Facilities and Services Agreement set forth in the attached
Exhibit F (the "Services Agreement").
ARTICLE VII
COVENANTS OF BUYER
Buyer covenants and agrees with Seller as follows:
7.01 REGULATORY FILINGS. As promptly as practicable after the
execution of the Agreement, Buyer shall make or cause to be made all filings and
submissions under any laws or regulations applicable to Buyer for the
consummation of the transactions contemplated herein. Buyer will coordinate and
cooperate with Seller in exchanging such information, will not make any such
filing without providing to Seller a final copy thereof for its review and
consent at least two full business days in advance of the proposed filing and
will provide such reasonable assistance as Seller may request in connection with
all of the foregoing.
7.02 CONDITIONS. Buyer shall take all commercially reasonable
actions necessary or desirable to cause the conditions set forth in Section 8.02
to be satisfied and to consummate the transactions contemplated herein as soon
as reasonably possible after the satisfaction thereof (but in any event within
three business days of such date).
7.03 EMPLOYEES. Buyer shall offer employment to substantially all of
the Business Employees and shall not dismiss employees so hired during the
ninety days after closing to the extent that the number of employees of Seller
that have been dismissed by Buyer during such ninety day period, plus the number
of Business Employees not offered employment by Buyer, exceeds fifty.
ARTICLE VIII
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CONDITIONS TO CLOSING
8.01 CONDITIONS TO BUYER'S OBLIGATIONS. The obligation of Buyer to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the following conditions on or before the Closing Date:
(a) The representations and warranties set forth in Article IV hereof
shall be true and correct in all material respects at and as of the Closing Date
as though then made and as though the Closing Date had been substituted for the
date of this Agreement throughout such representations and warranties (without
taking into account any disclosures by Seller of discoveries, events or
occurrences arising on or after the date hereof), except that any such
representation or warranty made as of a specified date (other than the date
hereof) shall only need to have been true on and as of such date;
(b) Seller shall have performed in all material respects all of the
covenants and agreements required to be performed and complied with by it under
this Agreement prior to the Closing;
(c) Seller shall have assigned to Buyer the agreements and permits
specified in the Disclosure Schedule under the captions referencing Sections
4.14 and 4.23 (except as otherwise noted thereon);
(d) Seller shall have obtained, or caused to be obtained, each
consent and approval necessary in order that the transactions contemplated
herein not constitute a breach or violation of, or result in a right of
termination or acceleration of, or creation of any encumbrance on any of the
Assets pursuant to the provisions of, any agreement, arrangement or undertaking
of or affecting Seller or any license, franchise or permit of or affecting
Seller, regardless of whether assigned to Seller pursuant to Section 8.01(c);
(e) Buyer shall have been successful in obtaining the agreement of
such of Seller's Business Employees, sales agents, sales representatives,
distributors and dealers to become employees, sales agents, sales
representatives, distributors and dealers of Buyer as Buyer reasonably concludes
are necessary for the continued operation of the Business.
(f) There shall not be threatened, instituted or pending any action
or proceeding, before any court or governmental authority or agency, domestic or
foreign, (i) challenging or seeking to make illegal, or to delay or otherwise
directly or indirectly restrain or prohibit, the consummation of the
transactions contemplated hereby or seeking to obtain material damages in
connection with such transactions, (ii) seeking to prohibit direct or indirect
ownership or operation by Buyer of all or a material portion of the Assets, or
to compel Buyer or any of its subsidiaries to dispose of or to hold separately
all or a material portion of the business or assets of Buyer and its
subsidiaries, as a result of the transactions contemplated hereby, (iii) seeking
to invalidate or render unenforceable any material provision of this Agreement
or any of the other agreements attached as exhibits hereto (collectively, and
including the Services Agreement, the "Related Agreements"), or (iv) otherwise
relating to and materially adversely affecting the transactions contemplated
hereby;
(g) There shall not be any action taken, or any statute, rule,
regulation, judgment, order or injunction enacted, entered, enforced,
promulgated, issued or deemed applicable to the transactions contemplated hereby
by any federal, state or foreign court, government or governmental authority or
agency, which would reasonably be expected to result, directly or indirectly, in
any of the consequences referred to in Section 8.01(f) hereof;
(h) There shall be no material difference between the Latest Balance
Sheet Trial Balance and the Closing Date Trial Balance (as defined in subsection
(k)(vii) below);
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(i) Buyer shall not have discovered any fact or circumstance existing
as of the date of this Agreement which has not been disclosed to Buyer as of the
date of this Agreement regarding the Business or Assets, which is, individually
or in the aggregate with other such facts and circumstances, materially adverse
to the value of the Assets or the Business, as determined by the Buyer in its
reasonable discretion;
(j) There shall have been no damage, destruction or loss of or to any
of the Assets, whether or not covered by insurance, which, in the aggregate,
has, or would be reasonably likely to have, a material adverse effect on the
Assets or the Business;
(k) On the Closing Date, Seller shall have delivered to Buyer all of
the following:
(i) the Xxxx of Sale and such other instruments of conveyance,
transfer, assignment and delivery as Buyer shall have reasonably requested
pursuant to Section 3.02 hereof;
(ii) the Assignment and Assumption Agreement;
(iii) certificates of the officers of Seller with the best
knowledge of the Company or other persons satisfactory to Buyer
substantially in the form set forth in Exhibit G attached hereto, dated the
Closing Date, stating that the conditions precedent set forth in
subsections (a) and (b) above have been satisfied;
(iv) copies of the third party and governmental consents and
approvals referred to in subsections (c) and (d) above;
(v) a copy of the text of the resolutions adopted by the board
of directors of Seller authorizing the execution, delivery and performance
of this Agreement and the consummation of all of the transactions
contemplated by this Agreement; along with a certificate executed on behalf
of Seller, by its corporate secretary certifying to Buyer that such copy is
a true, correct and complete copy of such resolutions, and that such
resolutions were duly adopted and have not been amended or rescinded;
(vi) an executed copy of each of the Related Agreements;
(vii) a trial balance of accounts receivable of the Business
dated as of the close of business on the day before the Closing certified
by the Chief Financial Officer of Seller (the "Closing Date Trial
Balance"); and
(ix) such other certificates, documents and instruments as
Buyer reasonably requests related to the transactions contemplated hereby.
8.02 CONDITIONS TO SELLER'S OBLIGATIONS. The obligations of Seller
to consummate the transactions contemplated by this Agreement are subject to the
satisfaction of the following conditions on or before the Closing Date:
(a) The representations and warranties set forth in Article V hereof
will be true and correct in all material respects at and as of the Closing as
though then made and as though the Closing Date had been substituted for the
date of this Agreement throughout such representations and warranties;
(b) Buyer shall have performed in all material respects all the
covenants and agreements required to be performed by it under this Agreement
prior to the Closing;
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(c) There shall not be threatened, instituted or pending any action
or proceeding, before any court or governmental authority or agency, domestic or
foreign, (i) challenging or seeking to make illegal, or to delay or otherwise
directly or indirectly restrain or prohibit, the consummation of the
transactions contemplated hereby or seeking to obtain material damages in
connection with such transactions, (ii) seeking to invalidate or render
unenforceable any material provision of this Agreement or any of the Related
Agreements, or (iii) otherwise relating to and materially adversely affecting
the transactions contemplated hereby;
(e) There shall not be any action taken, or any statute, rule,
regulation, judgment, order or injunction, enacted, entered, enforced,
promulgated, issued or deemed applicable to the transactions contemplated hereby
by any federal, state or foreign court, government or governmental authority or
agency, which would reasonably be expected to result, directly or indirectly, in
any of the consequences referred to in Section 8.02(d) hereof;
(f) On the Closing Date, Buyer will have delivered to Seller:
(i) a wire transfer in immediately available funds in the amount
of the Purchase Price,
(ii) a certificate of appropriate officer(s) of Buyer
substantially in the form set forth as Exhibit H attached hereto, dated the
Closing Date, stating that the conditions precedent set forth in
subsections (a) and (b) above have been satisfied,
(iii) an executed copy of the Assignment and Assumption
Agreement and of each of the Related Agreements, and
(iv) a copy of the text of the resolutions adopted by the board
of directors of Buyer authorizing the execution, delivery and performance
of this Agreement and the consummation of all of the transactions
contemplated by this Agreement, along with a certificate executed on behalf
of Buyer by its corporate secretary certifying to Seller that such copy is
a true, correct and complete copy of such resolutions, and that such
resolutions were duly adopted and have not been amended or rescinded.
ARTICLE IX
TERMINATION
9.01 TERMINATION. This Agreement may be terminated at any time
prior to the Closing:
(a) by the mutual consent of Buyer and Seller;
(b) by either Buyer or Seller if there has been a material
misrepresentation, breach of warranty or breach of covenant on the part of the
other in the representations, warranties and covenants set forth in this
Agreement;
(c) by either Buyer or Seller if the transactions contemplated hereby
have not been consummated by September 30, 1998; PROVIDED THAT, neither Buyer
nor Seller will be entitled to terminate this Agreement pursuant to this
Section 9.01(c) if such party's willful breach of this Agreement has prevented
the consummation of the transactions contemplated hereby; or
(d) by Buyer if, after the date hereof, there shall have been a
material adverse change in
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the financial condition or business of the Business or if, after the date
hereof, an event shall have occurred which, so far as reasonably can be
foreseen, would result in any such change, except to the extent such change is
directly caused by Buyer.
9.02 EFFECT OF TERMINATION. In the event of termination of this
Agreement by either Buyer or Seller as provided in Section 9.01, this Agreement
shall become void and there shall be no liability on the part of either Buyer or
Seller, or their respective stockholders, officers, or directors, except that
Sections 12.01, 12.02 and 12.10 hereof shall survive indefinitely, and except
with respect to willful breaches of this Agreement prior to the time of such
termination.
ARTICLE X
ADDITIONAL AGREEMENTS
10.01 CONSULTING SERVICES. Seller shall retain in its employ, and
make available to Buyer in accordance with and subject to the terms set forth in
the Services Agreement, the services of Xxx X. Xxxx and Xxxxxxx Xxxxx (the
"Leased Employees") for such proportion of their respective work time as shall
be reasonably requested by Buyer. The Leased Employees shall at all times
remain employees of Seller and Seller shall be solely responsible for all
compensation, benefits, insurance and other expenses related to the Leased
Employees.
10.02 OLD RECEIVABLES. Buyer covenants and agrees to use its best
efforts to collect the receivables of the Business outstanding on the Closing
Date that are older than 360 days ("Old Receivables"). With respect to any Old
Receivable actually collected by Buyer within one year after the Closing Date,
Buyer shall pay to Seller, within 30 days of the end of any month in which it
receives payment on such Old Receivable, one hundred percent (100%) of the cash
amount actually collected, provided, however, that Buyer's aggregate obligation
to pay Seller for any Old Receivable so collected shall be limited to $300,000
and Buyer shall retain any and all payments in excess of such amount and any and
all payments actually received more than one year after the Closing Date.
10.03 NONCOMPETITION COVENANT.
(a) During the three-year period commencing on the Closing Date,
Seller shall not directly or indirectly engage in, invest in, finance, own,
manage, operate, control or participate in the ownership, management, operation
or control of, or be in any way connected with, render services to or assist any
business activities that are competitive with the Business as conducted prior to
the consummation of the transactions contemplated hereby. Seller understands
that Buyer would not have agreed to purchase the Assets without having received
this noncompetition covenant from Seller, and Seller acknowledges that it has
entered into this noncompetition covenant as a material inducement to Buyer to
consummate the transactions contemplated hereby. Notwithstanding this Section
10.03(a), Seller may continue to distribute Products through sales to the
distributors and dealers for which it does not have ongoing supply agreements,
but not through third party or direct billing, in accordance with the Excluded
Business.
(b) Except as contemplated by Section 6.06, 6.07, and 10.01, during
the three-year period commencing on the Closing Date, neither Seller nor Buyer
shall, without the written consent of the other party, directly or indirectly,
either as principal, agent, independent contractor, consultant, director,
officer, employee, employer, advisor, stockholder, partner or in any other
individual capacity whatsoever, either for their own benefit or for the benefit
of any other person, solicit or cause to be solicited for employment any
employee of the other party, or hire any such employee with whom it has had
contact in the course of the transaction contemplated by this Agreement. Any
such consent granted by the Company is revocable at any time. For purposes of
this paragraph, solicitation shall not include solicitation of employees (i) who
first solicit employment from the party in question, or (ii) who are solicited
20
(A) by advertising in periodicals of general circulation, or (B) by an employee
search firm on behalf of the party in question, so long as such party did not
direct or encourage such firm to solicit such employee or any other employees of
the other party. In addition, and without limiting the generality of the
foregoing, Seller shall not, without the written consent of Buyer, directly or
indirectly, solicit , cause to be solicited or hire any Business Employee
(except those Business Employees referenced in the Services Agreement) for a
period of three years after the date of this Agreement.
(c) REMEDIES. Seller acknowledges that it would be difficult to
fully compensate the Buyer for damages resulting from any breach by Seller of
the provisions of this Section 10.03. Accordingly, in the event of any actual
or threatened breach of such provisions, the Buyer shall (in addition to any
other remedies which it may have) be entitled to temporary and/or permanent
injunctive relief to enforce such provisions, and such relief may be granted
without the necessity of proving actual damages. Seller further acknowledges
that this Agreement constitutes a material inducement to the Buyer to complete
the purchase of the Assets and Buyer will be relying on the enforceability of
this Section 10.03 in completing such acquisition.
ARTICLE XI
SURVIVAL; INDEMNIFICATION
11.01 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Notwithstanding any
investigation made by or on behalf of any of the parties hereto or the results
of any such investigation and notwithstanding the participation of such party in
the Closing, the representations and warranties contained in Article IV and
Article V hereof shall survive the Closing for a period of two years following
the Closing Date.
11.02 INDEMNIFICATION BY SELLER. (a) Subject to the limitations of
Section 11.02(b), Seller agrees to indemnify in full Buyer and its officers,
directors, employees, agents and stockholders (collectively, the "Buyer
Indemnified Parties") and hold them harmless against any loss, liability,
deficiency, damage, expense or cost (including reasonable legal expenses),
whether or not actually incurred or paid prior to the third anniversary of the
Closing Date (collectively, "Losses"), which Buyer Indemnified Parties may
suffer, sustain or become subject to, as a result of (i) any misrepresentation
in any of the representations and warranties of Seller contained in this
Agreement or in any exhibits, schedules, certificates or other documents
delivered or to be delivered by or on behalf of Seller pursuant to the terms of
this Agreement or otherwise referenced or incorporated in this Agreement
(collectively, the "Related Documents"), (ii) any breach of, or failure to
perform, any agreement of Seller contained in this Agreement or any of the
Related Documents, or (iii) any "Claims" (as defined in Section 11.04(a) hereof)
or threatened Claims against Buyer arising out of the actions or inactions of
Seller with respect to the Assets or the Business prior to the Closing
(collectively, "Buyer Losses").
(b) Seller shall be liable to Buyer Indemnified Parties for any Buyer
Losses only if the aggregate amount of all Buyer Losses exceeds $36,500 (the
"Basket Amount"), in which case Seller shall be obligated to indemnify the Buyer
Indemnified Parties only for the excess of the aggregate amount of all such
Buyer Losses over the Basket Amount; provided, however, that Losses of Buyer
resulting from breach of the covenants and warranties contained in sections
6.06(a), 6.06(c), Article X or from liabilities of Seller not expressly assumed
by this Agreement shall not be subject to such Basket Amount.
11.03 INDEMNIFICATION BY BUYER. (a) Subject to the limitations of
Section 11.03(b), Buyer agrees to indemnify in full the Seller, and its
officers, directors, employees, agents and stockholders (collectively, the
"Seller Indemnified Parties") and hold them harmless against any Losses which
any of the Seller Indemnified Parties may suffer, sustain or become subject to
as a result of (i) any misrepresentation in any of the representations and
warranties of Buyer contained in this Agreement or in
21
any of the Related Documents, (ii) any breach of, or failure to perform, any
agreement of Buyer contained in this Agreement or any of the Related Documents
(including, without limitation, any WARN Act liability incurred by Buyer for
violation of the covenant contained in section 7.03), or (iii) any Claims or
threatened Claims against Seller arising out of the actions or inactions of
Buyer with respect to the Assets or the Business after the Closing
(collectively, "Seller Losses").
(b) Buyer shall be liable to the Seller Indemnified Parties for any
Seller Losses only if the aggregate amount of all Seller Losses exceeds the
Basket Amount, in which case Buyer shall be obligated to indemnify the Seller
Indemnified Parties only for the excess of the aggregate amount of all such
Seller Losses over the Basket Amount; provided, however, that Losses of Seller
resulting from breach of the covenant contained in section 7.03 shall not be
subject to such Basket Amount.
11.04 METHOD OF ASSERTING CLAIMS. As used herein, an "Indemnified
Party" shall refer to a "Buyer Indemnified Party" or "Seller Indemnified Party,"
as applicable, the "Notifying Party" shall refer to the party hereto whose
Indemnified Parties are entitled to indemnification hereunder, and the
"Indemnifying Party" shall refer to the party hereto obligated to indemnify such
Notifying Party's Indemnified Parties.
(a) In the event that any of the Indemnified Parties is made a
defendant in or party to any action or proceeding, judicial or administrative,
instituted by any third party for the liability or the costs or expenses of
which are Losses (any such third party action or proceeding being referred to as
a "Claim"), the Notifying Party shall give the Indemnifying Party prompt notice
thereof. The failure to give such notice shall not affect any Indemnified
Party's ability to seek reimbursement unless such failure has materially and
adversely affected the Indemnifying Party's ability to defend successfully a
Claim. The Indemnifying Party shall be entitled to contest and defend such
Claim; PROVIDED, that the Indemnifying Party (i) has a reasonable basis for
concluding that such defense may be successful and (ii) diligently contests and
defends such Claim. Notice of the intention so to contest and defend shall be
given by the Indemnifying Party to the Notifying Party within 20 business days
after the Notifying Party's notice of such Claim (but, in all events, at least
five business days prior to the date that an answer to such Claim is due to be
filed). Such contest and defense shall be conducted by reputable attorneys
employed by the Indemnifying Party. The Notifying Party shall be entitled at
any time, at its own cost and expense (which expense shall not constitute a Loss
unless the Notifying Party reasonably determines that the Indemnifying Party is
not adequately representing or, because of a conflict of interest, may not
adequately represent, any interests of the Indemnified Parties, and only to the
extent that such expenses are reasonable), to participate in such contest and
defense and to be represented by attorneys of its or their own choosing. If the
Notifying Party elects to participate in such defense, the Notifying Party will
cooperate with the Indemnifying Party in the conduct of such defense. Neither
the Notifying Party nor the Indemnifying Party may concede, settle or compromise
any Claim without the consent of the other party, which consents will not be
unreasonably withheld. Notwithstanding the foregoing, (i) if a Claim seeks
equitable relief or (ii) if the subject matter of a Claim relates to the ongoing
business of any of the Indemnified Parties, which Claim, if decided against any
of the Indemnified Parties, would materially adversely affect the ongoing
business or reputation of any of the Indemnified Parties, then, in each such
case, the Indemnified Parties alone shall be entitled to contest, defend and
settle such Claim in the first instance and, if the Indemnified Parties do not
contest, defend or settle such Claim, the Indemnifying Party shall then have the
right to contest and defend (but not settle) such Claim.
(b) In the event any Indemnified Party should have a claim against
any Indemnifying Party that does not involve a Claim, the Notifying Party shall
deliver a notice of such claim with reasonable promptness to the Indemnifying
Party. If the Indemnifying Party notifies the Notifying Party that it does not
dispute the claim described in such notice or fails to notify the Notifying
Party within 30 days after delivery of such notice by the Notifying Party
whether the Indemnifying Party disputes the claim described in such notice, the
Loss in the amount specified in the Notifying Party's notice will be
conclusively deemed a liability of the Indemnifying Party and the Indemnifying
Party shall pay the amount
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of such Loss to the Indemnified Party on demand. If the Indemnifying Party has
timely disputed its Liability with respect to such claim, the Chief Executive
Officers of each of the Indemnifying Party and the Notifying Party will proceed
in good faith to negotiate a resolution of such dispute, and if not resolved
through the negotiations of such Chief Executive Officers within 60 days after
the delivery of the Notifying Party's notice of such claim, such dispute shall
be resolved fully and finally in Kansas City, Missouri by an arbitrator selected
pursuant to, and an arbitration governed by, the Commercial Arbitration Rules of
the American Arbitration Association. The arbitrator shall resolve the dispute
within 30 days after selection and judgment upon the award rendered by such
arbitrator may be entered in any court of competent jurisdiction.
(c) After the Closing, the rights set forth in this Article XI shall
be each party's sole and exclusive remedies against the other party hereto for
misrepresentations or breaches of covenants contained in this Agreement and the
Related Documents, other than those covenants contained in Article X.
Notwithstanding the foregoing, nothing herein shall prevent any of the
Indemnified Parties from bringing an action based upon allegations of fraud or
other intentional breach of an obligation of or with respect to either party in
connection with this Agreement and the Related Documents. In the event such
action is brought, the prevailing party's attorneys' fees and costs shall be
paid by the nonprevailing party.
ARTICLE XII
MISCELLANEOUS
12.01 PRESS RELEASES AND ANNOUNCEMENTS. Prior to the Closing Date,
neither party hereto shall issue any press release (or make any other public
announcement) related to this Agreement or the transactions contemplated hereby
or make any announcement to the employees, customers or suppliers of Seller
without prior written approval of the other party hereto, except as may be
necessary, in the opinion of counsel to the party seeking to make disclosure, to
comply with the requirements of this Agreement or applicable law. If any such
press release or public announcement is so required, the party making such
disclosure shall consult with the other party prior to making such disclosure,
and the parties shall use all reasonable efforts, acting in good faith, to agree
upon a text for such disclosure which is satisfactory to both parties.
12.02 EXPENSES. Except as otherwise expressly provided for herein,
Seller and Buyer will pay all of their own expenses (including attorneys' and
accountants' fees, in connection with the negotiation of this Agreement, the
performance of their respective obligations hereunder and the consummation of
the transactions contemplated by this Agreement (whether consummated or not).
12.03 FURTHER ASSURANCES. Seller agrees that, on and after the
Closing Date, it shall take all appropriate action and execute any documents,
instruments or conveyances of any kind which may be reasonably necessary or
advisable to carry out any of the provisions hereof, including, without
limitation, putting Buyer in possession and operating control of the Assets and
transferring all Permits and environmental permits to Buyer that are
transferable.
12.04 COOPERATION AND EXCHANGE OF INFORMATION. Buyer and Seller shall
provide each other with such cooperation and information as either of them
reasonably may request of the other in filing any Tax return, amended return or
claim for refund, determining a liability for Taxes or a right to a refund of
Taxes or in conducting any audit or proceeding in respect of Taxes. Such
cooperation and information shall include providing copies of relevant Tax
returns or portions thereof, together with accompanying schedules and related
work papers and documents relating to rulings or other determinations by Taxing
authorities. Each party shall make its employees available on a mutually
convenient basis to provide explanation of any documents or information provided
hereunder. The Seller upon written request by the Buyer, will provide to the
Buyer such factual information reasonably necessary for filing Tax returns, Tax
23
planning and contesting any Tax audit that the Seller possesses as the Buyer may
reasonably request with respect to the Assets (which information the Seller
agrees to maintain and preserve for so long as it may be needed by the Buyer).
12.05 AMENDMENT AND WAIVER. This Agreement may not be amended or
waived except in a writing executed by the party against which such amendment or
waiver is sought to be enforced. No course of dealing between or among any
persons having any interest in this Agreement will be deemed effective to modify
or amend any part of this Agreement or any rights or obligations of any person
under or by reason of this Agreement.
12.06 NOTICES. All notices, demands and other communications to be
given or delivered under or by reason of the provisions of this Agreement will
be in writing and will be deemed to have been given when personally delivered or
three business days after being mailed by first class U.S. mail, return receipt
requested, or when receipt is acknowledged, if sent by facsimile, telecopy or
other electronic transmission device. Notices, demands and communications to
Buyer and Seller will, unless another address is specified in writing, be sent
to the address indicated below:
NOTICES TO BUYER: WITH A COPY TO:
Xx. Xxxxx X. Xxxxxx
Rehabilicare Inc.
0000 Xxx Xxxxxxx 0
Xxx Xxxxxxxx, XX 00000
Xxxxxx & Whitney LLP
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxx Xxxxxx
Fax: (000) 000-0000
NOTICES TO SELLER:
Xx. Xxxxxxx X. Xxxxxxx
Xxxxxx Healthcare, Inc.
000 Xxxxxxxxxx Xxxxxxxxx
Xxxxx Xxxx, XX 00000
WITH A COPY TO:
Xxxxxx & Xxxxxx, L.L.P.
000 Xxxxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxx
Fax: (000) 000-0000
12.07 ASSIGNMENT. This Agreement and all of the provisions hereof
will be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, except that neither this Agreement
nor any of the rights, interests or obligations hereunder may be assigned by
either party hereto without the prior written consent of the other party hereto.
12.08 SEVERABILITY. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this
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Agreement is held to be prohibited by or invalid under applicable law, such
provision will be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
12.09 COMPLETE AGREEMENT. This Agreement and the Related Agreements
and the Exhibits hereto, the Disclosure Schedule and the other documents
referred to herein contain the complete agreement between the parties and
supersede any prior understandings, agreements or representations by or between
the parties, written or oral, which may have related to the subject matter
hereof in any way.
12.10 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, any one of which need not contain the signatures of more than one
party, but all such counterparts taken together will constitute one and the same
instrument.
12.11 GOVERNING LAW. The internal law, without regard to conflicts of
laws principles, of the State of Minnesota will govern all questions concerning
the construction, validity and interpretation of this Agreement and the
performance of the obligations imposed by this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
REHABILICARE INC.
By
-------------------------------------------
Its
----------------------------------------
XXXXXX HEALTHCARE, INC.
By
-------------------------------------------
Its
----------------------------------------
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